Half-year results for ADES International (ADES) were neatly summed up by Canaccord Genuity as "soft". Adjusted cash profits of $38m (£30m) were 14 per cent adrift of the broker’s forecasts, and a fifth down on the first half of 2017. Activity levels have lagged the increase in net debt. What’s more, upgrades and re-certifications meant the Middle East oil services company's rig utilisation came in at just 80 per cent, down on the six-year average of 90 per cent.
Against this flatlining operational and financial progress, the promises have gotten bigger. Following the addition of three new rigs from Nabors and a handful of contract renewals, the order backlog is up 15 per cent to $492m since the year-end. But by the end of 2018, management expects orders to have ballooned to $1.35bn, if a recently-inked deal to acquire the semi-operational land rigs from US-based peer Weatherford lives up to its lofty expectations. Some $750m of new business is expected from the Weatherford deal in the next six months alone.
Add that to around $200m in renewals, and ADES’ pipeline starts to look a lot stronger. Earnings, investors will hope, should step up – particularly after a half year in which a 6.5 percentage point drop in the cash profit margin was below the fall in the top line. With this in mind, Canaccord left its full-year adjusted earnings per share forecast unchanged at $1.49, rising to $2.18 in 2019.
| ADES INTERNATIONAL (ADES) | ||||
| ORD PRICE: | 1,400¢ | MARKET VALUE: | £462m | |
| TOUCH: | 1,385-1,400¢ | 12-MONTH HIGH: | 1,750¢ | LOW: 1,184¢ |
| DIVIDEND YIELD: | nil | PE RATIO: | 13 | |
| NET ASSET VALUE: | 857¢ | NET DEBT: | 48% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2017 (restated) | 87.8 | 18.6 | 55.0 | n/a |
| 2018 | 79.7 | 22.2 | 50.0 | nil |
| % change | -9 | +19 | -9 | - |
| Ex-div: | n/a | |||
| Payment: | n/a | |||
| £1=$1.28 | ||||
