Straight PLC - 52.5

We last featured this company in January 2008 and since then the share price has been as low as 18.5p – the level which it reached last December. It has recovered strongly since but the current price still places a fairly minimal valuation on the business when taking into consideration the level of net cash.

Straight was established in 1993, starting from scratch. The company developed into the largest supplier of kerbside recycling boxes in the UK as well as supplying other waste and recycling container solutions.

A division set up to supply materials handling containers was added shortly after flotation in 2003.

The key acquisition of Black-wall Limited, the UK’s largest supplier of home composters and water butts, was completed in 2005.

This means that Straight now supplies a range of waste and recycling solutions to local authorities and the waste industry as well as mainstream businesses.

The acquisition of the assets and trade of Harcostar Gar-den Products from Harcostar Drums Limited for £400k was announced in late January. Final results for the year ended December 31, 2008 saw revenue increase by 8per cent to £25.4m (2007: £23.6m), driven by a 20per cent jump in revenue from the core trade business to £23.1m.

Headline operating profit fell from £1m to £400,000 and as a result of exceptional costs the loss before taxation was £1m (2007: profit £600,000). The final dividend was maintained at 2p per share, making 3p for the year (2007: 3.25p) and providing a decent yield. The level of net cash stood at £1.6m at the period end (2007: £1.6m).

Net assets fell from £10.2m a year earlier to £8.9m at the period end, but this still represents a premium to the current market capitalisation.

The past couple of years have been tough for Straight, with successive wet summers conspiring against the company.

The recent results demonstrate unquestionable resilience and even given poor trading conditions a record order book has been achieved.

Some challenges do remain, but it appears that the company remains keen to make progress including expanding overseas activities.

Straight is a well funded business which has invested significantly in the future. It is cash generative and appears to have moved on from a very tough period. Operating in an attractive niche market, the company should flourish over the longer term.

WARNING: Opinions expressed are the writers’ judgments at the time of writing. The information does not constitute a personal recommendation and readers should seek their own professional advice as to the suitability of the investments.