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Kentz Corporation – great trading update
Posted 14/01/11
Kentz Corporation, the AIM quoted engineering and construction group with a focus on oil and gas markets issued a highly positive trading statement ahead of its full year results for 2010 which are expected to be announced in late March 2011. In a weak market Kentz shares were up 8% as I write.
The strong performance reported at the time of the Interim Results in September 2010 has continued through the second half of 2010 with significant natural growth from current contracts and increased demand for the group’s services across the three Global Business Units (GBUs); Engineering, Procurement and Construction (EPC), Construction, and Technical Support Services.
They now expect that revenues and profits for 2010 will be significantly ahead of current market expectations for the year – prior to the update consensus expectations were for Consensus pre-tax profit of £34.37m earnings per share of 20p and dividend per share of 4.83p.
The Backlog at the end of the year was US$1,600m, in line with the level reported at the half
year and up from US$1,497m at the end of December 2009. They have also received letters of intent, not yet converted to backlog, and new orders from our clients in 2010 together totalling a further US$25m. Total order intake to backlog between January and December 2010 was US$1,253m
Perhaps most encouraging is that natural growth on existing orders represented 39% of the total order intake for 2010
The Chief Exec drew attention to pricing pressure in the Middle East which caused some delay to EPC projects in the first half of the year, but a number of these projects are now moving ahead with a substantial uplift in activity in the second half.
The cash position remains strong with net cash at the end of December 2010 Including client advances) approximately US$200m, (June 2010 $196m, Dec 2009:US$168.3m)
Following the results the house broker upgraded their PBT and EPS numbers by around 13% for 2010 and 2011. We agree that the current valuation is attractive with an ex cash 2012 P/E of less than 11.0x revised forecasts of organic growth.
Effective use of cash on the balance sheet for niche acquisitions could drive earnings per share further.
It still looks an interesting one to follow
This entry was posted 1 year, 4 months ago.
