Preliminary Results For Molins PLC (MLIN.L)

A 40% rise in the Molins PLC (MLIN.L) share price, shows belated recognition of action taken by management to restructure several struggling businesses. This is now a lean group with sound growth prospects and a strong balance sheet. More significantly, there is the added bonus of a rapidly growing laboratory business, while acquisitions are also moving up the agenda. The potential is still not fully recognised.


Profits up by 9%
After a lower first half of the year when underlying pre-tax profits came back from £1.7m to £0.8m, management delivered the indicated strong second half, easily making up the shortfall with a full-year figure of £4.9m, 9% above the previous year and comfortably above City expectations of unchanged profits. The incidence of contract completions, which tends to favour the second six months, was more marked than usual, while the planned reversal in Scientific Services following the heavy investment during the first half duly materialised.

Momentum continues to build
The new testing regime for tobacco products in the US is coming on stream slower than we had hoped. However, momentum remains strongly in the right direction. The two manufacturing divisions are working on their growth strategies, with several opportunities emerging despite the challenging global trading climate. We have lifted our profit target for 2013 by 6%, and believe these revised figures could prove conservative. We expressed increasing confidence about the medium-term outlook in our report published last August – we retain this view.

Strong balance sheet
The Molins PLC (MLIN.L) balance sheet remains strong, with net cash balances raised by £0.3m to £7.4m over the year, despite a major investment in new laboratory facilities in the US. Our current estimates indicate continuing cash-generative trading. The triennial pension revaluation is due to be published in mid-2013; while a rise in contributions is possible, the underlying position appears under firm control.

Valuation: Still undervalued
The Molins PLC (MLIN.L) share price has advanced by 40% over the past six months. While this is well ahead of the market, the prospective rating of 8.4x 2013 earnings is still less than half that of larger UK-based global capital goods manufacturers. Even if the shares pause for breath in the short term, the group still looks undervalued.

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