That Weir’s (WEIR) profits fell sharply during the first half is no surprise. The engineer had already flagged weak oil and gas revenue, driven by lower demand for pressure pumping equipment used in shale drilling, and group underlying operating profit fell 12 per cent to £217m. More crucial is the second half, and chief executive Keith Cochrane still thinks Weir will hit full-year forecasts for low single-digit revenue growth and broadly stable margins.
Momentum is certainly building. Orders for mining equipment and pressure pumping aftermarket work both grew quarter on quarter - the latter was 25 per cent higher than the previous six months - and Mr Cochrane forecasts "good" sequential revenue and profit growth in the second half. The odds are good given the oil and gas industry has "passed the trough point" and miners' predisposition toward smaller projects hits Weir's sweet spot in terms of original equipment. True, like-for-like orders fell 7 per cent to £1.26bn, but that was still 13 per cent better than the second half of 2012. A group book-to-bill ratio of 1.05 is also promising, reflecting a shift from original equipment to higher-margin aftermarket work, which now generates almost two-thirds of sales and made up for much of the lost equipment orders.
Broker Numis Securities expects full-year adjusted pre-tax profit of £455m, giving adjusted EPS of 153.7p, up from £443m and 150.1p in 2012.
WEIR (WEIR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,152p | MARKET VALUE: | £4.59bn | |
| TOUCH: | 2,151-2,152p | 12-MONTH HIGH: | 2,490p | Low: 1,542p |
| DIVIDEND YIELD: | 1.8% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 663p* | NET DEBT: | 67% | |
| Half-year to 28 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 1.32 | 201 | 67.9 | 8.0 |
| 2012 | 1.20 | 165 | 56.6 | 8.8 |
| % change | -10 | -18 | -17 | +10 |
Ex-div: 2 Oct Payment: 1 Nov *Includes intangible assets of £1.75bn, or 819p a share | ||||
