Low & Bonar

LN: LWB

£120.7m market cap

17.53p last close

Low & Bonar produces specialist performance materials for a variety of end markets by combining polymers with specialty additives and pigments. From FY19 Building & Industrial and Interiors & Transportation will be combined as the Colbond division.

Investment summary

Low & Bonar announced a £54m Placing and Open Offer (c £50m net) alongside its FY18 results. The results themselves were broadly in line with our estimates – albeit with a lower final dividend – as was year-end net debt at £128.5m. A return to Civil Engineering profitability is a welcome development ahead of the expected disposal of that division and Interiors & Transport also performed well in H2. Ongoing production issues at Coated Technical Textiles remained a drag on financial performance although there now appears to be a clear strategy for resolving problems here. We trimmed our divisional margin estimates for FY19 and FY20 giving rise to 7–8% EBITDA reductions and adjusted for lower interest costs and an increased number of shares after the equity raise as well as a re-set dividend cover policy of approximately 2.5x. The new equity funding goes a long way towards resolving balance sheet net debt constraints and allows the relatively new management team to execute its updated strategic plan.

Y/E Nov
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2017A 446.5 55.8 30.7 0.0 N/A 1.8
2018A 431.9 39.2 16.7 0.0 N/A 1.2
2019E 440.4 42.6 18.9 2.2 8.0 5.7
2020E 451.6 46.3 23.3 2.4 7.3 2.8
Last updated on 19/03/2019
Industry outlook

The new management team has restated key strategic medium-term financial targets of revenue growth 1-2% above regional weighted GDP, 10% operating margins, a 12%+ return on capital employed and an average dividend payout equal to 40% of PAT.

Last updated on 19/03/2019
Sector
Industrials
Share price graph
Balance sheet
Forecast net debt (£m) 93.6
Forecast gearing ratio (%) 50
Price performance
%
1m
3m
12m
Actual 3.4 15.9 (68.2)
Relative* 2.5 6.4 (68.9)
52-week high/low 54.3p/12.8p
*% relative to local index
Key management
Philip de Klerk CEO
Ian Ashton CFO

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