Glynwed International shares have under-performed the stock market as a whole by 40% since January, and the engineering sector by 50%. Ahead of last week’s interims they looked distinctly undervalued.
So with no bad news – if little very good – emerging with the figures, investors seized the opportunity to buy and the price perked up over several days.
While operating profits were up only marginally at £47.5m, a big white hope of the group, its fast-growing pipe systems, increased its contribution by 10% to £17.3m. It further pleased the City two days after the figures with news of a sizeable US acquisition.
Metals distribution also increased its profits, but the consumer and construction and the metals processing arms were down.
But brokers noted that Glynwed has some excellent brands with strong market shares in its portfolio, that its home market is strong, and US sales are buoyant.
The market was also encouraged by news that the company has rid itself of £70m of unprofitable businesses, and what is still on the sales slab is not losing money. A sizeable further disposal is expected soon.
Meanwhile, Tony Wilson, the chief executive elect, is shopping around with up to £100m to spend on further acquisitions.
The strong pound wiped £4m off first-half profits and the company has pencilled in a £10m hit on this count for the full year.
Analysts note that the budget’s end to dividend tax credits for pension funds would increase the group’s pension charge and more than wipe out any benefits from lower corporation tax.
That has decided analyst Michael Blogg of broker Charterhouse Tilney to take a cautious line on profits this year, and to leave his earlier forecast of £90m pre-tax and the 12.75p dividend unchanged.