Monday, 9 December 2013

Plastics Capital - New Purchase

I first became aware of this AIM-listed company via John Rosier’s blog JIC

Plastics Capital (PLA) is a specialist plastics products manufacturer focused on proprietary products for niche markets. The Group has four factories in the UK, one in Thailand and sales offices in the USA, Japan, India and China.

The Company was established by Faisal Rahmatallah and Arun Nagwaney and was incorporated in December 2002.  Since then the company has grown mainly through acquisitions and was listed on the AIM market in London in December 2007.

Currently approximately 60 per cent of sales are exported to over 80 countries worldwide and production is concentrated in the UK where significant engineering know-how and automation underpins the Group's competitiveness.  The Group has approximately 300 employees within the four key operating subsidiaries: BNL in Knaresborough (North Yorkshire), C&T Matrix in Wellingborough (Northamptonshire), Palagan in Dunstable (Bedfordshire) and Bell Plastics in Poole (Dorset).

The defining characteristics of Plastics Capital’s businesses are:


  • Leaders in their niche industrial markets ­in many cases with no direct or limited competition
  • Long established (25 years or more) with long term customer relationships and high retention rates
  • "Mission critical” to customers with our products frequently representing a low fraction of customers’ costs
  • Highly automated with bespoke manufacturing processes that have been perfected over many years and are hence very difficult to replicate

Bell Plastics is the global leader in manufacturing highly specialised plastic mandrels used predominantly by the manufacturers of hydraulic and other industrial hoses in their own manufacturing processes.  Hose mandrels are long, high-specification rods around which reinforced industrial rubber hoses are formed and the mandrel a critical consumable in the global rubber hose industry.

BNL is a market leading specialist designer and manufacturer of innovative plastic bearings products as well as plastic gears, shafts and bushes.  Using in-house expertise, BNL works in long term partnership with its customers, designing and developing customised solutions for major multi-national OEMs.

C& T Matrix manufactures creasing matrix, a consumable product which is an integral part of the manufacture of cardboard boxes, cards, point of sale material and the like.  Creasing matrix enables folds to be made in cardboard and facilitates accurate high quality creasing prior to folding, enabling cardboard to be creased automatically and accurately by high speed box making and printing machines.

Palagan manufactures blown polyethylene films used in high performance industrial packaging.  Palagan focuses on small and medium-sized UK and European customers with bespoke needs in terms of film strength, tear resistance, printing, surface finish and the like.

Results

Last week, the Company issued results for the half-year to 30th September 2013. Revenues increased 4.1% to £16.3m. Mandrel increased sales by 56% compared to the same period last year.

Excluding the one-off realized foreign exchange gain in H1 2012-13, profits increased by 4.4% and earnings were up 7%. Net debt was reduced by £0.5m to £8.1m.

PLA has increased the interim dividend over 50% to 1.0p payable 30th December (ex div 11th December) and offers a prospective yield of 2.4% this year. The projection is for 4.0p - 3.2% next year and 5.0p - 4%  in 2 years.

Commenting on these results, Faisal Rahmatallah, Executive Chairman, said: “I am pleased to report that growth in sales and in underlying profitability have both resumed. In the half year, demand from Europe has improved, new business has contributed to growth across the Group, additional sales and marketing investment has continued and new capacity has been added for both industrial films and machined bearings. We have also recently announced the acquisition of Shengli, the leading Chinese producer of creasing matrix, which is a major step forward in this region. The Board expects the Group to trade in line with expectations for the rest of the year.” 

This appears to be a well-run operation and PLA offers exciting opportunities for growth, particularly with its new base in Shanghai. I made an initial purchase today at 124p.

As ever, slow & steady steps…..

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