I have a lot of time for this group and believe that the market continues to undervalue its shares.
Yesterday it reported its Final Results to end-June, showing a 17% increase in revenues to £3,969.4m (£3,405.4m), lifting its adjusted pre-tax profits 13% to £118.1m (£104.8m), with its earnings rising 7% to 20.6p per share, and a 5.15p dividend.
The business is a leading UK infrastructure services, construction and property group.
The company provides specialist design and build capabilities and the knowledge, skills and intellectual capital of its people ensures that it is able to project manage and integrate all aspects of a project, operating through a network of offices spanning across England, Wales, Scotland and Northern Ireland.
Its core markets have remained favourable over the last year, as it continues to be a ‘strategic supplier’ to the UK Government, with some 90% of group revenue generated from public sector and regulated companies.
The contract awards reflect long-standing client relationships and regionally based UK operations – over the year it has secured significant contracts on its infrastructure services side from United Utilities, Southern Water, South West Water, Anglian Water and for Birmingham’s roads.
The construction division handled contracts in the Defence, Education, Healthcare, Justice and Borders, Local Council as well as for Heathrow Airport.
CEO Andrew Davies stated that:
"The past three years have seen the Group achieve significant operational and financial progress.
The strong results for FY24 are testament to the hard work and commitment of our people who have enhanced our resilience and strengthened our financial position in-line with our medium-term value creation plan.
Our order book remains strong and growing at £10.8bn and provides us with good multi-year revenue visibility.
The contracts within our order book reflect the bidding discipline and risk management now embedded in the business.
I am also pleased to report that the Group significantly reduced its average month-end net debt position as well as improved its year-end net cash position.
I am confident we can sustain this momentum going forward.
The Group has started the financial year well and is trading in-line with the Board's expectations.
The Group is well positioned to continue benefiting from UK Government infrastructure spending commitments and we are confident in sustaining the strong cash generation evidenced especially over the last two years allowing us to significantly deleverage, increase dividends to shareholders and deliver the evolved long-term sustainable growth plan which will benefit all stakeholders."
Analysts at Panmure Liberum have the group’s shares as a Buy, looking for 250p in due course, against the current 143p, which I consider gives the shares strong appeal.
My recent TP remains very firm.
(Profile 24.06.22 @ 71p set a Target Price of 90p*)
(Profile 20.05.24 @ 146.8p set a Target Price of 177p)
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