Capital spending, targeted innovation and a crackdown on fixed costs helped Synthomer (SYNT) post underlying profit growth at the half-year mark for the first time in three years. Coupled with a 7 per cent rise in sales volumes, that prompted investors to lift by 6 per cent shares in the supplier of emulsion polymers used in paper, textiles, latex gloves and construction.
Volumes rose 13 per cent in the Asian Nitrile Latex business as demand outstripped supply and the group reaped the rewards of previous investments in Malaysia. Europe and North America also put in decent shifts: strip out the impact of performance bonuses and currency movements and underlying operating profit was broadly flat. That reflected tight cost control and rising sales of higher-margin coatings, functional polymers and foam, offset by tepid European paper and carpet markets.
Better cash generation and the swapping of debt held in euros for sterling drove net debt down 31 per cent to about £77m. But that won't last: £43m of dividend payments are still outstanding, and the proposed expansion of its Asian Nitrile capacity led management to predict that capital expenditure would more than double to about £20m for the full year.
Broker Canaccord Genuity upgraded its adjusted EPS forecast to 20.5p for this year (from 19.5p in 2014).
| SYNTHOMER (SYNT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 350p | MARKET VALUE: | £1.2bn | |
| TOUCH: | 349.8-350.5p | 12-MONTH HIGH: | 354p | LOW: 178p |
| DIVIDEND YIELD: | 2.3%† | PE RATIO: | 23 | |
| NET ASSET VALUE: | 69p* | NET DEBT: | 31% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 478 | 29.9 | 7.0 | 3.0 |
| 2015 | 455 | 36.8 | 8.6 | 3.2 |
| % change | -5 | +23 | +23 | +7 |
Ex-div: 8 Oct Payment: 5 Nov *Includes intangible assets of £282m, or 83p a share †Excludes special dividend of 7.8p in 2014 | ||||
