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Alumasc: having weathered the storm is it now time to shine?


Alumasc [LON:ALU] the AIM-listed, Kettering-based sustainable building materials company is due to publish its six months results for the period ending 31st December 2023 next Tuesday (6th February).

The manufacturer of gutters and drainpipes was involved in the protracted acquisition of competitor, Leicester-based Aluminium Roofline Products (ARP)  last year, announcing the take-over in July.

However, the AIM-listed company’s proposed transaction was queried by the Competition and Markets Authority and it wasn’t until the fireworks were being laid out for the New Year celebrations that the greenlight came through from the CMA, with final approval signed off on New Year’s Eve.

The stock has been steadily rising for the drainage product company. Opening 2023 at 166p, the Northamptonshire manufacturer’s shares were trading hands at 177.5p by the year’s end, a 6.9% return. However, Alumasc has provided many opportunities to make money given smart timing with its shares ranging between 132p and 186p over a 52-week period.

The company is slow burner, but given new environmental requirements for new builds, and the government’s (whatever shade it is after the next general election) commitment to building new homes, Alumasc seems to be in the right place at the right time.

Alumasc holding steady in challenging environment

The company has had volatile earnings over the last few years, but its latest set of results, published in September, saw Alumasc stay still compared to the year previous, which given the carnage in the construction and real estate sector in 2023 was something of a result. The company also has broad international exposure which has insulated it from the worst ravages of the UK real estate market.

Profit was down about 11% year-on-year to GBP11.2m, but the company also prudently cut its debt 40% year-on-year to GBP2.8m on the back of strong cashflow generation, in a time when cash (not credit) is king. Although revenue was flat year-on-year at GBP89.1m the company nevertheless recommended a final dividend of 6.9p/share, taking the total dividend payout for the year to 10.3p/share, up one-third of a penny on the year before.

Although progress has seemed incremental, given the context this wasn’t bad going for the year. The company remains cautiously optimistic about the coming year. Paul Hooper, chief executive said: “I am pleased with the group’s performance, in challenging trading conditions. Our excellent customer service and leading positions in a diverse range of end markets provide resilience, and we are continuing to progress our strategy, investing in areas where we see growth opportunities while controlling costs prudently where appropriate. With a strong balance sheet and a product portfolio which delivers environmental benefits to our customers, we remain well positioned to benefit from the eventual recovery in our end markets.”

Alumasc has three core divisions: water management, building products and roofing. Each division has several brands specialising in various building solutions. The theme that is playing into Alumasc’s court is the sustainability of new development, and the manufacturer has positioned itself at the apex of the sustainable building materials spectrum in the hope that developers – forced to by new sustainability regulations – will make a beeline for the company’s range of products and solutions.

Although the building sector’s current health seems a brittle as a pane of glass, Alumasc shares are still affordable and seem undervalued at their current price and should the materials firm continue its current direction of travel and carry through its late momentum from 2023 into a new year, shareholders should expect reasonable growth in 2024, and as such Alumasc becomes ‘One to Watch’.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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