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The Dewhurst (LSE:DWHA) analysis I posted in November was based on a somewhat crude method of simply doubling the numbers reported for the half year to March 2017. Last month the full year’s results were published, so I can now use proper numbers.
This family dominated (three generations) engineering company supplies lift components, push-buttons for ATMs, elevator parts and so on. Previous Newsletters fill in the detail on Dewhurst: 12th – 22nd Dec 2014, 15th June 2015, 14th – 17th Dec 2015, 25th – 27th July 2017, 21st, 22nd Nov 2017.
I bought Dewhurst “A” non-voting shares in April 2014 at £3.18 as a Warren Buffett style investment. It had the key characteristics: a strong economic franchise; able and trustworthy managers; a record of high rates of return on capital employed. I bought again in December 2014 at £3.75, and some more last month at £5.30 (market capitalisation £56.5m).
Reported numbers
| Sept. | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 |
| Sales, £m | 37 | 42 | 52 | 44 | 47 | 46 | 47 | 52.9 |
| EPS, p | 41 | 31 | 40 | 9 | 44 | 50 | 41 | 53 |
| Div, p | 6.6 | 6.7 | 7 (+ 5 special) | 8 | 9 | 10 (+ special 3) | 11 | 12 |
In 35 out of the last 36 years the dividend has grown by 5% or more. Revenue and earnings have gown nicely through a combination of organic growth and acquisitions. But note, it does use more shareholders’ capital today than it did a few years ago – we’ll examine that in more detail in a later Newsletter.
Divisional performance
Before analysing using both the owner earnings method and the RONTA method, I’ll update the description of the business units within the company in light of the 2017 annual report.
It is a global supplier of components to the lift, transport and keypad industries, with only 44% of sales in UK, Europe & ME (25% in UK). One-quarter of sales are in North America and one-third in Australia and Asia. However, a large proportion of the manufacturing is done in the UK, Europe & ME with 57% of employees in those countries, mostly the UK.
Revenue split
| £m | 2013 | 2017 |
| Lifts | 34.0 | 42.5 |
| Transport | 2.8 | 3.5 |
| Keypads | 9.6 | 10 |
| Intercompany sales | -2.8 | -3.2 |
44% of the profit is made in Australia/Asia region, with a quarter in UK and a one-fifth in Europe. The Americas trail with 13%.
Dewhurst UK Manufacturing
What it does:
- Pushbuttons, e.g. those in the Shard lifts, the new Elizabeth Line, Dubai train station, Network Rail elevators, the tallest building in Hong Kong,Heathrow’s Terminal 5 lifts
- Key switches – locks lifts so only those with a key can get at the controls
- Displays, e.g. electric display boards on London Underground
- Lanterns – waiting passengers can see which elevator has arrived.
- Fixtures – the entire panel in lifts with all the electronics behind it
- Customising design for prestigious interiors of lifts.
- Destination control – lifts figuring out where a lift is to go.
- Rail multi-sounder – doors talking to passengers, e.g. “door about to close”.
The good growth achieved the previous year was not continued in 2017, with slightly lower demand in all markets except Europe. A “lull” in production for Middle Eastern projects did not help.
“We are however confident that this lull is only temporary and expect continued growth in the coming years. Indeed, the new financial year has started more positively with a number of delayed projects starting to move into production.”
Thames Valley Controls
Lift control and remote monitoring of lifts (e.g. gives operational information online such as reports lift performance), also CCTV, e.g. in Manchester’s Arndale Centre.
Local Councils and Housing Associations use Dewhurst’s “Non Invasive Monitoring” system providing both lift monitoring and breakdown indication irrespective of make of lift. The online dashboard gives customers instant breakdown advice, KPI reports for tenants and better management of repairs.
2017 was “another challenging year” for this division, but the pattern of declining sales was reversed with “a small but important increase”.
Traffic Management Products
Mostly the manufacture of road bollards that bounce back when run over. This division was bought about a decade ago and was a perennial disappointment.
However, in 2016 sales grew “significantly”, and this year grew “slightly”, helped by the introduction of a new range of street bollards, which are “gradually building momentum in the market”.
These bollards are highly customisable regarding style, signs and banding (976 variations available), with short lead times offered to customers. Far Eastern sales are growing.
Dewhurst Hungary
A decade ago Dewhurst built a factory in Hungary to manufacture its keypads for ATMs etc. This was at the behest of a major customer. I was concerned at the time because of overreliance on one customer.
Today, this customer accounts for £9.6 million out £10m of the keypad revenue which is split across the UK, Europe, Asia & Australia and the Americas. Sales were up 8%, but most of that growth was in the first half.
The relationship seems to continue to be good.
“Keypads had a strong year, although the demand peaked in the first…………..
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