DS Smith delivers cheap growth

The group's strategy centres on tapping into faster-growing parts of Europe and snapping up peers to increase scale. It shelled out £433m on five acquisitions in the period. Those included Duropack, which deepened its foothold in Austria, Hungary and Slovakia, and Lantero, which boosted its presence in Iberia, in particular the key Spanish market. Indeed, it entered or expanded its operations in 13 countries in the period. This was complemented by a 3.1 per cent increase in like-for-like corrugated box volumes, exceeding management's target for the period of 2.8 per cent. Adjusted return on sales also improved, and return on average capital employed - a key measure for the company - was 15.4 per cent, above the medium-term target range.

Sales and operating profit rose in constant currencies by more than a tenth in both western and central Europe, reflecting higher volumes and acquisitions. The closure of the Wansbrough mill weighed on sales in the UK, but restructuring and disposals propped up profits there. The weak spot was northern Europe, where economic sanctions imposed on Russia took their toll.

Capital spending soared 35 per cent to £201m as management invested in a new display packaging plant in Germany and a digital printing facility in the UK. The group also stomached £50m in restructuring costs as it closed down underperforming assets. And net debt swelled 69 per cent to £1.1bn. Two post-period acquisitions - peer Goapaca in Portugal and Creo, an in-store marketing specialist in the UK - indicate management is more than comfortable with the debt load.

Broker Stifel expects adjusted pre-tax profit of £380m in the year to April 2017, giving EPS of 31.3p (from £332m and 27.4p in FY2016).