Findel
has been a good friend to Questor.
Be it from its role as an unglamorous yet stable
catalogue retailer simply selling DVD players
and fluffy toys, to acting as the partial saviour
to Farepak buying the Kleeneze catalogue and assorted
websites the two have stuck together.
From
first recommending the shares as a buy in October
2004, rightly arguing that Findel was more immune
from a downturn than most other retailers, going
on to reiterate that buy advice on a number
of occasions, it has been a loyal companion.
But
all friendships have to end at some stage and
this is certainly the case when it comes to
Findel.
Yes,
the shares soared even further yesterday , closing
up a somewhat toppy 13pc on news that Findel
is potentially going to hive off part of its
business, announced alongside its preliminary
results for the year to March.
Chief
executive Patrick Jolly hopes to finish his
strategic review by the summer and the outcome
has to be to divide the two parts of the business
down the middle.
The
company’s two key businesses are becoming
increasingly different one focused on consumers,
the other on government-funded purchasers and
separating them may lead to a re-rating of the
shares. The first and better known part of the
group is its fast-growing catalogue and internet
business. Under a cacophony of brand names now
including Kleeneze
plus old favourites such as the Cotswold Company
it sells everything from sofas to children’s
toys.
This
arm has seen significant growth rates, particularly
boosted by online sales, although it still posts
more than 3m mail order catalogues a year.
The
second part of the group is its education and
health business, which sells everything from
rulers to petri dishes to schools and hospitals.
This division has seen a process of change of
late, through reduced education sales while
facing reorganisation costs and the bill for
a new IT system at its healthcare business.
The
potential split is likely to make sense, in
spite of the fact that Findel has been grown
rapidly in recent years under its current structure.
Sales rose to £555m in the year to March
from £489m last year, although profits
fell from £35m a year ago to £17.4m
thanks to a number of exceptional items.
The
shares certainly have further to go with some
analysts pencilling in a combined 900p sum-of-the-parts
valuation if the businesses were to be split
but there are risks.
The
company needs to integrate recent acquisitions
smoothly, move one of its largest businesses
to a new warehouse without any slip-ups, and
work out what to do re the potential demerger.
Following the recent run and the gains produced,
readers should take some profits.
IN
a simple twist of fate, on the same day the
Government confirmed that up to 2,500 post offices
will have to close across the country, one of
the companies that helped contribute to its
downfall posted a stellar set of full-year results.
Of
course, to be fair, PayPoint cannot be blamed
for the post office closures, it just did a
better job of collecting cash to pay for everything
from gas bills to the congestion charge than
the Post Office did itself.
Both
companies currently have roughly 17,500 outlets,
but the key difference is that PayPoint’s
increased by 15pc last year, while the number
of post offices is clearly heading south.
PayPoint’s
real coup over the Post Office was when it landed
the exclusive contract for people to pay for
their TV licences in cash. That business helped
drive a 31pc increase in revenues to £157m
in the year to March, generating pre-tax profits
of £27m. The core UK business continues
to be a growth market as PayPoint pursues opportunities
to allow consumers to pay for online transactions
in cash, via their outlets.
But
the company is also looking abroad. It recently
bought PayStore SRL, the leading independent
Romanian mobile top-up provider. This is a great
growth business because, due to a lack of infrastructure,
97pc of bills in Romania are paid in cash, with
separate dedicated cash offices for gas, electricity,
etc. PayPoint intends to change all that by
creating a one-stop shop, a little like its
counter-top terminals in corner shops across
the UK.
PayPoint’s
shares are trading on around 22 times earnings
for the year to March 2009 and took a slight
hit yesterday on profit taking. The shares are
likely to plateau for a short time, but in terms
of extended growth prospects, PayPoint has much
further to go. One to tuck away for the long
term.
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