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Cimic Group Ltd share price jumps 4% on FY17 report, NPAT up 20.6%

The Cimic Group Ltd (ASX: CIM) share price has risen by 3.8% today after reporting.

Here are some of the FY17 highlights, compared to FY16:

  • Revenue grew by 23.7% to $13.4 billion
  • Earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 38.1% to $1.5 billion
  • EBITDA margin grew by 1.2% to 11.3%
  • Earnings before interest and tax (EBIT) grew by 32.2% to $1 billion
  • EBIT margin increased by 0.5% to 7.5%
  • Net profit after tax (NPAT) went up by 21% to $702 million
  • Earnings per share (EPS) grew by 22.6%
  • Dividend per share up by 23%

Cimic is clearly benefiting from the upswing in Australian and global growth. Management were pleased with the UGL purchase, saying that the FY17 result benefited from the successful integration of UGL throughout the year. Its service segment added $2.4 billion revenue and $156 million in profit before tax (PBT) in FY17 with the acquisition.

Management commented on its construction segment saying that it delivered solid margin performance, with ongoing focus on disciplined tendering, cost control and project delivery. The result was supported by a substantial contribution from the ramp up of large scale transport infrastructure projects. Revenue increased by 3.9% and PBT increased by 4.7%.

In the mining and mineral processing segment revenue growth was delivered by contract extensions and increased production levels. It expanded profit margins as a result of continued focus on driving efficiencies and creating value for customers. Revenue increased by 13.6% and PBT increased by 22.9%.

Cimic is also in a very good cash situation. Free operating cash flow increased by 11.9% to $1.6 billion. The company ended the year with net cash of $910 million, which was an increase of $500 million compared to last year.

Outlook

Management believe there is a positive outlook for its core markets. The sound balance sheet provides flexibility to pursue strategic growth opportunities and sustain shareholder returns.

Management have provided NPAT guidance in the range of $720 million to $780 million which is between 3% to 11% growth for FY18.

Foolish takeaway

Cimic seems to be in a sweet spot of taking advantage of global growth and infrastructure spending. It’s currently trading at 22x FY17’s earnings, which seems like a reasonable price for a company that could keep growing nicely over the next few years, however I’m not a buyer at the current price.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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