What job would a genius choose? That's a pertinent question, and we know the answer. Albert Einstein started his working life as a patent clerk for its job security and reliable income. The reliable income is exactly why we think investors should take a close look at patent and trademark attorney Murgitroyd (MUR), whose share rating is far below the only similar quoted company on the London market.
- Growth in patent applications
- Steady profits record
- More expertise in-house
- Cheap compared with sector peer
- Effect of Unified Patent Court
- Difficult to deal in shares
Murgitroyd is a steady operator with a good track record. This is because despite - or perhaps because of - the economic gloom, organisations are keen to defend the intellectual property of their products from attack. Equally important, companies in Asia are scrambling to have their technology recognised and defended in Europe and the US, which are often their most important export markets. Latest figures from the European Patent Office (EPO) bear this out. Preliminary statistics for 2012 reported European Patent applications up 5.7 per cent to a record 258,000, and almost two-thirds of these came from outside Europe, with a quarter coming from the US.
Growth overseas is an important element of Murgitroyd’s plans. The US business has two offices and client income there rose by 9.5 per cent in the first half of 2012-13. The first-half results also showed that, despite a slight fall in group revenue, gross profit margins improved from 58 to 60 per cent, feeding through to a 3 per cent rise in pre-tax profits to £2.27m, allowing management to boost the interim dividend 7 per cent to 3.75p.
MURGITROYD (MUR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 480p | MARKET VALUE: | £42m | |
| TOUCH: | 465-480p | 12-MONTH HIGH: | 480p | LOW: 320p |
| DIVIDEND YIELD: | 2.7% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 256p | NET DEBT: | 13% | |
| Year to 31 May | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 29.4 | 3.83 | 31.8 | 10.0 |
| 2011 | 33.2 | 4.04 | 31.1 | 10.8 |
| 2012 | 35.7 | 4.43 | 36.8 | 12.0 |
| 2013* | 36.5 | 4.60 | 36.6 | 12.5 |
| 2014* | 39.1 | 4.90 | 37.7 | 13.0 |
| % change | +7 | +7 | +3 | +4 |
Normal market size: 300 Market makers: 3 Beta: 0.5 *N+1 Singer estimates | ||||
Keith Young, chief executive, says the reason behind the rising profitability is that Murgitroyd is getting more work done by its own patent attorneys. This reduces the amount they have to spend on costly external advisors in so-called disbursements, which go into the cost of sales. Encouragingly for investors, Murgitroyd increased its number of qualified attorneys during the first half from 64 to 67.
True, there is some uncertainty on the horizon. The European Union recently reached agreement on the Unified Patent Court. This could greatly reduce the number of patent filings. There will no longer be a requirement to file patents in each EU country, as only one EU-wide filing will be required. Mr Young is unfazed. He says the new court will not open until 2014 at the earliest and, even when it does, it is unclear whether multi-nationals will prefer EU-wide patents to the existing tried-and-tested system. He doesn’t anticipate a significant hit on revenues.
