Davis Service has performed well in a tough market but owes a lot to the benefit of currency translation which added £49.3m to sales, £6.4m to operating profits and shaved £35.5m off its debt pile.
The UK operations remain the group's largest market and suffered from falling hotel linen volumes although the rate of decline has slowed. The healthcare business has done well though and Davis reckons there is more scope to win additional NHS work as 25 per cent of hospital laundry is currently done in-house and further outsourcing would provide authorities with significant cost savings. However, the group's decontamination arm has proved slower to get off the ground and chipped in start-up losses of £2.1m, but this should fall as volumes ramp up.
The performance was flat in the Nordic region due to operations in Sweden suffering from its heavy manufacturing base and those in Denmark struggled as lower hotel volumes hit profits. On the continent, operating profits rose 12 per cent to £32.7m driven by an improvement in trading at its German healthcare arm despite overcapacity and pricing pressures. Restructuring in Germany and the closure of plants in its Nordic region led to restructuring charges of £8.7m but Davis has also invested in new facilities.
Broker Cenkos Securities expects pre-tax profits of £93m and EPS of 39.8p (2009: £91.7m/39.4p).
DAVIS SERVICE (DVSG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 408p | MARKET VALUE: | £ 696m | |
| TOUCH: | 407-409p | 12-MONTH HIGH: | 438p | LOW: 221p |
| DIVIDEND YIELD: | 4.9% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 277p* | NET DEBT: | 102% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2005 | 656 | 81.6 | 30.7 | 17.3 |
| 2006 | 705 | 82.0 | 34.2 | 18.2 |
| 2007 | 822 | 78.7 | 37.1 | 19.4 |
| 2008 | 954 | 60.4 | 24.5 | 20.0 |
| 2009 | 971 | 61.7 | 26.6 | 20.0 |
| % change | +2 | +2 | +9 | - |
Ex-div:14 Apr Payment:06 May *Includes intangible assets of £530m, or 310p a share | ||||
