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Low & Bonar

Better funded for core strategy execution

Update | Basic Industries | 18 Feb 2019

Low & Bonar announced a fully underwritten £54m placing and open offer (c £50m net) alongside FY18 results. The new equity funding goes a long way towards resolving balance sheet net debt constraints and allows the relatively new management team to execute its updated strategic plan. Our revised estimates incorporate the funding effects, more gradual EBIT margin recovery and reset dividends in line with the stated policy.

Low & Bonar

Re-set dividend expectations, targeting recovery

Update | Basic Industries | 19 Dec 2018

Improving operating and financial performance and lower net debt are key management objectives. FY18 results should provide some evidence of progress here, although our revised estimates now contain lower margin and dividend expectations in all three forecast years. Balance sheet clarity and margin recovery will be key share price catalysts, in our view.

Low & Bonar

Tough conditions persisting in H2

Update | Basic Industries | 27 Sep 2018

While volume growth is being achieved in several divisions, some of the factors that affected H1 trading – most notably higher input costs – have not receded as quickly as anticipated. Underlying operational improvements are happening but have not been enough to offset these pressures to date. We have lowered FY18 earnings expectations sharply – slowing the rate of net debt reduction a little – with a flat DPS profile now.

Low & Bonar

H1 profits disappoint but change is underway

Update | Basic Industries | 23 Jul 2018

The new management team has a clear focus on improving financial and operational performance across the group and individual business units. H1 results bear testament to a number of challenges faced in the period but also showed signs that actions are beginning to take effect. We have reduced our EPS estimates (by c 20% this year, c 10% in the following two) to reflect more conservative margin assumptions.

Low & Bonar

Transition year

Update | Basic Industries | 17 Apr 2018

A new senior management team is in place with a clear agenda to improve operational and financial performance. FY18 is going to be a transition year but investors will still want to see evidence of progress from the two strongest business units and in addressing specific issues in the other two. We have not changed estimates at this stage, but note the increased H2 bias flagged by management. The attraction of the current valuation will depend on the level of investor confidence in underlying prospects.

Low & Bonar

Mixed trading, change underway

Update | Basic Industries | 12 Feb 2018

A period of stability following management change and delivery on some flagged FY18 group projects would see a good return of interest to the fundamental Low & Bonar investment case, in our view. There are clear markers for tracking progress and, in the near term, a 3.3% yield with the expected final dividend payment is a clear attraction.

Low & Bonar

Slightly softer end to FY17

Update | Basic Industries | 03 Jan 2018

A year end update led to a c 5% reduction in our FY17 PBT expectation. More detail on trading performance will emerge with the FY17 results due on 31 January and we will review our group estimates fully at that time. Investors will look for signs of trading stability and prospective cash generation, while eyeing a dividend yield of c 6%. The search for a new CEO is unlikely to have concluded by then, in our view; the role is being covered in the short term by an experienced existing NED.

Low & Bonar

Earnings progress but at a lower rate

Update | Basic Industries | 18 Oct 2017

Disappointing demand in Civil Engineering (CE) markets causes us to reduce earnings estimates. Despite this, FY17 is expected to show good progress overall although the reduction in net debt from the half year will now be less than previously anticipated. Good underlying performances from three business units are being partly obscured by CE. Resolving this is likely to benefit group valuation in our view.

Low & Bonar

Good growth delivered and anticipated

Update | Basic Industries | 20 Jul 2017

Good overall progress was achieved in H117 – although market conditions and business unit performance were somewhat mixed – and full year expectations are unchanged. A business strategy of increasing focus on better performing niche markets and margin enhancement is consistent with our double-digit earnings growth expectations. The rating acknowledges this and perhaps anticipates further improvement.

Low & Bonar

AGM flags significant FY17 progress expected

Update | Basic Industries | 13 Apr 2017

In a brief AGM statement, management stated that FY17 was off to a good start with unchanged guidance for the year. There is tangible evidence of strategic actions and their benefits extend beyond the current financial year. Low & Bonar's share price has picked up recently and is beginning to acknowledge the company's growth prospects.

Low & Bonar

Gathering strategic momentum

Update | Basic Industries | 15 Feb 2017

FY16 was a year of good underlying progress diluted by one underperforming business unit. We believe that FY17 is likely to more clearly demonstrate gains from strategic and operational execution, as seen in our upwardly revised estimates. Consequently, we expect the re-rating that began a year ago to continue.

Low & Bonar

Business improvement in action

Update | Basic Industries | 02 Aug 2016

Significant investment activity, business portfolio management and more favourable financing have all been prominent features in the year to date, with group EBIT progress also delivered in H116. We expect Low & Bonar to deliver solid H2 performance and to continue its strategy of business improvement. Our estimates are modestly higher in the current year, more so in the following two and the FY17e P/E is now below 10x with a dividend yield of c 5%.