SMALLER COMPANIES : Whittard's bubbling price is reaching the top of the cup

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The Independent Online
Whittard of Chelsea came to the market with an attractive proposition: a range of shops selling high-quality teas and coffees. From 79 shops when it floated on AIM last June, it has added another 20, with more in the pipeline. Yesterday a branch opened at the Trocadero centre in London's Piccadilly.

A successful retailing formula is a godsend; the concept can be rolled out in the almost certain knowledge that the money will flow in.

Retailing is the easiest business to boost sales, by the simple expedient of cutting prices - the pile 'em high, sell 'em cheap formula of Jack Cohen at Tesco. That works too, but if the punters fail to come in it is a strategy that leads to disaster. Whittard's shops are attractive and the concept should have a few more years of growth if expansion is sensibly managed.

So why did finance director David Boys sell almost a third of his holding last week? Simple enough: he recently announced his resignation, saying that after seven-and-a-half years at the company, he felt like a change. All well and good. But the stellar performance of the shares certainly provided a good time to lighten his holding.

Tipped on these pages at the time of the flotation, the market took a while before it was willing to acknowledge the strength of the brand. But from Christmas onwards the shares have soared, and are now showing investors from the time of the flotation a 40 per cent gain. They now stand at 215.5p.

The company expects to open stores at the rate of 15 to 20 a year. On that basis, you can look to growth of 10 per cent a year for the next few years. The company reported a 30 per cent increase in earnings at the interim stage. If that advance is maintained for the year, shares are trading on a forward price earnings ratio of 23 times earnings.

Small, successful growth companies like Whittard are always appealing. The downside is that the market will reach saturation levels quickly. Each shop needs a hinterland of customers, and it is doubtful there is room for more than one shop in each major city; Birmingham has two Whittards. The company has recently opened its first overseas franchise, in Dubai, which is trading within budget. But at these levels, the shares are high enough.

RICHARD PHILLIPS

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