Under the capable leadership of Angela Ahrendts, I always saw Burberry(LSE: BRBY) as a company with great long-term potential, and I was a little disappointed by her departure in 2014.
But I needn't have worried, as today's full-year results showed the purveyor of high-end coats and bags is still looking good, despite the tightening retail situation. The firm's global reach is partly to thank for that, with 39% of its 2016/17 revenues coming from the Asia Pacific region, 25% from the Americas, and 36% from the rest of the world -- UK sales make up only a tiny portion.
And though the Hong Kong and US markets were described as challenging, Chinese sales are recovering, and the company saw a 3% rise in retail revenues -- though with wholesale down we saw a 2% drop in overall revenue.
Underlying adjusted pre-tax profit did fall by 21%, with the company in a transition phase and engaging in some cost-cutting -- not to mention the current chief executive Christopher Bailey set to stand down in favour of Marco Gobbetti in July. We're also facing a reversal this year of the 10% boost provided by the fall in the pound, so we are in uncertain times.
But cash flow was strong, which for me is a key characteristic of this high-margin luxury retailer, and we saw a rise of £149m for a year-end net cash figure of £809m.
The dividend was lifted by 5% to yield 2.3%, and £150m in share buybacks was completed -- with a further £300m on the cards for this year.
And that cash flow is what I really like about Burberry. It strengthens my confidence in the company as a solid provider of both dividends (modest but well-covered and progressive), and earnings growth at P/E multiples of 18-20, which I'd say is probably about right for the long term.
Closer to home
While I never buy anything from Burberry, I'm a regular customer of Conviviality Retail(LSE: CVR). The company, you see, owns Bargain Booze and Wine Rack, among other alcoholic beverage distribution operations.
Conviviality only listed on AIM as recently as 2013, and since then we've seen the share price gain 132% to 320p, with the start of a period of forecast earnings growth in 2016 giving it an extra boost -- over the last two years the price is up 120%.
The year to April is expected to bring in a 40% rise in EPS, putting the shares on an attractively low PEG of 0.4 and a not-at-all-stretching P/E of 16. First-half results to October suggest that's well on track, with revenue up 211%, adjusted pre-tax profit up 295%, and adjusted H1 EPS up 89%. If anything, the upbeat full-year forecast might actually turn out to be on the conservative side.
The acquisition of Matthew Clark and Bibendum have moved Conviviality's prospects up a notch, I reckon, and I think it sets the scene for a good few years of both growth and income. As well as the firm's attractive growth valuation, dividends are predicted to yield better than 4% and should be rising significantly ahead of inflation.
What drawbacks do I see? Net debt stood at £138.4m at the halfway stage, though that was down a little and is well within the firm's EBITDA bank covenant, and it's not too risky for a company with six-month revenues of nearly £800m.
Overall, I see another attractive long-term growth and income combination.
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Burberry. 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.