Low & Bonar |
In-line update, estimates unchanged |
FY15 update |
General industrials |
4 November 2015 |
Share price performance
Business description
Next events
Analysts
Low & Bonar is a research client of Edison Investment Research Limited |
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As it approaches the end of FY15, Low & Bonar has confirmed that it is trading in line with existing market guidance and, consequently, our estimates are unchanged. We believe that the benefits of organisational change and investment will become increasingly apparent in FY16 and be attractive to growth-oriented investors.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
11/13 |
403.1 |
25.3 |
5.9 |
2.6 |
11.3 |
3.9 |
11/14 |
410.6 |
24.7 |
5.3 |
2.7 |
12.6 |
4.1 |
11/15e |
403.4 |
26.0 |
5.6 |
2.8 |
11.9 |
4.2 |
11/16e |
418.2 |
29.2 |
6.4 |
3.0 |
10.4 |
4.5 |
Note: *PBT and EPS (fully diluted) are normalised, excluding intangible amortisation and exceptional items.
Divisional and group trading patterns unchanged
In a short IMS covering H215 performance to date, Low & Bonar confirmed that trading is in line with existing market expectations for FY15. With minor exceptions, divisional performance is also consistent with H115 results. Coated Technical Textiles (CTT) has traded strongly in Europe throughout the year (although project-based architectural membranes and specialist container sales have been low) and Interiors & Transport has experienced high demand and plant utilisation levels in all regions served. Civils activity levels have remained ‘muted’, although a combination of management change and cost reduction is likely to be improving returns here. Building & Industrial has experienced some sector strength and no further softness in Europe in H2. Lastly, Sports & Leisure is understood to have seen a good peak selling season. We believe that the key FX cross rates (ie £/€ and £/US$) for the year to date are closely in line with those seen at the H115 stage.
Emerging markets investment update
Low & Bonar has added discrete new capacity in emerging markets with two high-profile investments. Economic conditions in Saudi Arabia have deteriorated with the falling oil price and this is contributing to a still slow ramp-up of the Civils-oriented JV in the region. As mentioned above, CTT has also been affected by this. In China, the new Colback/Interiors & Transport facility is well advanced now. The first production lines are in the process of being commissioned and are on track for completion by the end of Q116. Local carpet tile and automotive carpet demand continues to grow and the facility’s output will initially substitute for comparable imported Low & Bonar products.
Valuation: Discount to Royal Ten Cate
Low & Bonar’s share price has largely traded in the 65-70p range in the last two months (being up c 34% ytd, but off from a 75p high in June). Estimates and valuation multiples are in line with our last published note on 14 October. Since then, a buyout fund offer for peer, Ten Cate (KTC) has now been formally tabled (on 20 October at the expected €24.60 per share level) and, as previously noted, Low & Bonar is trading on c 35-40% P/E discounts to KTC on this basis.
Exhibit 1: Financial summary
£m |
2012 |
2013 |
2013 |
2014 |
2015e |
2016e |
2017e |
||
Year end 30 November |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
Restated IAS19R |
IAS19R |
IAS19R |
IAS19R |
IAS19R |
||||
Revenue |
|
|
380.5 |
403.1 |
403.1 |
410.6 |
403.4 |
418.2 |
432.0 |
EBITDA |
|
|
43.8 |
45.6 |
44.8 |
44.5 |
47.3 |
50.9 |
52.9 |
Operating Profit (ex SBP) |
|
|
31.7 |
