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Castings boosts output levels

The iron castings and machinery business is using automation to improve efficiencies
June 12, 2019

Castings (CGS) has spent some time now fighting to return its embattled machining business, CNC Speedwell, to its old revenue and profit levels. It has signalled on a couple of occasions that this would take years to accomplish. But the iron castings and machining business’s investment in automation and efficiencies finally appears to be yielding benefits.

IC TIP: Sell at 446p

CNC has been brought “back under operational control”, the business says, with output levels now sufficiently high that it has been able to reduce previously substantial levels of additional transport costs incurred early in the year, and the loss for the year has fallen. Both divisions experienced disruption prompted by the introduction of new production processes last year. Management expects CNC’s profitability to improve again during its new financial year. CNC losses fell from £4m in 2018 to £1.3m.

All of this is coming at a cost, and Castings’ boost to operating profit was dented by a greater rise in working capital. The boost in payables of £2m was offset by increases in inventory and receivables of £2.9m and £4.4m, respectively.

Bloomberg consensus forecasts project full-year adjusted EPS of 32.65p through to September 2020, rising to 33.6p in FY2021.

CASTINGS (CGS)   
ORD PRICE:446pMARKET VALUE:£194m
TOUCH:434-470p12-MONTH HIGH:448pLOW: 343p
DIVIDEND YIELD:3.3%PE RATIO:18
NET ASSET VALUE:308pNET CASH:£25.8m
Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201513117.531.813.30
201613219.737.113.71
201711915.929.813.97
201813312.122.514.50
2019*15014.125.214.78
% change+13+17+12+2
Ex-div:18 Jul   
Payment:27 Aug   
*Excludes supplementary dividend of 15p per share, to be paid on 23 July with an ex-dividend date of 20 June