Join our community of smart investors

Business review for Brammer

The industrial maintenance group's new chief executive, Meinie Oldersma, has his work cut out
August 5, 2016

Brammer 's (BRAM) management is starting to perfect the art of the downbeat trading statement. While the market was probably braced for the 51.2 per cent slump in half-year adjusted operating profits and the cut to the interim dividend after June's brutal profit warning, a lack of "any improvements in market conditions in the UK and Europe" again gave investors a reason to head for the exit.

IC TIP: Hold at 86p

As the slowdown in trading did not accelerate until May, interim financials suggest the industrial maintenance company's problems are more to do with inventory than sales, which declined by a not-catastrophic 1.3 per cent on a constant currency basis. But the issues were severe enough to prompt chairman Bill Whiteley to announce that new chief executive Meinie Oldersma will conduct a "detailed business review" to establish whether Brammer has sufficient capital.

Mr Oldersma, who joined on 1 August from Bunzl (BNZL), has also been asked to improve gross margins (which fell by 100 basis points to 29.5 per cent in the period), reduce stock overhang and manage net debt, which at 2.8 times cash profits is now brushing up against financial covenant limits.

Analysts at Peel Hunt are forecasting full-year adjusted pre-tax profits of £12.5m and EPS of 6.3p, down from £27.6m and 14.8p in the 2015 financial year.

BRAMMER (BRAM)

ORD PRICE:86pMARKET VALUE:£111m
TOUCH:86-87p12-MONTH HIGH:327pLOW: 58p
DIVIDEND YIELD:8.3%PE RATIO:NA
NET ASSET VALUE:93p*NET DEBT:89%

Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20153669.15.23.6
2016372-13.9-12.1nil
% change+2---

Ex-div: na

Payment: na

*Includes intangible assets of £146m, or 112p a share.