Barnstorming half-year figures from Anpario (LSE: ANP) have driven the shares higher this morning. The company operates as an international producer and distributor of natural animal feed additives for animal health, nutrition and biosecurity.
A consistent growth share
With the share price just below 419p, the market capitalisation stands close to £90m. But unlike some small-cap stocks, Anpario has a consistent record of trading. Shareholders have shared some of the company’s success through the impressive escalation of the dividend over the past few years. The compound annual growth rate of the dividend is running just above 12%.
The results cover the six months to 30 June. Revenue increased by 13% compared to the equivalent period in the prior year, and adjusted diluted earnings per share shot up by 34%. The directors expressed their satisfaction and confidence in the outlook by pushing up the interim dividend by 10%. Chairman Peter Lawrence said in the report the period was “extremely challenging” because of Covid-19, but the directors are “delighted” with the strong sales and profit performance.
Looking ahead, he reckons Anpario will continue the online and direct marketing tactics that produced the strong performance in the period. The firm also plans to build on new business gained from those competitors unable to supply customers during lockdown. He’s confident about the ongoing “profitable development” of the business.
The coronavirus has certainly shaken things up in many sectors and I reckon Anpario has proved to be one of the winners. The crisis caused the suspension of travel and industry trade exhibitions scheduled for 2020 and that saved costs for the company. Lawrence reckons travel activities will ramp up again to pursue business development initiatives. But he thinks “some valuable lessons have been learnt” about how technology can make operations more efficient.
Global expansion on the agenda
Meanwhile, Anpario has an international reach with its sales. Last year, around 41% of profit before tax came from sales in Asia, 32% from Europe, 15% from the Americas and 12% from the Middle East and Africa. Lawrence points out that the company’s strong balance sheet provides the resources to expand globally. One angle of attack is that the directors are hunting for complementary acquisitions “which may arise in these uncertain times.”
And I agree wholeheartedly with the tactic of buying assets when they are distressed during difficult periods. Downturns are among the best times for most businesses to go shopping for acquisitions, rather than paying top dollar during boom times.
Financially, the company is in a good position with net cash on the balance sheet of around £13m. And with the share price at 419p, the forward-looking earnings multiple for 2021 sits just below 22, dropping to around 19 when you adjust for the cash pile. Meanwhile, the anticipated dividend yield runs close to 2.1%. The valuation matches the quality of the enterprise, to me. And I’d buy and hold this growth share in a diversified portfolio for at least 10 years.
