Mulberry bushed

Today’s report showed reported profit before tax falling from £7.5m in 2017 to just £6.9m, although largely due to start-up costs in Asia. Profit before tax from existing business actually rose 36% to £11.3m, but that was before deducting start-up costs of £2m and net operating expenses of £2.4m.

There was good news in there, with gross margins increasing by 185 basis points to 63.5%, revenue up 1% to £169.7m and retail sales up 3%. The UK was broadly flat but international sales rose 20%. Digital revenues rose 14% and now make up 17% of group revenue (against 15% in 2017). The group’s cash balance stands at £25.1m, up from £21.1m. That is all to the good.

Round and round

CEO Thierry Andretta reported significant progress on its international strategy, creating new Mulberry subsidiaries in China, Hong Kong, Taiwan and Japan, and announcing today a new majority owned venture in South Korea. “Following another period of cash generation, our balance sheet is strong.  Although the UK market remains challenging, we will continue to invest in our strategy to develop Mulberry into a global luxury brand to deliver increased shareholder value.”

So can Mulberry finally show some swagger? I looked at the stock one year ago and said it still has a long way to go. One year on the journey remains market rocky. However, I am encouraged by increased international sales, greater penetration in Asia, and its omnichannel strategy, which is the only way for retailers to survive these days. However, the £465m stock still trades at a whopping 77 times earnings and the dividend yield is low at just 0.65%.

Next Port of call

I are more tempted by another consumer small stock with an outsize international presence, ceramics and cookware firm Portmeirion Group (LSE: PMP), whose brands include Royal Worcester, Spode and Wax Lyrical. My Foolish colleague Paul Summers is also an admirer, noting that although these brands are not big sellers in the UK, they are much more popular in North America.

Big in the States sounds good to me, especially given the strong dollar and weak pound. The stock is up 40% in the last year to 1,280p, and up 450% measured over 10 years. It is a tad expensive as a result, trading at a forecast valuation of 17.6 times earnings, but at least it offers a yield of 2.8%, covered twice.

Warming up

Earnings per share growth forecasts look promising, with 11% expected this year and 7% next. Strong return on capital employed of 23.6% and operating margins of 10.1% strengthen the case for this AIM-traded firm £119m company.

Portmeirion is continuing to grow steadily, in May it reported a 15% rise in total group sales for the first four months of 2018, with group sales up 20% on a constant currency basis over the year. Both stocks have potential, but for me, Portmeirion looks better placed to serve up success.

The post One small-cap growth stock I’d buy and one I’d sell today appeared first on The Twelfth Magpie.

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harveyj has no position in any of the shares mentioned. The Motley Fool UK has recommended Portmeirion Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I think the clear answer is to invest in shares in top UK companies, but even then I’d say you need to set one clear priority. Warren Buffett famously relies on his number one rule of investing, “never lose money”. But if you don’t beat inflation then you will lose money in real terms.

Here are two companies that have been helping their shareholders beat inflation, and I reckon they’ll continue to do so.

International success

Portmeirion Group (LSE: PMP), a pottery company based in Stoke-on-Trent (and founded by the daughter of the designer of the eponymous Italianate Welsh village), has a solid track record of growing its earnings and paying progressive dividends.

Those dividends have been providing yields of better than 3% per year, and the payment of 34.66p per share announced Thursday for the 2017 year amounts to a 3.3% yield on the current share price of 1,049p at the time of writing. That alone would keep your investment pot running ahead of inflation, especially as the latest dividend was lifted by 7.5%, which is way ahead of inflation that’s currently running around 3%.

And though it’s had its ups and downs, the share price has gained 60% over the past five years, providing a total return of better than 75%.

The company, which owns the Royal Worcester and Spode brands (both of which are particularly popular in the USA), saw revenue climb by 10.6% during the year, with pre-tax profit up 13% and earnings per share up 9.2%. That seems easily enough to support the dividend, and with cash generation turning 2016’s year-end net borrowings of £2.3m into net cash of £1.6m, I view forecast rises for the next two years with confidence.

Growth plus dividends

Marshalls (LSE: MSLH) manufactures a range of materials and products for the home improvement and home building markets, supplying wholesale to a large number of builders and retailers among others. And it’s been a very profitable business for years.

Earnings per share more than trebled between 2013 and 2017, and over the same period the annual dividend roughly doubled to last year’s 10.2p per share. That provided a yield of 2.2%, and forecasters are predicting rises for this year and next which would lift the payment 28% by 2019, for a yield of 3%.

EPS has grown in double-digits for each of the past five years, and that’s likely to slow, which is expected, as growth can’t go on at that pace for ever. But I still see Marshalls as an attractive long-term investment which should eventually comfortably beat inflation. In fact, over the past five years, shareholders have seen their investments almost quadruple in value.

The company is strongly cash generative, and has the ability to grow by acquisition too — it acquired pre-cast concrete manufacturer CPM Group in November for £38.3m.

And along with full-year results this week, chief executive Martyn Coffey said: “The underlying drivers have remained positive in our main end markets and our sales and order intake have been strong in the first 2 months of 2018.“

If you stick to investing in companies like these which can beat inflation in the long run, you could even become a millionaire.

