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Low & Bonar boosts growth target

RESULTS: Specialist materials group Low & Bonar is making operational progress and has upped its growth target
February 5, 2013

Low & Bonar's (LWB) headline profits were hit by an £11.2m provision in its loss-making yarns business. But, adjust for that and for amortisation costs, and full-year profit rose 10.7 per cent on a constant currency basis to £24.5m.

IC TIP: Buy at 60p

The specialist materials group has also taken steps to improve performance by merging and rebranding the two major businesses within the performance textiles division - called Bonar. Despite costs and disruption, together with a £1.8m operating loss in yarns, the group operating margin still grew from 7.9 per cent to 8 per cent. Meanwhile, operating profit at the Bonar division rose 14.7 per cent to £25m on a constant currency basis and, while average selling prices rose 1.7 per cent, raw material costs were marginally lower. However, retaining margin quality at the technical coated fabrics division meant that sales there fell down 3.4 per cent, with the unit's operating profit having remained flat at £10.7m.

The group has upped its medium term growth target - it's now aiming for annual organic growth of at least 3 per cent greater than eurozone GDP growth, where 70 per cent of turnover is generated. Earnings-related targets, however, remain unchanged - for an operating margin of 10 per cent and a 17 per cent return on capital.

Broker Numis Securities expects adjusted pre-tax profit of £26m for 2013, giving EPS of 6.6p (from £24.5p and 6.3p in 2012).

LOW & BONAR (LWB)
ORD PRICE:60pMARKET VALUE:£105m
TOUCH:60-62p12-MONTH HIGH:67pLOW: 49p
DIVIDEND YIELD:4%PE RATIO:128
NET ASSET VALUE:87p*NET DEBT:52%

Year to 30 NovTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20083352.2039.41.90
20093050.70-0.400.80
201034510.22.201.60
201138923.46.532.10
20123816.100.472.40
% change-2-74-93+14

Ex-div: 20 Mar

Payment: 18 Apr

Includes intangible assets of £111m, or 63p a share