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Studio agrees sale of education business

The sale will raise £50m for pension payments and debt funding
December 17, 2019

Studio Retail Group (STU) - known until recently as Findel - has announced the sale of its education business to the Yorkshire Purchasing Organisation, led by Wakefield City Council. The group is expected to get £50m in the deal, which will go towards funding the pension scheme and making payments towards the group’s credit facility. The reduced working capital demands also mean the group will accelerate investment in the studio business.

IC TIP: Hold at 228p

The group rebranded as Studio Retail at its AGM in July to reflect management’s strategy to focus on its studio digital business, which provides toys, games, gifts, home & leisure and other items. Online sales accounted for 81 per cent of the group total over the half-year to September, up nine percentage points from a year earlier, due in part to the launch of a Studio app, which has so far been downloaded 200,000 times. The 11 weeks post-period end, which includes Black Friday and the run up to Christmas, has delivered a 10 per cent jump in sales.

A surge in PPI claims ahead of the August deadline led to a severe drop in pre-tax profits, to £2.6m from £15.5m in the prior period. However, on an adjusted basis profits rose 12 per cent to £13m, helped by a strong contribution from both divisions. Bloomberg consensus expectations are for adjusted EPS of 28.3p for the March full year, up from 27p in FY2019.

STUDIO RETAIL GROUP (STU)  
ORD PRICE:228pMARKET VALUE:£ 197m
TOUCH:225-229p12-MONTH HIGH:261pLOW: 153p
DIVIDEND YIELD:NILPE RATIO:15
NET ASSET VALUE: 59pNET DEBT*:£241m
Half-year to 27 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201813415.514.4nil
20191322.62.4nil
% change-1-83-83-
Ex-div:na   
Payment:na   
*Does not include IFRS 16 lease liabilities of £44m