With the cost of industrial inputs on the rise, financial performance is increasingly dependent on the ability of manufacturers to pass those increases through to customers. This point is again brought home by half-year figures from Castings (CGS), specifically the mainstay foundry business, where profits, although 10.5 per cent to the good, were constrained by “the time lag in passing on raw material price increases”. Nevertheless, incremental improvements in production processes, including increased automation, are having the desired effect on profitability, although the continuing capital commitments linked to this process act as another short-term constraint.
CNC Speedwell, the truck and automotive components manufacturing unit, remains the main drag on performance at the iron casting and machining group. Persistent production issues resulted in a 10.9 per cent decrease in external revenue, and precipitated the resignation of CNC’s managing director at the beginning of October. The management structure of the business is under review, and although remedial measures (and severance costs) trimmed profit to the tune of £1m, “changes being made at the machining operation are not expected to have any meaningful impact on profitability during the remainder of the year”.
Consensus forecasts point to adjusted EPS of 29.6p for the March 2018 year-end, rising to 33.4p in FY2019.
| CASTINGS (CGS) | ||||
| ORD PRICE: | 430p | MARKET VALUE: | £187m | |
| TOUCH: | 420-440p | 12-MONTH HIGH: | 490p | LOW: 390p |
| DIVIDEND YIELD: | 3.3% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 285p | NET CASH: | £24.5m | |
| Half-year to | Turnover | Pre-tax | Earnings per | Dividend |
| 30 Sep | (£m) | profit (£m) | share (p) | per share (p) |
| 2016 | 57.9 | 7.1 | 13.0 | 3.38 |
| 2017 | 61.7 | 5.9 | 11.0 | 3.38 |
| % change | +7 | -16 | -15 | - |
| Ex-div: | 23 Nov | |||
| Payment: | 2 Jan |
