Things have gone from bad to worse at CNC Speedwell, the machinery-making division of outsourcer Castings (CGS). After the termination of a major contract hurt sales in the 2017 financial year, the division's managing director resigned abruptly in November. In 2018, the business has struggled to meet demand, leading to £1.2m of additional transport costs to prevent disruption to customer production lines. Thus the machinery division reported a loss of nearly £4m, compared with a £1.5m profit in the comparable period last year.
Still, investors can take comfort in the fact that costs in the division are now back down to historic levels, while the recruitment of a new general manager should help bring the business under control. Trading is expected to improve in the second half of the current financial year.
Moreover, progress in the core foundries business (95 per cent of revenues) has been better. The group has improved productivity through a number of investments, notably robotic handling. Automation is a focus for the division, with £1.8m invested in improvements during the year. Management said this focus will continue in the current financial year. Output has increased by 4.2 per cent to 49,200 tonnes, pushing up external revenues 13.6 per cent to £127m – although an increase in the price of raw materials pushed margins down 300 basis points to 11 per cent.
Bloomberg consensus estimates 2019 EPS of 32.1p, from 22.3p this year.
| CASTINGS (CGS) | ||||
| ORD PRICE: | 424p | MARKET VALUE: | £185m | |
| TOUCH: | 416-434p | 12-MONTH HIGH: | 489p | LOW: 400p |
| DIVIDEND YIELD: | 3.4% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 294p | NET CASH: | £24.1m | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 137 | 21.8 | 39.6 | 12.96 |
| 2015 | 131 | 17.5 | 31.8 | 13.30 |
| 2016 | 132 | 19.7 | 37.1 | 13.71 |
| 2017 | 119 | 15.9 | 29.8 | 13.97 |
| 2018 | 133 | 12.1 | 22.5 | 14.50 |
| % change | +12 | -24 | -25 | +4 |
| Ex-div: | 12 Jul | |||
| Payment: | 17 Aug | |||
