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Power trip

THE GLOBAL RESOURCES and power industry sectors have remained affected by the economic downturn, which includes materials handling and process plant supplier ELB Group. However, there are indications suggesting activity levels in the mining, minerals, power, port, construction and industrial sectors are picking up – the areas ELB operates in.

Though it’s possible its interim results to year-end 2010 (to be released next year) will paint a different picture, for the year to end-June 2010 the group reported a flat set of results. Revenue was maintained at R1,24bn, with operating profit up by 12% to R790m, resulting in an improved operating margin of 6,4% (2009: 5,7%).

Net finance income fell by 63% to R6,7m, resulting in EBT decreasing by 4% to R89m. Due to a lower effective tax rate, profit for the period remained flat at R62m.

During the period the number of shares in issue dropped by 8%. Consequently, headline earnings per share improved by 3% from 189,1c to 195,6c/share. A final dividend of 30c/share was declared, 50% higher than the previous period’s, resulting in the total dividend declared increasing by 40% to 42c/share. Cash generation was strong for the period, due to improved cash flow management.

The group revealed at its results presentation it would continue to benefit from its strategy of focusing on materials handling and appropriate process plant solutions, while prospects for the coming period are more encouraging than the comparable period.

The group seems a viable investment option, with operations achieving reason-able operating margins and a good RoE. The group’s balance sheet isn’t geared, with approximately 76% of its net asset value in cash (980c/share) and offers a dividend yield of 3,5%.

Trading on a historic earnings multiple of 6,1 times and a discount to its NTAV, analysts don’t think the share is expensive. However, due to the limited disclosure about its operations and prospects they recommend the share only to speculative investors.
 
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