Denby sets itself a place in US: The Investment Column

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The Independent Online
Out of every cloud comes a silver lining and the one from Coloroll, the collapsed 1980s stock market star, is Denby, the pottery group. Bought out by management in 1990 and floated at 130p in June 1994, the group's shares have more than doubled, rising another 7p to 277.5p yesterday.

The reason for the latest strength was an upbeat annual general meeting statement announcing that sales romped ahead by 15 per cent in the first three months of the year to December. The buoyant current trading picture builds on an impressive record which has seen profits jump from pounds 2.76m to pounds 4.76m in the past three years.

Denby, founded in 1809, has been revitalised by a renewed concentration on design, aiming in particular at the "aspirational" market of young newly-weds and the like. Cleverly pitched just below Wedgwood and Royal Doulton's rather more formal products, Denby has probably rightly assumed that the days of bringing out the best china for special occasions are waning.

But while it continues to add to what it claims is a leading position in the UK, the one-off gains from its refocusing there seem to be largely over. The domestic market has been flat for several years and most of the growth is coming from overseas markets, where Denby seems to be replicating its success.

Although it has been across the Atlantic for most of this decade, sales in the US continue to rise at rates above 30 per cent. It seems that Americans have taken to this type of crockery in a big way and, since September, to Denby's matching glassware range which it reintroduced after a 10- year gap.

The rip-roaring pound could represent a problem if it is sustained. Denby says only a fifth of its revenues are in foreign currencies and an average 7 per cent rise in prices means it is covered up to around $1.64.

But even assuming no sterling impact, an unchanged profit forecast of pounds 6.9m for the current year puts the shares on a chunky forward rating of 20. Hold.