Companies: ALU ��

Following recent restructuring, including the sale of its zinc and aluminium alloys business last summer and a key acquisition, Alumasc has seriously transformed the quality of its earnings.

Under chief executive Paul Hooper, the group has evolved into a specialist supplier of higher margin and niche building products, many of which are sustainable and in high demand. These include products such as solar shading systems for buildings, added through May’s significant �13.5m acquisition of Levolux, as well as intensive green roofs and exterior solid wall insulation for social housing.

Interim results to December revealed a rise in continuing pre-tax profits of almost 50% to �4.5m, with earnings rising by the same amount to 8.6p and the interim dividend upped by 5% to 3.25p. Boosted by Levolux, ongoing sales grew by 26% to �59.9m, driven by the building products division, where revenues surged north by more than 50% to �40.2m. A drop in both sales and profits was seen within the engineering products division, reflecting a move away from traditional automotive sector and towards ‘new product and market areas’ offering more fertile growth.

Forecasts in the market for June 2008 suggest the company can drive underlying pre-tax profits from �7.5m to �9.6m and earnings to 18.1p (14.3p), placing the shares on a forward price-to-earnings ratio of only 11 with a yield of around 5%. With the stronger second half underway, order books up and environmental drivers fuelling demand for sustainable product, the shares are compelling fare. Strong buy.

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