The share price of Castings (CGS) was on the rise following release of these numbers. A predicted profit contraction in the group's current accounting year, ending March 2017, was tempered by news of a 30p supplementary dividend. The return will obviously take some of the sting out of the profit warning, but the West Midlands-based iron castings and machining group had no debt and cash resources equivalent to 93p a share at the period-end - and it is the shareholders' money, after all.
The warning followed on from the loss of a major contract at the group's machining business, CNC Speedwell. Replacement work won't come on stream immediately, so the group doesn't anticipate any recovery in profitability until the 2018 financial year.
The contract loss aside, the group pushed up gross profits by 6 per cent to £34m, despite revenues being held in check due to a general reduction in raw material prices. And investors can take heart from Castings' operational performance. A change in the product mix in favour of more complex, machined parts enabled the core foundry business to increase sales revenues despite a slight dip in output. It was this increase in complexity that impacted profitability at the group's William Lee unit in the previous year, but management has been actively reviewing foundry techniques in order to boost productivity.
Following the warning, Arden Partners reduced its adjusted profit and EPS forecast for the March 2017 year-end from £22.5m and 41.2p, respectively, to £18m and 33.8p.
| CASTINGS (CGS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 470p | MARKET VALUE: | £205m | |
| TOUCH: | 460p-470p | 12-MONTHHIGH: | 515p | LOW: 405p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 298p | NET CASH: | £40.4m | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 126 | 23.1 | 40.3 | 11.75 |
| 2013 | 122 | 19.2 | 33.9 | 12.34 |
| 2014 | 137 | 21.8 | 39.6 | 12.96 |
| 2015 | 131 | 17.5 | 31.8 | 13.30 |
| 2016 | 132 | 19.7 | 37.1 | 13.71 * |
| % change | +1 | +12 | +17 | +3 |
Ex-div:n23 Jun Payment:n19 Aug *Not including 30p supplementary dividend, payable 22 Jul 2016, same ex-date applies | ||||
