Metal products group Rubicon looks a much better investment proposition now than last winter when a profit warning took heavy toll of the shares. It has a much wider customer base, stronger management, and measures introduced to cut costs and improve efficiency.
The interim statement that followed the warning was more hopeful and results for the year show pre-tax profits ahead of forecasts at £14.22m (£10.88m). The strong pound cut £700,000 off profits. For the current year, house broker Williams de Broe forecasts £18m pre-tax and a modest increase in dividends to 6.7p (6.3p) covered by 12.4p of earnings (12.2p).
At their current 106p, the shares sell on a prospective price per earnings of 8.5 times and look good value, the broker says.
For next year, the broker predicts £20.5m pre-tax and a 7.2p dividend almost twice covered by earnings of 7.2p.
The results put fresh life into the shares, which had halved over the past year and were struggling along close to their 12-month low of 90p ahead of figures.
Rubicon is a different company from two years ago following the £94m reverse takeover of the Calder industrial materials business and the purchase of Irish engineer Higgins.
The group has four divisions – metal fabrications, specialist castings, magnets, and lead products.
With Calder and Higgins included for the year, turnover was up 30% at £231m and operating profits – ahead of a combined £2.5m of restructuring and closure costs – up 55% at £18.5m.
The profit warning was linked with a shortfall in business from IBM and Ford, two of four major customers which account for 60% of sales. The much wider customer base has cut the big four’s share to around 30%.