A stinging May trading update from Brammer (BRAM) warned of "testing" market conditions and currency headwinds, but investors sent the shares plummeting a further 4 per cent in response to its first-half results. Tepid demand in Nordic regions plagued by weak oil markets triggered a 4 per cent slide in constant-currency sales per working day in that part of the world.
As the distributor of maintenance, repair and overhaul products generates more than 60 per cent of revenues from the eurozone, the weak euro was also a notable issue. Strip out that headache, which reduced revenue by £25m, and sales increased by a respectable 7.5 per cent. In fact, constant-currency top-line growth was achieved across all its European operations, as Brammer's installation of industrial tool vending machines and focus on key accounts helped it gobble up market share.
But bringing the number of pan-European key accounts up to 77 also had an adverse effect on profits. Aside from soft Nordic markets, higher sales of lower-margin tools and general maintenance products knocked gross margins back by 80 basis points to 30.5 per cent.
Management expects those pressures to ease in the second half, noting that the cost-reduction programme should save £4m. Broker Investec expects full-year adjusted pre-tax profit of £33m, giving EPS of 18.4p (from £35.1m and 20.2p in 2014).
| BRAMMER (BRAM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 305p | MARKET VALUE: | £395m | |
| TOUCH: | 306-313p | 12-MONTH HIGH: | 455p | LOW: 265p |
| DIVIDEND YIELD: | 3.5% | PE RATIO: | 42 | |
| NET ASSET VALUE: | 113p* | NET DEBT: | 62% | |
| Half-year to 30 June | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 364 | 11.6 | 7.1 | 3.6 |
| 2015 | 366 | 9.1 | 5.2 | 3.6 |
| % change | +0 | -22 | -27 | - |
Ex-div: 8 Oct Payment: 5 Nov *Includes intangible assets of £149m, or 115p a share | ||||
