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Straight reports 11% revenue growth for 2009 as core businesses grow, looks to stronger 2010

Environmental products and services group Straight plc (AIM: STT) reported an 11% increase in turnover for 2009, expecting pre-tax profits to be in line with expectations along with a stronger 2010 after orders in the final quarter of 2009 reached unprecedented levels.

Revenues for 2009 reached £28 million as business grew with improvements in both the municipal and non-municipal divisions, which the group said were at healthy margins following investments in new products

Revenues in the non-municipal division were helped by growth of garden and hardware sales in both the UK and overseas, where customers generated 4% of the total revenues with the group expecting substantial increases in the current year. The performance was further helped by the acquisition of water butts and compost bins manufacturer Harcostar and the commencement of outsourced manufacturing in the US following the implementation of this model in Australia.

The group’s retail business has also made progress, reporting revenue increases for the final quarter of the year following the withdrawal of competitor WRAP from the English home compost bin market in October 2009, while also reducing delivery costs to eliminate most of its operating losses.

Despite the increased capital investment in new products in both the municipal and non-municipal businesses, which was accelerated by the cash payback on the group’s investment in food waste containers in 2008, Straight had a positive cash balance of £1.6 million at the end of the year.

Astaire Securities welcomed the update, reiterating its 'buy ' recommendation for the stock and leaving the target price unchanged at 125 pence, even though revenues of £28 million were below its projection of £30.2 million, noting that its profit estimate of £1.4 million is attainable. Astaire also said that the target of increasing the share of international sales in its total to 10% by 2011 is achievable after the share of overseas sales rose to 4% of the total in 2009.

The strong performance of the retail business following the exit of WRAP led Astaire to conclude that its forecasts for both 2010 and 2011 look realistic.

Straight is a supplier of specialist kerbside recycling containers and a broad range of waste and recycling container solutions. The business operates through two divisions. The core Trade Business supplies products in bulk to local authorities, utilities, the waste industry, retailers and other businesses and the Retail Business supplies a range of proprietary environmentally friendly consumer products directly to the public, often in partnership with a local authority or a utility.

Shares in the company rose 4.1 % to 100.5 pence per share on the news.

Disclosure: The author holds no positions in the company