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ContourGlobal powers through Covid-19

The developer of wholesale power generation assets saw little disruption from the pandemic and has upped its quarterly dividend
August 10, 2020

Wholesale power generator ContourGlobal (GLO) saw its adjusted cash profits (Ebitda) dip by 2 per cent in the six months to 30 June, to $351m (£270m). This came as the renewables portfolio was hit by lower sun and wind availability, while the first half of 2019 also benefitted from $46m of proceeds from selling a minority interest in some of its solar assets. Excluding these ‘farm down’ gains, adjusted cash profits improved by 13 per cent, with November’s acquisition of two natural gas-fired combined heat and power (CHP) plants in Mexico adding $46m.

IC TIP: Buy at 202p

There have been “no notable adverse impacts” from Covid-19. Because ContourGlobal doesn’t distribute power and operates under fixed-price contracts, it has been protected from power price volatility. In addition, the thermal division is paid to provide capacity regardless of demand, meaning it has also been insulated from volume fluctuations.

Net debt has ticked down 6 per cent since the December year-end to $3.3bn, equivalent to 4.4 times ‘pro-forma’ cash profits – this includes the full year expected earnings of the CHP assets. While high, leverage is within the group’s 4-4.5 times target range and the majority of this debt is at the project level, so it is paid down from assets’ cash flows.

Meanwhile, net cash generated from operations increased by almost a quarter year-on-year to $371m. ContourGlobal will hand shareholders a 4.0591¢ dividend for the June quarter, in line with its plans to increase the annual payout by 10 per cent year-on year.

Maintaining its full year guidance of $710m-745m of adjusted cash profits, this would be an increase from the $703m recorded in 2019. Analyst consensus compiled by FactSet is pencilling in $720m.

CONTOURGLOBAL (GLO)   
ORD PRICE:202pMARKET VALUE:£ 1.3bn
TOUCH:201-202p12-MONTH HIGH:226pLOW: 120p
DIVIDEND YIELD:5.9%PE RATIO:20
NET ASSET VALUE:44p*NET DEBT:£3.3bn
Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
201961723.22.07.38
202068010211.08.12
% change+10+338+450+10
Ex-div:03 Sep   
Payment:25 Sep   
£1=$1.31, *Includes £324m in intangible assets or 48p a share