Ellis rides the chemical bronco

The Investment Column

For a company ostensibly exposed to the vagaries of the chemical price cycle, Ellis and Everard's track record is second to none. As Jonathan Taylor, chairman of the Bradford-based chemicals distributor, highlighted yesterday, earnings per share and pre-tax profits have almost doubled in the last three years, a period which has seen massive swings in chemicals prices. The share price has responded accordingly, nearly doubling from a low of 153p at the end of 1992 to 282p yesterday.

Results for the year to April once again make impressive reading. Stripping out a one-off pounds 7.7m charge taken on last year's sale of a swimming pool equipment and food and drink hygiene business, pre-tax profits rose 22 per cent to a record pounds 25.6m on turnover 11 per cent up at pounds 571m. Earnings per share were 8 per cent higher at 20p, while the 9.2p payout is a tenth up on last year.

The sales figure includes a maiden pounds 12.7m contribution from acquisitions, including Rhode Island-based George Mann which made Ellis the fifth-largest chemicals distributor in the US. Almost half of profits come from across the pond. All told, five businesses have been bought so far this year and should add pounds 60m to turnover.

Cost control is another key to Ellis's success. Despite the increased level of business, distribution and administrative expenses rose by only 2-3 percentage points, squeezing operating margins higher.

Tight working capital control and strong cash flow also did wonders for the balance sheet. Gearing halved to 16 per cent, despite Ellis splashing out pounds 14m on acquisitions.

However, there are several reasons to believe that the recent rapid rate growth is likely to be a little more restrained going forward.

Having re-focused on chemicals distribution and sold off loss-makers, Ellis increasingly relies on corporate activity to drive profits ahead. While the track record in this area is good, the number of earnings-enhancing deals out there is not infinite.

Second, the commodity chemicals cycle is becoming less volatile, making stock profits more difficult to achieve while raising the prospect of stock losses being incurred.

And pushing up operating margins much further will be difficult in an increasingly competitive environment, especially in the US.

Analysts nudged up their profits forecasts for the full year by about pounds 500,000 to pounds 29.5m, suggesting a forward price-earnings ratio of less than 13 with the shares at 282p. That is an undemanding rating, but probably is an accurate reflection of more subdued prospects going forward. Hold.

News
peopleFrankie Boyle responds to referendum result in characteristically offensive style
Sport
Lewis Hamilton will start the Singapore Grand Prix from pole, with Nico Rosberg second and Daniel Ricciardo third
F1... for floodlit Singapore Grand Prix
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvHe is only remaining member of original cast
Arts and Entertainment
tvHighs and lows of the cast's careers since 2004
PROMOTED VIDEO
Sport
Fans hold up a scarf at West Ham vs Liverpool
footballAfter Arsenal's clear victory, focus turns to West Ham vs Liverpool
New Articles
i100... she's just started school
News
news
News
ebooksAn unforgettable anthology of contemporary reportage
New Articles
i100
Life and Style
Couples have been having sex less in 2014, according to a new survey
life
Arts and Entertainment
musicBiographer Hunter Davies has collected nearly a hundred original manuscripts
Sport
football
New Articles
i100... despite rising prices
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam