Invensys has been a takeover favourite for years and the rumour mill was in overdrive again ahead of these results. Predictably, however, there was no news and management is keeping quiet. And while the figures largely matched estimates – which were downgraded following January’s profits warnings – firm catalysts for a rerating are hard to spot.
Extra costs incurred on Chinese nuclear contracts and Asian rail projects was well-flagged and clipped 20 per cent off adjusted operating profit to £209m. Inevitably, operating margin plunged 230 basis points to 8.2 per cent, largely reflecting the operations management division, IOM. Indeed, with some lower margin greenfield projects now beginning to ramp-up, only a modest increase in the IOM's division's margin – from the current 7.5 per cent – looks likely. Margins at the rail business will bump along the bottom of the 15-17 per cent target range for a few years, too, and economic headwinds will cap progress at the domestic appliance controls division. Still, new rail work in Saudi Arabia and Turkey helped the group order book grow 12 per cent to £2.75bn and there are plenty of contracts available in China and elsewhere. IOM has a £3bn pool of work to go after, too.
JP Morgan Cazenove expects pre-tax profit of £213m in 2013, giving EPS of 20.8p.
INVENSYS (ISYS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 211p | MARKET VALUE: | £1.71bn | |
| TOUCH: | 211-211.4p | 12-MONTH HIGH: | 338p | LOW: 167p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 68p* | NET CASH: | £262m | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 2.11 | 199 | 21.1 | nil |
| 2009 | 2.28 | 165 | 17.4 | 1.5 |
| 2010 | 2.24 | 179 | 18.3 | 3.0 |
| 2011 | 2.49 | 222 | 21.5 | 4.0 |
| 2012 | 2.54 | 140 | 12.1 | 4.4 |
| % change | +2 | -37 | -44 | +10 |
Ex-div: 20 Jun Payment: 3 Aug *Includes intangible assets of £457m, or 56p per share | ||||
