In its final-year results released today (25 June), the group posted a pre-tax profit of £200m, up 20% from £167m last year, for the year ended 30 April 2015, although the business saw a drop in revenue to £3.8bn from £4bn in 2014.
The rise in profits was attributed to the contribution from volume growth and the group’s focus on higher added-value products and services to its customers as well as the benefit of synergies from its acquisition of SCA Packaging.
Group chief executive Miles Roberts said: “It’s a strong set of results despite the obvious Forex headwinds. The most important thing behind the results is about how we continue to build the quality of the business, building sustainability into our results.
“The progress in the business with customers is evidenced by accelerating volume growth, together with increased margins and returns, from our unique and enhanced offering.
“We have been delighted with the positive customer reaction to our recent acquisitions. The progress we continue to make with global customers, together with the opportunities we see for growth as we expand our international reach and offering, gives us confidence to increase our medium-term margin target by 100 basis points.
“Notwithstanding the continued challenging market environment, we remain excited about the prospects for the business."
The board proposed a final dividend of 7.7p per share which, together with the interim dividend of 3.7p, gives a total dividend for the year of 11.4p, up from 10p per share last year.
Return on sales for the year was 8.8%, compared with a medium-term target of 7%-9%, while the group’s net debt was reduced to £651m, 1.49x the group’s EBITDA.
In the firm’s UK operations, revenues fell 3% to £905m. The drop was attributed to a competitive market environment and challenging retail landscape and was said to reflect reduced external sales from recycling.
But operating profit rose 27% to £81m, adjusted before amortisation and exceptional items, which was attributed to a combination of improvements in both its packaging and paper operations.
In its packaging operations the company said it focused on higher added-value contracts, driving the performance packaging initiatives and the delivery of cost initiatives.
In its paper operations it saw improved performance, efficiency and profitability from its Kemsley mill in Kent in the first half of the year.
The firm’s capital expenditure in 2014/15 was £149m, 52% of which was investment in growth and efficiency.
The group said the acquisition of Grupo Lantero's corrugated activities, including several operations in which it currently has a minority holding, will strengthen its operations in Spain and build on its acquisition of Andopack last year. The acquisition is subject to competition authority clearance, which is expected during Q3 2015 with completion shortly afterwards.
Roberts said: “Grupo Lantero is a high-quality business that we have known and partnered with for a number of years and significantly increases our offering to pan-European customers in this large and growing market."
The total consideration, including the assumption of debt, is expected to be around €190m (£135m), subject to closing adjustments.
Last month DS Smith completed its acquisition of Austria-based recycled corrugated board packaging business Duropack.
Shares in DS Smith rose by 3.5% this morning following the announcement of the results.
