Electricity generation group ContourGlobal (GLO) has impressed with its maiden set of results as a public company. Plans to double cash profits over the next five years were materially ahead of schedule as adjusted profits rose 17 per cent last year, while the growing contribution from thermal assets pulled further ahead of renewables. That was largely in line with management's expectations, particularly as the November float provided good clarity over the year's progress with only a month to go.
The group holds a combination of thermal and renewable generation assets across Europe, Latin America and Sub-Saharan Africa. It plans to grow its network by buying up further assets – it recently agreed to buy five 50MW solar plants from Acciona Energía in Spain – and is developing some itself.
The group also wants to straddle the divide between highly leveraged, high-growth investment and stable, income-generating utilities. While its dividend isn't overly-generous at the moment, the group is paying out around $17.5m (£12.5m) for 2017, and should ramp up to between $75m and $80m this year.
The eye-watering debt represents 4.1 times cash profits, but this is down from 4.8 in 2016. What's more, chief executive Joseph Brandt says he's comfortable with debt levels of around 4 to 4.5 times cash profits as the group targets growth rates which are considered impossible for well-established European utilities. He also said the company can issue high-yield debt for a cost close to that of a BBB-rated company, while a reliance on longer-term wholesale contracts means cash flows are stable.
Strong contribution from the thermal portfolio and good cash profit growth has prompted analysts at JP Morgan to upgrade current-year forecasts. It now expects cash profits of $610m, giving EPS of 24¢ for 2018 (from $492m and 7¢ in 2017).
CONTOURGLOBAL (GLO) | ||||
ORD PRICE: | 240p | MARKET VALUE: | £1.61bn | |
TOUCH: | 238-240p | 12-MONTH HIGH: | 306p | LOW: 226p |
DIVIDEND YIELD: | 0.8% | PE RATIO: | na | |
NET ASSET VALUE: | 86¢* | NET DEBT: | $2.1bn |
Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
2014** | 0.80 | -128.1 | na | nil |
2015** | 0.84 | -31.5 | na | nil |
2016** | 0.91 | 42.9 | 0.06 | nil |
2017 | 1.02 | 40.6 | 0.03 | 2.60 |
% change | +13 | -5 | -50 | - |
Ex-div: | 3 May | |||
Payment: | 31 May | |||
*Includes intangible assets of $137m, or 20p a share **Pre-IPO figures £1=$1.4 |