Friday newspaper share tips: DS Smith a share to keep

DS Smith is being unpacked by the papers in Friday’s share tips.

The FTSE 250 packaging group posted a drop in first half pre-tax profit and revenue as the packaging company took a hit from restructuring costs.

For the six months to the end of October, pre-tax profit fell 26% to £91m as the group booked £48m of exceptional costs, namely related to the closure of its Wansborough paper mill and other restructuring activity.

Meanwhile, revenue slipped 1% from the first half of last year to £1.95bn. At constant currency, however, revenue was up 6%.

The Telegraph’s Questor noted that while the business of cardboard boxes may to some be a bit boring, it has proven reliable enough to support growth and expand through acquisitions.

It said that the company still has plenty of scope to carry on growing, with a market share of around 16% in Europe.

Questor also highlighted that while the acquisitions have driven debt levels up, investors should not worry as the company has a habit of reducing debt levels quickly as it generates cash.

It said the shares have been on a great run over the year and as the company is growing earnings, the dividend should rise by quite a bit and advised to ‘hold for the income’.

The Times’ Tempus was a bit more optimistic and rated the shares a ‘buy’ on Friday.

It said that when chief executive Miles Roberts arrived at the company, he promised he would make it the leader in recycled packaging for consumer goods – a promise he’s kept through acquisition.

Tempus also said that the company has worked closely with customers to develop packaging they need to promote greater efficiencies.

However it pointed out the company’s weakness to exchange rates, specifically the fall in the euro against the pound, as well as the company’s exceptional restructuring costs.

It said yesterday’s 21.5p fall in the share price was hard to fathom and advised the fall helps it look like an attractive buying opportunity, observing that the company is still performing well and is building in future growth.