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Drinks can and plastic packaging giant Rexam proved its attractions as a defensive play with strong half-year results. Both its can and plastics divisions benefited from acquisitions during the period, and the group's businesses managed to pass on cost increases.
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The can business saw a 19 per cent rise in sales and a 28 per cent increase in underlying operating profits. The result was bolstered by the acquisition of Rostar, a Russian can maker. That's part of the group's attempt to target fast-growing emerging markets. Yet, even without the Rostar contribution, organic sales were 8 per cent ahead and profits were up 9 per cent.
Plastic packaging, which now accounts for nearly 40 per cent of profits, benefited from the 2007 acquisition of the high-margin OI Plastics business. Sales were 70 per cent ahead and profits were up by 95 per cent. Organic sales and profits were 6 per cent and 7 per cent ahead respectively.
Beneficial currency movements added another £12m to profits. Prospects for growth continue to look good, so broker Seymour Pierce is forecasting full-year pre-tax profits of £332m and EPS of 36.8p (£224m and 25.9p, respectively, in 2007).
| Rexam (REX) | ||||
|---|---|---|---|---|
| ORD PRICE: | 382p | MARKET VALUE: | £2.5bn | |
| TOUCH: | 381-382p | 12-MONTH HIGH: | 570p | LOW: 341p |
| DIVIDEND YIELD: | 5.3% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 295p* | NET DEBT: | 102% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 1.69 | 97 | 11.5 | 8.3 |
| 2008 | 2.19 | 141 | 15.1 | 8.7 |
| % change | +30 | +45 | +31 | +5 |
Ex-div: 8 Oct Payment: 4 Nov *Includes intangible assets of £2.3bn, or 363p a share |
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Click here for a guide to the terms used in IC results tables.
Rexam's shares are down on our buy tip (459p, 29 Feb 2008) but its future continues to look bright, despite wider economic woes. So, trading on 10 times forecasts earnings and paying a decent yield, the shares remain a buy.
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