Results from first full year of independence
The FY13 results show that in its first full year since splitting from Cookson, Alent Plc, (ALNT) delivered a solid performance despite challenging conditions in the global electronics market. During this period management has put steps in place for delivering profits growth, even if the inevitable recovery in the global electronics market is delayed. The stock gives exposure to the global electronics sector without the risk associated with a specific brand or type of electronic device.
FY13: Solid performance in challenging markets
NSV (revenues adjusted for commodity metal prices) was broadly flat y-o-y at £420.1m as Alent took market share without compromising pricing. Adjusted operating profit declined by 3.2% to £94.1m. Although overheads were tightly contained, NSV/gross profit dropped by 1.0pp, which reflected lower sales of copper damascene additive in H113 to a major customer. These sales were largely replaced by sales to other customers in H2. Cash generation was strong, with a 100% EBITDA to operating cash flow conversion enabling a 33% reduction in net debt to £96.5m. Net debt/EBITDA reduced from 1.3x to 1.0x.
FY13: Putting steps in place for future growth
During FY13 management continued to position the group for future growth. It further rationalised product lines to focus on high unit count applications and aligned manufacturing capacity and processes accordingly. These measures are estimated to deliver further cost savings of £3m in FY14 and £2m in FY15. It invested in new, more efficient facilities in China and India, both to be commissioned in FY14. It continued to invest in new products for emerging applications, eg nano silver for LED general illumination, where the group is beginning to experience demand. The stronger balance sheet supports management’s stated ambition of making acquisitions. Collectively, these actions are expected to support profits growth even if the recovery in the electronics market, currently predicted for FY14, is delayed.
Valuation: Exposure to global electronics sector
The average prospective P/E multiple for UK-listed chemical companies is 13.9x, while the global average is 19.5x. Given Alent’s exposure to the global electronics sector, where consumer demand, especially from developing countries, will eventually drive growth, a multiple more in line with global peers seems justified.
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