Castings (CGS) hasn't benefited from steel prices falling to their lowest level in over a decade. The West Midlands-based manufacturer, which makes iron castings mainly used in heavy-duty trucks, passed cheaper raw material costs on to customers, says chief executive David Gawthorpe. He pegs the impact on sales at about £2m.
Fortunately, that shortfall was more than offset by solid demand in the European heavy-truck market. Major customers Scania and Volvo both reported surging order intake in their recent third-quarter updates, while another core customer, Dutch truck manufacturer Daf, also reported a strong recovery. These improvements have translated into plenty of extra work for Castings. Mr Gawthorpe confirmed that the outlook now looks much more promising, too, following a temporary lull in which consumers opted to buy older trucks on the cheap as a result of new emissions legislation.
This activity in the truck market, together with rising appetite for Casting's value-added services, boosted the bottom line. Indeed, the addition of machining and finishing services helped to drive operating profit up 15 per cent to £9.5m.
House broker Arden Partners expects pre-tax profit of £20.6m in the year to March 2016, giving EPS of 37.8p (from £17.5m and 31.8p in FY2015).
| CASTINGS (CGS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 460p | MARKET VALUE: | £201m | |
| TOUCH: | 452-465p | 12-MONTH HIGH: | 479p | LOW: 370p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 281p | NET CASH: | £21.9m | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 63.6 | 8.3 | 15.1 | 3.22 |
| 2015 | 65.0 | 9.5 | 17.4 | 3.38 |
| % change | +2 | +14 | +15 | +5 |
Ex-div: 26 Nov Payment: 4 Jan | ||||
