Long trading histories, bombproof cash-rich balance sheets and superb long-term shareholder returns may be thought of as the hallmarks of a select few blue-chip companies.
However, the three companies Im writing about today are not the crme de la crme of the FTSE 100, but AIM-listed firms that many investors will never have considered or perhaps even heard of. James Halstead (LSE: JHD), Nichols (LSE: NICL) and FW Thorpe (LSE: TFW) are well-established family businesses, run with a view to enduring long-term success, making for ideal buy-and-hold investments.
Put these companies in an ISA and youre sheltered from tax on capital gains and income. Hold the shares for two years and they also become exempt from inheritance tax one of the reasons the families have chosen an AIM listing for their businesses in preference to being on the main market.
- Founded: 1915
- Business: Flooring
- Share price: 327p
- Market cap: 678m
- Last year revenue: 223.5m
- Last year pre-tax profit: 41.8m (margin 18.7%)
- Net cash: 38.5m
Youll find Halsteads products around the world in schools, hospitals, airports, retail spaces and so on. Geographically, revenue breaks down as: UK 35%, Europe and Scandinavia 43%, and Rest of the World 22%.
The company posted record numbers last year, with the chief executive commenting:
We remain on track to continue growth, and following a decade which has seen a financial crisis and a global construction contraction and in which we have doubled turnover, tripled our profit after tax and quadrupled the dividend, I can only say not bad at all.
Halstead trades on a trailing P/E of 21.5 well below the AIM market P/E of 53, but at a slight premium to the FTSE 250s 19.8 (the index the company would be in, if it were listed on the main market).
Halsteads dividend yield is 3.1%, compared with 2.5% for the FTSE 250. Furthermore, Halstead has paid special dividends from time to time, and I wouldnt be surprised to see another in what is the companys centenary year this year. Interim results are due to be released tomorrow (Tuesday).
- Founded: 1908
- Business: Soft drinks
- Share price: 1,180p
- Market cap: 435m
- Last year revenue: 109.2m
- Last year pre-tax profit: 25.7m (margin 23.5%)
- Net cash: 34.5m
Nichols brand portfolio includes founding brand Vimto, which is sold in over 65 countries and Levi Roots, Sunkist and Panda which are sold in the UK. The company generates 78% of total revenue from the UK, with all bar 4% of the remainder coming from the Middle East and Africa. In the Arabian peninsula, Vimto has enjoyed over 80 years of dominance as the beverage of choice for the sunset feast during Ramadan.
Nichols earnings have increased by a compound annual growth rate (CAGR) of 16.3% over the last four years well ahead of IRN-BRU maker AG Barr (10.6%), beer behemoth SABMiller (10.7%) and global spirits supremo Diageo (7.3%).
Nichols trades on a trailing P/E of 21.3 and a yield of 1.9% a slight premium to the FTSE SmallCaps 20.7 and 2.5% (the index the company would be in, if it were listed on the main market).
- Founded: 1936
- Industry: Lighting
- Share price: 148p
- Market cap: 171m
- Last year revenue: 62.9m
- Last year pre-tax profit: 12.4m (margin 19.7%)
- Net cash: 19.3m
Thorpes subsidiaries specialise in various areas of the lighting industry, including industrial, retail and display, signage and cleanroom (laboratories, semi-conductor manufacturing spaces and so on). The company generates 88% of total revenue from the UK, with the majority of the remainder coming from Europe.
Profit growth has been subdued in the last few years, as Thorpe has been investing heavily in LED-orientated product development and new manufacturing facilities, as well as supporting a road and tunnel lighting start-up business that is only now moving into profit. A four-year dividend CAGR of 15% is probably a better indicator of the progress of the underlying business.
Like Nichols, Thorpe would be in the FTSE SmallCap index if it were listed on the main market. Thorpes P/E of 16.4 is on the value side of the indexs 20.7. The companys dividend yield of 2.2% is a little lower than the 2.5% of the index, but like Halstead the lighting firm has a history of paying special dividends from time to time.
Halstead, Nichols and Thorpe are solid, classy smaller companies that have handsomely rewarded long-term shareholders. I believe they are great ISA candidates, and could sit nicely alongside five elite FTSE 100 blue chips that you can read about in this FREE research report from the Motley Fool’s leading analysts.
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G A Chester has no position in any shares mentioned. The Motley Fool UK owns shares of FW Thorpe. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.