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Redhall retains appeal

RESULTS: There is room for improvement at Redhall
June 14, 2012

Redhall's performance continues to be overshadowed by the ongoing legal action relating to the Vivergo contract that was terminated last year. Management is pushing hard for a resolution and, according to analysts from Canaccord Genuity, a successful outcome could lead to a cash return of £10m. This would virtually wipe out debt and enable the resumption of dividends.

IC TIP: Buy at 81p

Strip out £11.9m of Vivergo revenue in the prior half year's figures and Redhall's turnover was actually 14 per cent higher, with adjusted pre-tax profits up a third to £1.3m. Recent contract wins include a £3.2m deal with Sellafield and a five-year £25m contract with Huntsman. The order book is up marginally to £103m.

New chief executive Richard Shuttleworth, formerly of former Amec and Cape, completes a management shake up designed to focus attention on growing each of the group's three operating divisions: nuclear, engineering and manufacturing. There is scope for margin improvement at both nuclear and engineering, while manufacturing should bounce back after problems with sub-contracted work at the Aldermaston nuclear weapons facility hit margins in the first half.

Broker FinnCap expects full-year adjusted EPS of 10.7p, rising to 12.6p in 2013.

REDHALL (RHL)

ORD PRICE:81pMARKET VALUE:£24.2m
TOUCH:80-82p12-MONTH HIGH:114pLOW: 55p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:128p*NET DEBT:28%

Half-year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201164.30.290.70nil
201259.90.992.70nil
% change-+237+286-

*Includes intangible assets of £29.8m, or 100p a share