Cimic Group Ltd (ASX: CIM) shares will be one to watch this morning after the construction company reported its 2019 half year report after the market had closed yesterday.
Cimic Group was formerly called Leighton Holdings. The company changed its name shortly after some bribery scandals emerged in the news and it was acquired by its majority shareholder, Spainish firm Grupo ACS. On a more positive note, Cimic is today a major international construction and mining contractor with brands like UGL, CPB Contractors, Thiess, Broad and Sedgman under its banner.
Cimic’s Half Year 2019 Result
Cimic reported that its revenue increased by 0.3% to $6.95 billion in the half year to June 2019.
Since the start of 2019 the construction and engineering company (and its subsidiaries) have won many important contracts including: a five-year extension with Sydney Trains for maintenance and logistics for $630 million, the ‘Tunnel, Stations and Development PPP package of Brisbane’s Cross River Rail project’ for $2.7 billion and Auckland Airport’s taxiway and stands for NZ$200 million.
Cimic’s EBITDA (click here to learn what EBITDA means) increased by 16.9% to $1.02 billion and EBIT increased by 3.1% to $569 million in the half-year. Its net profit after tax (NPAT) and earnings per share (EPS) increased by 1.1% to $366.7 million and 113.1 cents respectively.
Cimic Balance Sheet, Cash Flow And Dividend
Cimic’s net operating cash flow declined by 49.7% to $359.9 million and ‘free operating cash flow’ fell by 93.1% to $33.4 million.
The company’s net cash position declined by 15.7% (from December 2018) to $1.37 billion at June 2019 and net contract debtors grew by 31.1% to $1.44 billion.
An interim dividend of $0.71 per share will be paid, which is 1.4% higher than last year, representing a dividend payout ratio of 62.8%.
Cimic’s Management Comments
Cimic Group Executive Chairman Marcelino Fernandez Verdes said:
“At the half way point in 2019, Cimic Group remains in a strong financial position. Our net cash and work in hand increased consistently and we have a strong foundation for profitable growth.
We will maintain focus on optimising our business and leveraging innovative technologies in the construction mining and services sectors.”
Is Cimic A Buy?
The company is guiding net profit for its FY19 to be between $790 million and $840 million, compared $778.5 million in FY18.
Cimic has a huge opportunity to capitalise on all these projects that it’s winning. However, for now it only adds to the revenue line. The company needs to deliver the projects on time and on budget to generate large profit growth for shareholders.
Ultimately, Cimic is not the type of business I’d buy for my portfolio, instead I would invest in more reliable cash flow generators or proven businesses such as those in the free report below.
[ls_content_block id=”14945″ para=”paragraphs”]
[ls_content_block id=”18380″ para=”paragraphs”]
