It’s always interesting when a new company arrives on the stock market and today Midwich Group (LSE: MIDW) reports its first set of full-year results since being admitted to the FTSE AIM market during May 2016.
Growth and balanced returns
The firm describes itself as a specialist audio, visual and document solutions distributor to the trade market, dealing in products such as large format displays, projectors, digital signage, printers and scanners. Investing in distributors that trade between product manufacturers and the companies selling things to end users always appeals to me. Distributors tend to ride the fortunes of entire industries, responding to demand without the costly cut-and-thrust of dealing with end users.
During 2016, around 65% of the firm’s operating profit came from the UK and Ireland, 21% from Germany, 8% from Australasia and 6% from France. It seems clear that the firm has plenty of room to expand further internationally, and it has moved fast since raising around £24m (net) with the recent initial public offering (IPO) of shares. During September, the company used part of the proceeds to acquire two companies, which underlines the company’s organic and acquisitive growth strategy.
The strategy seems to be working. Revenue is up 17.8% compared to a year ago, adjusted operating profit ballooned 22.2% and adjusted earnings per share notched up 19.5%. In a sign that Midwich plans to deliver balanced returns for investors, the directors declared a maiden dividend of 8.62p and committed to a progressive dividend policy.
At today’s share price of 335p, the forward price-to-earnings (P/E) rating runs at just over 16 for 2018 and the forward dividend yield is around 3.6%. City analysts following the firm expect earnings to cover the payout around 1.7 times.
Rolling out in the UK and the US
Petrol forecourt retailer Applegreen (APGN) describes itself as Ireland’s largest motorway service area operator and it also enjoys a leading position in the Irish petrol forecourt sector. Last year around 71% of gross profit came from Ireland, 27% from the UK and 2% from the USA. The firm is seeing brisk progress in rolling out its offering in Britain, and the potential for growth in America looks vast.
Today’s full-year results are encouraging, with revenue up 9% compared to a year ago, net profit shooting up by 43% and diluted earnings per share ratcheting up 27%. The directors revealed their confidence in the firm’s prospects by declaring a maiden dividend of 1.25 euro cents.
The firm has three strands to its plan for growing the estate of forecourt convenience retail outlets — a “low fuel prices, always” price promise, intended to drive footfall to the stores, a “better value always” tailored retail offer, and a strong food and beverage focus, aiming to offer premium products and service to the company’s customers.
The appeal of Applegreen’s offering is enhanced by strategic partnerships with brands such as Burger King, Subway, Costa Coffee, Greggs, Lavazza, Chopstix, Freshii and 7-Eleven, and the company also has its own brands in aCafé and Bakewell café.
At today’s share price around 417p, the forward P/E rating for 2018 is just over 15 and the dividend yield runs at just over 0.4%. City analysts following the firm expect earnings to cover the payout around 16 times, suggesting the directors are keeping funds back to progress opportunities to grow.
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Kevin Godbold has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.