'Strength to strength': Monadelphous (ASX:MND) share price spikes 8% on strong earnings

The engineering company has just released its 1H FY22 results. Here are the details.

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Key points

  • Monadelphous shares surged today after the company released its half-yearly earnings
  • It was a period of growth and contract wins for the engineering group, having secured $860 million in new contracts and extensions
  • In the last 12 months, the Monadelphous share price has fallen 9%

The Monadelphous Group Limited (ASX: MND) share price is on the move today. This comes after the company released its interim report and financial results for the half-year ended 31 December 2021.

At the time of writing, Monadelphous shares are trading 8.15% higher at $10.75 apiece.

Monadelphous share price lurches forward as sales grow

Monadelphous is an engineering company that provides construction, maintenance, and industrial services to the resource, energy, and infrastructure sectors. Key takeouts from the company's earnings results today include:

  • Revenue came in at $1,065 million, up 12.% on the prior corresponding period (pcp)
  • Record half-year maintenance and industrial services revenue
  • Net profit after tax (NPAT) of $30.1 million, up 17.7% from the year prior
  • Secured $860 million of new contracts and extensions
  • 90%-owned Chilean business, Buildtek, continues to go "from strength-to-strength"
  • Strategic focus on people attraction, retention, and wellbeing initiatives
  • Interim dividend of 24 cents per share declared

What else happened this half for Monadelphous?

The Monadelphous share price is soaring today on the back of a positive result. A highlight from the company's performance was that its maintenance and industrial services division achieved a record half-year of revenue.

Monadelphous says this result was underpinned by high demand for maintenance services and a surge in demand for services across both the resources and energy sectors.

The company also secured approximately $860 million of new contracts and contract extensions during the period. These contract wins were established across the resources, energy, infrastructure, and international markets.

Over in its Chile operations, Buildtek "continues to go from strength-to-strength". As such, Monadelphous increased its shareholding in the business from 75% to 90% during the period in a vote of confidence.

Like its fellow ASX players, Monadelphous wasn't immune to labour cost and supply chain headwinds observed throughout 2021.

"The Company continued to face labour cost and productivity pressures, with demand for labour in the industry remaining strong and COVID-19 restrictions constraining labour supply and mobility," it remarked.

As a result of its strong NPAT of $30.1 million, the board declared a fully franked interim dividend of 24 cents per share.

Management commentary

Speaking on the result pushing up the Monadelphous share price today, managing director Rob Velletri said:

The resources sector will continue to provide opportunities, with the Australian iron ore industry remaining particularly buoyant. The demand for battery metals is forecast to remain strong and conditions in the energy sector are expected to continue to show an improving trend. The renewable energy market and developments in the hydrogen sector will also provide opportunities over the longer term.

The shortage of skilled labour will continue to be challenging. The increase in COVID-19 case numbers in Western Australia will also provide further challenges in the short-term. Monadelphous' reputation and longstanding commitment to delivering safe, reliable and cost competitive solutions, puts it in a strong position to capitalise on these opportunities and navigate the challenging environment that lies ahead.

What's next for Monadelphous?

According to the release, "the outlook for Monadelphous' core markets is strong".

"With the demand for battery metals forecast to remain strong, developments in lithium, copper, nickel, and rare earths will provide numerous prospects in the coming years," the company said.

"These markets, along with the gold sector, will present opportunities for Monadelphous in Australia, South America, Mongolia, and Papua New Guinea."

The level of construction activity in Australia is set to be a net positive for the company going forward, with a large number of projects having already been completed.

"Due to the timing of award and commencement of new major projects, construction activity is expected to decline in the second half of FY22, before increasing again in FY23," Monadelphous said.

"As a result, Monadelphous' full-year revenue for FY22 is expected to be approximately 5–10% lower than the previous year."

Monadelphous share price snapshot

In the last 12 months, the Monadelphous share price has fallen 9%. However, since trading recommenced in 2022, it has climbed 11%.

Over the past month, it has soared another 15% and has spiked 21% in the past 5 days of trading.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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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