Under the capable leadership of Angela Ahrendts, I always saw Burberry (LSE: BRBY) as acompany with great long-term potential, and I was a little disappointedby her departure in 2014.
But I neednthave worried, as todays full-year results showed the purveyor of high-end coats and bagsis still looking good, despite thetightening retail situation. The firms global reach is partly to thank for that, with 39% of its2016/17revenues coming from the Asia Pacific region, 25% from the Americas, and 36% from the rest of the world UK sales make up only a tiny portion.
And though the Hong Kong and US markets were described aschallenging, Chinese sales are recovering, and the company saw a 3% rise in retail revenues though with wholesale down we saw a 2% drop in overall revenue.
Underlying adjusted pre-tax profit did fall by 21%, with the company in a transition phase and engaging in some cost-cutting not to mention the current chief executiveChristopher Bailey set to stand down in favour ofMarco Gobbetti in July. Were also facing a reversal this year of the 10% boost provided by the fall in the pound, so we are in uncertaintimes.
But cash flow was strong, which for me isa key characteristic of this high-margin luxury retailer, and we saw a rise of 149m for a year-end net cash figure of 809m.
The dividend was lifted by 5% to yield 2.3%, and 150m in share buybacks was completed with a further 300m on the cards for this year.
And that cash flow is what I really like about Burberry. It strengthens my confidence in the company as a solid provider of both dividends (modest but well-covered and progressive), and earnings growth at P/E multiples of 18-20, which Id say is probably about right for the long term.
Closer to home
While I never buy anything from Burberry, Im a regular customer of Conviviality Retail (LSE: CVR). The company, you see, ownsBargain Booze and Wine Rack, among other alcoholic beverage distribution operations.
Conviviality only listed on AIM as recently as 2013, and since then weve seen the share price gain 132% to 320p, with the start of a period of forecastearnings growth in 2016 giving it an extra boost over the last two yearsthe price is up 120%.
The year to April is expected to bring in a 40% rise in EPS, putting the shares on an attractively low PEG of 0.4 and a not-at-all-stretching P/E of 16. First-half results to Octobersuggest thats well on track, with revenue up 211%, adjusted pre-tax profit up 295%, and adjusted H1 EPS up 89%. If anything, the upbeat full-year forecast might actually turn out to be on the conservative side.
The acquisition ofMatthew Clark and Bibendum have movedConvivialitys prospects up a notch, I reckon, and I think it sets the scene for a good few years of both growth and income. As well as the firmsattractive growth valuation, dividends are predicted to yield better than 4% and should be rising significantly ahead of inflation.
What drawbacks do I see? Net debt stood at 138.4m at the halfway stage, though that was down a little and is well within the firms EBITDA bank covenant, and itsnot too risky for a company with six-monthrevenues ofnearly 800m.
Overall, I see another attractivelong-termgrowth and income combination.
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