Low & Bonar (LWB) spent the first half of this year continuing the restructuring programme started in 2015. After the half-year end, the company successfully negotiated the sale of its artificial grass yarns business. While this segment performed reasonably well over the reported period, management believes it can achieve better returns by investing in its higher-margin businesses.
On the building and industrial side, profits increased by two-thirds on a constant-currency basis to £4.5m, driven by strong sales in the US. Profits there were boosted by the addition of a new major customer, while lower raw material pricing helped. Interior and transportation related products saw sales rise by 30 per cent, helped by additional capacity coming through from the new plant in China.
The civil engineering business also delivered an improvement, while the coated textiles segment was flat, as a strong market for trailer covers was offset by lower sales in the higher-margin niche segments.
Working capital outflows doubled to £26m as a result of funding the new facility in China and stock building, although the sale of the yarns business is expected to reduce gearing from 2.7 times cash profits to 1.8 by the year-end.
Analysts at Peel Hunt are forecasting adjusted pre-tax profits of £28.5m for the year to November 2016, giving EPS of 5.9p (from £25.4m and 5.2p in FY2015).
| LOW & BONAR (LWB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 66p | MARKET VALUE: | £217m | |
| TOUCH: | 62-66p | 12-MONTH HIGH: | 72p | 55p |
| DIVIDEND YIELD: | 4.2% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 51p* | NET DEBT: | 80% | |
| Half-year to 31 May | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 170 | 7.8 | 1.64 | 0.98 |
| 2016 | 181 | 8.3 | 1.63 | 1 |
| % change | +6 | +6 | -1 | +2 |
Ex-div: 25 Aug Payment: 22 Sep *Includes intangible assets of £96m, or 29p a share | ||||
