Previous investment in online sales helped ceramic housewares and giftware supplier Portmeirion Group (LON: PMP) to cope with the problems of Covid-19 and associated lockdowns. Online accounted for 47% of UK and US sales, up from 30% the year before.
Portmeirion’s own ecommerce platforms increased sales by 69%. The plan is to generate one-fifth of sales from this platform. Portmeirion acquired the shares it did not own in the Canadian associate company, which has little in the way of online sales. Bringing it into the group will help to increase online business in Canada.
Group revenues were hit by Covid-19, and the decline in profit was even more marked. In 2020, revenues dipped from £92.8m to £87.9m, although second half sales only fell by 6% compared with 20% in the first half. Underlying pre-tax profit fell from £7.4m to £1.4m.
The UK remains the largest revenue contributor despite a 2% decline. The Wax Lyrical business supplied hand sanitiser last year and a new range of products has been developed on the back of this experience.
North American revenues increased but that was down to a full contribution from branded homewares supplier Nambe and a few months of the consolidated Canadian business. Like-for-like revenues were 10% lower.
South Korea remains a problem area for Portmeirion, but it may be turning around its performance. Last year, revenues slumped from £20.8m to £13.1m. Parallel imports continue to hamper progress. New ranges exclusive to the country should help to grow revenues this year.
Rest of the world sales increased. Management wants to build up critical mass in the Middle East and south east Asia.
A placing raised £11.2m at 380p a share. There was cash generated in the period because of a reduction in working capital and net debt of £12.3m was turned into net cash of £700,000 at the end of 2020. The cash is being invested in automation for Portmeirion’s factories.
There could be a sharp bounce back in profit this year, but the Christmas period will be key to the overall performance. Increased scale will help improve efficiency. It is unlikely that Portmeirion will return to the 2019 level of earnings (56.9p a share) until 2022, when £1m of cost savings will have been achieved.
At the current share price of 575p, the 2022 multiple would then be around ten. A return to dividends has been trailed for this year. It will be much lower than in the past, but it will build up along with the earnings.
Portmeirion is attractive at the current share price, although investors may need to be patient.