Sector Spotlight: General Industrials

In this weeks sector spotlight we take a look at General Industrials. Are there any companies operating in general industrials that could appeal to investors?

Article updated: 3 September 2020 8:00am Author: Michael Baxter

In this week’s sector spotlight I take a brief look at all the companies operating in this sector with a market cap over £50 million; that’s eight companies.

Of these companies, The Share Centre has a recommendation on four of them, and in each case it says: ‘buy.’ These companies are: Smurfit Kappa, Smith DS, Smiths Group, and Vesuvius.

Three companies having been paying out dividends over three per cent based on current share price: Avation (yield: 6.47 per cent,) Smiths DS (6.26 per cent) and Smiths Group 3.27 per cent. Of course, with Covid, this could change. For example, see Smith DS below.

Two companies: Smurfit Kappa and Accsys Technologies see their current share price within 20 per cent of their all time high.

Three companies: Afarak, Avation, and Vesuvius have a net asset value greater than market cap. In the case of Smith DS, market cap and net assets are very close.

Let’s take a closer look:

Afarak

The company is a vertically-integrated producer of speciality alloys with operations in South Africa, Turkey, Germany, London, Helsinki and Malta.

The first half of 2020 saw revenue fall 45.7 per cent on the same period last year. On the other hand, losses at the company almost halved.

The company said: “The second half of the year is expected to continue on a weak tone until a vaccine for COVID-19 is found. The lower demand will have an impact on the Group’s sales and production cycles. Our profitability and cash flow position are strained which is leading to going concern difficulties. The Group may need to raise further funds to meet its liquidity needs during this period.”

Share price 30p
2020 high 50p
2020 low 25p
Five year high (2018) 92.5p
All time high (2018) 92.5p
Change last 12 months -56%
Change last five years -8%
Change since 2014 -2%
Market cap £m 72
Yield % 0
P/E -2
Revenue growth since 2015 -2,347%
Pre-tax profits growth since 2015 -1,038.5%
Total assets/total liabilities 1.5%
Current assets/total liabilities 0.4%
Current assets/current liabilities 0.9%
net assets £m  75.0

Avation

The company is a commercial passenger aircraft leasing company. It manages a fleet of aircraft which it leases to airlines across the world. Its customers include Loganair, Virgin Australia, Air France, easyJet, Eva Air, Philippine Airlines, Air India, Vietjet Air, Fiji Airways, Mandarin Airlines, Cebu Pacific, Garuda Indonesia, Galistair, airBaltic and Danish Air Transport.

In the nine months to the end of March, revenue was up 14 per cent and profit before tax surged 173 per cent. Things were looking good for the company. Earlier this year, shares hit an all-time high. Then Covid happened — to state the obvious, the virus has not been good for air travel. For example: one of its customers, Virgin Australia is in administration.

Shares are now roughly 40 per cent of the year high.

Share price 126.5p
2020 high 333.5p
2020 low 105p
Five year high (2020) 333.5p
All time high (2020) 333.5p
Change last 12 months -56%
Change last five years 4%
Change since 2010 69%
Market cap £m 79
Yield % 6.47
P/E 4
Revenue growth since 2015 6,779.5%
Pre-tax profits growth since 2015 44.4%
Total assets/total liabilities 1.2%
Current assets/total liabilities 0.1%
Current assets/current liabilities 1.3%
net assets £m  241.0

Accsys Technologies

The company specialises on sustainable wood, converting it into building materials.

It has a proprietary acetylation process, which it says boosts “the already naturally occurring acetyl content of wood and by doing so, reduces the ability of the wood to absorb water, rendering it more dimensionally stable and, because it is no longer easily digestible, extremely durable.”

In its last full year, revenue increased by 20 per cent. Underlying gross profit was up by a half.

Share price 91.5p
2020 high 104p
2020 low 65p
Five year high (2019) 108p
All time high (2019) 108p
Change last 12 months 6%
Change last five years 50%
Change since 2005 2,277%
Market cap £m 151
Yield % 0
P/E 52
Revenue growth since 2015 6,509.4%
Pre-tax profits growth since 2015 -133.3%
Total assets/total liabilities 2.6%
Current assets/total liabilities 0.9%
Current assets/current liabilities 2.9%
net assets £m  127.0

Coats

Is a leading industrial thread business.

In the six months to the end of June, group revenues were down 21% and adjusted operating profit was down 66 per cent.

It stated: “The group remains well placed to navigate through the current challenging environment and emerge even stronger having moved quickly and prudently on underpinning measures.”

Share price 55.2p
2020 high 79.6p
2020 low 36.5p
Five year high (2019) 90p
All time high (1988) 140000p
Change last 12 months -26%
Change last five years 112%
Change since 1988 -100%
Market cap £m 797
Yield % 0.77
P/E 11
Revenue growth since 2015 -571.9%
Pre-tax profits growth since 2015 108.8%
Total assets/total liabilities 1.4%
Current assets/total liabilities 0.6%
Current assets/current liabilities 1.5%
net assets £m  351.0

Smurfit Kappa

The company manufactures, distributes and sells of containerboard, corrugated containers and other paper-based packaging products.

In the six months to 30th June, revenue fell nine per cent, EBITDA was down 13 per cent.

Tony Smurfit, Group CEO, said: “During the first six months, the Group completed its largest ever investment, €134 million, in a recovery boiler in Austria. I am happy to report that this will reduce our CO2 emissions by 40,000 tonnes or a further 1.5 per cent towards the Group’s sustainability emissions target.

