A disappointing full year result from Spanish-controlled contractor CIMIC Group saw the shares slump 17% at one stage as investors sold the shares because of weak cash flows and margins.
CIMIC reported a statutory net profit after tax (NPAT) of $620 million for the full year from revenue of $11.4 billion and an underlying NPAT of $372 million adjusted for the profit on the sale of 50% of its Thiess construction business at the end of 2020.
CIMIC sold half of Thiess on December 31 to UK private equity investment group, Elliott Advisers for an enterprise value of around $4.3 billion and generated around $2.2 billion in cash for CIMIC, up from $1.9 billion that was initially estimated. The boost to the bottom line was $1.4 billion
But the real story was in the detail, not the topline numbers.
Underlying profit fell 25% year on year. The company’s cash flows were also weak.
Statutory revenue fell 22% as COVID-19 delayed and slowed down projects in Australia and overseas.
The resumption of dividends wasn’t enough to halt the slide in the share price.
The company will pay of 60 cents a share, 20% franked.
That’s lower than the last dividend paid by the company, a 71 cents a share in mid 2019.
There was also a “revenue reversal” of $1.1 billion after CIMIC lost a long-running dispute with US oil major, Chevron over cost blowouts on the Gorgon Jetty project in the LNG fields off the northwest WA coast.
Management’s guidance for 2021 is for a post-tax profit of between $400 million and $430 million, which while up to 16% than in 2020, would still be down on 2019 levels.
“While the pandemic had a bearing on revenues and the award of new projects during 2020, we have a strong level of work in hand of $30.1 billion, providing approximately two years’ worth of work and a positive outlook for the future,″ chief executive Juan Santamaria told shareholders in a statement. CIMIC said it expects to see $500 billion worth of tenders ″relevant to CIMIC” issued in 2021.
“The significant role of infrastructure in the economic recovery from the pandemic supports a positive outlook for our activities. Governments are pursuing stimulus packages in construction and services, including public private partnerships (PPP), while the mining market is proving resilient,” Mr Santamaria said.
CIM shares finished Wednesday’s trading session down a little under 4.5% at $21.56.
