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A subscriber wrote the following: Hi Prof any recent thoughts regarding N Brown as the price has dropped to approx 94 now.Are you buying more ? I believe the drop was due to ASOS having a recent trading update which was not as positive as expected with uncertainites with consumer confidence .
Thank you
I wrote a quick reply (on New Years day – so may be somewhat shaky – I would value your thought, especially if you have had contact with the company and its new directors):
I think the drop is mostly to do with sentiment on retailers plunging – and the ASOS shock means that online retailers are not immune. So much depends on the quality of the new executive team. I hope to meet them, but that won’t be until July. In the meantime I’ll sit tight and wait for announcements from the company concerning trading. I haven’t heard any reasons for panic.
The first half showed product revenues down by 3.1% but Power Brand revenues were up by 1.8% (now 58% of Product revenues) – this is a deliberate strategy of withdrawing resource from the legacy businesses and focusing on online (offline sales were down 22.4%).
The big news is the 12.7% rise in Financial Services revenue at £146.4m for six months. Customer loan book up £30m to £677.6m “growing customer loan book”.
Operating costs down 1.5%.
4.3m Active customer accounts (2.2m for Power Brands) Growth in most loyal customers. Increased market shares.
Dividend 7.1p Share price 92p (MCap £267m) Dividend yield 7.7%.
Lots of kitchen sink accounting by new directors, so accounts look bad after exceptional items are included. About £200m net assets if you ignore intangible assets.
“our full year expectations are unchanged” Expectations are:
FY18/19 Revenue £937m, PBT £80.7m, EPS 22.2p, DPS 7.1p
FY19/20 Revenue £954m, PBT £76.5m, EPS 21.0p, DPS 7.2p
Obviously Mr Market is concerned with the retail macro picture, but I must go with the facts as presented to me rather than general sentiment.
For Christmas I boug…
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