ALU23 Oct 2015 18:10
This is taken from the October issue of growthcompanyinvestor.co.uk:
Alumasc building orders.
Alumasc has been around a long time. Past performance has been chequered, but it looks like the company has moved firmly onto the front foot. It's been benefiting from focusing its efforts on building products, having exited the loss making engineering business.,
The year ended in June showed the group's best performance since before the financial crisis - revenues up 10 per cent from continuying operations and earnings per share up 19 per cent. It's certainly true that the UK building market is doing well at the moment and seems set fair. But Alumasc is also outperforming the industry. That's because it occupies some interesting niches.
Building regulations continue to get lighter, and ALU specialises in the environmentally important segments of energy and water management. These regulated premium products should be less vulnerable to competition and leave plenty of scope for further innovation. ALU products will often be specified by the architect or structural engineer. For example, rainwater management products are made from aluminium and steel rather than plastic, which occupies the commodity end of the market.
Roofing and walling was particularly strong last year. New products and improved management that came in three years ago drove sales up 22 per cent in the division. One division that isn't yet making a full contribution is Levolux. This installs solar shading in commercial buildings to manage heat and light into the building. It's a late-cycle business and won't really start to pick up until after the current year.
Overall, the order book in June was 27% higher than the previous year, which is a healthy reflection of the market and ALU positioning within it.
Following the disposals, the balance sheet showed a £1 million net cash position at the year end. There is therefore scope to make bolt-on acquisitions, though management say this isn't a priority. However, it's important to note that there's a pension fund deficit that could require further funding in future. Despite that, the dividend was increased by 20%,which gives a nice yield of 3.2%.
Looking at foreasts, we should think in terms of mid to high single digit revenue growth, with earnings coming in a bit better than this. As long as the UK building cycle remains healthy. AMU should do well with its new found focus. The stock trades on a price to earnings ratio of around 10 times and looks ripe for further rerating.
GCI recommendation - BUY
Hope this may prove useful/interesting. GCI have a pretty good record of recommendations; although not in the same class of Robbie Burns.
I have followed ALU off and on during the day. Could have bought in anywhere between around 170 and 178. Need to do some more research; no rush. Incidentally, it has a very high overall rating with stockopedia.
Regards
CM
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