Wassall shakes Hanson's curse:The Investment Column
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.Wassall is proof that in investment, as in other areas of life, the truth will eventually come out. For three years the shares have suffered the curse of Hanson, studiously ignoring earnings growth during that period of well in excess of 20 per cent a year. Yesterday they jumped 16p to 308.5p as investors realised that not all diversified industrial groups are made equal.
Underlying profits growth of 32 per cent, an increase in earnings per share of a fraction more and a dividend rise of 35 per cent to 2.1p confirmed another exceptional set of figures, the most striking feature of which was another cracking period from General Cable, which is turning out to have been a first-rate acquisition.
Margin growth is right at the top end of expectations and fast heading towards the 7 per cent target management set when it saw what its most efficient competitors were able to achieve. Cost cuts are also building up nicely from reduced stocks to better distribution, the addition of more value-added products and better marketing.
All that led to an extremely impressive jump in divisional profits from pounds 11.6m to pounds 17.9m, quite the best performer from what is easily Wassall's biggest division. Elsewhere, adhesives, sealants and other building materials group DAP benefited from tough cost controls in otherwise quite difficult markets and profits rose from pounds 3.5m to pounds 4.5m on flattish sales.
Wassall needs to find its next acquisition to keep the momentum going, but even without it earnings per share are forecast to grow at 13 per cent this year and 19 per cent next time on the basis of expected profits of pounds 64m this year and pounds 77m next.
In that context, a prospective p/e ratio of 15 falling to 12 is not demanding. Even if the shares only track the company's earnings growth they should see reasonable growth by the end of 1997. Good value.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments