Alumasc's problems first surfaced in January. Demand from diesel engine manufacturers, needing to beat an emissions deadline, meant an "extremely busy" final quarter for Alumasc's precision engineering business. However, an audit uncovered additional costs of "well over £1m", according to finance director Andrew Magson. Divisional sales actually jumped 19 per cent to £19.5m, but those additional costs meant underlying operating profit collapsed to £0.2m from £1.3m and the group's operating margin slipped to 2.7 per cent from 5.8 per cent. Management is taking action, but improvements "will not happen overnight", admits chief executive Paul Hooper. Revenue rose at the larger building products unit, too, but money spent on driving sales there pushed profits down a fifth to £1.7m.
|ORD PRICE:||92p||MARKET VALUE:||£33m|
|TOUCH:||90-94p||12-MONTH HIGH:||182p||Low: 77p|
|DIVIDEND YIELD:||8.4%||PE RATIO:||11|
|NET ASSET VALUE:||60p*||NET DEBT:||62%|
|Half-year to 31 Dec||Turnover (£m)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
Ex-div: 7 Mar
Payment: 10 Apr
*Includes intangible assets of £20.2m, or 56p a share
The dramatic dividend cut means a key reason for holding Alumasc's shares has disappeared. Operationally, prospects look challenging, too – the group won't be quick getting precision engineering back on track and harsh weather has meant a "muted" start to the second half for building products. Sell.
Last IC view: Fairly priced, 140p, 6 Sep 2011