LONDON (Alliance News) - Low & Bonar PLC Tuesday confirmed flat pretax profit for its last financial year, after it was hit by the weakness of the euro and a loss from its Saudi Arabian joint venture, although new Chief executive Brett Simpson was positive about the prospects for the business despite challenging markets in Europe.
The performance materials company reported a pretax profit of GBP16.7 million for the year to November 30, flat on the previous year, even though revenue rose to 1.9% to GBP410.6 million, from GBP403.1 million. It said exchange rate movements had knocked some GBP2.2 million off its profit, while revenue would have been up 7.2% had exchange rates remained constant over the year.
Its profit before tax, exceptional items and its share of joint venture results rose 4.0% to GBP26.3 million, from GBP25.3 million, but its Saudi Arabian joint venture contributed a GBP1.1 million loss to the company's results.
"Since taking over the role of group chief executive in September, I have been getting under the skin of the business and our operations globally, and what I have found is greatly encouraging. This is a solid business with good market positions and compelling opportunities for growth. I believe there are further improvements which can be made which will enhance and accelerate our growth prospects, and I look forward to setting these out in detail later in the year" Brett Simpson said in a statement.
Low & Bonar said it had started the year well, but experienced a significant drop in demand across its European civil engineering markets from mid-July. Results were lifted by strong and improving results in its Technical Coated Fabrics unit, further progress in Yarns and good results in Bonar's North American business. It said it also made good progress in seeding the flooring and filtration markets in China, supported by a newly established sales office in Shanghai.
"Whilst market conditions in Europe are expected to remain challenging, the board is confident that the group will continue to make further progress this year," it said in an outlook statement.
The company is trying to boost growth by investing in its operations, and capital expenditure for the year was GBP19.0 million, up from GBP11.3 million a year earlier. It spent GBP5.3 million on a new factory build in Changzhou, China, which is expected to cost a further GBP21.0 million by its completion scheduled for the first quarter of 2016.
Its Saudi Arabian joint venture made a total loss of GBP2.2 million in the year, after slower-than-expected sales growth that was hindered by procedural delays in gaining product approvals.
"We are pleased to report that product approvals are now starting to come through," it said.
The company will pay an unchanged final dividend of 1.75 pence a share, bringing its full-year dividend to 2.7 pence, up slightly from 2.6 pence in fiscal 2013.
"The board believes that this represents a sensible base for future dividends taking into account the anticipated sales and profit growth for the group whilst balancing the need to support and fund further investment. The proposed full year dividend is covered 2.0 times (2013: 2.3 times) by earnings before amortisation and non-recurring items," it said.
Still, Low & Bonar shares were up 4.2% at 52.36 pence Tuesday morning, a near three-month high for the stock.
Its stock had fallen from above 80 pence in early September, when it reduced its profit expectations for the year due to the European slowdown in civil engineering and the slower-than-expected order intake in its Saudi Arabian joint venture.
It had flagged again in December that its profit for the year would be similar to the previous year, estimating at that time that the strength of sterling had wiped GBP2.4 million off its overseas earnings and sales growth slowed in its Bonar business in the second half.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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