Shares in Low & Bonar rose almost 10 per cent after the specialist materials group pushed first-half underlying pre-tax profits up 20 per cent, despite a 22 per cent rise in raw material costs. This is significant because raw materials make up 50 per cent of sales revenue, with polymer costs tied to the price of oil.
However, of the £14.7m increase in costs, all but £4.7m was passed on to its customers through higher prices. The balance is expected to be recouped in the second half, and polymer prices are showing signs of stabilising. Operating margins were held at 6.5 per cent and management expects a rise to 9 per cent in the second half and is targeting 10 per cent by 2013.
Profits are also expected to grow following the restructuring of the loss-making yarns business after a new facility in Abu Dhabi came onstream, replacing the old facility based in Ostend that closed in June. Revenue in the core western Europe market rose 19 per cent to £116m, although the first half of last year was badly affected by the freezing conditions. The real growth is expected to come from markets like China and South America.
Numis Securities has upgraded full-year pre-tax profits estimates by 8 per cent to £23m, giving EPS of 5.6p (£18.6m and 4.4p in 2010), and lifted 2012 numbers by 14 per cent to £28.5m and 7p, respectively.
LOW & BONAR (LWB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 73p | MARKET VALUE: | £201m | |
| TOUCH: | 73-74p | 12-MONTH HIGH: | 74p | LOW: 34p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 23 | |
| NET ASSET VALUE: | 58p* | NET DEBT: | 42% | |
| Half-year to 31 May | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 156 | 7.9 | 2.38 | 0.50 |
| 2011 | 183 | 11.2 | 3.40 | 0.70 |
| % change | +17 | +42 | +43 | +40 |
Ex-div: 31 Aug Payment: 29 Sep *Includes intangible assets of £131m, or 45p a share | ||||