The post 2 inflation-busting small-cap stocks I’d buy with £2,000 today appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Portmeirion Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Digital marketing and ad tech company Crossrider (LSE: CROS) has risen by 143% over the last year. The group’s share price hit a low of 25p in 2016 after investors appeared to lose faith in the firm’s growth plans. But Crossrider’s performance is improving. It is now developing a subscription-based business model, targeting high levels of recurring revenue.

Today’s results suggest the company is making progress. Revenue rose by 5% to $30.1m during the first half and the group’s operating loss fell slightly from $932k to $891k.

The group’s shares have risen by 5% today, which suggests to me that investors are encouraged by the progress made so far. However, I believe there’s also a second, potentially transformative, opportunity at Crossrider.

The group had net cash of $68.7m on its balance sheet at the end of June. That’s high compared to its market cap of £89m, (about $114m). Some of this cash will be used to fund growth and acquisitions. However, if the group breaks into profit this year, as expected, then I think this cash could acquire a new significance.

You see, analysts are forecasting adjusted earnings of 4.9 cents per share this year. These would put the stock on a forecast P/E of about 18. But if you adjust the group’s share price to ignore Crossrider’s net cash, then the effective forecast P/E is just 7.3.

That’s very cheap for a growth stock. So although I’d want to do some further research, investors who believe Crossrider’s management can deliver on its growth plans might want to consider snapping up a few of these shares.

A buy-and-forget stock

Crossrider’s growth may yet disappoint. But ceramics and giftware firm Portmeirion Group (LSE: PMP) — whose brands include Royal Worcester and Wax Lyrical — is a proven performer I’d be happy to buy for a long-term portfolio.

The shares are currently 10% below the 52-week high of 1,000p seen earlier this year, but in my view this sell-off could be a buying opportunity. This business is heavily seasonal, as a large proportion of sales take place at Christmas in the three main markets of the UK, North America and South Korea.

The next set of results will see the first full-year contribution from Wax Lyrical, which Portmeirion acquired last year.

Analysts covering the company expect to see revenue rise by around 9% to £83.3m this year, while earnings per share are expected to rise by about 10% to 66.3p per share. A 4% dividend hike has been pencilled in, giving a payout of 33.4p per share and a yield of 3.7%.

These figures are attractive enough, in my view, but they become more appealing when we consider the group has net debt of just £1.7m and consistently strong free cash flow.

I believe there’s also a possibility that Portmeirion could become a bid target at some point, due to its portfolio of valuable brands and strong cash generation. In my view, these shares offer a low-risk trade with the potential to deliver a healthy profit.

The post Two small-cap growth stocks I’d buy in September appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Portmeirion Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

City analysts expect the company to report further growth this year with revenue of £119.6m projected, and off the back of this growth, analysts are expecting an earnings per share rise of 16% to 15.9p. If the company hits these targets, pre-tax profit will have grown by around 190% in six years, and earnings per share will be up 70%. 

As earnings have expanded over the past five years, shareholders have reaped the rewards. Management has hiked the company’s dividend payout per share by 200% since 2013 and shares in the company have produced a total return of around 240% since mid-2012.

Further growth ahead? 

I believe Walker’s returns can continue as the company builds on its existing presence to reach new customers. In October last year management completed the acquisition of Clarke & Clarke, an innovative design, fabrics and furnishing company with an international presence. 

Thanks to this acquisition, sales for the six months ended 31 July 2017 grew 35.6%. Excluding the new business, on a like-for-like basis sales increased 3.6% in reported currency. International sales are growing at a double-digit rate. During the reporting period, sales in Europe and the US rose 11.9% and 12.9% in reported currency, but sales in the UK declined by 1.8%. More lucrative licence income rose 18% in constant currency year-on-year for the period.

Despite Walker’s impressive growth, shares in the company trade at a relatively modest valuation of only 14.7 times forward earnings and support a dividend yield of 1.9%. As the company continues to use its reputation to drive global organic sales, while acquiring additional bolt-on growth, the group should be able to expand for many years to come.

Growth through acquisition 

Like Walker, Portmeirion Group’s (LSE: PMP) reputation and bespoke products have helped it grow steadily over the past five years, and these traits should ensure that the group has many more years of expansion ahead of it.

Over half a decade, Portmeirion’s revenue has grown by 50%, and over the same period, earnings per share increased 40%. Over the next two years, City analysts expect the company to report earnings growth of 11% for 2017 and 9% for 2018. These are hardly the market’s best growth rates. But Portmeirion has a strong reputation that should allow the group to continue to grow steadily over many years, so as a long-term investment the firm looks highly attractive. Shares in the company currently trade at a forward P/E of 13.8 and support a dividend yield of 3.7%.

Portmeirion is also executing select acquisitions to boost organic growth. Thanks to the purchase of Wax Lyrical, the UK’s largest manufacturer of home fragrances, for the six months ended 30 June 2017, total group sales rose 16%. With net debt of only £2.3m at the of the end of 2016 and a bank facility of £21m, the firm has plenty of financial headroom for further acquisitions to drive growth.

The post 2 high-growth small-caps I’d buy to retire on appeared first on The Twelfth Magpie.

More reading

• What investors need to know about the new 22% Stocks and Shares ISA tax
• By July 2027, BAE Systems shares could turn £5,000 into…
• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has recommended Portmeirion Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.