After failing to sell the business earlier this year and having warned on profits, packaging materials company API Group (API) cranked up its restructuring programme and has sunk over £5m into a number of projects. True, the strong pound trimmed revenue and the holographics division has struggled, but underlying operating profit jumped 23 per cent last year to £8.5m, net debt fell sharply and a first dividend in over a decade is promised.
Much of the progress came at the core laminates unit and smaller foils operations in Europe and the US. Demand for health and beauty packaging and an eye on costs pushed profits at the former up 14 per cent to £6.5m. Bulk shipments on a lucrative contract have finally begun and should ramp up quickly, too. Cost-cutting and lower raw material costs generated a five-fold increase in profit at the European foils business despite weaker sales. And, in the US, lower costs and demand for higher margin metallic pigment foil swelled profit there by 61 per cent.
Unfortunately, the end of a big laminates project, less demand from the foils division and one customer taking work in-house condemned the holographics unit to a loss of £0.3m. Management warns that a significant bounce back is unlikely this year, although a few contracts will be decided soon and rebuilding is under way.
Broker Numis Securities expects current year adjusted pre-tax profit of £8m and EPS of 9.9p, up from £6.8m and 8.7p in 2013.
API GROUP (API) | ||||
|---|---|---|---|---|
| ORD PRICE: | 71p | MARKET VALUE: | £54.5m | |
| TOUCH: | 70-72p | 12-MONTH HIGH: | 92.5p | LOW: 50p |
| DIVIDEND YIELD: | nil | PE RATIO: | 9 | |
| NET ASSET VALUE | 30p* | NET DEBT: | 11% | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 87 | -0.25 | -1.7 | nil |
| 2010 | 79 | -0.34 | 3.4 | nil |
| 2011 | 100 | 2.86 | 3.5 | nil |
| 2012 | 114 | 5.06 | 6.7 | nil |
| 2013 | 112 | 5.82 | 7.8 | nil |
| % change | -1 | +15 | +16 | - |
*Includes intangible assets of £5.2m, or 7p a share | ||||
