MIDAS SHARE TIPS: In 2001, when Peter Kenyon joined Ramsdens Holdings (RFX), the company consisted of three pawnbrokers. Last week, Kenyon opened his 136th store, in Worksop, Nottinghamshire. Unlike many on the High Street, Ramsdens is thriving – and at £1.66 the shares are a bargain. The number of stores is growing, customer numbers are increasing and there is plenty of potential for expansion. The balance sheet is rock-solid too, so shareholders should expect decent dividends for the foreseeable future. More than 800,000 customers visit the shops each year, attracted by Ramsden’s competitive foreign exchange offering and increasingly attractive shop fronts. Once filled mainly with unclaimed pawn items, the focus on new jewellery is playing out well, expanding Ramsdens’ customer base and driving sales. The group benefits from weak competition too, as peers have been hit by payday loan problems and other issues. Ramsdens only lends money against pawn items and 85 per cent of customers repay their loans and retrieve their jewellery, often within a few weeks. The average borrowing is £220 but some customers take out considerably more, such as £30,000 as down payment for a new Ferrari. Brokers expect annual sales to rise at least 12 per cent to £45 million with pre-tax profits flat at £6.5 million, rising to £7 million in 2020. A dividend of 7.1p has been pencilled in for the current year, increasing to 7.8p in 2020.
The shares of flooring group Victoria (VCP) were £8.35 in November 2017. On Friday, they closed at £4.60. Yet the business has grown substantially since then. The company recently unveiled half-year figures to September, showing a 44% increase in sales to £273 million and an 82% increase in underlying profit to £28 million. Brokers predict further strong results for the full year, with sales of £600 million and profits of more than £66 million. The company came a cropper in October, when it tried to raise money in the bond market and admitted that profit margins were growing less rapidly than chairman Geoff Wilding had previously indicated. The shares fell almost 40% in less than a week and the bond issue was pulled. Wilding has been trying to reassure the market ever since and the interim figures gave him the chance to show in numbers that the company is financially robust. He also bought a million shares in Victoria, spending almost £5 million to underline his faith in the business. Two other board directors also bought shares, dipping into their own pockets to do so. There is little doubt that Victoria is doing a lot of good things. It is gaining market share, driving down costs and moving into fancy tiles to complement the core carpet business. The group has also launched a value range, to broaden its appeal and sales have responded well.
The war of words between bosses at advertising giant WPP (WPP) and its former chief executive, Sir Martin Sorrell, reached fever pitch last night ahead of a key strategy update. Johnny Hornby, the head of WPP-backed The & Partnership, urged Sorrell to stop ‘talking down’ the company and its new chief executive Mark Read, adding: ‘It’s disrespectful to them and makes him look small.’ Hornby, the half-brother of author Nick Hornby, said: ‘When he left in the summer the company badly needed a change of direction and strategy that Martin had not delivered and he should allow Mark to get on now unhindered.’ The intervention comes ahead of a key summit for Read, who will welcome shareholders to WPP’s London headquarters on Tuesday to set out his plans to turn it around following a difficult period.
SHARE PUNT OF THE WEEK: GPs software provider EMIS Group (EMIS) has reached a settlement with the NHS, so it time to back it? Emis, listed on London’s junior market AIM, provides software and IT services to GP surgeries across the UK. At the moment, it has a 56% share of the market. Emis lets doctors across different parts of the NHS access a patient’s records quickly, helps pharmacies manage their stock and provides patient information services. Emis hasn’t been free of issues in the past – this week it announced it had reached an £11.2million settlement with the NHS over failures in its NHS Digital contract this year. That related to reporting obligations, and Emis is confident the issues have been resolved. George Salmon, an analyst at Hargreaves Lansdown, says: ‘Delivering a better NHS is something we all want, and improving the infrastructure is a cost-effective way to do that. Emis plays nicely to that trend.’ Healthcare isn’t as exposed to blips in the economy, he adds, and software providers generally have strong cash flows so they can provide a steady stream of dividends. Salmon points out that Emis hasn’t necessarily progressed as fast as it might have hoped, and the fine it incurred from the NHS might make investors wary. He adds: ‘The £57.5m acquisition of Ascribe in 2013 hasn’t delivered the results expected, contributing to a rocky ride in recent years.’ And, of course, NHS cost pressures make it a tricky customer.
Thomas Cook has seen more than £1bn wiped off its value over the year: Is it time to get away from the travel giant? A heatwave that saw millions basking in their gardens, parks or at the seaside here rather than book a last-minute getaway was bad news for High Street travel agent Thomas Cook Group (TCG). It has seen more than £1billion wiped off its value over the year. Now, with most of the sector in the doldrums, shareholders might wonder if it is time to take a break from the industry or whether the cheap shares are a bargain to be snapped up. Thomas Cook had welcomed 2018 with the best of hopes, increasing its fleet of aircraft to 100 and expanding capacity across the business to pull in as many customers as possible. But the cracks were showing as early as July. In an update to investors that month, it said the ‘sustained period of hot weather’ had halted bookings, making it harder to rake in profit from the ‘lates’ market where customers book at the 11th hour. As the sun beat down, Thomas Cook’s woes intensified. In September it said operating profit would be down at around £280m, or 13% lower than the general expectation at the time.
