Companies: SPGH ��

Floated on the Official List in 2007 by way of a placing priced at 180p, Superglass’s valuation was subsequently shattered by earnings disappointment, caused by slower than expected take-up of the government’s CERT (Carbon Emission Reduction Target) programme.

Being a leading maker of glass mineral fibre insulation products for the under-fire property market didn’t help, with the collapse of the house building sector leading to more fierce competition in Superglass’s core retrofit market.

Facing the headwinds of spiralling energy and raw material costs, the company did well to remain profitable in the year to August, with the annual numbers matching downgraded expectations. ‘Normalised’ pre-tax profits slipped from �8.6m to �7.6m, on sales of �41.1m (2007: �44m). Continuing to churn out cash, the company also reduced borrowings and declared a final dividend of 1.7p, giving a 3.4p total for the year.

Chairman Tim Ross is now ‘confident that CERT activity, which has been low during the first year of the programme, will increase in the second and third years’. Significantly, the Pre-Budget Report announced �100m of new money and �50m of brought-forward money to help people insulate their homes, while a 20% increase in CERT targets was announced by the Brown government in September.

With CERT activity beginning to increase, the longer-term outlook looks healthy, although short-term challenges, in the form of downturn and rising input costs, persist. Based on forecasts for August 2009, which suggest a decline in profits to �6m and in earnings from 9.3p to 7.4p, the shares are trading on a budget price-to-earnings ratio of less than four times, with a yield of 12%. On that basis, the shares look to be a very compelling recovery bet indeed.

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