I’ve written about these two British stocks before. Needless to say, I’m bullish on the long-term prospects for these companies and I’d buy. Last week, both released interesting statements, which I think are worth me taking a closer look.
#1 – Robert Walters
We got a quick trading update from Robert Walters (LSE: RWA) last week and its second quarter results are due on 7 July. Despite the short announcement, it was a good one.
The company indicated that “positive momentum” has continued through the first two months of Q2 2021. This means that “the board now expects profit before taxation for the full year ending 31 December 2021 to be materially ahead of current market expectations”.
The profits upgrade is clearly going to be welcomed by investors. And I reckon it could drive the British stock higher. The recruitment market is improving and I think this could continue as lockdown restrictions ease.
Most companies have have had hiring freezes in place during the pandemic. In fact, during the coronavirus crisis, costs such as labour were the first to go. So it hasn’t been a good environment for Robert Walters.
But as economies start to reopen, business sentiment is likely to improve, which means recruitment could increase. And the company is in a good position to capitalise on this.
Robert Walters also has a strong brand and operates a global business. The firm has a strong balance sheet and had a net cash position of £140m as at the end of March. It has also restarted its dividend payments, which income-hungry investors will be happy about.
The shares trade on a price-to-earnings ratio of 88x. So the stock isn’t cheap. This means that it could be sensitive to any Covid-19 setbacks.
#2 – Card Factory
Card Factory (LSE: CARD) shares were hurt when it released further details of its refinancing package. It turned out that the company needed to raise “net equity proceeds of £70m”. And investors didn’t like this.
The firm released its full-year results last week and I wasn’t surprised that the figures weren’t great. It’s worth noting here that the new CEO, Darcy Willson-Rymer joined in March. So it was his first review since joining.
The ship has a new captain and the bad news is now out in the open. The pandemic has been bad for Card Factory’s business. The numbers clearly demonstrate this. Both revenue and profitability took huge hits.
What’s also notable is that the company has had to borrow its way out of the crisis. In 2020, net debt as a multiple of EBITDA was 1.1x. But fast forward 12 months, and that figure has increased to 2.3x.
Most investors would shudder at this, but let’s not forget that the past 18 months have been unprecedented. Again, any Covid-19 setbacks could negatively impact the shares.
But I reckon the worst is over for the company and the British stock should rise from here. Most of its stores are now open and trading looks encouraging so far. While fewer customers are visiting its shops, they are spending more. If things continue to improve, then Card Factory should be able to service its liabilities. I’d buy now as I see a brighter future ahead.
