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Thorntons: no longer a choccy horror story

RESULTS: Over the past five years Thorntons has all too often been the bearer of bad news. Now a new strategy seems to be paying off and chairman Paul Wilkinson splashes out almost £150,000 buying shares in the chocolate retailer
February 26, 2013

Over the past five years, the price of Thorntons' shares has melted away from a peak of 200p as the combination of minuscule sales growth and profit warnings left a bitter taste among shareholders. But whereas the half-year results 12 months ago were ghastly, the latest figures are rather good; indeed, they sparked a 10 per cent rise in the share price and chairman Paul Wilkinson was quick to buy 310,000 shares at 47p apiece.

IC TIP: Hold at 47.5p

Thorntons is now halfway through a three-year makeover. The aim is to close 120 stores over the period and produce sales growth through supermarkets and new sales avenues including private label, international and online. It's a tricky strategy because, in the short term at least, it means increasing dependency on fickle supermarkets. However, the company has little choice because returns on its own retail interests are so poor.

In the latest six-month period (and before accounting for exceptional costs and central overheads) retailing reported operating profits of £5.15m on sales of £73.5m, while S&O (incorporating commercial sales channels and manufacturing) returned £10.3m on turnover of £60.2m. And while Thorntons reports that markets remain "very challenging", it also has a "strong order book" for Easter.

Investec Securities forecasts full-year sales marginally higher at £222m, while normalised profits jump from £0.9m to £3m to produce prospective EPS of 3.2p.

THORNTONS (THT)

ORD PRICE:47.5pMARKET VALUE:£32.5m
TOUCH:47.25-47.75p12-MONTH HIGH:47.75pLOW: 18.875p
DIVIDEND YIELD:nilPE RATIO:18
NET ASSET VALUE: 18p*NET DEBT:140%

Half-year to 12 JanTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20121300.620.90nil
20131344.594.90nil
% change+3+640+444-

*Includes intangible assets of £2.07m, or 3p a share