13 February 2020 – trading statement

Following the disappointing trading statement of 14 January, the company has updated the market again.  The expectations for 2019 results are unchanged from the previous announcement, with revenues likely to be £112.5m (2018: £111.1m) and adjusted pre-tax profits likely to be £9.0m (2018: £10.7m).  Despite this disappointing result, strong cash flow has led to a reduction in net debt of £3.3m to £16.6m.  The strong cash flow means that the dividend for the year will rise 5% to around 6.4p, putting the shares on a yield of 6.3%.  With no deferred consideration payments due in 2020 net debt should fall once again.  The first half of the current year is likely to produce a weaker performance continuing the trend from the second half of 2019, although trading is expected to pick up later in the year.  The company has taken steps to reduce its cost base with four warehouses closing and further significant cost savings have been identified.  On that basis, and given the attractive dividend yield, we rate the shares a SPECULATIVE BUY.