Investors marked shares in cigarette filter manufacturer Filtrona down 10 per cent after flat profit growth in 2007 and the admission that “market conditions are expected to remain challenging” for key businesses in 2008.
The result was muddied by the £32m acquisition in May of US plastics company Duraco, the £28m sale of Globalpack (a Brazilian consumer packaging business,) restructuring costs - as the group reduces manufacturing capacity for cigarette filters - and a negative currency impact due to a falling US dollar.
The adjusted result, on a constant currency basis, trumpeted the company, was a 14 per cent increase in profit before tax. But investors took more notice that even after the adjustments, revenues were flat as Filtrona scales back its cigarette filters business in favour of manufacturing a broad range of products in two key areas – plastic and fibre technologies.
| FILTRONA (FLTR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 189p | MARKET VALUE: | £388m | |
| TOUCH: | 188-189p | 12-MONTH HIGH: | 300p | LOW: 162p |
| DIVIDEND YIELD: | 3.7% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 66p* | NET DEBT: | 100% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2004 | 478 | 45.7 | 13.9 | ** |
| 2005 | 514 | 50.0 | 14.4 | 6.4 |
| 2006 | 517 | 52.2 | 15.3 | 6.9 |
| 2007*** | 494 | 51.7 | 15.3 | 7.6 |
| % change | -4 | -1 | - | +10 |
Ex-div: 9 Apr Payment: 2 May *Includes intangible assets of £87m, or 42p a share **Prior to demerger from Bunzl in June 2005 ***EPS for continuing operations | ||||
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On a positive note, the company’s balance sheet is relatively strong, backed by strong cash flow, which at the operating level, increased by almost 10 per cent to £85m.
Evolution Securities is forecasting sales of £556m, pre-tax profits of £63.2m and adjusted EPS of 19.4p (17.7p) in 2008.
