Good morning!
I'm holding the fort here today as Paul is traveling.
Cheers,
Graham
Robinson (LON:RBN)
Share price: 115p (-14%)
No. shares: 17.7m
Market cap: £20m
A significantly weaker result (pre-exceptionals) had been well-flagged - Paul discussed the trading statement here in January.
Revenue fell by 7% to £27.5 million and operating profit almost halved to £1.4 million, thanks both to a lower gross margin and higher costs.
Perhaps the shares are down by a further 14% today because of the cautious outlook statement:
The general economic conditions suggest another challenging year ahead with continued pressure on consumer product brands and the UK retail sector. Continued investment in both personnel and equipment are leading to significant additional expenditure in 2017, justified by new business, some of which is already coming on stream. We remain on track to deliver revenue growth in 2017.
Although it is difficult for companies to do so, I much prefer when they acknowledge that they are struggling to compete within their industry, rather than blaming macro conditions.
In this case, is it true that consumer product brands generally are under pressure? Or is it more likely that Robinson's packaging solutions simply haven't quite managed to differentiate themselves from the alternatives in recent times?
"Significant additional expenditure" is a sign that the company does feel the need to change, but of course is likely to impact profitability in the short term. Revenue growth is mentioned, but there is no explicit mention of any anticipated profitability growth for 2017.
My opinion
Despite the weak outlook, I can see a potential value investment here. Net tangible assets are £15.6 million.
Paul's previous report suggested that the value of surplus land might be some £10 million. According to today's statement:
The Group is currently working with partners to find prospective tenants, develop detailed plans and sell the sites. Proceeds from the eventual sales will be used to finance the expansion of the operations and reduce debt.
So the company could potentially pay off all of its £5.6 million borrowings and swing into a healthy net cash position.
So on balance, the £20 million valuation here strikes me as reasonably attractive, if you can make the assumption that earnings will at least stabilise from the current level. In saying that, bear in mind I am always heavily biased in favour of family businesses, and those which have illustrious histories. Robinson ticks…