32.8 |
32.0 |
31.8 |
33.3 |
35.9 |
36.9 |
Net Interest |
(5.1) |
(5.3) |
(5.3) |
(5.0) |
(4.8) |
(5.0) |
(5.0) |
||
SBP |
(1.2) |
(0.6) |
(0.6) |
(0.6) |
(0.6) |
(0.6) |
(0.6) |
||
Saudi JV |
0 |
0 |
(0.6) |
(1.1) |
(1.5) |
(0.7) |
0.0 |
||
PNFC |
(0.9) |
(0.8) |
(0.8) |
(0.4) |
(0.4) |
(0.4) |
(0.4) |
||
Profit Before Tax (company norm) |
|
24.5 |
26.1 |
25.3 |
24.7 |
26.0 |
29.2 |
30.9 |
|
Intangible Amortisation |
(5.8) |
(5.6) |
(5.6) |
(5.2) |
(4.2) |
(4.2) |
(4.2) |
||
Exceptionals |
(12.6) |
(2.7) |
(2.4) |
(3.3) |
(1.0) |
0 |
0 |
||
Profit Before Tax (FRS 3) |
|
|
6.1 |
17.8 |
16.2 |
16.2 |
20.8 |
25.0 |
26.7 |
Tax |
(4.7) |
(5.0) |
(4.9) |
(4.8) |
(6.6) |
(7.7) |
(8.1) |
||
Minorities |
0.0 |
(0.5) |
(0.5) |
(0.3) |
(0.3) |
(0.3) |
(0.3) |
||
Profit After Tax (norm) |
19.0 |
19.6 |
18.2 |
17.9 |
19.0 |
21.6 |
22.8 |
||
Profit After Tax (FRS 3) |
1.4 |
12.8 |
11.3 |
11.4 |
14.2 |
17.3 |
18.5 |
||
Average Number of Shares Outstanding (m) |
288.4 |
301.0 |
301.0 |
327.0 |
328.3 |
328.4 |
328.4 |
||
EPS FD- normalised (p) |
|
|
6.1 |
6.1 |
5.9 |
5.3 |
5.6 |
6.4 |
6.7 |
EPS - FRS 3 (p) |
|
|
0.5 |
4.1 |
3.7 |
3.4 |
4.2 |
5.2 |
5.5 |
Dividend per share (p) |
2.4 |
2.6 |
2.6 |
2.7 |
2.8 |
3.0 |
3.2 |
||
Gross Margin (%) |
|||||||||
EBITDA Margin (%) |
11.5 |
11.3 |
11.1 |
10.8 |
11.7 |
12.2 |
12.2 |
||
Operating Margin (before amort. and except) (%) |
8.3 |
8.1 |
7.9 |
7.7 |
8.3 |
8.6 |
8.5 |
||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
223.4 |
232.9 |
232.9 |
230.2 |
229.3 |
239.6 |
245.6 |
Intangible Assets |
110.9 |
115.2 |
115.2 |
105.8 |
92.8 |
89.8 |
86.8 |
||
Tangible Assets |
108.8 |
114.2 |
114.2 |
119.3 |
131.1 |
144.4 |
153.4 |
||
Investments |
3.7 |
3.5 |
3.5 |
5.1 |
5.4 |
5.4 |
5.4 |
||
Current Assets |
|
|
171.3 |
186.4 |
186.4 |
192.0 |
194.8 |
193.6 |
196.1 |
Stocks |
75.1 |
86.8 |
86.8 |
90.9 |
90.9 |
94.3 |
97.4 |
||
Debtors |
60.3 |
63.8 |
63.8 |
62.8 |
62.8 |
65.1 |
67.3 |
||
Other |
9.0 |
17.9 |
17.9 |
12.5 |
6.5 |
6.8 |
7.0 |
||
Cash |
26.9 |
17.9 |
17.9 |
25.8 |
34.6 |
27.4 |
24.5 |
||
Current Liabilities |
|
|
(82.5) |
(88.4) |
(88.4) |
(87.7) |
(90.4) |
(94.1) |
(97.6) |
Creditors |
(82.5) |
(88.4) |
(88.4) |
(87.7) |
(90.4) |
(94.1) |
(97.6) |
||
Short term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Long Term Liabilities |
|
|
(159.6) |
(142.5) |
(142.5) |
(147.6) |
(154.9) |
(151.3) |
(147.7) |
Long term borrowings |
(109.5) |
(104.7) |
(104.7) |
(113.8) |
(127.6) |
(127.6) |
(127.6) |
||
Other long term liabilities |
(50.1) |
(37.8) |
(37.8) |
(33.8) |
(27.3) |
(23.7) |
(20.1) |
||
Net Assets |
|
|
152.6 |
188.4 |
188.4 |
186.9 |
178.8 |
187.8 |
196.4 |
CASH FLOW |
|||||||||
Operating Cash Flow |
|
|
36.4 |
35.9 |
35.9 |
33.6 |
42.2 |
44.2 |
46.4 |
Net Interest |
(4.8) |
(4.8) |
(4.8) |
(4.5) |
(4.8) |
(5.0) |
(5.0) |
||
Tax |
(3.9) |
(6.8) |
(6.8) |
(7.7) |
(7.1) |
(7.7) |
(8.1) |
||
Capex |
(13.8) |
(13.4) |
(13.4) |
(20.2) |
(35.0) |
(29.5) |
(26.2) |
||
Acquisitions/disposals |
(8.6) |
(25.0) |
(25.0) |
3.0 |
4.7 |
0 |
0 |
||
Financing |
0.2 |
19.9 |
19.9 |
0 |
0 |
0 |
(0) |
||
Dividends |
(6.3) |
(7.2) |
(7.2) |
(8.8) |
(8.9) |
(9.2) |
(10.0) |
||
Net Cash Flow |
(0.8) |
(1.4) |
(1.4) |
(4.5) |
(8.9) |
(7.2) |
(2.9) |
||
Opening net debt/(cash) |
|
|
85.3 |
82.6 |
82.6 |
86.8 |
88.0 |
93.0 |
100.2 |
HP finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
3.5 |
(2.8) |
(2.8) |
3.3 |
3.9 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
82.6 |
86.8 |
86.8 |
88.0 |
93.0 |
100.2 |
103.1 |
Source: Company accounts, Edison Investment Research
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