Cortworth itches to expand

Specialist engineer Cortworth, which is itching to expand, could soon be in a position to do so, according to City brokers. Although trading at a 38% discount to the engineering sector overall, the share price looks to undervalue the company’s prospects -particularly of two of its best businesses, aerospace and electronic metering. The price of […]

Specialist engineer Cortworth, which is itching to expand, could soon be in a position to do so, according to City brokers.

Although trading at a 38% discount to the engineering sector overall, the share price looks to undervalue the company’s prospects -particularly of two of its best businesses, aerospace and electronic metering.

The price of a forthcoming 10% institutional stake is shadowing the share price. And it is also likely that the management, which owns 24% of the company, will trim a percentage point or two from its holdings.

If these deals are done, the shares could power ahead this year. The company is keen to expand, and brokers reckon that with nil borrowings and over £9m cash in the kitty, it could comfortably gear up to 40% for acquisitions.

The just-published 1996 figures – operating profits up 14% at £9.8m – showed a 4.7% fall in sales to £67m, but that reflects the company’s exit from around £6m worth of low-margin business, now partly replaced with £3m of more profitable work. That has left around 30% spare capacity in the Newage transmissions business. Newage and Aerospace Forgings – where the work includes components for the Apache and EH101 helicopters, and the Airbus – accounted for 38% of sales.

House broker HSBC James Capel forecasts profits this year of £11.4m pre-tax (£10.1m).