Lupus Capital (LUP) designs, makes and distributes all the bits and pieces that are fitted to doors and windows; it makes other specialist goods, too - such as static control devices on photo copiers and sunroof seals for cars. Its business is also split fairly evenly down the middle between two regions: the US, where business is looking up, and the UK and Europe, where trading is still tough.
- Big exposure to improving US housing sector
- Lossmaking composite doors division sold
- Profits already reviving
- Dividend reinstated
- Demand still weak in the UK
- More closure costs to come
Growth in the US has been enough to offset the gloomy picture elsewhere, not least because of tangible signs that US housebuilding activity has at least bottomed out. Permits for home construction last November rose to their highest level in more than four years. True, the improvement is from a low base, but in 2012 housebuilding is expected to add to US national income for the first time since 2005. Demand has also been boosted by relatively mild weather, and Lupus' underlying US operating profits jumped 22 per cent in the first half of 2012 to $9.3m (£5.7m).
In the UK, however, the Grouphomesafe operating arm has seen a fall in orders, mainly as a result of lower activity in social housing, while at the European business, which operates as Schlegel International, modest growth in the German and eastern European markets has been more than offset by weak demand in southern Europe. Moreover, the 2012 accounts will include a €1.5m (£1.2m) provision relating to the closure of the Belgian building products business. However, UK profits should show an improvement next year, following the disposal in August of the composite doors business, which racked up operating losses of £1.1m in the first half. That said, the 2012 figures will probably include a £3m writedown of assets associated with the disposal.
| LUPUS CAPITAL (LUP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 160p | MARKET VALUE: | £208m | |
| TOUCH: | 158-160p | 12M HIGH: | 175p | LOW: 110p |
| DIVIDEND YIELD: | 3.0% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 219p | NET DEBT: | 11% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 242 | -0.65 | 0.32 | nil |
| 2010 | 252 | 1.78 | 1.15 | 2.0 |
| 2011 | 230 | 1.31 | 6.23 | 3.5 |
| 2012* | 240 | 21.2 | 9.8 | 4.3 |
| 2013* | 246 | 22.3 | 12.0 | 4.8 |
| % change | +3 | +5 | +22 | +12 |
Normal market size: 2,000 Matched bargain trading Beta: 0.8 *Edison estimates (profits and EPS not comparable with historic figures) | ||||
However, there are bright spots. Coventry-based doors and windows parts firm Fab & Fix, bought for £14m last August, is already making a useful contribution. And Lupus reckons it will continue to grab a larger market share, helped by an expanded product range.
Having stripped out its underperforming parts, Lupus should be well placed to benefit from an uptick in the housing sector. Even though that looks unlikely in the near term in the UK, Lupus has still managed to push group turnover ahead by 5.9 per cent in the 11 months to November.
Group finances have also improved markedly following the disposal of oil services unit Gall Thompson for £75m, and the interim dividend was reinstated. What's more, management reckons that it will be able to raise the full-year payout to 4p a share - twice the level that Lupus managed in 2010.
