Could the RCG Corporation Ltd (ASX: RCG) share price rocket higher in 2017, following today's bumper profit result?
Here are the key takeaways from today's result:
- Revenue rose 39% to $301 million
- Profit rose 31% to $21 million
- A fully franked half year dividend of 3 cents per share was declared
RCG Corp is a $750 million retailer specialising in athleisure footwear. It distributes brands including CAT, Skechers, Vans, Dr. Martens, Timberland, Saucony and more. It also owns The Athlete's Foot, Hype DC (acquired August 2016) and Platypus stores.
According to the company, its underlying operating profit (EBITDA) increased to $42.9 million during the half, up 42%.
"We are exceptionally pleased with the results that the group has delivered and the progress we have made in the transformative period since RCG acquired the Accent Group in 2015 and Hype DC in 2016," Co-CEO Hilton Brett said. Accent Group is the wholesaler and retailer of Vans, Timberland, Skechers and Dr. Martens. It also runs those stores.
"With the distribution rights to 10 international brands and over 400 stores across 10 retail banners, RCG is the regional leader in the retail and distribution of performance and lifestyle footwear," Mr Brett added. "With its dominant market position and diversified portfolio, the Group is well positioned to withstand tough market conditions, capitalise on opportunities and deliver outstanding long-term returns for our shareholders."
Looking ahead, RCG said the tough market environment since Boxing Day has forced it to revise downwards it operating profit forecasts. Previously, the company was expecting EBITDA of $90 million over its full 2017 financial year. However, it now expects that figure to be between $85 million and $88 million.
Should you buy RCG shares?
Given its recent acquisitions, there are many moving parts underneath the hood of RCG. However, today's result appears mostly upbeat despite the slight reduction in forecast operating profit.
At today's prices, the company's shares change hands at roughly 23 times profit and on a dividend yield of approximately 4.5%. In my opinion, that's a fair price to pay.
Meaning, it's not a standout buy or sell at these levels, in my opinion.
