Alumasc profits fall but foundations laid for strong second half

Sustainable building and engineering product supplier Alumasc Group (LON:ALU) posted a slight downturn in its half-turn results, due to challenging market conditions. However, the company’s outlook appears more positive.

Owing to operational changes and political tensions, the group had to content itself with ‘resilient’ results.

The company’s revenue narrowed to £41.1 million for the six month period ended 31 December 2019, down from £44.3 million for the same period a year earlier. Similarly, the Group’s statutory profit before tax dropped from £3.4 million to £2.1 million, while underlying profit before tax remained flat at £2.3 million at the end of both half year periods.

Further, Alumasc net debt widened from £5.1 million as of 30 June 2019, to £6.6 million at the end of the calendar year.

However, the company were pleased to announce its underlying operating margin had improved to 6.1%, up from 5.4%, and its triennial pension deficit valuation at 31 March 2019 was ‘significantly lower’ at £22.4 million, versus £33.0 million in 2016.

Alumasc comments

Responding to the posting of the results, company Chief Executive Paul Hooper, stated:

“In light of the challenging market conditions in 2019, we acted swiftly to restructure and reposition the Group in the second half of our last financial year. This underpinned a resilient H1 profit performance.”

“The Group’s pension deficit and cash funding requirement are significantly reduced.”

“With an increased order book of £23.6 million, up over 10% on six months ago, strong contract pipelines and the Group’s usual seasonal trading bias towards the second half referenced in the Outlook Statement, the Board’s expectations for full year performance remain unchanged.”

“The Board remains confident in prospects for the medium and longer-term performance of the Group in view of our leading specialist market positions in water and energy management, addressing climate change and the growing sustainability agenda.”

Strong second half expected

Looking ahead, the company’s outlook statement read:

“Group order books in the six months to 31 December 2019 were up by £3.0 million to £23.6 million, with encouraging trends across the Group, except for Levolux where we are being deliberately selective and cautious with order intake in line with the turnaround plan. Contract pipelines are strong at both Alumasc Roofing and Gatic, with a £1m project recently secured by Alumasc Roofing expected to deliver a positive impact in the second half year.”

“We anticipate that Alumasc should benefit from its usual seasonal second half trading bias. This could be more marked in the current financial year as we expect Levolux to return to profit in the coming months as it trades out of underperforming contracts from a significantly lower overhead base.”

“More broadly, with around two-thirds of Group revenues relating to the management of the scarce resources of water and energy in the built environment, and circa 75% of the Group’s products sourced from recycled or recyclable materials, the Group should benefit from the growing sustainability agenda as well as from increasing business confidence and positive market indicators in the UK economy following the recent General Election and EU Withdrawal Agreement.”

Investor notes

Following the update, the company’es shares rallied 5.14% or 5.50p to 112.50p per share 04/02/20 17:07 GMT.

Analysts from Peel Hunt echoed the positive Alumasc outlook, upgrading their stance from ‘Add’ to ‘Buy’.

The Group’s p/e ratio stands at 8.63, their dividend yield is generous at 6.53%.

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Jamie Gordon
Senior Journalist at the UK Investor Magazine. Also a contributing writer at the Investment Observer, UK Property Journal and UK Startup Magazine. Postgraduate of King's College London with a specialisation in Business Ethics. Interested in Development Economics and David Hume.