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SSL's chief executive Gary Watts is adamant that the £20m cost of relocating the company's manufacturing facilities will be paid back within three years. Shareholders weren't so sure, and after climbing almost 46 per cent in past 12 months, the shares fell almost 4 per cent.
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Investors may also be nervous about whether the condom manufacturer can achieve future growth in earnings of 20 per cent-plus to justify the company's premium rating. Still, having posted 11 per cent sales growth in the period, Mr Watts is adamant that revenue growth is what investors want from SSL, which has a high fixed-cost base and is able to produce even higher profit growth. "The underlying business shows that the story is about the sales number, which is more than we needed to achieve our [profit] targets, " says Mr Watts. Before one-off restructuring charges, pre-tax profits rose by 18 per cent to £22.3m.
SSL's innovation is underpinning growth in markets it dominates - the company has 35 per cent of the world's market share in condoms - as well as helping to extend its geographic reach by tapping into emerging markets like China. For example, the Durex play range boosted sales by 16 per cent in the period.
Cazenove forecasts adjusted EPS of 19.8p in 2008 (17.1p in 2007), rising to 24.8p in 2009.
| SSL INTERNATIONAL (SSL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 509p | MARKET VALUE: | £970m | |
| TOUCH: | 509-510p | 12-MONTH HIGH: | 536p | LOW: 329p |
| DIVIDEND YIELD: | 1.4% | PE RATIO: | 299 | |
| NET ASSET VALUE:* | 44p | NET DEBT: | 82% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2006 | 236 | 18.9 | 6.9 | 2.1 |
| 2007 | 263 | -11.9 | -8.5 | 2.3 |
| % change | +11 | - | - | +10 |
Ex-div: 23 Jan Payment: 5 Mar *Includes intangible assets of £799m, or 370p a share |
||||
Investors buying into SSL are brave if they think there will be a happy ending, as the shares already trade on a high earnings multiple that already discounts the company's strong growth prospects. Fairly priced.
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-IC-1.5.4a-prod - 31/10/2008 13:11:34 - carlos.princz
