ST Ives (LON:SIV) (FTSE Small Cap Index) I have bought a holding in publishing and marketing company, St Ives. The company had a pretty torrid time during the 2000's with the shares falling from a peak of 650p in December 1999 to as low as 46p during 2009. Over the last 18 months or so the share price has staged a recovery as the momentum in the business has changed. The Company has to some extent re-positioned itself away from commoditised bulk printing to more value added services through the addition of marketing services. It now works with its clients on marketing strategy and providing them with the tools to execute it. During the last couple of years it has made some acquisitions in this area; Tactical Solutions, a leading field marketing company, Response One, who provide integrated marketing solutions , Pragma, a leading consultancy specialising in retail and consumer markets and Incite Marketing Planning Limited, an industry leading market research and insights consultancy. The Company also made an investment in Sponge Limited, a leading provider of mobile marketing solutions.
Recent results have started to show the fruits of these investments. The latest trading statement from the company issued on the 27th November was fairly upbeat with management talking about higher margins being achieved and improved operating profits as the balance of the business shifted towards the higher value added marketing operations.
This brings me to valuation where on consensus forecasts the Company is valued at only 7.3x earnings for the year to July 2013 falling to 6.8x July 2014. Enterprise Value (net debt + market capitalisation) is less than half turnover. A more than 2x covered dividend of 6.3p is forecast for the current year giving a prospective yield at 120p of 5.3%.
Although the shares have performed well over the last six months or so my view is that they could have a lot further to go. I have bought a 3.5% holding in the JIC portfolio with the proceeds of yesterday's sale of Halfords. (see transaction history)
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St. Ives (130.5p and 4.9% of JIC portfolio) has issued its results for the 6 months ended 31st January 2013 in which it showed progress in its shift from a commodity print business to a added value marketing services group. Group revenue was down slightly at £161.7m v £166.4m in the prior year. However, removing the effect of acquisitions and the commodity print markets which it has exited, Group revenue increased by 2.9%. The marketing services segment saw revenue increase by 36% to £31.1m, pre-tax profits were up 10.1% to £12.2m and earnings per share up 8.8% to 7.67p. The interim dividend has been increased by 14.3% to 2.0p per share.
Conclusion: The Group seems to be making good progress in its strategy of re-positioning the Group towards higher margin businesses and indeed yesterday's announcement of the proposed acquisition of Amaze plc further helps this process. It jumped 7.2% yesterday so it is difficult to predict what it might do today, however my view is that the Group still looks good value on 7.9x consensus earnings forecasts to July 2013 falling to 7.5x to July 2014 and with a healthy dividend yield of 4.8% on the forecast dividend for the current year of 6.3p. 4th largest holding in the JIC portfolio; Happy Holder!
