Engineering group Invensys turned out a patchy but broadly encouraging set of numbers for the first half. Underlying operating profits were down 3 per cent at constant currencies, due to a big drop in rail-signalling margins. Around £18m of unforeseen costs on contracts with three "key strategic clients" were to blame, says chief financial officer Wayne Edmunds, who declined to name them. This headache was already flagged in a July trading update, but the cost guidance is now £5m higher.
Operating margins are expected to return to 17-18 per cent in the second half - lower than the 20-plus levels investors got used to in the Anglo-Spanish railway boom, but in line with the company's target. The reason margins are now structurally lower - though still hefty - is that Invensys has been hunting out new clients in emerging markets to replace debt-saddled European governments. It announced a promising partnership with Chinese rolling stock manufacturer CSR in September.
Indeed, emerging markets now account for nearly half the group order book - up from just 17 per cent in March 2008. That's also thanks to Invensys Operations Management, which sells safety software to oil refineries and power plants and has been particularly successful in the booming Chinese nuclear power industry.
Singer Capital expects adjusted full-year pre-tax profits of £224m and EPS of 22p (£204m and 20.8p in 2010).
INVENSYS (ISYS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 305p | MARKET VALUE: | £2.47bn | |
| TOUCH: | 305-305.4p | 12-MONTH HIGH: | 350p | LOW: 225p |
| DIVIDEND YIELD: | 1.1% | PE RATIO: | 19 | |
| NET ASSET VALUE*: | 48p | NET CASH: | £336m | |
| Half-year to 30 Sep | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Net div per share (p) |
|---|---|---|---|---|
| 2009 | 1.07 | 88.0 | 9.6 | 1.0 |
| 2010 | 1.16 | 75.0 | 7.4 | 1.5 |
| % change | +9 | -15 | -23 | +50 |
Ex-div:10 Nov Payment:10 Dec *Including intangible assets of £430m, or 53p a share | ||||
