LATHAM (JAMES) (LON:LTHM)
SECTOR – SUPPORT SERVICES
RATING – BUY
MARKET CAP – £167m
CURRENT PRICE – 853p#
TARGET PRICE – UNDER REVIEW
COMPANY DESCRIPTION
The group’s activity is the importation and distribution of wood based sheet materials and joinery quality hardwoods and softwoods, hardwood flooring and other products, offering national coverage from eleven locations.
Another solid performance, ahead of expectations
NORTHLAND VIEW
FY17A performance: Another solid performance, where revenue was £199m, c. 1.4% ahead of forecasts (above) and +7% YoY. Gross margin benefitted from both higher volumes and higher prices as a result of the weaker sterling, and was +60bps higher at 18.1% (17.5% forecast). The benefits flowed through the P&L where EPS was 55.8p, 18% ahead of our forecast and +4% YoY. Recommended final divi of 10.85p taking the total divi to 15.35p, well covered by earnings at 3.6x, though marginally below what we expected for FY17E. The balance sheet is in strong shape with over £16m of net cash well ahead of our forecast £8.6m, as we expected higher capex spend on Wigston and Yate, which looks to be deferred to FY18E. Yate is nearing completion with a move planned for July and negotiations for the Wigston construction is at an advanced stage with relocation expected by March 2018.
Forecasts: Trading in FY18 has started well, where April and May was +3% YoY, however pressure on margin is referenced in the statement.
Valuation & Recommendation: Our previous price target of 800p is under review, and given the strong performance we will review our FY18E forecasts as well.
The share price has performed strongly, and is trading on c. 15x FY17A earnings of 55.8p not demanding in our view. We retain our Buy rating in the interim on a solid track record of exceeding expectations.