By Graeme Davies, 20 May 2008
Romag's transformation from architectural and security glass maker to a player in the racy world of solar-powered glass products for integration directly into buildings continues apace. The move has given the group strong growth prospects, as illustrated by this good set of results, and there's also the chance of a further uplift from an imminent expansion of its solar capability.
The PowerGlaz building integrated solar product accounted for more than half Romag's sales in the first half of the year and, with production capacity growing from 12MW equivalent to 28MW equivalent by September, it will become a more dominant part of the sales mix. But the original business remains core as it provides cross selling opportunities and a complete product range for customers.
With little appetite for solar in the UK, Romag exported 72 per cent of its production, mainly to continental Europe, where tariffs are generous, and the Middle East, where a recent deal with Gulf International Trading Group of the United Arab Emirates should help to raise Romag's profile.
| Romag Holdings (ROM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 209p | MARKET VALUE: | £104.5m | |
| TOUCH: | 205-213 | 12-MONTH HIGH: | 273.5p | LOW: 169.5p |
| DIVIDEND YIELD: | 0.6% | PE RATIO: | 44 | |
| NET ASSET VALUE: | 60p | NET DEBT: | 38% | |
| Six months to 31 Mar 2008 | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Net div per share (p) |
|---|---|---|---|---|
| 2007 | 6.86 | 0.74 | 1.20 | 0.40 |
| 2008 | 11.6 | 0.90 | 1.30 | 0.43 |
| % change | +69 | +21 | +8 | +8 |
|
Ex-div: 4 Jun Payment: 20 Jun |
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Margins slipped a little in the first half due to the extra investment in PowerGlaz capacity, but this should recover next year, as should cashflows.
IC VIEW
Romag has managed its expansion very well and built itself a good position in a niche of the solar market which should continue to grow rapidly. Its shares are not cheap at 25 times forecast earnings, but this is not unusual in this sector. Good value.
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