Charter's shares tumbled following these results, as the market responded sharply to a more than 50 per cent drop in profits. Investors, already nervous over the patchiness of the recovery in Charter's markets, were also shaken by a worrying company investigation into irregular payments made by a subsidiary.
The company investigation focuses on the activities of an overseas subsidiary of its Howden business where payments were made to obtain business in an unnamed emerging market. Analysts think it is unlikely that the payments will turn out to be material for the company, but there is the possibility that Charter may have to reissue a revised set of preliminary results when the auditors have finished. Nonetheless, chief executive Michael Foster is sticking to his forecast of a return to sales and profits growth in 2011.
The news came on top of an operational performance that emphasised how highly geared Charter's profits are to sales volumes. A lack of sustained improvement at the consumable wire and welding equipment business, ESAB, meant sales fell 18 per cent to £1.03bn. The biggest sales decline was in Europe, down 35.4 per cent to £424m due to problems in the shipbuilding industry in Germany and Poland. The profit margin also tumbled 5.5 percentage points to 6.3 per cent. Cost-cutting, a stronger after-market and currency gains cushioned Howden, Charter's original equipment maker, and underlying operating profits here fell by a more modest 3.6 per cent to £70.5m. Howden's order book stood at £441m at the year-end, with £340m due for delivery this year.
Investec Securities forecasts pre-tax profits of £144m for 2010, giving EPS of 64.5p.
CHARTER INTERNATIONAL (CHTR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 686p | MARKET VALUE: | £1.15bn | |
| TOUCH: | 683-685p | 12-MONTH HIGH: | 797p | LOW: 331p |
| DIVIDEND YIELD: | 3% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 329p* | NET CASH: | £51m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2005 | 1.07 | 104 | 46.9 | nil |
| 2006 | 1.26 | 146 | 74.4 | nil |
| 2007 | 1.45 | 178 | 82.7 | 12.0 |
| 2008 | 1.89 | 198 | 90.1 | 21.0 |
| 2009 | 1.66 | 92.7 | 38.1 | 21.5 |
| % change | - | - | - | +2 |
Ex-div: 14 Apr Payment: 7 May *Includes intangible assets of £139m, or 83p a share | ||||
