View from City Road: Spring Rams home results

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The Independent Online
ANOTHER results season and another set of seemingly flawless figures from Spring Ram, the kitchen and bathroom maker. For the six months to June, the Leeds-based building materials group reported pre-tax profits up 13 per cent to pounds 18.4m. Sales increased 17 per cent to pounds 102m.

Turnover was up in each area of Spring Ram's operations. It sold 19 per cent more kitchens and 13 per cent more bathrooms. Its third division - which includes burgeoning exports and new product lines like doors - recorded a 40 per cent rise.

Earnings per share progressed 17 per cent to 3.5p and the interim dividend was lifted 20 per cent to 0.103p. The group is ungeared - it earned pounds 1.1m in interest receivable in the half.

The more cynical observers are puzzled. Deep recession in consumer markets coupled with the stagnant residential property market suggests there is little money about for home improvements. What is special about Spring Ram?

Part of the answer is in its slick operation. Spring Ram will deliver its kit in days rather than weeks. That makes it attractive to retailers like Texas and B&Q, which will encourage anything that boosts sales in its sheds. Spring Ram's strong financial position also means retailers can be comforted that they will be paid rather than left as creditors in some administrator's in-tray.

Pre-tax profit margins of 18 per cent in the first half also indicate that Spring Ram has a firm grip on costs. City analysts are confident of the future and think the company will make pounds 45m in the full year - 20 per cent up on last time.

The figures published are little short of wonderful but it would be reassuring if Spring Ram provided more details. Many companies now give divisional profit breakdowns and a balance sheet at the half-year.

The stock market has had its doubts. Spring Ram's shares have out-performed the FT All Share Index by 250 per cent over three years. By six months ago, the price had got carried away, which explains a good part of the 25 per cent fall in the past four months. The 10p rise on yesterday's results to 143p suggests followers may be returning.

But with the shares trading on a prospective multiple of 16 times earnings, there is no need to chase them.