Engineering company Redhall (RHL) shocked investors when it issued a profits warning three months ago and followed another body blow in March last year when it was turfed off the Vivergo biomass contract that contributed £15.25m to 2010-11’s turnover. In the latest financial year, exceptional charges of at £5.93m again put a big dent into profits. Of that figure £2.5m related to the Vivergo contract and much of the rest to unprofitable legacy nuclear decommissioning contracts at Sellafield. But even if one-off items are excluded, adjusted pre-tax profits still fell from £3.93m to £1.9m.
Redhall's business mix is split roughly three-quarters contracting and a quarter manufacturing which includes making blast-proof doors. Contracting margins are low and that is unlikely to change so as a result it's not surprising that new chief executive Richard Shuttleworth wants to increase manufacturing’s importance and will part finance such a move by selling off some smaller contracting businesses. Those disposals might raise between £3m and £5m. According to brokerage finnCap, his mid-term margin target is 6-7 per cent: no part of the business got anywhere near that in the last financial year. But prospects may be improving.
Only last week the last of the legacy Sellafield contracts was concluded and the Vivergo dispute (essentially how much overrun time Redhall should have been given) should be concluded soon. For 2012-13 FinnCap forecasts an improvement in operating margins from 1.59 to 2.8 per cent to drive adjusted pre-tax profits up from £1.9m to £3m on revenues of £125m.
| REDHALL (RHL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 63p | MARKET VALUE: | £ 18.8m | |
| TOUCH: | 61-65p | 12-MONTH HIGH: | 114p | LOW: 49p |
| DIVIDEND YIELD: | NIL | PE RATIO: | NA | |
| NET ASSET VALUE: | 104p | NET DEBT: | 34% | |
| Year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 87 | 4.38 | 16.9 | 4.00 |
| 2009 | 129 | 5.14 | 14.2 | 4.40 |
| 2010 | 145 | 4.54 | 12.0 | 4.80 |
| 2011 | 118 | -8.10 | -23.5 | nil |
| 2012 | 117 | -4.00 | -14.5 | nil |
| % change | -1 | - | - | - |
Ex-div: na Payment: na | ||||
