Powerflute has featured in the AIM portfolio since its inception, and it is a company which we feel shows great promise in the long term. It is a paper and packaging group which seeks to acquire companies with strong fundamentals whose performance can be improved through a combination of management focus and targeted investment.
The Group’s 2015 results were very positive, and the firm is beginning to make synergies from its acquisition of Corenso at the end of 2014. Strong improvements can be observed in performance within all areas, improving sales and production across the group. Group revenues and subsequently earnings more than doubled in 2015, and net debt halved, now representing 0.7 times EBITDA. The acquisition also significantly increases Powerflute’s scale and global presence.
Key factors such as market conditions and foreign exchange rates were working in Powerflute’s favour throughout 2015, meanwhile management were also able to make improvements to the underlying operating performance across the group. Given the 2015 financial results, the company demonstrates a solid fundamental base and potential for additional profitability. Overall, financials for 2015 are very promising.
Recently, the share price has fallen as a result of a slowdown in Chinese markets, however improvements have been seen in the first 4 months of 2016 in European markets, with US markets continuing to perform well. As the company continues to grow, we expect that this risk will be minimised by diversification of the business portfolio. We currently view the stock as intrinsically undervalued in terms of fundamentals, and see potential for returns in the long term.
Opinions constitute our judgment as of this date and are subject to change without warning. The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your original investment. Past performance is not a reliable indicator of future results and forecasts are not a reliable indicator of future performance. The information in this document was correct as of 20/07/2016.