Straight may be minnow-size now but it aims to have a £100m market capitalisation by end-2014. That seems a tall order although its market value did reach £35m in 2006. And if Straight is going to meet this ambitious target, a key factor will be its revised growth strategy.
Instead of contracting out production of recycling bins and kerbside boxes, the company has suddenly become a manufacturer of two-thirds of its output. In turn that development has pushed up margins. In 2010 adjusted operating profits rose from £1.55m to £1.94m if acquisition costs, exceptionals and share option costs are ignored.
This change of strategy has been possible thanks to three acquisitions and in particular the purchase of a factory with 20 injection moulding machines in Hull. Acquisitions, the addition of blow-moulding capacity and development of the Hull site cost in total almost £8m, so it’s not surprising that there’s debt on Straight’s balance sheet for the first time since the company floated in 1993. One cost of moving into manufacturing has been a big increase in working capital needs.
Broker Cenkos forecasts 2011 sales of £33m and adjusted profits up from £1.9m to £2.2m - so increasing EPS from 11.9p to 13.7p.
STRAIGHT (STT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 100.75p | MARKET VALUE: | £12.0m | |
| TOUCH: | 98.5-103p | 12-MONTH HIGH: | 117.5p | LOW: 89.5p |
| DIVIDEND YIELD: | 4.0% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 86p* | NET DEBT: | 27% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2006 | 27.8 | 1.96 | 12.4 | 3.90 |
| 2007 | 23.6 | 0.59 | 9.4 | 3.25 |
| 2008 | 25.4 | -0.97 | -4.6 | 3.00 |
| 2009 | 28.3 | 1.56 | 10.1 | 3.50 |
| 2010 | 30.7 | 1.47 | 12.2 | 4.00 |
| % change | +8 | -6 | +21 | +14 |
Ex-div: 4 May Payment: 3 Jun Aim: Industrial engineering *Including intangibles of £7.58m, or 64p a share | ||||
