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Plastics Capital's sales surge to boost second-half profits

"Order books are healthy and we anticipate a significant uplift in profitability during the second half of the financial year"

Buoyant demand for its films and mandrels lifted sales at Plastics Capital Plc (LON:PLA) by almost a third in its latest half year.

Revenues rose 31% to £36.6mln, with organic growth of 13.5%, though earnings were held back by a combination of heavy expenditure on plant upgrades, raw material price rises and adverse currency movements.

READ: Plastics Capital on track for a “year of good progress” after solid first-half performance

Underlying profits [EBITDA] dropped by 6% to £2.6mln, though Plastics expects the second half to start to see the benefits of its recent spending.

Full-year profits are expected to be well ahead of the £4.35mln seen last year, but slightly below market forecasts.

Films, used to wrap food and make bags and sacks, increased revenues by 18.9%, while sales of mandrels, used as the template to make holes in products, jumped 40%.

Faisal Rahmatallah, executive chairman, said the first half trends had continued in the second part of the year with films and mandrels still going well, a steady performance in the matrix group and slower growth than expected in the bearings business.  

READ: Plastics Capital upbeat after 'very good year' for growth

Bearings, though, will hold back the half though it is seeing higher order conversion than the previous year while Rahmahtallah is also confident of a significant currency boost for the group next year once the sterling currency hedges expire.

“Order books are healthy and we anticipate a significant uplift in profitability during the second half of the financial year which should benefit from the seasonal demand upswing and new business coming on stream.“ 

Broker Allenby Capital said the organic revenue growth at 13.5% year-on-year was almost double a year earlier and well above the internal target of between 5%-10% annually.

Significant investment of £3mln has been undertaken and some improvement is anticipated in the second half but not enough to recover all of the lost ground compared to last year.

The broker's forecasts for this year’s earnings have been reduced by 9.8% from 12.2p to 11p though 2018/19 forecasts are unchanged.

Shares dipped 2% to 123.5p.

--adds broker comment, share price --



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July 02 2018
The Films division enjoyed strong organic growth but the performance of the Industrial division was slowed by a disappointing showing in the ball bearings business

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