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Shares of Alumasc (LSE: ALU) are down 3.5% at 166p after the company released a trading update ahead of its AGM today. With the update telling us “the Board’s expectations for full-year results remain unchanged,” the City consensus earnings per share (EPS) forecast of 21.6p puts the company on a bargain-basement price-to-earnings (P/E) ratio of 7.7.

Furthermore, a forecast dividend of 7.65p (covered a robust 2.8 times by forecast EPS) gives a juicy prospective yield of 4.6%. And, just for good measure, this £59m cap company has a strong balance sheet, having reported a net cash position of £6.1m at its last financial year-end of 30 June.

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Dependent on H2 to meet expectations

Alumasc provides premium products and systems in high-growth niches in its principal market of UK construction. It’s also building export sales. These jumped to 17% of last year’s group revenue of £105m from 9% of £92m the year before.

The company today advised that against a background of relatively flat demand in the UK construction market, its like-for-like domestic revenues increased by 4% year to date. However, it also said that export sales “are lower than the prior year. It didn’t put a number on the decrease but said it reflected, “the later phasing of larger projects.”

Indeed, this was a theme in a number of areas of business across the group and we were told “financial performance is expected to have a greater weighting towards the second half than was the case last year.” The H1/H2 profit weighting was 45%/55% last year, so the current-year outturn is going to be very dependent indeed on a strong second half. In such situations, the risk of a profit warning is heightened.

Alumasc appears to be well managed and I like its focus on specialist segments and its international ambitions. Nevertheless, there’s no getting away from its exposure to the cyclical construction market and there are recent signs this is weakening in the UK. I will await the company’s second-half performance with interest, but I’m minded to avoid it right now.

Confident outlook

I’m rather more confident on the outlook for specialist staffing group Empresaria (LSE: EMR). Its shares are trading at 127p, as I’m writing, valuing it at £62m. A current-year EPS forecast of 13.9p puts the company on a P/E of 9.1 and this falls to 8.5 for 2018 on expectations of a rise in EPS to 15p. Dividend forecasts of 1.3p and 1.45p give yields of not much more than 1%, but with these payouts covered more than 10 times by forecast EPS, there is plenty of scope for substantial increases in coming years.

Of course, like the construction market, recruitment is also cyclical. However, Empresaria is nicely diversified by both sector and geography. Seven key sectors range from aviation services to healthcare, while the group operates in 20 countries around the world. The breakdown of last year’s £270m revenue was Continental Europe 34%, Asia Pacific 29%, UK 26% and Americas 11%.

The company is seeing good growth opportunities within its existing businesses and from potential complementary acquisitions. It said in its half-year results to 30 June that it’s “confident” of meeting full-year market expectations. As such, I rate the shares a ‘buy’.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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