SIF Folio: Profit warnings from Bonmarché and Keller + a fresh look at Morses Club

Tuesday, Oct 16 2018 by
29
SIF Folio Profit warnings from Bonmarcheacute and Keller  a fresh look at Morses Club

Last week’s market wobble certainly generated some column inches. The SIF folio certainly didn’t escape unscathed, giving up all the gains seen since March.

It’s too soon to say whether last week’s falls were the start of a more significant market sell-off. For now, I’m going to focus on stock-specific issues that are affecting my shares’ performance. Unfortunately, these include two recent profit warnings.

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SIF performance vs. FTSE All Share 2018 YTD

Bonmarche warns on footfall

Women’s clothing retailer Bonmarche Holdings issued a profit warning on 27 September. This was particularly frustrating as I’d reviewed the firm’s performance favourably just two days earlier, following a solid Q1 update.

As the stock still qualified for my SIF screen, I’d then opted to keep the shares in the portfolio for another month.

Online vs stores: I was reassured by online sales growth of 27.3% during Q1. But I should have been more suspicious about the 1.2% fall in like-for-like store sales during the period. According to the firm, this weakness has extended into the second quarter.

Rather than blaming warm weather, management’s view is that weak footfall on the high street is the main cause. The balance sheet remains strong, so that’s not a concern. What we need to know is how easily Bonmarche might be able to start closing stores.

Are rents falling? Last year’s annual report shows that the average unexpired lease length was 3.5 years at the end of June 2018. That’s sounds reasonably flexible.

What’s worries me is that the firm only managed to negotiate an average 4% rent reduction on 42 lease renewals last year.

This seems to compare poorly with Next, which renewed 19 store leases last year and cut rent costs by 28%.

Obviously Next has considerably more heft with landlords. But is Bonmarche’s management doing everything possible to take advantage of the retail downturn and cut store costs? Like Graham Neary, I’m not convinced.

What’s the hit? Underlying pre-tax profit for the 2018/19 financial year is now expected to be £5.5m, 31% below the FY18 figure of £8.0m.

That’s a disappointing outcome. It means that Bonmarche is likely to exit the SIF fund at a loss at the end of this…

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Keller Group plc is a geotechnical solutions specialist. The Company connects global resources and local knowledge, and tackles the engineering challenges in over 40 countries. Its segments include North America, EMEA and Asia-Pacific (APAC). The Company operates through over 50 offices throughout the United States and Canada. It offers micro-piling, ground anchors and grouting services, and a range of piling solutions. The EMEA division offers a range of geotechnical products and solutions. It operates across approximately 30 countries, notably in Germany, France, Poland, Austria and the United Kingdom in Europe, United Arab Emirates and Saudi Arabia in the Middle East, in South Africa and certain parts of sub-Saharan Africa, and in Brazil. The APAC division offers ground improvement and heavy foundation products and solutions. Austral and Waterway operate in Australia specializing in near shore marine piling and construction. more »

LSE Price
622p
Change
2.3%
Mkt Cap (£m)
438.1
P/E (fwd)
6.1
Yield (fwd)
6.2

Bonmarche Holdings plc is a multi-channel retailer of womenswear and accessories. The Company offers clothing and accessories in a range of sizes for women through its own store portfolio, Website, mail order catalogues and through the Ideal World TV shopping channel. The Company's subsidiaries include Bluebird UK Topco, Bluebird UK Holdco and Bonmarch Limited. The Company has approximately 310 stores across the United Kingdom. more »

LSE Price
82p
Change
-2.4%
Mkt Cap (£m)
42.0
P/E (fwd)
8.5
Yield (fwd)
9.2

Morses Club PLC is a United Kingdom-based home collected credit (HCC) lender. The Company is a consumer finance business focused on the home collected credit market. The Company operates under the Morses Club brand and provides unsecured loans to customers over 20-78 week periods, which are repayable on a weekly basis. It provides a range of loan products through a combination of traditional and online marketing channels. The Company's main country of operation is the United Kingdom. more »

LSE Price
142.5p
Change
0.7%
Mkt Cap (£m)
183.2
P/E (fwd)
9.5
Yield (fwd)
6.1



  Is LON:KLR fundamentally strong or weak? Find out More »


1 Comment on this Article show/hide all

GabrielMulholland 17th Oct 1 of 1

I hold this stock, thought it was solid and wonder should I buy more ?

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About Roland Head

Roland Head

I'm a private investor and writer on stock markets, with a particular fondness for free cash flow, dividends and value. I also have a lingering interest in commodity stocks. In earlier life, I worked as an engineer in telecoms and IT. The rules-based approach required for this kind of work undoubtedly influenced my investing style. I also learned a lot from seeing the tech bubble deflate in 2000-1, when I was working for a large and now defunct Canadian firm.  My investment focus is increasingly on developing rules-based strategies such as my Stock in Focus portfolio. This reflects a significant part of my personal portfolio and is the subject of my weekly column here at Stockopedia. more »

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