Ideal Shopping Direct have been tipped by SHARES mag as one of their tips for 2005.
They say "Ideal's three shopping channels now reach over 8 million households. Sales & profits growth is running at 45% which is about the same as ASOS but the 2005 prospective PE is 60% lower".
Broker estimates: current-year profits will top £3m dropping PE to 17. Next year profits should reach £5m cutting PE to 12. In 2007 PE should fall to single figures.
From Citywire after trading statement in October 2004..
Following a number of false starts TV shopping company, Ideal Shopping Direct, has started to live up to investors dreams.
This morning the group announced that trading in the last eight weeks had been ahead of expectations and that it expected to beat full year forecasts with profits before tax in excess of £3 million.
The Christmas trading period, which is yet to get underway, will still be crucial.
Jim Hodkinson, who was bought in as chairman of Ideal in April, told Citywire: 'What has happened is that we've done a lot of things to change the business. We've done a lot in the buying area and a lot in the distribution area… it's starting to bear fruit.'
This will be welcome news for long-term shareholders that have had to sit through a number of disappointments while waiting for the company to live up to its promise.
First there was a fire, which destroyed much of the group's operations.
Despite a hostile commercial environment management managed to get the business firing on all cylinders again before being forced to issue a warning last year because the company lacked the infrastructure to deal with demand. At this point Citywire, which had previously tipped the shares, suggested shareholders take a small profit at 46p given the uncertainties.
However, now the shares are now back with a vengeance following recent management action.
After the warning the company relocated its customer services operation to India, closed its traditional mail order business and reorganised its buying and distribution armIn addition Ideal Shopping's move onto Freeview digital TV has been a big success.
Cash generation has remained strong and at the half way stage at the end of June the company had net funds of £4.6 million.
The sensitive shares have more than kept up with the company's quick turnaround and have jumped another 27p today to 149.5p.
The company's chequered past is a concern but Hodkinson assured Citywire: 'I'm confident about the future because of the things we have put in place and I'm trying to make sure we don't disappoint.' There is little chance of any disappointment from today's announcement.
I am long on IDS with an end of 2005 price target of 300p. Please DYOR and good luck.
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LATEST NEWS-FROM TRADING STATEMENT 5/1/05
"Having considered the company's recent trading performance, the Board believes
that market expectations of full year 2004 profit before tax are too low. With
the full picture of sales for the year to December 31st 2004 now clear, profit
before tax for the year is likely to be in excess of £4 million, a record for
the company."
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