Low & Bonar PLC (LON:LWB): A new senior management team is in place with a clear agenda to improve operational and financial performance. FY18 is going to be a transition year but investors will still want to see evidence of progress from the two strongest business units and in addressing specific issues in the other two. We have not changed estimates at this stage, but note the increased H2 bias flagged by management. The attraction of the current valuation will depend on the level of investor confidence in underlying prospects.
Progress and challenges
Overall demand conditions appear to be stable against previous updates and Q1 revenues were ahead of the prior year (although volume, price and FX effects were not separately disclosed). The largest two divisions (46% of FY17 revenue, 77% of EBIT before central costs) remain the better performers in this regard, although product mix and input costs are both flagged as headwinds. There were short progress reports on performance improvement initiatives in Civil Engineering (now under a special projects team) and Coated Technical Textiles, which were consistent with previous comments and reminded us they are not quick fixes. Our model factors in £5m exceptional costs into FY18 estimates and more clarity will emerge here as the year progresses.
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