Increased operating efficiencies, lower unit costs and a more favourable product mix enabled Synthomer (SYNT) to book a 17 per cent rise in adjusted operating profit despite lower chemical sales volumes. Improved half-year profitability was attained on the back of self-help measures, including last year's cost initiative which has already delivered annualised savings equivalent to €11m (£9.4m). Management also pointed to the efficacy of the group's research and development (R&D) programme, with products launched over the past five years now generating 18 per cent of sales - nigh on the targeted rate.
Margins were on the rise in the Asian nitrile latex segment, partly reflecting the step-up in R&D. So despite some softness in Middle Eastern markets, the Asia/rest of world operations maintained the momentum achieved during the second half of 2015, with underlying profit 31 per cent to the good at constant currencies. The performance of Synthomer's European and North American businesses was muted by comparison. But a 4.5 per cent profit rise on flat volumes highlights the switch to a higher-margin speciality chemicals mix.
Good cash generation brought net debt down in the period under review, although subsequent finalisation of the deal to acquire the performance and adhesive coatings business of Hexion Inc, increased net borrowings from £46.7m to £215m, representing a pro-forma post acquisition leverage multiple of 1.5.
Capital IQ's consensus earnings for December 2015 2016 stands at 22.8p, rising to 24.3p in 2017.
| SYNTHOMER (SYNT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 387p | MARKET VALUE: | £1.32bn | |
| TOUCH: | 386p-387p | 12-MONTH HIGH: | 387p | LOW: 273p |
| DIVIDEND YIELD: | 2.3% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 82p* | NET DEBT: | 76% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 455 | 36.8 | 8.6 | 3.2 |
| 2016 | 446 | 57.4 | 14.0 | 3.5 |
| % change | -2 | +56 | +63 | +9 |
Ex-div: 6 Oct Payment: 4 Nov *Includes intangible assets of £367m, or 109p a share | ||||
