A year of two halves for Metalrax was also very much a year of two divisions. However, downside for the weaker consumer durables business now looks limited and demand for its specialist engineering skills should grow again in 2012. What's more, management's reputation for being overcautious suggests there's a chance to beat estimates, too.
Despite a slower second half, underlying specialist engineering revenues rose 16 per cent to £42.5m, offsetting a 15 per cent decline in consumer durables. Still, after disposals, group revenue actually grew 5 per cent and adjusted operating profit crept up to £2.4m. Crucially, trading in the first quarter has been "better than feared" and ahead of last year. And Metalrax is on a much firmer financial footing: net debt has halved since 2009 and a new four-year banking facility has removed the overhang of refinancing.
Moreover, two years into a recovery cycle, chief executive Andrew Richardson wants to push the growth agenda harder. A bolt-on niche engineering acquisition "possibly later this year" would help. It could also get margins nearer the 10 per cent industry norm from 6 per cent at the year-end. If not, further cuts to central costs and savings on materials should.
Broker Arden Partners expects current year adjusted pre-tax profit of £1.9m and EPS of 1.2p (£1.4m and 0.9p in 2011).
METALRAX (MRX) | ||||
|---|---|---|---|---|
| ORD PRICE: | 9p | MARKET VALUE: | £10.8m | |
| TOUCH: | 8.75-9.5p | 12-MONTH HIGH: | 12.25p | LOW: 7p |
| DIVIDEND YIELD: | nil | PE RATIO: | 82 | |
| NET ASSET VALUE | 14p* | NET DEBT: | 35% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 119 | -5.2 | -1.8 | 1.7 |
| 2008 | 72.3 | -1.8 | -2.2 | nil |
| 2009 | 61.2 | -3.7 | -3.0 | nil |
| 2010 | 65.5 | 0.2 | 0.29 | nil |
| 2011 | 63.0 | -0.4 | 0.11 | nil |
| % change | -4 | - | - | - |
*Includes intangible assets of £7.6m, or 6p a share | ||||
