Why the Decmil (ASX:DCG) share price jumped 9% today

The Decmil Group Limited (ASX:DCG) share price was on form and jumped 9% higher on Wednesday. Here’s why investors were buying shares…

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The Decmil Group Limited (ASX: DCG) share price was on form on Wednesday.

At one stage, the engineering company’s shares were up as much as 9% to 60 cents.

The Decmil share price eventually closed the day 7% higher at 59 cents.

Why did the Decmil share price zoom higher?

Investors were buying Decmil shares on Wednesday following the release of its half year results. Those results revealed a big improvement in its profitability despite softer revenues.

For the six months ended 31 December, the company reported a 30% decline in revenue to $165.1 million.

However, earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $5.6 million. This compares to an EBITDA loss of $19.9 million a year earlier.

It was a similar story on the bottom line, with its profit coming in at $0.6 million. This is a huge improvement on the $31.4 million loss it posted a year earlier.

Management notes that its strong result was underpinned by renewed strategy to target contracts with blue chip clients within Decmil’s areas of core expertise.

Positively, at the end of the period, the company had work in hand of ~$600 million. It expects this to expand further during the second half as government spending on infrastructure development continues its strong momentum.

Management commentary

Decmil’s Chief Executive Officer, Dickie Dique, commented: “The Company has successfully navigated several key operational and financial obstacles and emerged in an increasingly improved position as the first half of the 2021 fiscal year progressed.”

“Decmil’s business structure has been streamlined, our focus on prudent capital management has increased, and we are successfully securing lower risk contracts from blue chip clients. This has enabled us to beat our own expectations and achieve a period of profitability in FY21.”

“Crucially, we have also reaffirmed our F150+ accreditation, which in conjunction with a reinforced working capital position will drive our ability to target the burgeoning tender pipeline of infrastructure works from the Federal and State Governments of over $7 billion within the Company’s core capabilities.”

Outlook

There was no guidance for the remainder of the year. However, management anticipates that the strong momentum experienced in the first half will continue into the second half of the fiscal year.

The company also intends to maintain its renewed focus on targeting lower risk projects with blue chip customers across the infrastructure, resources, energy and construction sectors. It notes that these sectors continue to have a strong pipeline of upcoming work.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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