Oil & gas services group Hunting boosted half-year cash profits by an impressive 121 per cent year on year to £78.4m - helped by the successful integration of last year's acquisitions and strong momentum in the group's shale-related drilling activity. True, the shares aren't cheaply rated - but improving profit margins and an anticipated step-up in drilling activity in the Gulf of Mexico point to a re-rating.
It was the strong performance at Hunting's well completion division that underpinned the marked revenue increase during the period. But, more importantly, Hunting managed to boost the cash margin by five percentage points year on year to 19 per cent and analysts at broker Investec Securities reckon that "the positive outlook suggests potential for further margin improvement in 2012" And while capital expenditure rose 71 per cent to £37.2m, healthy cash flow enabled Hunting to reduce net debt from the year-end by £27m to £191.4m.
Management says that Hunting's Titan shale oil business, acquired last year for $775m (£491m), has also performed well - but the scale of last year's acquisitions led to a fivefold increase in the amortisation charge to £14.4m.
Investec expects full-year pre-tax profit of £93.1m, giving EPS of 62.4p (£38.8m and 38.7p in 2011).
| HUNTING (HTG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 781p | MARKET VALUE: | £1.1bn | |
| TOUCH: | 781-783p | 12-MONTH HIGH: | 977p | LOW: 527p |
| DIVIDEND YIELD: | 2.0% | PE RATIO: | 27 | |
| NET ASSET VALUE: | 493p* | NET DEBT: | 26% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 251 | 22.1 | 10.7 | 4.00 |
| 2012 | 407 | 37.6 | 19.0 | 4.50 |
| % change | +62 | +70 | +78 | +13 |
Ex-div: 24 Oct Payment: 16 Nov *Includes intangible assets of £520m, or 353p a share | ||||
