Smaller Companies: Don't get sweet on Thorntons
Sunday 22 February 1998
Not bad, when so many smaller companies have been stuck in the doldrums. Clearly the view is that the nation's sweet tooth is in no danger of disappearing, whatever the verdict of the health police, and that expansion will go on unimpeded for the next few years.
And on their current price, the shares are expecting great things to come. Assuming the company maintains sales growth of 20 per cent a year for the next three years, the shares are still trading on a price/earnings ratio of 23 times for 1998 earnings and 20 times 1999 earnings, on the basis of forecasts by stockbroker Henderson Crosthwaite. That is roughly a 25 per cent premium to the sector. Last October the group posted a 32 per cent rise in profits to pounds 11.5m for the year to June 1997, excluding a pounds 21.7m restructuring provision in 1996.
At the same time recently appointed chief executive Roger Paffard has introduced a simple plan for keeping the ball rolling. He hopes to oversee a huge stores expansion, with 200 new shops opened over the next four years, taking the chain to more than 500 sites. Over 500 staff will be recruited for the expansion.
He also hopes to restructure the manufacturing and packing facilities.
While there should be scope to improve efficiencies, this could well be offset by the cost of the expansion. Rents, pre-opening expenses - refurbishing and fitting out the new shops - could well prove a drag on profits for the next few years. And profits are also dependent on new manufacturing facilities opening in time for this year's Christmas rush. Work is on schedule, but it introduces further uncertainty into the equation.
The market is over-egging the cake at Thorntons. Growth should continue, but the share price is expecting too much. For non-holders the shares are best avoided. Existing holders could be well served by taking some profits.
The Microsoft mogul told fans a few home truths during his Reddit AMA
- 1 Woman falls to her death as she celebrates marriage proposal at the edge of Ibiza cliff
- 3 Dad attempts revenge on teenage daughter, plan backfires spectacularly
- 4 Ball pool for adults opens in London
- 5 Amal Clooney gives excellent response to fashion question at European Court of Human Rights
Woman falls to her death as she celebrates marriage proposal at the edge of Ibiza cliff
Boris Johnson claims porn-obsessed Islamic jihadists are 'literally w*****s'
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Ball pool for adults opens in London
Amal Clooney gives excellent response to fashion question at European Court of Human Rights
9 reasons Greece's experiment with the radical left is doomed to failure
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
Have we reached 'peak food'? Shortages loom as global production rates slow
Greece elections: Syriza and EU on collision course after election win for left-wing party
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
iJobs Money & Business
£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...
£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...