“Paper-based packaging is renewable, recyclable and bio-degradable. Together with the mega-trends of e-commerce and the consumers’ desire for sustainable packaging solutions, corrugated is the most innovative and sustainable transport and merchandising solution. SKG is uniquely positioned to capitalise on these long-term trends with its unrivalled market offering and SMART business applications that enable our customers to increase sales, reduce costs and mitigate risk.”

Share price 2,674p
2020 high 3,010p
2020 low 1,944p
Five year high (2018) 3,270p
All time high (2018) 3,270p
Change last 12 months 6%
Change last five years 33%
Change since 2007 90%
Market cap £m 6,379
Yield % 0.9
P/E 16
Revenue growth since 2015 569.2%
Pre-tax profits growth since 2015 17.5%
Total assets/total liabilities 1.4%
Current assets/total liabilities 0.4%
Current assets/current liabilities 1.2%
net assets £m  2993.0

Smith DS

The company provides corrugated and plastic packaging in 25 countries. It also operates a recycling business that collects used paper and corrugated cardboard from which it makes the recycled paper used in corrugated packaging.

In the 12 months to April 2020, revenue increased two per cent and adjusted operating profit was up five per cent.

Miles Roberts, Group Chief Executive said: “Our business model is resilient, built on our consistent FMCG and e-commerce customer base. In the short term, however, the impact of Covid-19 on the economies in which we operate is likely to impact volumes to industrial customers and add to operating costs. In particular, infrastructure constraints have driven elevated OCC prices, although we currently expect the impact to be limited to H1. With the current economic uncertainty, we continue to focus on our employees, our customers, our communities and on the efficiency and cash generation of our business and accordingly the Board considers it premature to resume dividend payments at this stage.

“In the medium-term, the growth drivers of e-commerce and sustainability are as strong as ever. The Covid-19 crisis is also expected to accelerate a number of the structural drivers for corrugated packaging and our scale and innovation led customer offering positions us well and gives us confidence for the future.”

Share price 259p
2020 high 386p
2020 low 255p
Five year high (2018) 511p
All time high (2018) 511p
Change last 12 months -24%
Change last five years -16%
Change since 2008 205%
Market cap £m 3,551
Yield % 6.26
P/E 7
Revenue growth since 2015 2,647%
Pre-tax profits growth since 2015 39.4%
Total assets/total liabilities 1.6%
Current assets/total liabilities 0.4%
Current assets/current liabilities 0.9%
net assets £m  3,351.0

Smiths Group

The company is a diversified global industrial technology company. It lists five areas of operation:

  • Medical Technology
  • Security & Defence
  • General Industry
  • Energy
  • Space and Aerospace

Divisions include:

  • John Crane, an oil and gas support services company,
  • Smiths Detection- which sells security scanners,
  • Smiths Medical, Smiths Interconnect - electronic communications parts and services,
  • Flex-Tek which manufactures parts for heating liquids and gas for various industries.

For the ten months ended 31 May 2020, underlying revenue for Continuing Operations was up two per cent. Reported year-to-date revenue increased six per cent including three per cent from the acquisition of United Flexible.

Andy Reynolds Smith, Group Chief Executive, commented:

“Market-leading positions and a flexible business model have enabled the Group to continue to perform through crisis disruption.

Our immediate focus is the safety of our people and business continuity for our customers. We will continue to take the actions necessary to safeguard our long-term competitiveness.

“We are confident that we will meet the challenges of the current crisis - and emerge stronger, better able to outperform long-term.”

Share price 1402p
2020 high 1760p
2020 low 815p
Five year high (2018) 1,780p
All time high (2018) 1,780p
Change last 12 months -16%
Change last five years 30%
Change since 1988 404%
Market cap £m 5,555
Yield % 3.27
P/E 25
Revenue growth since 2015 -1,533.6%
Pre-tax profits growth since 2015 -12.1%
Total assets/total liabilities 1.8%
Current assets/total liabilities 0.9%
Current assets/current liabilities 2.9%
net assets £m  2,381.0

Vesuvius

It says that it is a global leader in molten metal flow engineering.

In the first half of this year, revenue fell 19 per cent and trading profit dropped 48.3 per cent.

Patrick André, CEO, said:

“Vesuvius demonstrated the strength and resilience of its flexible business model in H1 with a strong positive free cash flow generation. Our quick and decisive implementation of Covid-related cost savings measures, in addition to the planned delivery of the recurring savings from our restructuring programme, allowed us to limit the negative impact of the pandemic on our results.

“Looking forward, the first signs of improvement are now apparent in both Steel and Foundry, but we expect the pace of a recovery to be slow over the coming months. Consequently, the Board has not declared an interim dividend at this time and will review the position as the year progresses. Likewise, until we have greater certainty on the shape of the recovery, we cannot provide meaningful guidance as to our full year results.

“However, thanks to the optimisation of our manufacturing footprint over the past three years, Vesuvius is now very well positioned to benefit from the recovery of end markets when it occurs.”

Share price 409p
2020 high 510p
2020 low 302p
Five year high (2018) 636p
All time high (2018) 636p
Change last 12 months -12%
Change last five years 4%
Change since 2012 19%
Market cap £m 1,109
Yield % 1.52
P/E 14
Revenue growth since 2015 2,943.2%
Pre-tax profits growth since 2015 54.5%
Total assets/total liabilities 2.1%
Current assets/total liabilities 0.8%
Current assets/current liabilities 1.7%
net assets £m  1,115.0

All prices are approximate figures taken from 1 September 2020 from Yahoo Finance.


These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.

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