Alumasc dips into reserves to maintain divi

9th Sep 2010 17:06

Alumasc, the building and engineering products group, has held its full year dividend at 10p, despite it not being covered by earnings, as a sign of confidence in the future.In the year to 30 June the company's underlying profit before tax rose to £3.38m from £1.80m the year before. Non-recurring items and brand amortisation put a £0.68m dent into this year's pre-tax profits, but that was way down on the £3.37m hit taken last year.Revenue fell to £93.0m from £109.1m a year earlier, with building products revenues down by 18% to £64.5m, reflecting the impact of late cycle exposure. The order book is looking a lot healthier, however, and at the end of June was 34% ahead of the low point at the end of 2009.Net debt has been reduced by £1m over the year to £9.3m, bringing gearing down to 33%, despite the £3.4m of pension deficit reduction payments made during the year. The group's overall pre-tax pension deficit measured under IAS19 decreased from £12.5m at 30 June 2009 to £11.6m at 30 June 2010.Underlying earnings per share of 7.9p was down from 10.0p the year before. That meant the company had to dip into reserves to pay a full year dividend of 10p, and the shares are now yielding nearly 10% as a result, but broker KBC Peel Hunt thinks next year's earnings per share (EPS) - projected by Peel Hunt to be 10.6p - will restore cover to the divi, allowing it to continue to be maintained."Having held the dividend through an uncovered period and looking to leverage recovering sales into restoring EPS cover we can be more confident that the near 10% yield is real," the broker said. FinnCap said the full year figures were slightly lower than expectations but was also encouraged by the maintained dividend, as this underpins the broker's "buy" recommendation.Alumasc chief executive Paul Hooper hailed the group's "robust performance" through the recent recession. "The group's balance sheet remains strong, the funding of our pension schemes has improved significantly and we have demonstrated our ability to control costs and cash. Our export sales strategies should bear fruit as the year progresses, and the board has confidence in the exciting medium and longer term strategic potential of the group," Hooper said.