Alumasc (ALU) – 210p

Alumasc (ALU) – 210p

Shares in Alumasc have taken a breather in recent weeks, having risen strongly over the last 18 months or so.  We watched the company closely as it navigated the challenges associated with Covid-19 and it is no secret that it is now in very good shape.  Given the recent dip in the share price now may be an opportune time to buy in.  Although final results have recently been released, the Annual General Meeting is a matter of weeks away and a positive trading update at that time could see the shares regain the upward momentum which had been building.

The company supplies premium building products, systems and solutions, with the business being divided into three segments; Building Envelope, Water Management and Housebuilding Products.  Alumasc is AIM-listed, having moved from the Main Market in June 2019.

Results for the year ended 30 June 2021, released on 7 September, showed considerable improvement on the corresponding figures for the prior year.  Revenue from continuing operations jumped to £90.5m (2020: £76.0m) and underlying operating profit was £11.0m (2020: £4.2m).  Reported profit before tax was £9.8m (2020: £2.7m), which translated into underlying earnings per share of 23.7p (2020: 8.2p).  A final dividend of 6.25p per share (2020: nil) took the total for the year to 9.5p per share (2020: 2.0p).  Net bank debt as at 30 June 2021 was £0.9m, an improvement on the figure of £4.3m from a year earlier.

Water Management delivered strong performance with operating profit of £6.1m versus £4.8m a year earlier.  The Building Envelope division saw a significant £7.8m revenue increase and a £5.2m operating profit improvement, including a £1.4m turnaround at Levolux.  Housebuilding Products, better known as Timloc, delivered an exceptionally good year, growing revenue by 22% and operating profit by 105%.  The company is mindful of environmental growth drivers, with approximately 80% of sales derived from environmental solution products

Sustainable growth should lie ahead and the company has a clear strategy to exploit the market positions it enjoys.  Water Management is benefitting from both its UK and export-focussed strategy.  Building Envelope moved into the new financial year with a strong order book, supported by a recent restructuring, and Housebuilding Products continues to develop useful new products.  Potential short-term disruption to customers’ operations from shortages of building materials, labour and road haulage and delays in the global container shipping industry has been highlighted.  However, the company is by no means alone in facing these challenges and they should be factored into the share price at this stage.

The company’s Annual General Meeting is scheduled for 21 October and in the past this event has been accompanied by a trading update.  This news could be the catalyst for the share price to move higher again.  Hence, we believe that now is a good time to look at the shares both for patient investors and those with a shorter investment time horizon.  BUY.

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