Marchpole - Additional News

Growth Company Investor 21 October 2005

Marchpole - STRONG BUY
Companies: MPH
21/10/2005

Growth Company Investor flagged up Marchpole as a strong buy at 24.5p in July, and although the shares have tailed off to 18.25p, we remain exceptionally bullish on prospects under experienced fashion entrepreneur and chief executive Greg Tufnell. He has revived the fortunes of this venture and positioned it well within its sector since taking the reigns in 2002.

Somewhat unfairly, the City lumps Marchpole in with its struggling retail sector peers, but the company is a very different corporate animal from the one Tufnell inherited. It acts as brand manager for six high quality labels – Emanuel Ungaro, Ungaro, Yves Saint Lauren (YSL), Boateng, Jean-Charles de Castelbajac (JCC) and Jean-Charles de Castelbajac/Rossignol. All continue to sell well and Tufnell is keen to add other quality brands to the roster.

Last year to end-March, Marchpole scored a 84% profits leap to £4.9m, well ahead of forecasts, on turnover lifted 62% to £32.5m. The news flow since our recommendation has been positive. The recent $5.5m acquisition of Moda America, a US venture that licenses the Emanuel Ungaro ‘diffusion’ label for the US market, gives Marchpole a high-growth American arm with a distribution platform, and Marchpole is also expanding JCC in Japan. Concerns over the impending cessation of its UK YSL distribution deal at the end of 2006 have weighed on sentiment, GCI has learnt that Marchpole is close to a deal that will replace the YSL license. For 2006, Shore Capital forecasts profits of £5.4m off £35m sales, giving earnings of 2.64p. At current levels, the shares trade off a very low multiple of 6.9 and sport a decent yield of 4.4%. A re-rating is long overdue. Strong buy.

James Crux
Market cap: £24.5m
PE Forecast: 6.9
Share price: 18.25p