Cardboard box maker DS Smith optimistic despite profits drop

Box maker DS Smith delivered a confident message with full-year results as the ecommerce boom and shift away from plastic-free packaging helped sales volumes surge.

“Whilst the business has seen reduced profitability over the last twelve months, we firmly believe that we exit 2020/21 stronger,” DS Smith said “The current year has started well, with the volume momentum of the final quarter of 2021 continuing into this year.”

Full-year results from DS Smith matched market expectations, with pre-tax profit for the year ended April down 37 per cent to £231m on flat revenue of nearly £6bn. The out-turn reflected weaker volumes, higher costs and production underutilisation at the start of the pandemic.

But momentum in packaging volumes seen in the second quarter built throughout the financial year resulting in second half growth of 8.2 per cent, the company said. It added that higher raw materials costs should be “fully” recovered via cost increases.

The resilient performance meant DS Smith held its full-year dividend at 12.1p a share and cut net debt by £306m to £1.8bn.

Briefly

Melrose Industries proposed a £730m capital return to shareholders, equivalent to 15p per share, after completing the £2.6bn sale of its Nortek Air Management division. The engineering takeover specialist said trading remains in line with the expectations given in a May update, with “encouraging signs” at its aerospace division that the start of a recovery is in sight. Melrose also noted the sale last week of Brush, which makes transformers and turbogenerators, for a net cash consideration of £100m. “We have taken a conservative view for the level of the current return of capital, but if markets continue to recover, we expect to announce a further significant return next year,” said Simon Peckham, chief executive.

Gear4Music said current year results are likely to beat expectations after trading in April and May proved stronger than expected. The music equipment retailer posted a net profit of £12.6m for the full year ended March, up nearly fivefold year on year, on revenue up 31 per cent to £157.5m.

Kingspan said in a trading update that positive trends reported in April have continued and that its order backlog has continued to grow. The building materials supplier noted that raw material inflation has continued at record levels, which it predicted would continue through the summer months at least. For the first half it targeted a trading profit in the region of €315m, up 37 per cent year on year, on revenue up 40 per cent to €2.9bn.

Grafton, the building materials distributor, will enter Finland for the first time after agreeing to buy family-owned sector peer IKH for a total consideration of €199.3m.

Aston Martin confirmed it is suing two Swiss car dealers whom it claims withheld more than £10m of customers’ money that had been paid towards its £2.5m Valkyrie hypercar.

Podcast company AudioBoom said it expects to generate annual revenues “significantly in excess of current market expectations”. Advertising sales in the year to date have already covered more than 99 per cent of the recently upwardly revised revenue target, it said.

Staffline, the recruitment and training group, posted a 66 per cent surge in annual underlying operating profit to £4.8m and revealed a three-year extension of its contract with Tesco.

National Express said it had agreed to buy Spanish urban bus operator Transportes Rober for a headline price of €13m.

A lack of entrepreneurial culture has left London’s FTSE 100 looking like an index from the 19th century, according to star fund manager James Anderson, whose firm Baillie Gifford is now doubling down on China.

James Vorley, a former Deutsche Bank trader, was sentenced to 12 months and one day in prison for “spoofing” the gold and silver futures markets between 2008 and 2013. He was found guilty in September along with Cedric Chanu, another ex-Deutsche trader.

Beyond the Square Mile

Soho House, the owner of private members’ clubs, has laid out aggressive expansion plans as it filed to go public in New York. The group, which is switching its name to the Membership Collective Group as part of the initial public offering, is targeting a valuation of about $3bn, according to people familiar with the matter.

Activision Blizzard shareholders narrowly backed CEO Bobby Kotick’s $155m pay package following a delayed vote.

Oil rose to its highest level in two years and Asia-Pacific stocks jumped following a rebound on Wall Street as investors were reassured by signals that the Federal Reserve would continue to support the economic recovery from the coronavirus pandemic.

Essential comment before you go

Helen Thomas
A rejected £8.7bn bid for Wm Morrison from private equity highlights the debate over whether boards should sell to good buyers, not just ones with deep pockets. Whether or not the politicians intervene, stakeholder capitalism doesn’t spontaneously evaporate on first contact with an M&A banker.

Gideon Rachman
After challenging the geopolitical environment that provided the backdrop for the rise of Asia, President Xi Jinping has to find a new “China model” — distinct from the east Asian model — if the rise of China is to continue uninterrupted.