The interim results announced last Thursday by this provider of specialist energy and water efficiency solutions, were much as expected.
They reflected the impact of the earlier-than-expected UK General Election together with the project mix in the period, for the six months to end-July, and the increased overheads needed to support the level of revenue for the year.
They showed an adjusted first-half pre-tax loss of £3.8m (£0.4m loss), however, the group’s Order Book across Energy and Water stood at £114m (H1 FY24: £118m and FY24 £102m) of which, taking a prudent view, over 40% is now expected to be delivered in H2 FY25.
CEO Mitesh Dhanak stated that:
"I am pleased with the progress the Group has made so far this year.
While the earlier than anticipated UK General Election with the associated purdah and the subsequent period while the new Government confirmed its policy priorities and commitment to growth has caused decisions and approvals to be delayed by clients, this is now easing.
We are rapidly building our operational capability to deliver the required work for our clients this financial year with most projects continuing into FY26 and beyond.
With a healthy project pipeline; the UK Government's increased focus on meeting net zero and building 1.5 million new homes over the next five years; together with nascent growth internationally, we remain confident in the ability of the Group to deliver for its customers and shareholders alike.
We have the people, product and market position to accelerate growth across the Group, supported by the drive to net-zero, water efficiency and nutrient neutrality.”
Apparently, demand remains strong with significant market opportunities for its decarbonisation, water efficiency, and nutrient neutrality solutions.
The current year, to end-January 2025, will see a spring back to profitability, with a stronger second-half year righting the halfway results.
Brokers Views
Analyst Greg Poulton at Singer Capital Markets currently has a Buy note out on the group’s shares, with a 12-month Price Objective of 67p.
He estimates the year to end-January 2025 will see revenues rising to £81.8m (£53.8m), helping to turn the company around from the 2024 loss of £6.0m into a £2.4m adjusted pre-tax profit, worth 5.3p (loss 13.1p) in earnings per share.
For the 2026 year he goes for £93.5m revenues, with £3.8m profits generating 8.4p per share in earnings.
Over at Panmure Liberum analyst Joe Brent also has a Buy note on the group’s equity, looking for 80p.
His estimates for this year are for £81m sales, £2.5m profits, and earnings of 5.5p per share.
He looks for £91m of sales in 2026, with £3.8m profits and 8.3p per share in earnings.
Further forward, Brent has figures out for 2027 of £101m revenues, £4.5m profits and earnings of 9.6p per share.
My View
I am not at all put off by this £13m capitalised group’s first-half loss; in fact, I actually believe that it gives risk-tolerant investors a cheap entry-level purchase of shares in a company that is charging ahead with its plans.
Based upon the broker’s estimates the shares, now 39p, could put on a good 50%, if not more, within the next year or so.
I stick confidently with my early July Target Price.
(Profile 10.07.24 @ 41.45p set a Target Price of 52p)
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