View from City Road: Mix of tastes in Glynwed slice
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Your support makes all the difference.GLYNWED is a handy cross-sectional slice of the UK economy, as its markets span housebuilding, consumer durables, automotive, general manufacturing and infrastructure.
Apart from the tantalising prospect of a big increase in demand from the water companies, whose orders have not flooded in so far, the bad news is that there is no sign of any upturn in the domestic market although car and commercial vehicle makers are still increasing exports.
The good news is that Glynwed expects to earn enough profits to cover a maintained total dividend of 11.65p after an unchanged and uncovered interim payment of 4.15p.
At 196p, up 13p, a reasonably certain prospective yield of 8 per cent means that it is not an overly expensive share to hold for anyone hoping for a bid, rumours of which pushed the shares to a peak of 280p in late April.
But whether a p/e of 15 or 16, assuming pre-tax profits of betwen pounds 36m and pounds 40m, is good value is another question. Glynwed's half-year results show just how tough the recession is for the company.
Despite the removal of more than 10 per cent of the workforce in the past 18 months Glynwed's operating profits have been roughly flat over the past three half-years.
A mild improvement to pounds 21.5m from pounds 20m in the comparable period reflects a cost-cutting-led recovery in building products offset by falls in plastics, steels and engineered products.
A cut in interest charges from pounds 9.6m to pounds 6.1m, thanks to disposals, lower interest rates and some underlying cash inflow, bumped up pre-tax profits by 48 per cent to pounds 15.4m. But pre-tax profits were little changed on the previous six months and are likely to make only modest progress in the remainder of the year. The biggest item to take pre-tax profits beyond the pounds 36m necessary to cover the dividend is likely to be reduced losses in tubes and fittings after a badly-executed rationalisation racked up losses of pounds 11m in 1991.
Without bid talk the shares are fully valued.
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