As a power generation group with a buy-or-build strategy, ContourGlobal (GLO) occupies a unique position. Management plans to position itself halfway between a high-growth, highly leveraged investment and the stable income of a utility play. This makes for a risky looking proposition, but the group’s half-year numbers indicate it is making progress.
Plans to double cash profits by 2022 remain ahead of schedule. Management expects adjusted profits to be between $600m and $630m (£463m-£486m) for the year, boosted by acquisitions. One such acquisition – of Spanish concentrated solar power assets – now looks better value than previously realised, as the Spanish energy regulator has allowed for a higher-than-expected return rate from 2020. Acquisitions have pushed debt up significantly, but management expects it to reduce in the second half of the year back down to 4.5 times cash profits. The group refinanced its corporate bond, which will cut interest costs by $10m a year.
The investment case now features an income element. The group sold a 49 per cent stake in a solar portfolio in the year, the proceeds of which will be utilised to fund distributions towards the top of the $75m-$80m range previously stated. The half-year dividend is guided as a third of the total annual payment, implying an annual payout of 12¢ and yield of 4 per cent at the current price.
Bloomberg consensus forecasts indicate an adjusted EPS of 17.8ȼ in 2018 (from 4.2ȼ in 2017).
| CONTOURGLOBAL (GLO) | ||||
| ORD PRICE: | 234p | MARKET VALUE: | £1.57bn | |
| TOUCH: | 232-236p | 12-MONTH HIGH: | 306p | LOW: 206p |
| DIVIDEND YIELD: | 2.2% | PE RATIO: | na | |
| NET ASSET VALUE: | 71¢* | NET DEBT: | $3.0bn | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2017 | 462 | 10.4 | -0.01 | nil |
| 2018 | 535 | 6.9 | 0.01 | 4.00 |
| % change | +16 | -34 | - | - |
| Ex-div: | 16 Aug | |||
| Payment: | 7 Sep | |||
