Stocks to watch in June
With large sections of the high street in a trough of despair, it is refreshing to find pockets of growth - even super-growth. That certainly seems an appropriate description for the fortunes of luxury handbag group Mulberry.
In the year to March 2011, the Somerset-based manufacturer and retailer quadrupled profits from its 86 stores (half of them outside the UK) from £5.1 million to £23.3 million. The shares took off.
Two and a half years ago they changed hands at just over a pound. Now you will get no change from 20 quid for a share. With former Hermès chief Bruno Guillon now in change, the market is talking about Mulberry becoming the next Burberry.
Just to show this is not a flash in the pan, last December’s interims showed that profits had trebled on another doubling of sales. Analysts project pre-tax returns of £36 million for the year just ended and think the group capable of making £60 million this year and £80 million next – reflecting the desirability of the brand in Asia-Pacific and North America, where some think sales have hardly scratched the surface.
Trouble is, Mulberry’s valuation is now at rarified levels – still selling on 25 times hoped-for earnings in 2014.
Majestic Wine has delivered more pedestrian, but still impressive, retailing performance. Growth has resumed with a vengeance after a brief blip in 2009. Intense competition from supermarkets has been kept at bay by a formula of selling wine by the mixed case (a minimum of six bottles in its 175 stores and 12 bottles online).
Profits for the year just ended should come in at £22.95 million (£20 million). Returns of £26.3 million and £28.8 million are forecast for this year and next.
There is momentum behind the shares of Anite, a computer software outfit supplying the leisure industry and now recovering impressively from recession.
Profits sank from a peak of £23.5 million in 2007 to a loss of £4 million in 2010. A painful recovery began last year and now the market predicts record profits of £24.6 million (£12.2 million last time) for the year to April. In March, Anite won a big contract to supply Thomas Cook with reservation systems. Anite shares have more than doubled in the past year, but prospects remain bright.
Analysts expect profits to top £30 million this year and £33 million next. That would put the shares on an earnings multiple of 15.7.
May Gurney is a cashrich infrastructure company offering a wide range of services to local authorities as well as the water, energy and transport sectors.
Pending results should show profi ts up from £18.8 million to £27.5 million, as the benefits of recent acquisitions show through. Profits for the coming year are expected to top £30 million.
Sharp dividend rises – it was up 35% at the half year – should boost the yield to more than 4%.
Consort Medical, supplier of inhalers and other drug delivery systems to the pharmaceutical industry, could see profi ts rise from £12.7 million to £19.11 million in the year to June.
Recently the company has struggled to grow revenues, but analysts appear confident the group will grow revenues and profi ts over the next few years. They forecast earnings to rise about 10% a year for the next two years.
This article was first published in our sister publication, Money Observer.
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.
A catch-all phrase that can range from assessing the price of a property or vehicle before offering it for sale or the net worth of assets in an investment portfolio to the prices of shares on a stock exchange.
If you own shares in a company, you’re entitled to a slice of the profits and these are paid as dividends on top of any capital growth in the shares’ value. The amount of the dividend is down to the board of directors (who can decide not to pay a dividend and reinvest any profits in the company) and they will be paid twice yearly (announced at the AGM and six months later as an interim). Dividends are always declared as a sum of money rather than a percentage of the share’s price. Although dividends automatically receive a 10% tax credit from HM Revenue & Customs (HMRC), which takes the company having already paid corporation tax on its profits into account. Dividends are classed as income and, as such, are liable for personal taxation and so shareholders have to declare them to HMRC.