Packaging company DS Smith (SMDS) makes two-thirds of profits in the troubled eurozone, yet still reported growth across all regions as volumes of its corrugated packaging rose by 2.3 per cent. Chief executive Miles Roberts told us that its boxes remain in high demand, as the success of online and discount retailers ensures customers require the latest packaging solutions from the leading supplier.
Adjusted operating profits climbed a tenth to £176m. As well as organic growth, that reflected a 120 basis point increase in the average margin, to 8.9 per cent, as more cost savings were delivered from the 2012 acquisition of Swedish packaging rival SCA. Input costs, which can ravage the income statements of packaging companies, proved mercifully stable during the period.
Currency headwinds, however, continue to plague DS Smith: at the half-way point the strong pound wiped £114m off revenue. Yet Mr Roberts is confident that rising demand for packaging will offset the weak currency and anaemic GDP growth in the eurozone. He's also bullish on prospects in Turkey. Management plans to tap into the nation's 75m population and economic growth, which is faster than in most European countries, by acquiring a Turkish corrugated packaging business.
Broker Canaccord Genuity expects full-year adjusted pre-tax profit of £287m, giving adjusted EPS of 23.6p (from £259m and 21.4p in 2014).
| DS SMITH (SMDS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 305p | MARKET VALUE: | £2.9bn | |
| TOUCH: | 304-305p | 12-MONTH HIGH: | 359p | 232p |
| DIVIDEND YIELD: | 3.4% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 121p* | NET DEBT: | 61% | |
| Half-year to 31 Oct | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 2.08 | 85 | 7.5 | 3.2 |
| 2014 | 1.97 | 123 | 10.2 | 3.7 |
| % change | -5 | +45 | +36 | +16 |
Ex-div:06 Apr Payment: 1 May *Includes intangible assets of £896m, or 95p a share | ||||
