Midas share tips: Alumasc & Cranswick

By Joanne Hart for The Mail on Sunday
Updated: 05:37 EDT, 25 October 2009

The Mail on Sunday's share-tipping column looks at a green boost for Alumasc and updates on the prospects for Cranswick. You can also sign up for free additional Midas share tips that will be sent to your inbox once a week.

Green fingers: Alumasc could be helped by environmental concerns

Green building trend likely to boost Alumasc

China is one of the most polluted countries on the planet, so when designers in Guangzhou (formerly known as Canton) start building a tower block that they expect to be the most energy-efficient in the world, it is a sure sign that the construction industry is changing.

Buildings consume huge amounts of energy, particularly large modern ones featuring floor-to-ceiling windows on every storey.

They may be attractive to look at and work in, but they require a great deal of heating in winter and even more air conditioning in summer.

In Britain, for example, more than 40% of energy consumption is building-related.

In other countries, particularly the US, where the winters can be freezing and the summers extremely hot, the percentage is even higher.

Governments have become more aware of this uncomfortable fact. In many parts of Europe, planning permission is granted only if the construction firm can prove a building will be energy efficient. The trend is catching on here and in America since President Obama moved into the White House.

As green pressure intensifies, companies such as Alumasc should benefit.

It was founded more than 20 years ago as an engineering business, but it has shifted orientation in the past five years to focus on products for sustainable buildings.

These include solar shading, which controls light, heat and air in a lowcost, environmentally friendly way. Adjustable strips of metal are placed on roofs or on framework outside windows to deflect the sun and reduce the need for air conditioning.

The method can cut solar heat gain by up to 90%, which may not sound terribly welcome as the clocks go back, but it is useful in the height of summer.

Alumasc also supplies green roofs, which are covered with moss, plants or even low-maintenance gardens. The foliage insulates in winter, cuts heat in the summer and absorbs rainfall, which reduces surface drainage and helps to avoid floods. This is likely to become more appealing as the Government demands that constructionfirms reduce the impact of flooding when designing retail parks or other large projects.

Alumasc has a drainage division, too, and makes precision engineering products for trucks, telecoms companies and lighting manufacturers.

It has not been doing terribly well over the past year, thanks to a slump in construction activity and problems in the industrial landscape. Profits in the year to the end of June fell from £9.6m to £5.2m and brokers forecast a similar level of profitability in 2010. Nonetheless, this business has several distinguishing features.

The management under chairman John McCall, chief executive Paul Hooper and finance director Andrew Magson, are well-respected, highly focused and determined to deliver long-term growth. The sustainable products division has been expanding and should do even better as economic conditions improve. The business is already making headway overseas, but Hooper is keen to increase the group's international presence, particularly in the Middle East and America.

The precision components arm should improve considerably as the economy recovers, especially as

costs have been cut to the bone and a new managing director, Warren Roberts, has been installed.

•Midas verdict: Alumasc shares are trading at 102.5p. The dividend in 2009 was 10p and it is expected to remain at that level next year, putting the stock on an inviting 10% yield. The group holds its annual meeting on Thursday and trading is thought to be holding up under difficult circumstances. This business is not finding life easy, but it is coping admirably and should deliver solid growth over the coming years. Buy.