Buy something from online retailer Amazon and there’s a good chance it will arrive in a box made by DS Smith (SMDS). Next (NXT) uses its boxes too, and convenience and discount stores love its cost-saving shelf-ready packaging. The volumes of corrugated packaging sold by the group rose 2.2 per cent last year, easily beating both internal targets and the wider market. A full-year contribution and associated cost savings from the acquisition of SCA in 2012 helped drive underlying operating profit up almost a quarter to £307m.
The weak euro is a stubborn headwind. Smith makes two-thirds of profits in the eurozone, and at current exchange rates the full-year impact on profits could be over £7m at the pre-tax level. But growth trends and the SCA deal are building margins. Indeed, integrating SCA saved Smith €40m (£32m) last year, and should save a further €40m this year. Margins, already up 80 basis points to 7.6 per cent despite higher paper prices, should move nearer the top end of management's 7-9 per cent target range.
Expect adjusted EPS of 23.7p in the current financial year (up from 21.4p), says broker Investec Securities - a small downgrade to account for the weak euro.
DS SMITH (SMDS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 289p | MARKET VALUE: | £2.7bn | |
| TOUCH: | 289-290p | 12-MONTH HIGH: | 359p | LOW: 230p |
| DIVIDEND YIELD: | 3.5% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 121p* | NET DEBT: | 73% | |
| Year to 30 Apr | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 2.07 | 55 | 6.7 | 3.17 |
| 2011 | 1.76 | 78 | 8.6 | 4.5 |
| 2012 | 1.97 | 22 | 1.2 | 5.9 |
| 2013 | 3.67 | 82 | 7.2 | 8 |
| 2014 | 4.04 | 167 | 15.3 | 10 |
| % change | +10 | +104 | +113 | +25 |
Ex-div: 1 Oct Payment: 3 Nov *Includes intangible assets of £961m, or 102p a share | ||||
