12/10/2005
Watermark, the provider of inflight catering, products and cabin management services to airlines, reported record sales, margins and profits for an excellent half to June. First results unveiled under IFRS showed profits rising 50% to £2.35m, on sales lifted 15% to £35.2m – gross margins grew by 4% to 37.18%, and investors were treated to a maiden interim dividend.
Charismatic chief executive John Caulcutt explained that during the period the number of international passengers grew by 8% with average airline loads topping 70%. Despite these trends, airlines are still struggling with the ‘ballooning’ cost of fuel. As a result, they remain extremely keen on the low-cost model of Watermark’s catering division, as well as its ‘Encompass’ outsourcing package (bmi was the first airline to adopt the package and others are waiting in the wings).
Watermark continues to win new airline and travel clients globally, especially in India and the Far East. ‘There is a swathe of all new carriers coming out of India’, enthuses Caulcutt, ‘and it has been a huge area of growth for us’. Since the period end, the group has submitted two sizeable single source product tenders to major airlines – investors might expect news on one of these by the end of this month. Furthermore, the recent Gate Gourmet unrest at Heathrow is providing opportunities for the group. Watermark has taken on a Heathrow catering contract with Sri Lankan Airlines from Gate Gourmet – this has become a long-term deal for the group – and Caulcutt says others are in the pipeline.
Analysts are going for full year profits of £7.9m and earnings of 11.7p, leaving the shares on an unjustifiably low p/e of 11.1. Watermark, originally recommended by Growth Company Investor at 104p, remains a buy.
| Market cap: | £64.9m |
| PE Forecast: | 11.1 |
| Share price: | 130p |
| LSE | 0pm |
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| Other company articles: |
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| 12/10/2005 |
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