Cimic Group Ltd (ASX: CIM) just announced a profit update for the first nine months of FY20.
It’s one of Australia’s largest engineering and construction businesses.
Cimic update
The company said that revenue in the first nine months of its FY20 was $9.3 billion, down 13% from FY19’s $10.7 billion.
Cimic said that revenue returned to growth in the third quarter, up 8% compared to the second quarter of FY20, after COVID-19 caused a slowdown of revenue across its businesses, both domestic and overseas, and a temporary delay in the awarding of new projects.
The engineering business said that its margins remained resilient with operating profit, profit before tax (PBT) and net profit after tax (NPAT) of 8.6%, 6.9% and 5.1% respectively. Margins were helped by the diversity of its business as well as cost-cutting measures.
The operating cash flow before factoring was $922 million over the last twelve months. The factoring balance reduced by $134 million in the year to date, and $142 million year on year to $1.83 billion.
For the nine months to 30 September 2020, Cimic generated a NPAT of $474 million. It’s good to see that the company is still making profit despite the COVID-19 difficulties.
Balance sheet
Cimic revealed that at 30 September 2020 it had $3.6 billion of cash, though it had net debt of $1.67 billion.
Its supply chain finance balance reduced by $705 million year to date, and reduced by $561 million year on year to $146 million.
Cimic had work in hand of $35.5 billion, which is equivalent to more than two years of work.
Management also said that the pipeline remains positive.
Approximately $1.4 billion of new work was awarded in the third quarter of FY20. Some of the wins included mining services at Mount Owen, building and infrastructure projects in India and Australia, resources and water infrastructure in WA and Queensland, maintenance, shutdowns and sustaining capital projects in WA and Queensland and maintenance and turnaround services in Queensland, WA and Victoria.
The company has a large amount of work to do.
Management comments
Cimic CEO Juan Santamaria said: “The significant role of infrastructure in the economic recovery from the pandemic supports a positive outlook for the construction, services, mining and PPP sectors.
“We continue to work with governments to progress the future infrastructure pipeline and to support our clients to fast-track and deliver projects in construction, services and mining. Our focus remains on closely managing capital expenditure and working capital, and generating sustainable cash-backed profits.”
Summary
Cimic is a decent way to get exposure to the constant investment in infrastructure in Australia and other countries.
However, with such large projects there is potential for things to go wrong. That’s why I prefer ASX growth shares that can offer more consistent growth like Pushpay Holdings Ltd (ASX: PPH).