Investment Column: Mayflower blooms in its niche
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Your support makes all the difference.Car parts makers are generally having a tough time at the moment, with manufacturers putting a squeeze on margins in an attempt to cut costs. But Mayflower is a component manufacturer with a difference. It has carved out a lucrative niche developing and designing car bodies and its profits are blossoming.
Manufacturers are looking to sell an ever more diverse range of cars of different designs and styles to attract customers. To do so they are outsourcing more work to suppliers such as Mayflower who have the flexibility and expertise to create these new models.
Mayflower's pre-tax profits for the six months to June rose 58 per cent to pounds 16.1m, mostly thanks to a maiden contribution from last year's US acquisition SCSM. That said, underlying operating profits still rose an impressive 22 per cent.
Within that, European profits rose by nearly a fifth to pounds 6.9m, despite a temporary dip in sales. US profits jumped from pounds 2.2m to pounds 7.7m and the expected surge in sales of a new Mercedes Benz M Class sports car should help earnings further this year.
It also has a wealth of other new orders in the pipeline. It has recently won contracts with Ford and a Brazilian truck manufacturer to produce new truck bodies. And more acquisitions are on the cards. Analysts believe Mayflower's gearing will fall swiftly over the next few years and it could afford a sizeable acquisition, probably within the aerospace industry. Mayflower has recently moved into this area, teaming up with British Aerospace to help design the Nimrod and the new Eurofighter.
Prospects also look rosy at bus making subsidiary, Walter Alexander. Profits there rose by 48 per cent to pounds 3.7m. It is expanding rapidly in the Far East and has won a contract in Sweden to provide new buses for Stagecoach.
House broker BZW forecasts current year profits of pounds 34m, putting the shares, up 3.5p at 158p, on a prospective p/e ratio of 15. Mayflower's shares have motored upwards in the last few years, rising from just 22p in 1993, but they should remain in the fast lane for some time yet. Good value.
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