Good morning! Today I shall be reviewing results from Thorntons (LON:THT), Alliance Pharma (LON:APH), and Ubisense (LON:UBI). The market has opened down a little, with the FTSE 100 currently down 15 points, at 6,577.
So, turning first to Thorntons (LON:THT), I've been sceptical this year to date about the strong rise in share price here, mainly because they still have a mountain to climb in terms of paying down a considerable amount of net debt, plus the cashflow drain that their pension deficit continues to be.
So starting with valuation, the shares are down 2p this morning so far, at 88p. With just under 68.4m shares in issue, that equates to a market cap of £60.2m. Net debt has reduced slightly, but is still considerable, reported at £27.5m on 29 Jun 2013. So that's about 40p per share in net debt to factor into the valuation. The pension deficit is a further £24.9m (down from £29.1m a year earlier), so that's another 36p per share in debt effectively.
Revenues for the 52 weeks ended 29 Jun 2013 came in up 1.8% to £221.1m, and profit before tax rose from £0.9m last time to £5.6m this time. So a good recovery, but still a pretty marginal business, only delivering a 2.5% profit margin - I can't get excited about that performance.
Cashflow generation was £8.3m, as you tend to find with retailers that they are good at generating cash, once the depreciation charge for the shops is added back. That's why the sector was so attractive to Private Equity a few years ago, as they viewed the sector as cash cows to be milked to repay the crippling debt that PE loads onto companies they acquire. Although Thorntons seem to have accumulated a fair bit of debt themselves, without any assistance from PE.
Basic EPS dropped out at 5.6p, which looks to be slightly ahead of broker consensus forecast of 5.36p, and with 6.92p forecast for the current year that puts the valuation at a PER of 15.7 times 2012/13 actual EPS, and 12.7 times 2013/14 forecast. That doesn't look cheap to me, considering there's no dividend, and in all likelihood profits for the next few years are likely to be consumed in reducing debt &…
