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Laura Ashley Holdings (LSE:ALY) reported a 14.9% increase in pre-tax profits for the first half ending 26 July. That is news that is fit to print, even if the print is floral. Laura Ashley shares increase by as much as 11% in early trading and are still up nearly 7.0% at 3:00 pm.
The company, whose handbags can usually be found at my wife’s side, has been redesigning itself to expand its horizons and potential markets. The half-year results were boosted by an 8% uptick in sales of home furnishings and fashions over the same period last year.
The company languished for about a decade before the turn of the century, but began blossoming again after it was acquired by its present owners in 1998 who brought with them ideas for new patterns of doing business. The company’s product offerings are compartmentalized into four categories: Furniture, Home Accessories, Decorating and Fashion which, in the UK, account for 30%, 27%, 24% and 19% of the business, respectively.
The company boasts 208 stores and a hotel in the UK and 296 franchised stores in 32 additional countries. A second hotel was opened near Lake Windermere this year. The hotels are furnished by – guess who – Laura Ashley. Revenue from international franchising and licensing revenue was up 13.6% during the first half to £17.1 million. The company reported:
- Total group sales of £144.0 million, up 4.9% from £137.3 million in 2013
- Pretax profit of £8.5 million, up 14.9% from £7.4 million in 2013
- EPS of 0.87 pence, up from 0.76 pence in H1 2013
- Total comprehensive income was £6.1 million, up from £3.5 million in 2013
If I may offer a couple of personal observations . . .
- The hotels have the potential to add to the bottom line both tangibly and intangibly by the both the direct revenues and the impression coefficient upon the hotel guests who leave with subliminal ideas for decorating their own homes with Laura Ashley products.
- On a dimmer note, a shadow is going to remain over the company, as far as investors are concerned, until Khoo Kay Peng and Pauline Chai settle their marital dispute, a fight that necessarily includes the distraction of the disposition of their combined 60% ownership. In this case, it is not going to be easy to separate business from personal. Failure to judiciously resolve their personal issues has the potential to do unnecessary harm to a business that is currently enjoying a refreshing, new season of life.
Laura Ashley is one of those opportunities where long-term investors have some significant intangibles to assess alongside of the financials. The story is bigger than the financial reports, and the denouement is unpredictable.
