Tuesday, August 28, 2012

Tue 28 Aug - YULC, LAM, BPI

Good morning! I trust you enjoyed the long weekend, as did I. Lots of announcements this morning, but very few that interest me.

I've glanced at results from mid-cap Yule Catto (YULC) at 142p, for a £481m mkt cap. They seem quite good value - with interim operating profit up 5%, and underlying EPS up 30% to 12.3p. Good increase in interim dividend to 2.2p as well.

Net debt has reduced sharply to £174m. They reiterate guidance from June saying that the full year should see underlying profit ahead of last year's £96m. Seems quite good value to me, although I do note there is a pension deficit of £116m shown on the balance sheet. Might be worth a further look.

Oil rig maker, Lamprell (LAM) has been very accident prone of late, and its interims to 30 June are poor, as they had previously warned. The £233m mkt cap (at 90p a share) has swung into H1 losses of $33.8m at the operating level (note accounts in US dollars). The interim divi is cancelled.

Net debt has come down sharply to $35.7m, but there is an emphasis of matter section from the auditors, saying that there is a question mark over Going Concern, due to breach of banking covenants. That's not something you see often, and it's a major red flag.

The debt position doesn't look too bad, but the management here just seem incompetent, based on the group lurching from profits warning to profits warning, hence I'm steering clear of these shares from now on. A large contract business which does not seem to be under control, is a dangerous beast. Although they do seem to have a sensible pipeline of new contract wins, so customers must still have faith in Lamprell.

British Polythene Industries (BPI) delivers flat interim results, with operating profit at £15m for the 6 months to 30 June. Net debt nicely down from £38.5m a year ago to £23.3m. Although the pension deficit has more than doubled to £70m before tax, similar to big increases in most pension deficits at the moment, due to low bond yields increasing the present value of future liabilities (due to them being discounted at a lower rate).

The forecast PER of 7 looks about right, when you allow for the fact that net debt + pension deficit is about equal to the mkt cap, so the adjusted PER is really about 14. Divi yield is reasonable at forecast 3.7%.

That's it! Market just opened down about 5 points.

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