Smaller companies: Big gains on the cards

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The Independent Online
NOW THAT it has been spun off from Fine Art Developments and has announced its first set of final results since the demerger, a clearer picture is emerging at Creative Publishing, writes Richard Phillips. Sales of pounds 155.2m produced pre-tax profits of pounds 15.2m. On a price of 172p, the shares look to be rated on the not over-demanding PE of 11.7 times next year's earnings.

Creative's business is split into card publishing, with a whopping 50 per cent market share of the Christmas card market for direct sales to retailers. The market for everyday cards has also been growing strongly, and with its strong relationships with retailers, this will be an area the company can also do well in. While sales of gift products are dwindling, UK card sales rose an impressive 18 per cent. The company is also building up so-called solus contracts with the big supermarkets. As well as Asda and Sainsbury, it has added a contract with Safeway. Solus contracts are where the company runs the entire card display for the business, from planning and designing the offer to stocking the products. These probably account for upwards of pounds 15m of sales.

While problems in its wholesale and stationery divisions seem to have been ironed out, these two units are of less consequence to the group's future, although there could be scope for some improvement in margins, which at 4 per cent are well below the 15.5 per cent the direct to retail division manages.

The Christmas market looks buoyant already, and the benefits of demerger are flowing through. The shares look like a good bet for the long term.

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