Colorpak runs to fresh record high

Colorpak rallied to a record high this morning after posting a better than expected full-year profit and dividend.

The stock jumped 6.4% to 83 cents after the Australia and New Zealand packaging group delivered an 8.8% increase in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to $18.2 million for the year ended June 30, 2013.

This is ahead of the $17.9 million that the market was expecting, although the group reported a 10.4% drop in sales to $171.7 million.

While the focus is on topline growth this reporting season, investors are not perturbed by Colorpak’s result because the group is undergoing a transformation by shedding unprofitable contracts and consolidating its cost base.

The rationalisation is paying off with EBITDA margins jumping to 10.6% from last year’s 8.7%.

The fact that the company has upped its dividend by 7.7% to 3.5 cents a share is also supporting the stock. Analysts were only tipping dividends to increase to 3.3 cents a share.

However, management has warned that 2013-14 profit will take a $2.4 million hit from the restructuring costs of its Victorian operations.

The stock is trading on a 2012-13 price earnings of around nine times.

Colorpak is part of the Uncapped 100 and was highlighted as one of the five bargains under a buck on July 17.