Good morning!

AGA Rangemaster (LON:AGA)

Share price: 155p
No. shares: 69.26m
Market Cap: £107.4m

The investment case for this share looks pretty obvious at first sight - as a maker of very expensive cookers, it's bound to benefit from the economic recovery, especially as better off people have generally seen their incomes rise - just look at the remuneration reports of most Listed companies, and you'll find Directors who have been greedily filling their own pockets whilst suppressing the pay & numbers of staff they employ. Shareholders are asleep at the wheel usually, so allow this greed to continue unchecked. All of which is scandalous in my opinion, but positive if you happen to make expensive cookers, because it means your customers have got more money.

I'm sure that Aga's customers are not just company Directors, but as the rich are getting richer (arguably QE has seen to that) then demand should be improving, which it is;

Interim results - for the six months to 30 Jun 2014 are published this morning. Revenues are up 3.3% (with the UK being particularly strong at +9.7%, although that must mean other geographies were weak). The company seems to have a heavily H2-biased phasing of profitability, as they say;

Group operating profits were up 60% to £2.4 million for the half year (2013: £1.5 million).  Our expectations for full year 2014 operating profit remain unchanged with performance expected to be well ahead of last year (full year 2013: £8.2 million).

Therefore a meaningful valuation would have to look at full year forecasts, rather than taking the interim figures & doubling to annualise them. So what does "well ahead" mean? They must surely be talking of £10m+ I imagine? Broker consensus seems to be for £11.1m profit this year (about 12.5p EPS).

Outlook - this is a mixed bag, with some uncertainty over market conditions, but generally positive noises are made, and new products in the pipeline could drive growth. The order book is up at the half year end, and the summary says this;

Taken overall, the indicators are encouraging that we will see a higher revenue growth rate in the second half bringing improved trading results for the year.

The company specifically mentions its operational gearing from improved sales potential - i.e. increased sales having a disproportionately good impact on profit, due to higher revenues passing through a P&L with many fixed…

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