Branded ceramic products supplier Portmeirion (LON: PMP) had a poor first half of 2019, but it is confident that the second half will be much better, and it could possibly maintain full year profit. That will be helped by a second half contribution from the recently acquired Nambe business.

Management warned about first half trading in a trading statement in May. In the six months to June 2019, revenues were 5% lower at £34.9m, while pre-exceptional profit slumped from £2.1m to £525,000. This decline is due to the relatively fixed cost base.

Lower exports hit revenues, but Portmeirion believes that new product development will improve sales in the important Korean market. US sales increased, but they were lower in dollar terms. The US order book is ahead of last year.

In contrast, UK revenues were 9% higher. Home fragrance sales were maintained. E-commerce sales were 13% higher.

The interim dividend was maintained at 8p a share and the total dividend is likely to be unchanged at 37.5p a share. That is nearly twice covered by earnings.


During the first half, Portmeirion and Churchill China (LON:CHH) bought the stake in ceramic materials supplier Furlong Mills that was previously owned by Dudson. Portmeirion spent £363,000 to take its stake to 44.4%. Churchill paid £454,000 for 9.5%, which took its stake to 55.6%. This means that Furlong will not be consolidated in the Portmeirion figures. Even so, the first half contribution from the associate fell from £98,000 to £35,000.

In July, Portmeirion acquired US-based homeware brand Nambe, which supplies products including barware and serveware. This provides a stronger position in the US market and diversifies the product range into metal and wood products.

Portmeirion paid £9.6m ($12m) in cash for Nambe and that means that it could end the year with net debt of £6.8m. Strong cash generation means this is not a problem. There is no pension deficit any more.


The second half is always more important, although there are likely to be some extra costs due to Brexit preparations. Panmure Gordon forecasts underlying 2019 pre-tax profit of £9.6m, which is £100,000 lower than the previous year, but it is expected to recover to £11m in 2020.

At 985p, the shares are trading on 12 times 2020 prospective earnings and an increase in the dividend is expected so the forecast 2020 yield is 4%.

Portmeirion is a strong international business and the recent weakness of the pound could help earnings. The shares are appear undervalued.