Rexam had a horrid time during 2009 as the recession bit harder than anticipated. But following last year's dizzying events, the packaging group appears to have regained some balance and composure.
Proceeds of the group's £334m rights issues have provided support to its balance sheet and brought the ratings agencies back on side, as did the decision to pull the half-year dividend and cut the final dividend to 8p a share.
Savage cost cutting, which was largely responsible for the £313m net exceptional charge before tax, produced £29m-worth of savings last year and is expected to produce £75m in 2010, and £82m in 2011. Record efficiency savings of £42m were also achieved during 2009. But the development that has had investors and management breathing the biggest sigh of relief is that markets are finally stabilising.
The restructuring undertaken has cut 5 per cent from plastic moulding capacity, but management believe the plastics division, which accounts for 30 per cent of profits, is still well placed to participate in future growth. The group will also be focusing capital expenditure, which is expected to remain below the depreciation charge this year and next, on growth areas: the South American drinks can operation and healthcare products.
Broker Bank of America Merrill Lynch forecasts underlying pre-tax profits this year of £351m and EPS of 27.6p (£287m and 27.5p in 2009).
| Rexam (REX) | ||||
|---|---|---|---|---|
| ORD PRICE: | 274p | MARKET VALUE: | £2.4bn | |
| TOUCH: | 273-274p | 12-MONTH HIGH: | 306p | LOW: 189p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | na | |
| NET ASSET VALUE: | 265p* | NET DEBT: | 79% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p)** | Dividend per share (p)** |
|---|---|---|---|---|
| 2005 | 3.24 | 331 | 36.0 | 16.1 |
| 2006 | 3.30 | 268 | 30.9 | 16.9 |
| 2007 | 3.61 | 260 | 25.2 | 17.8 |
| 2008 | 4.62 | 240 | 23.9 | 18.7 |
| 2009 | 4.87 | -59 | -3.7 | 8.0 |
| % change | +5 | - | - | -5 |
Ex-div: 5 May Payment: 3 Jun *Includes intangible assets of £2.5bn, or 283p a share **Restated for four-for-11 rights issue at 150p a share in July 2009. Adjustment factor: 0.891 | ||||
