The Monadelphous Group Limited (ASX: MND) share price has been amongst the biggest movers on the market today following the release of its preliminary full-year results.
At the time of writing the mining services company's shares are up almost 5% to $14.42.
Here are the key takeaways from its results:
- Revenue fell 8.7% to $1,249 million.
- Net profit after tax down 14.1% to $57.6 million.
- Earnings per share of 61.4 cents.
- Final dividend of 30 cents per share fully franked, bringing its full-year dividend to 54 cents per share.
- Net cash of $228.1 million.
Although this was a relatively weak result from Monadelphous, I believe management's confidence in the company's future performance is what has pushed its shares higher today.
According to today's release, management believes that Australian resources and energy market conditions have now stabilised.
As a result, it expects to benefit due to solid levels of sustaining capital expenditure providing construction opportunities for companies in the sector.
But while competitive pressures are expected to weigh on its margins somewhat, this could be offset by growth in revenues from overseas business and infrastructure projects.
Furthermore, management is prepared to fuel growth by putting its strong cash balance to use by pursuing suitable acquisitions.
Should you invest?
Although its performance is likely to improve in FY 2018, with its shares up 31% since this time last year and now changing hands at 23x earnings, I don't see a lot of value in them.
Especially given the pressure on margins it faces from a highly competitive market which includes the likes of Worleyparsons Limited (ASX: WOR) and RCR Tomlinson Limited (ASX: RCR).
In light of this I would suggest investors avoid Monadelphous until its shares come down to a more appropriate level.
