UPDATE: DS Smith Targets Higher Returns, Less Cyclical Work

24th Jun 2010 08:50

(Adds executive and analyst comments, share price.) By Rachael Gormley Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Packaging company DS Smith PLC (SMDS.LN) Thursday said it is targeting higher returns and less cyclical business as part of a major company review. "In [sectors such as] food and drink and cleaning products, the demand is far less cyclical than in the automobile sector," said Chief Executive Miles Roberts, who took up the role in May and is now carrying out the review of the strategy and business operations. Roberts said the company would also look to differentiate itself in the packaging industry, saying more innovation was needed. The company said the review of the business should be completed in the fiscal 2011 but Roberts said he would be "very surprised" if the company didn't carry out some kind of merger and acquisition activity in the next few years. "Any company looking to increase returns for shareholders is going to look at that," he said. "Our strong balance sheet...gives us opportunities to look at acquisition and disposals in due time." DS Smith also Thursday reported more than double fiscal year pretax profit as costs and spending fell, and said trading in the current fiscal year has started well as "I'm more optimistic now about opportunities than I was when I took up the chief executive role last October," Roberts added. For the year ended April 30, DS Smith, which makes packaging for food and drink and boxes for televisions and fridges, posted pretax profit of GBP55 million, compared with GBP16.8 million a year earlier. The company was hit by GBP13.3 million of charges in fiscal 2010 but this was down from the GBP55.7 million a year earlier. Its capital expenditure also fell to GBP52.6 million from GBP87.4 million in fiscal 2009. Revenue fell to GBP2.07 billion from GBP2.1 billion, and the company said strong cash flow generation helped it narrow net debt by GBP52 million to GBP239.5 million. DS Smith increased its full-year dividend 4.5% to 3.1 pence a share, taking the total for the year to 4.6 pence--up from 4.4 pence a year earlier. Following the results Evolution Securities analyst Harry Philips kept a "buy" rating and a target price of 200 pence, saying the results beat expectations. He added that Miles Roberts and his soon-to-be-announced strategy can "demystify" the company to highlight the recovery and potential for re-rating. At 0741 GMT, shares in DS Smith were up 0.6 pence, or 0.5%, at 120.6 pence while the wider FTSE 350 index was down 0.2%. -By Rachael Gormley, Dow Jones Newswires; 44-20-7842-9308; [email protected] (END) Dow Jones Newswires June 24, 2010 03:50 ET (07:50 GMT)