Slowing growth and a more competitive market in MDF, plywood and chipboard panels is weighing on timber merchant James Latham (LTHM) today. Results for the 12 months to end-March may show an unexpected boost in sales, yet the market appears concerned about near-term trading, explaining today's 3.7% decline to 657p.

While house broker Northland Capital reckons revenue for the year to end-March at £174.9 million was slightly ahead of expectations, with a 6% rise in the second half of the year, yet that also implies a slight slowdown from the first half. Growth early in the new financial year is 7%, according to chairman Peter Latham.

LTHM - Comparison Line Chart (Rebased to first)

Diluted earnings per share was 40p down 8.9% on a reported basis but up 9.2% by management’s preferred adjusted measure, which excludes a one-off gain on its pension scheme last year.

Investment is being made into new products including decorative woods and upgrades to facilities in order to protect market share and improve efficiency.

‘We expect the redevelopment of the two oldest sites to be phased over the next three years and this will dip into cash reserves but the balance sheet remains strong and the dividend remains well covered,’ writes Northland analyst David Johnson.

Johnson has upgraded revenue and profit forecasts for the year ahead. Earnings per share (EPS) of 44p is expected in 2015/16, up from a previous estimate of 40p. EPS is expected to hit 47.1p the year after, implying gradual improvement in the months ahead.

Issue Date: 24 Jun 2015