Last year was predictably hard for Synthomer (SYNT). Falling demand in Europe easily offset recovery in Asia, depressing the cash profit margin and ending a run of unbroken growth in underlying earnings stretching back to 2006. And while there have been signs of improvement in European construction work, a sustained rebound seems some way off.
And that is the problem. Even though operating profit in Europe and North America tumbled 10 per cent to £89.8m, Synthomer still made well over fourth-fifths of its money there. That makes it highly geared to a Eurozone recovery, but no one has any idea when that will be. In the meantime, margins on the Continent are now below the 2013 average and the weaker euro will only make comparisons harder. The focus, then, is on Asia, where demand for nitrile latex, used to make rubber gloves, bounced profit up by 21 per cent to £23m. Management expects margin to improve again in 2014.
Broker N+1 Singer expects progress in Asia to drive adjusted pre-tax profit up to £95.7m this year, giving adjusted EPS of 21.1p (from £90.1m and 20.7p in 2013).
SYNTHOMER (SYNT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 268p | MARKET VALUE: | £ 911m | |
| TOUCH: | 262-269p | 12-MONTH HIGH: | 290p | LOW: 170p |
| DIVIDEND YIELD: | 2.2% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 85p* | NET DEBT: | 44% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 0.54 | 7.1 | 2.6 | nil |
| 2010 | 0.57 | 54.2 | 20.7 | 2.6 |
| 2011 | 1.06 | 39.5 | 9.8 | 3.5 |
| 2012 | 1.11 | 58.8 | 15.6 | 5.5 |
| 2013 | 1.05 | 59.1 | 14.2 | 6 |
| % change | -5 | +1 | -9 | +9 |
Ex-div: 04 Jun Payment: 04 Jul *Includes intangible assets of £351m, or 103p per share | ||||
