Questor share tip: Murgitroyd eyes bigger dividends

Murgitroyd
515p-27½p
Questor says HOLD

PATENT and trademark attorney Murgitroyd [LON:MUR] said yesterday that the strength of the pound and competition on price were the reasons for an 11pc slump in annual profits and they don’t expect a recovery next year.

That said, Questor thinks the shares are still worth holding on to as the company is making plenty of cash, debts are falling and dividends continue to rise.

The fall in profits also needs putting in perspective. The market was expecting the company to make about £4.7m at the start of the year, and yesterday Murgitroyd said it had made £4.1m in the year ended June 30.

The detail showed that more than half of that profit miss was because of the strength of the pound.

Murgitroyd uses in-house patent and trademark attorneys to protect the intellectual property of companies. Asian companies are scrambling to have their technology recognised and defended in their most important end markets of Europe and the US while Western corporates want their own technology protected against imports.

Apple’s patent wars with Samsung are just an example of a growing trend. The US business at Murgitroyd increased revenue by 26pc to £12.9m during the year.

Murgitroyd’s cash flow increased to £2.9m during the year, up from £2.1m last year. The company is now almost debt free, with net debt of £380,000, down from £1.9m a year ago.

The share price can be volatile as the shares are tightly held by retail investors.

Murgitroyd shares are now trading on 15.7 times forecast earnings. Since the flotation 15 years ago, the company has steadily increased the dividend and management said it is looking at a more aggressive dividend policy now the company is almost debt free.

The shares remain a solid hold for the income.