Recent acquisitions by Unicorn International, the abrasive products concern, not only fill gaps in its range but are niche businesses achieving margins above those of existing interests in the group. All will enhance earnings this year.
Unicorn reports 1996 figures showing sales little changed at £102m, but pre-tax profits up 21.3% at £7.31m. House broker Albert E Sharp looks for £9.4m pre-tax this year, with earnings of 16.4p (14.44p) and a 7.2p dividend (6.15p).
The broker calculates the trio of newcomers joining since December – Diamond Abrasive, Nimbus Diamond Tool and FT Superabrasives – will contribute 15% of the £9.9m operating profits it estimates for 1997, but their share of turnover, estimated at £123m, will be only 9%.
On the broker’s expectations, margins of the newcomers this year will all top 12%, and diamond tool maker Nimbus will achieve nearly 15%. The broker expects margins of the existing businesses to show little improvement on the 7.5% achieved in 1996.
On Sharp’s estimates, Unicorn shares trade on a prospective earnings multiple of less than 10 times and yield under 5%.
Last year, Unicorn increased its profits in the UK and the US (respectively by 41% to £3.1m and 21% to £4m) but European profits fell 66% to £500,000.
The European setback was largely caused by dull and competitive markets, although restructuring also took its toll. Improved trading in these key markets mainly awaits their economic recovery, said chief executive David Rimmer.