Alumasc, once perhaps best known for making aluminium beer barrels, is now focused on more sober lines of business, namely sustainable building products.
Water management, building envelope (roofing, balconies, balustrades, etc.) and housebuilding products are its three areas now – with strong positions and brands in their individual markets.
Like many companies of its size, the strategy has been 'buy and build' as a result of which four-fifths of sales come from environmental solution products with a focus on managing scarce resources of water and energy.
The year to the end of June 2021 was a good one for all three divisions and this has been reflected in the share price -which has more than doubled this year.
Building strong: Alumasc focuses heavily on creating sustainable housebuilding products
Some of that rise has been given back recently but with the share price off by around 15 per cent in the last three months now might be a good time to 'buy on the dip'.
The Building Envelope and Water Management divisions compete to be top dog in the group.
Building accounted for £41million (45.4 per cent) of the group's £90.5million turnover in the most recent financial year.
Water Management chipped in with £38.4million (42.4 per cent) while the Housebuilding Products arm saw revenue rise to £11.1million (12.2 per cent).
To save you doing the arithmetic, that's group revenue of £90.5million, up from £76.0million the previous year, which was affected for three months by the construction sector lockdown in the early throes of the Covid-19 epidemic in the UK.
Around 80 per cent of group revenues are linked to specification & regulation and it is a fairly safe bet that even post-Brexit, regulatory requirements are not going to ease much, if at all, thereby ensuring a regularly mutating market that a market leader such as Alumasc can exploit.
On the subject of Brexit, export revenues, currently 14 per cent of group sales, are being targeted in selective markets.
The most recent news flow from the company related to a number of new contracts in the Middle East and Far East that built on earlier wins.
Aluminium: Alumasc was once, perhaps best known for making beer barrels out of aluminium
Gatic, part of the group's Water Management division, bagged the contracts, which are worth more than £3.5million in aggregate.
'These are excellent export wins for Alumasc that demonstrate our globally renowned quality and leading edge products,' said Paul Hooper, chief executive
Revenue is now more or less on a par with the pre-pandemic financial year to the end of June 2019 but growth in the bottom line is eye-catching.
Pre-tax profit in fiscal 2021 was £9.8million, up from £2.4million the year before and £1.0million in pre-pandemic fiscal 2019.
After or post-tax profit leapt to £7.6million from £1.9million the prior year and £0.7million the year before that.
The sharp rise in profitability came from the benefits of a significant streamlining of the business, reducing the number of operating/manufacturing sites from ten to six and extracting some £2.4million a year of costs.
Operating margins grew as a result, from the Covid-affected prior year's 5.5 per cent to 12.2 per cent, which is almost double two years ago.
'This movement into a 'double-digit percentage' return has been achieved earlier than expected,' Hooper noted in the results statement.
One area of uncertainty is the supply chain problems affecting the UK generally and this was noted by Hooper, who said the group was 'Cognisant of the potential for short-term disruption to our customers' operations from shortages of building materials, labour and road haulage, and delays in the global container shipping industry'.
That comment probably accounts for the recent share price weakness; the shares have drifted to around 242p from 276p in mid-July.
'The knock-on impact of these effects should be clearer in a few months time, but for now our forecasts are unchanged,' said broker Peel Hunt, which has a target price of 295p for the stock.
FinnCap, the AIM-listed company's nominated adviser (or Nomad), has a 315p target.
Orders throughout the group remain strong, particularly in the Building Envelope division and a growing online offering and export business for the Water Management arm while Housebuilding Products continues to operate 'against a favourable backdrop of structural UK housing shortage'.
Net debt at the end of June was reduced to £914,000 from £4.3million a year earlier pointing to plenty of firepower available for the group to continue its strategy of making bolt-on acquisitions and paying dividends.
In the year just gone, the full-year dividend was 9.5p, up from 6.4p the year before and 7.35p in pre-pandemic fiscal 2019.
The consensus view among brokers is for an increase in the divi this year to 10.5p and next year to 12.5p.