Interactive Investor

ii view: DS Smith says positive trends accelerated by Covid-19

Covid hurt, but do green credentials and exposure to e-commerce make these shares a buy?

23rd June 2021 15:27

Keith Bowman from interactive investor

Covid hurt, but do green credentials and exposure to e-commerce make these shares a buy?

Full-year results to 30 April

  • Revenue down 1% to £5.98 billion
  • Pre-tax profit down 37% to £231 million
  • Final dividend of 8.1p per share
  • Total dividend of 12.1p from no dividend the year before
  • Net debt down 15% to £1.8 billion


  • New financial year started well

Chief executive Miles Roberts said:

“We invested heavily to keep all of our people safe and all of factories open throughout the pandemic and this enabled us to build good momentum through the year after a challenging Q1.

“The growth drivers of e-commerce sustainability and plastic-free packaging have accelerated over the last twelve months and we are very well placed to capitalise on this growth. We have worked hard over many years to focus our business purely on fibre-based packaging and this differentiation is clearly recognised by our customers."

ii round-up:

Founded as a box making business in the 1940’s, DS Smith (LSE:SMDS) is today a major provider of sustainable packaging, paper products and recycling services worldwide.

It employs around 29,000 people in over 30 countries and across more than 300 different sites.

Group customers include Amazon (NASDAQ:AMZN), Unilever (LSE:ULVR) and Nestle (SIX:NESN).

For a round-up of these latest results, please click here.

ii view:

DS Smith’s home UK market generated its biggest slug of single nation sales over this pandemic marred year, accounting for just under 16% of overall revenue, followed by France and then Iberia at 15% and 11% respectively. Its combined rest of the world region accounted for nearly 29% of revenues, with the USA making up just over 9% of sales.

Paper assets are managed to support its packaging operations. Structural growth drivers focus on e-commerce expansion, environmental trends to replace plastic packaging and the requirement for more sophisticated packaging from retailers. Over 80% of all corrugated packaging sold is sent back to its paper mills for recycling. Two new state-of-the-art packaging plants have recently opened in Italy and Poland.

For investors, a forecast price/earnings (PE) ratio above both the three and 10-year averages, suggests the shares are not obviously cheap. Inflationary cost pressures including such items as energy, transport and labour also continue to weigh. 

But exposure to potential further growth in e-commerce remains. The previous sale of its plastics business has boosted its environmental credentials, with investment in new packaging ongoing, while speculation regarding a possible bid from rival Mondi (LSE:MNDI) should not be forgotten. A historic and forecast dividend yield of close to 3% is also not derisory in the current ultra-low interest rate environment. In all, and with the core growth drivers of e-commerce and sustainability here to stay, DS Smith could be one to tuck away for the long term. 


  • Exposure to e-commerce and environmental trends
  • Back paying the dividend


  • Valuation not obviously cheap
  • Group input costs rising

The average rating of stock market analysts:


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