Sweet Things Are Made of This!

Thorntons (LSE: THT) : SP=47.75p, MCAP=£32.6m

Thorntons released its interim results today, showing some positive signs that it's shift away from 'own shop' retail sales to distribution through supermarket and other established retailers is starting to work.

Key Financial Points are:

·    Revenues up 2.9% to £133.7 million (2012: £130.0 million).

·    Profit before tax (PBT) and exceptional items rose by £2.2 million to £5.3 million (2012: £3.1 million).

·    Profit after tax rose by 49.3% to £4.0 million (2012: £2.7 million)

·    Exceptional items total £0.7 million (2012: £2.4 million) consisting of impairment and onerous lease provision movements.

·    Cash generated from operations £15.0 million (2012: £11.6 million).

·    Net debt up slightly, at £17.5 million (2012: £16.2 million).

·    No interim dividend (2012: Nil).

 Technical Analysis

 

The share price graph (above) seems to show that the recovery is progressing well. It will be interesting to see if the steady decline, between February 2011 and November 2011, is matched on the recovery by a steady rise. There doesn't seem to be any technical barriers to indicate sticking points as THT progresses through 2013.

Key Metrics

With the PSR at 0.15, there would appear to be scope for the return to profit being rewarded by a re-rating over the coming months.

What do you think?

Mick.

P.S. Pass the chocolates!

Panmure Gordon (SP=19.5p) - Recovery Play?

Is Panmure Gordon (PMR) a Recovery Opportunity?

Panmure Gordon (SP=19.5p, MCAP=£30.1m) seems to be undergoing a recovery, having seemingly completed a sloping (and untidy) inverted Head & Shoulders pattern, see below...

The resistance level at about 19.5p, had previously given support (in late 2008/early 2009), as can be seen on the longer term graph (below)...

 Panmure Gordon - Key Metrics

What stands out on the Sharescope "Key Metrics" (below), is the fact that a large part of the MCAP seems to comprise cash (£11.687m as at 30th June 2012, see the PMR Interim Results).

Recent News

With the improvements noted in the interim report and recent good news (see above), coupled with a rising share price and strengthening OBV, Panmure Gordon looks like it's worthy of consideration by us DIY-Investors. What do you think?

Can Premier Foods get back to the First Division?

Premier Foods (LSE: PFD) - SP= 85.75p, MCAP=£205.6m (at close 24/10/2012)

Premier Foods looks as though it is shaping up to be a classic recovery stock. At the beginning of October, I added it to one of the DIY-Investors Active Portfolios (replacing Shaftsinkers) and so far that looks to have been a good move. So in amongst my current plans to "Escape to the Country", what attracted me to it?

Well, you won't be surprised to hear that it was a combination of technical and fundamental indicators. I've summarised these below...

Technical Indicators

Back at the beginning of October, the PFD share price had nudged through the 50 day moving average, following a lateral breakout from the downtrend (marked by the orange line) that had been in place since the middle of June. On Friday 5th October, I bought PFD for the active DIY-Investors portfolio at 66.5p (having sold ShaftSinkers the day before). At the time, the SP graph looked like this...

You can see that, as is common, there was no increased volume to support the lateral breakout (17th September onwards) although the OBV broke up through the downtrend and the RSI was starting to show increasing strength. The clear breakthrough of the 50 day m.a. was the factor that tipped the balance for me, coupled with the general shape of the Share price graph over the medium term (see below):

Note that the low at the beginning of September 2012 was a higher low, compared to the lows of October/November 2011 (marked by the high volume).

Fundamental Analysis

Let's have a look at the Key Metrics (from Sharescope):

Background

 PFD has been burdened by the large debts (£1.2 Bn) taken on when it acquired Hovis and Mr Kipling group (RHM) in March 2007, just before the credit crunch and subsequent economic downturn. PFD has been facing an uphill battle since then, having to cover large interest payments, hefty bank fees and with the need to correct the large pension deficit.

Summary

Notwithstanding the above, the fundamentals do meet some of my criteria for a potential recovery stock, as follows:

• Low PSR (currently 0.12 [pr])
• Positive operating margin (+4.68% on last results - see Blue Arrow [above])
• Low P/E (currently 2.86)
• Improving Newsflow re. disposals etc.

Some of the more bearish counterpoints included:

• Level of debt
• Pension issues
• negative cashflow in y/e 31.12.2011 (see orange line on key metrics)
• negative tangible book value
• slight fall in turnover

As usual, as a DIY-Investor, I am quite happy to weigh up the evidence and dip my toe in the water (buying my initial holding) based on my own judgement. So far, so good and I can see the potential for more upside on the share price.

Why not take a look and see what you think about the recovery prospects for PFD?

Be sure to let me know your verdict!

Mick.