Don't be fooled by the sharp fall in headline first-half profits at Low & Bonar, because if you strip out non-recurring items and amortisation charges, underlying pre-tax profits rose by 22 per cent to £9.6m, which is pretty impressive given the tough trading climate and higher raw material costs.
Operating margins at the specialist materials group rose from 6.5 per cent to 6.9 per cent, thanks to management's success in pushing through price increases to offset higher polymer prices. And further progress is anticipated in the second half because polymer prices in June and July fell sharply. In fact, margin growth would have been stronger without higher spending on sales and marketing as well as costs associated with the merger of two operating units.
On a constant currency basis, revenues increased by 4 per cent, with flooring, building products and civil engineering delivering a strong performance, although this was partly offset by weak sales in the leisure segment, principally as a result of a cut in demand in the artificial grass market.
Analysts at Numis Securities have increased their full-year pre-tax profit estimates by £0.4m to £25.4m - to take into account the €5.95m (£4.7m) acquisition in March of green roofing specialist Xero Flor International - giving adjusted EPS of 6.4p (from £23.4m and 6p in 2011).
| LOW & BONAR (LWB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 62p | MARKET VALUE: | £186m | |
| TOUCH: | 61-63p | 12-MONTH HIGH: | 77p | LOW: 38p |
| DIVIDEND YIELD: | 3.5% | PE RATIO: | 25 | |
| NET ASSET VALUE: | 53p* | NET DEBT: | 60% | |
| Half-year to 31 May | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 183 | 11.2 | 5.97 | 0.70 |
| 2012 | 184 | 6.3 | 1.93 | 0.80 |
| % change | +1 | -44 | -68 | +14 |
Ex-div: 29 Aug Payment: 27 Sep *Includes intangible assets of £120m, or 40p a share | ||||
