06.01.2025
In less than a month’s time, on Tuesday 4th February, this building and engineering products group will announce its First-Half Results to end-December 2024.
Despite it operating in a very challenging marketplace, I would expect the accompanying statement to be bullish in tone and further help to identify the fact that the group’s shares are undervalued at the current 307p.
The Business
With its headquarters based in Burton Latimer, near Kettering in Northamptonshire, The Alumasc Group (LON:ALU) is a sustainable building products, systems and solutions company.
The company's segments include Water Management, Building Envelope and Housebuilding Products.
The Water Management segment manufactures sustainable rainwater goods, drainage products and gas and airtight inspection covers.
Under the Alumasc Water Management Solutions banner, customers benefit from rainwater and drainage products that capture, retain and control the flow of rainwater inside and outside buildings from origination source to water course, sewer or ground.
The Building Envelope segment supplies a range of roofing products and also provides technical advice, service and environmental credentials.
While the Housebuilding Products segment manufactures products for housebuilding made from recycled and recyclable materials.
The group’s brands include Alumasc, Alumasc Skyline, Alumasc Rainwater, Harmer, Wade, Gatic, Roof-Pro, Alumasc Roofing, Blackdown and Timloc.
Sales By Activity
In the year to end-June 2024 the group’s Water Management side accounted for £48.32m of total sales (47.98%), Building Envelope operations covered £37.60m sales (37.34%), while Housebuilding Products saw £14.81m turnover (14.71%).
On a geographic sales basis, some 90.6% were made into the UK market, 5.3% into the Far East, 3.0% into Europe, with the Middle East, North America and the Rest of the World accounting for the balance 1.1%.
AGM Trading Update
On Thursday 24th October last year, the group held its AGM to consider its 2024 record results.
At that time the company indicated that the positive trading momentum has continued into the first quarter of the financial year ending 30th June 2025.
Furthermore, it noted that it had continued to outperform the sector, against a challenging backdrop in commercial construction markets, through its strategic focus on sustainable building products and solutions, growing sales through customer service and innovation, and targeted export opportunities.
Its balance sheet and cash generation remained strong, supported by continued disciplined management of working capital in the first three months of the financial year.
The company noted that while demand headwinds in its key markets were expected to persist for the rest of 2024, the quality of its businesses and the execution of its well identified strategic priorities, gave the Board confidence in the delivery of another year of growth, in line with its expectations.
CEO Paul Hooper stated that:
"I am pleased that our strong trading momentum has continued into the new financial year.
We continue to demonstrate our ability to outperform our commercial markets, through execution of our proven strategy.
With strong foundations and a clear line of sight to deliver our medium-term ambitions, we remain well positioned to deliver significant shareholder value."
The Equity
There are some 36,133,558 shares in issue.
The larger holders include John McCall (11.24%), Philip Gwyn (7.57%), Hargreaves Lansdown (7.08%), Charley Stanley (5.05%), AXA Investment Managers (4.98%), Grahm Hooper (2.93%), Chelverton Asset Management (2.57%), Maitland Asset (pty) (2.46%), Teviot Partners (1.44%), Castlefield Investment Partners (1.38%), Fortezza Finanz AG (1.11%) and HSBC Global Asset Management (1.08%).
Broker’s View
Analyst David Buxton at Cavendish Capital Markets has recently increased his Price Objective on the group’s shares from 330p to 410p.
For the current year to end-June 2025 he estimates that the group will increase its revenues to £110.5m (£100.7m), while its adjusted pre-tax profits could rise to £14.2m (£13.0m), lifting its earnings to 29.4p (26.6p) and increasing its dividend to 11.0p (10.8p) per share.
For the year to June 2026, he goes for £116.4m in sales, £15.3m in profits, 31.4p earnings, and 11.3p of dividends per share.
Buxton considers that:
“Alumasc has traded more resiliently in challenging markets than many of its peers, with internal actions and M&A continuing to offer scope to drive margins towards its targeted medium-term margins of 15-20%.
It is also well positioned to benefit from market trends and potential building sector recovery.
Progress towards a 20% margin would imply significant upside to the shares.”
My View
This group, which I have followed for some years, has shown five years of consistent growth.
And in 2024 the group’s shares more than doubled, which is very impressive against such an overall lacklustre market.
The shares dipped to a low of 161p in April last year, before climbing gradually back up to a recent 329p high, they have since eased back to 307p at which level the group is valued at only £111m.
Ahead of the Interim Results being published at the start of next month, I believe that there is scope for them to run ahead again, while also taking note of Buxton’s 410p Price Aim.
(Profile 13.02.20 @ 116p set a Target Price of 145p*)
(Profile 08.06.20 @ 80p set a Target Price of 105p*)
(Profile 10.01.24 @ 183p set a Target Price of 222p*)
(Asterisks * denote that Target Prices have been achieved since Profile publication)
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