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A £3.2bn UK government contract to build two aircraft carriers in a joint venture with BAE Systems is expected to be signed soon and other large contracts, such as one to provide pilot training to the armed forces, are also imminent for VT. These should help sustain strong revenue and earnings growth.
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VT's order book now stands at £4.9bn, up from £3.7bn a year ago, boosted by contracts on such projects as the Future Strategic Tanker Aircraft, Lewisham Building Schools for the Future and a contract to supply vessels to the navies of Oman and Trinidad and Tobago. Finance director Philip Harrison says the shipbuilding unit has work to keep it busy until 2011, while discussions with other potential customers, such as the Hellenic Navy, may result in additional business. Elsewhere, rationalisation at VT's education and skills unit has resulted in improved profits, while the support services division has been bolstered by the acquisition of British Nuclear Group Project Services. This division is positioning itself for the government's nuclear power new build and de-commissioning programmes.
Citigroup expects pre-tax tax of £96.5m in 2009 (£80.4m in 2008), with EPS of 41.9p (35p in 2008).
VT GROUP (VTG) |
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|---|---|---|---|---|
| ORD PRICE: | 680p | MARKET VALUE: | £1,193m | |
| TOUCH: | 680-681p | 12-MONTH HIGH: | 709p | LOW: 514p |
| DIVIDEND YIELD: | 1.9% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 148p* | NET DEBT: | 55% | |
| Year to 1 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2004 | 0.54 | 26.3 | 9.0 | 9.0 |
| 2005 | 0.59 | 41.6 | 18.0 | 9.8 |
| 2006 | 0.71 | 55.5 | 24.0 | 10.8 |
| 2007 | 0.85 | 53.8 | 25.4 | 11.9 |
| 2008 | 1.02 | 71.3 | 32.2 | 13.1 |
| % change | +20 | +33 | +27 | +11 |
Ex-div:18 Jun Payment:6 Aug *Includes intangible assets of £321.5m, or 183p a share |
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Click here for a guide to the terms used in IC results tables
Half of VT's profits now come from its support services businesses, supporting the shares' premium rating. We suggested buying the shares at 588p (10 August 2007) and, reflecting the strong earnings visibility and a pipeline of key contracts, we reiterate that advice. Buy.
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-IC-1.5.4a-prod - 31/10/2008 13:11:34 - carlos.princz
