Sunday, 13 February 2011

Jacques Vert: Green for Go?

After the roller-coaster that is HMV (mostly a roller-coaster in the downward direction), I am more suspicious of retail stocks. Jacques Vert Plc (JQV) might just restore the faith and put the fun back into the fairground.

JQV is a retailer of four womenswear brands, aimed at the middle-aged to older lady (aged 30+), sold through its own stores, department stores and the internet.

The current share price of 16.75p (mid-point as at 11 February) gives the company a market value of £32m. Based upon the 2010 basic EPS of 2.5p, this represents a PER of 6.7x. The Company is listed on AIM.

Source: London Stock Exchange
In the past five years, the shares have hit a high of 26.5p (April 2007) and a low of 3.25p (Dec 2008).


The Company was founded in 1972 by two tailors and listed on the stock market in 1977 with the Jacques Vert brand. 

In December 2002, the Company acquired William Baird Plc, which came with three further brands and a garment manufacturer in Sri Lanka for £18m.

In late 2010, the Company started to develop its online presence with the launch of two multi-brand sites.

The four brands are now retailed in c900 outlets, including a small presence in Canada and Ireland.

Risks & Challenges

  • Fashion-led retail, although geared towards older women, which as a group tends to have more disposable income and favourable demographics;
  • Currency risk / overseas suppliers - there appears to be a hedging strategy in place, but currency movements will have an impact;
  • There is small pension scheme deficit on the balance sheet (£0.65m) and
  • An upgrade to the IT infrastucture to support online growth has been announced - budgeted at £3m - but brings with it the risks of not being implemented to time or cost.
The Company website is here 

The Rules

The following analysis is based on the 12 months to 24 April 2010 (FY10) unless otherwise stated

1 - Assets - the NAV at the April 10 was £23m compared to a market cap of £32m, equating to a premium of 39%. On the face of it, the balance sheet looks healthy with limited goodwill, lots of cash (£12m) and positive net current assets.  

However, when you probe the notes it gets potentially better as you discover that there are £11m of unrecognised deferred tax assets (ie will help to reduce the tax bill when profits are made). Adding in the deferred tax asset and deducting £4.5m out of the cash for the 2010 dividend and a planned IT upgrade, results in an adjusted NAV of £30m or 15.5p per share.

In addition, there is potential upside in the market value of the fixed assets (£3m book value versus cost of £18m) and future costs being lower than provided for (£6m) in respect of dilapidations and claims against the group in respect of industrial diseases (but these will be utilised over the next 20 years).

On this basis, I conclude that the market value is trading at around adjusted asset value, of which around £8m (25%) represents cash. Pass

2 - Market Value - a market cap of £32m is lower than the floor of £50m, but I'm considering dropping this to £20m anyway. Pass(ish)

3 - Cash Flow - (a) net current assets of £23m and (b) operating cash of £9m after working capital and provision movements. Out of this, we need to provide for capex (£1m) and tax and dividends (£1.5m), meaning that there is plenty of cash left over. Pass

4 - Debt - net cash of £12m, resulting in an EV of £20m. With EBITDA of £7m, this results in an EV/EBITDA ratio of 2.9x. Even with adjusted cash of £8m (see #1 above), this still represents an EV/EBITDA ratio of just 3.4x.

Given that it is a retailer, we can have a look at the rent positions. Annual rents of £4.7m, result in EBITDAR of £11.7m. If rents are capitalised at 8x, we have a rent-adjusted EV of £58m. The rent-adjusted EV/EBITDAR ratio is 4.9x, which is acceptable. Pass

5 - PER - the 2010 EPS was 2.5p, implying a PER of 6.7x based on the current price.

The acquisition of Baird in December 2002 transformed the existing Vert business and consequently, I am going to consider FY04 (12 months to April 2004) as my starting point for analysing long-term results to ensure an element of consistency.  Also, the current CEO and FD assumed their roles in 2003, so there is a nice overlap with this period. Based on this 7 year analysis, the average EPS falls to 1.6p, equating to a PER of 10x, which is still below the target ceiling of 12x. Pass

6 - Yield - the 2010 DPS was 0.65p, representing a yield of 3.9% and earnings cover of 4.2 times . The dividend is new territory for the company (no dividend has been paid in the past ten years (source: Sharelockholmes)) and lots of warm noises are being made: "The Board believes it is in the interests of the Company and the shareholders to put a progressive dividend policy in place". Pass

7 - ROE - the 2010 ROE was 25% and the average annual 7 year ROE is 21% (source: Sharelockholmes). Pass

8 - Directors - the directors are interested in about 9m shares and (discounted) options (c£1.5m in value). Remuneration is reasonable, although the Execs did get 100% bonuses in FY10, which seems generous. The two Execs and the Chairman acquired 0.5m shares at 15p each in July 2010, which is encouraging. Pass

9/10 - Buy or Bye? Based upon a 7 year average of EPS of 1.6p and a 7 year average PER of 8x, we arrive at a 'long-term fair price' of 13p, which is below the current price. Bye


The interim results for the 6 months to October 2010 were released in January 2011, including a trading update. The results were broadly positive, and despite the tough trading conditions, posted LFL sales +3.1%, although margins were squeezed slightly (-0.3%). Positive cash generation was maintained. Sales were effected in the miserable December weather, but rebounded in January, which is more than most listed retailers have said.

Investors Chronicle tipped it as a BUY in January 2011.


So, Jacques Vert is a small-time AIM listed fashion-led retailer, which should be enough to make me run for the hills. However, it passes all of my Rules, apart from the long-term fair price one, which is miserable. It is not a 'Net Net' nor is it valued at a significant discount to reported net assets, but it appears to be a well run business, valued on a lowly multiple with lots of cash swilling about, and upside potential in its balance sheet (market value of assets), business model (defensive customer base and expanding online presence) and dividend policy (now that it has one).

I am going to BUY the shares at around 17p (note the nasty spread) and aim for a target price of at least 30p, being basic EPS of 3p and a rating of 10x (above the current 7x, but below the retail sector average of 13x). The cash balance and dividends will give me some down-side protection whilst I wait. Green for Go. Hopefully.


  1. Interesting write-up. Thanks for sharing!

  2. Thanks Mark. Interesting comment on Diploma on your blog - it's a company that crops up on 'to do' list from time to time

  3. Surely just because you are an AIM listed company doesn't mean you are bad!


  4. David

    Absolutely not! Although the listing and diclosure rules are a bit softer in comparison to the Main Market, and therefore it's worth being an extra bit diligent.

    What I find strange is that you can't hold AIM shares in an ISA

  5. AIM is apparently too 'risky' for ISA, although you can hold them in a SIPP, so their not too risky for your pension! Also they get other tax breaks like venture capital trusts I think.

    As for Jaques Vert, I agree with your original assessment. It seems to be a decent company trading around fair value (I have it at a 30% discount), but that’s too close for me to bother investing. If it goes to 30p then kudos to you old chap.

  6. Hi John

    JVQ is now in my SIPP so I can sit and wait for my 30p! I'm under no illusion that it will happy over-night but if they continue heading in the right direction, EPS will continue to grow, and with dividends and cash on the balance sheet, we might head northwards.

    I wish I had spotted it earlier when the price was a bit lower. Time will tell