| CATEGORY: SMALL CAP ANALYSIS SECTOR: GENERAL RETAILERS |
Small Cap Focus: Stagecoach Theatre performs |
|
By Andrew Hore
|
|
Thu 29 Jan 2009
|
LONDON (SHARECAST) - At a time of doom and gloom Stagecoach Theatre Arts continues to prosper.
The children’s theatre and dance schools franchise operator is not totally immune from the economy’s problems but tight management of the business has enabled Stagecoach to grow its interim profits.
However, the Stagecoach share price has fallen along with its peers in the stock market and it has lost nearly one-third of its value since the full year figures were reported in August 2008.
The shares have fallen from 68.5p each to 46.5p each over the past five months even though profits have increased 28% to £333,000 in the six months to November 2008.
This was achieved even though revenues dipped slightly from £3.09m to £3.05m. This decline is due to a combination of higher revenues from existing franchises and lower initial franchise fees.
Overall student numbers are holding up with 40,112 students around the world – 91% of them in the UK. Managing director David Spriggs says that parents do not tend to cut back on spending on their children unless they have to.
Local redundancies do have an effect, though. Spriggs points to the closure of Rover leading to falling student numbers in the local franchise area at the time, but he says that after two tough terms student numbers picked up again.
The shortfall in interim revenues was because potential franchisees were finding it difficult to raise bank finance to start their businesses. This is pure additional profit and hit gross profit. Reduced admin costs more than offset that.
Once banks start to lend again the new franchise fees will flow through again. Until that happens, Stagecoach can carry on making profits and generating cash. Net cash was £1.3m at the end of November 2008 and Stagecoach is paying a maiden interim dividend of 0.5p a share.
Stagecoach is extending its market by offering courses to 16-18 year olds. These are part time courses over two years. They involve classes on Saturday mornings for 32 weeks of each year plus six weeks of residential training across the two year period. The resulting qualification is equivalent to an A level.
The total cost of the course is £9,500 and is payable in two instalments at the start of each year. This enables Stagecoach to continue to generate revenues from students who would have been too old for the normal classes.
The international market still represents a significant opportunity.
The biggest competitor around the world is the Helen O’Grady Drama Academy, which is represented in 50 countries. Stagecoach has operations in 10.
There are three more country franchisees ready to start trading but they are on hold at the moment as the franchisees try to secure finance.
Hardman & Co’s full year profit forecast is deliberately cautious due to the lack of initial franchise fees. It predicts an increase from £710,000 to £720,000 in the year to May 2009, which suggests a small decline in profits in the second half. The shares are trading on nine times prospective earnings.
An unchanged final dividend would mean the shares yield 5.4%. Cash accounts for more than one-quarter of the company’s market capitalisation.
Stagecoach may not grow in the short-term but it will continue to generate cash and provide its shareholders with an attractive income.
|
|
| |
|
 |
Archived Stories |
 |
|
Front Page Stories |
|
|
