Good twist for Sheffield
John Bull
The market has taken a turn for the better following the Government's stern measures and I am encouraged about shortterm buying prospects. In retrospect I have to confess that I made a blunder in selling short Yorkshire Chemicals and I commiserate with any punters who burnt their fingers.
So this week I am buying Sheffield Twist Drill and Steel. This Sheffield-based group has had a good record of profits and, under the chairmanship of Mr Alex Dormer, is a soundly run business. Conditions last year were, however, tough and profits fell from £1.16 million to £967,000. In the current period there have been signs of an upturn. After three months trading orders received were at a higher rate than at any time since 1970, and conditions of this sort continued through to March and May. And, in time, the directors were saying that they believed that hoped-for conditions would improve in the rest of the year.
Sheffield Twist's interests are in the manufacture of twist drills and precision cutting tools. It has a wide market for its Products and last year its UK, European, Australasian and North American contributions were 84, 5, 4, and 7 per cent respectively. Sheffield, now over the worst of the recession, should be well placed when the upturn fully materialises. The company gained a further stake in the supply Of specialised toolings to the engineering industry through the acquisition of Aldridge Tool and, what is more, the full benefits of rationalisation have yet to show through. Increased capacity, new warehousing and shipping facilities will all help.
Also, as a major exporter (sales overseas accounted for 28 per cent of the total turnover last year), the sterling currency realignment will help. It should also be remembered that Sheffield Twist exports to Germany over the existing tariff barriers and the prospects when we join the EEC with these barriers coming down, are good. I am going for maintained pre-tax profits this Year, with a slight increase in earnings to 4.1 per share, but in 1973 Sheffield Twist Could well make £1.3 million, indicating earnings of 5.6p. , The shares currently stand at 65p, which is only just above the 57p low for the year. They are selling at 151 times last year's earnings (on my estimate) but this multiple falls to 11 on 1973 results. This is a good long-term situation as well as being attractive as an account gamble.
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