Strong supermarket demand for recycled corrugated cardboard display boxes helped DS Smith to a solid set of full-year results, and the group said it expects to complete the €1.6bn (£1.4bn) takeover of Swedish rival SCA Packaging on 30 June. There are some worries over the execution risk on such a large deal, but if management pulls it off the shares are a bargain.
Underlying pre-tax profits were up 44 per cent to £110.2m after excluding £88.5m in exceptional costs related to the closure of some UK paper mills and one-off SCA deal costs. Corrugated box volumes climbed 2 per cent, and DS Smith was effective at passing on price increases and cutting costs. Having saved £7.8m in the year in the UK it's ahead of its targeted savings of £10m by 2014, and on track to achieve €13m at Otor, the French business acquired in 2010.
Mr Dryden expects a further €75m of synergies from the SCA deal, and added that they will update the market in October if more savings have been found. Analysts are confident this will happen, and broker Panmure Gordon forecasts adjusted pre-tax profits of £187m and EPS of 14.7p this year (from 12.8p in 2011).
DS SMITH (SMDS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 137p | MARKET VALUE: | £1.27bn | |
| TOUCH: | 137-138p | 12-MONTH HIGH: | 196p | LOW: 112p |
| DIVIDEND YIELD: | 4.3% | PE RATIO: | 115 | |
| NET ASSET VALUE: | 114p* | NET CASH: | £322m | |
| Year to 30 Apr | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 1.97 | 109 | 13.5 | 6.06 |
| 2009 | 2.11 | 16.8 | -2.07 | 3.03 |
| 2010 | 2.07 | 55.0 | 6.68 | 3.17 |
| 2011** | 1.76 | 77.6 | 8.60 | 4.50 |
| 2012 | 1.97 | 21.7 | 1.20 | 5.90 |
| % change | +12 | -72 | -86 | +31 |
Ex-div:3 Oct Payment:1 Nov *Includes intangible assets of £310m, or 33p a share. **Restated following the sale of office products division Spicer and rights issue | ||||
