McColl's Retail Group plc and W.H. Ireland Group plc: two up-and-coming growth stocks you probably haven't considered

Share prices at these two smaller companies have been flying lately and today's results show continuing promise, despite one or two short-term setbacks.

Wealth of opportunity

AIM-listed W.H. Ireland Group(LSE: WHI) is up 2.41% today after posting a 24% rise in group revenue to £14.9m in Monday's interim results, marking a confident rebound after recent hesitancy.

Its share price is now up almost 60% from 91p to 145p over 12 months, despite reporting a pre-tax loss of £3.03m in February. Today's interims for the six months to 31 May show group revenue up 24% to £14.9m, with the highlight a 239% rise in corporate and institutional broking transaction revenue to £2.8m. Private wealth management fee income rose 23% to £5.4m.

Right lines

As well as restoring profitability, the firm has bolstered its cash balance through the previously announced sale of its Manchester office. Recurring revenues are now at 45% of total revenues, with the company boasting a strong business pipeline and a rise in private wealth management assets under management to £3.1bn. Operating profit before exceptional items was £400,000.

A relatively small-scale wealth manager like this, with a total market cap of around £41m, is always going to be risky, but right now the trajectory looks promising.

Retail therapy

The market was less excited by today's update from McColl's Retail Group (LSE: MCLS), its share price dipping 0.96% in early trading. However, nor was it overly concerned by the fact that profits have nearly halved, from £8.2m in 2016 to £4.5m, viewing this as an exceptional one-off.

The £237m convenience retailer's interim results for the 26-week period to 28 May covers a time of change and opportunity as the group integrates 298 new convenience stores acquired from the Co-op at a cost of £117m. Total revenue rose 7.6% to £504.8m, up from £469.2m in 2016, as the new stores steadily opened.

Bring me sunshine

However, like-for-like sales were flat, rising just 0.2% in the first half, although accelerating to 1.4% in Q2 on the back of favourable weather, which boosted alcohol and grocery sales. Performance in newly converted stores rose a healthier 2.8% in H1, and an even better 3.8% in Q2. Gross margins crept up 90 basis points to 25.4%. Progress may be slow, but it is steady.

That sharp drop in pre-tax profits was down to £1.3m of store pre-opening costs, and £2.3m of exceptional costs, mostly professional fees and write-off of historical banking fees resulting from the Co-op acquisition and refinancing. Markets retain their faith in the firm's growth story, which has seen the stock rise 38% in the last year.

The Plus side

McColl's chief executive Jonathan Miller expects further profit and sales growth from the integrated stores in the second half of the year, with 700,000 customers now holding its Plus loyalty card. "As the wider convenience and wholesale sector evolves and continues to grow, McColl's is in a strong position to benefit," Miller concluded.

Trading at 16.25 times earnings, McColl's is priced for further growth, plus you get an attractive 4.95% yield as well.

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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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