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.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Books should be for everyone, says Els, 8. Publisher Scholastic now agrees
booksAn eight-year-old saw a pirate book was ‘for boys’ and took on the publishers
Life and Style
Mary Beard received abuse after speaking positively on 'Question Time' about immigrant workers: 'When people say ridiculous, untrue and hurtful things, then I think you should call them out'
tech
Life and Style
Most mail-order brides are thought to come from Thailand, the Philippines and Romania
life
News
i100
Life and Style
tech
Voices
Margaret Thatcher, with her director of publicity Sir Gordon Reece, who helped her and the Tory Party to victory in 1979
voicesThe subject is being celebrated by the V&A museum, triggering some happy memories for former PR man DJ Taylor
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

Day In a Page

General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
Public relations as 'art'? Surely not

Confessions of a former PR man

The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

Bill Granger's luxurious sweet treats

Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

The mother of all goodbyes

Paula Radcliffe's farewell to the London Marathon will be a family affair
Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

Steven Naismith: 'We know we must do better'

The Everton forward explains the reasons behind club's decline this season
Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

Michael Calvin's Last Word

Praise to Wenger for having the courage of his convictions