More on Brambles
Brambles: full year results
Brambles has continued its strong cyclical growth with sales up 8% at CER for the year to June 2005 and Pre-exceptional EBITA up 20%. The main driver of both growth in both sales and profit was Chep, the pallet hire business which generates 45% of sales and 64% of operating profits.
Not only is Chep the largest business, it is also currently the fastest growing with sales up 9% and profits up 31%. Its pre-exceptional EBITA increased by £70m, accounting for the bulk of Brambles’ £76m increase.
The waste disposal and street cleaning business, Cleanaway showed 8% a decline in profits for the year (at CER) as a whole, despite sales growth of 6% at CER (flat at actual exchange rates). The impact on Brambles as a whole was fairly limited despite the size of the business (33% of sales, 18% of EBITA) with Cleanaway’s EBITA declining by just £7m. The longer term outlook for this business is good with the increasing regulation of waste disposal making a larger industry and more complex operationally.
The remaining businesses performed reasonably well, but are much smaller and had a limited impact at group level, adding £12m to EBITA between them.
At 331p Brambles is trading at a prospective PE of of 20× and should yield close to 3%. With pallet hire largely following the same drivers as the highly cyclical transport industry, the rating needs continued good economic conditions to justify.
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