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CIMIC share price: 2019’s half-year results in focus

Profits of A$367 million, an extensive backlog of projects and a strong interim dividend couldn't stop CIMIC's share price diving as much as 17.10% in early morning trade.

CIMIC Group Ltd, a market leader in engineering, services, mining and construction, released its 2019 half-year results after the market close on Wednesday.

Although the company reported robust profits and an impressive backlog of projects, investor's sold off the stock aggressively in morning trade.

At the time of writing, CIMIC's share price was down as much as 17.10%.

Though investors have responded negatively to CIMIC's HY19 results release, there are still a number of positives to consider.

Profits and revenue remain solid

CIMIC demonstrated its power as a market leader during 2019's first half, delivering profits after tax of A$367 million on revenues of A$7 billion.

Reflecting on these impressive results, Marcelino Fernández Verdes, Group Executive Chairman, said that:

‘At the half way point in 2019, CIMIC Group remains in a strong financial position. Our net cash and work in hand increased consistently and we have a strong foundation for profitable growth.’

Dividend due soon

In recent years CIMIC Group Ltd has grown its reputation as a solid dividend payer for income-focused investors.

As the company continues to produce impressive cash returns – generating free cash flows of A$1.8 billion during HY19 – the company’s dividend is likely to be a continued focus.

In saying that, investors may have been disappointed when the company reported an interim dividend of A$0.71 per share, set to be paid on October 3. This represents just a 1.4% increase in CIMIC’s dividend year-over-year.

The company currently has a dividend yield of 3.43%.

Projects keep flowing

A$36.8 billion worth of work in hand was a highlight of CIMIC’s half-year results.

On this topic, Chairman Verdes pointed out that:

‘We are capitalising on the strong pipeline of opportunities, including the increasing number of Alliance contracts that are coming to the market.’

Yet it's not just the company’s current work in hand that is likely to interest investors.

In the areas of construction, mining and services, CIMIC has a pipeline of projects valued at A$60 billion for the remainder of the 2019 financial year.

For those looking longer-term, the company has an even more impressive pipeline of projects valued at A$400 billion lined up for 2020 and beyond.

Full year profit guidance

Finally, CIMIC has confirmed profit guidance between the range of A$790 million to A$840 million. This equates to an increase of 1% to 8% on 2018’s full-year profit.

With such a precipitous decline in CIMIC's share price at the market open, investors may have been expecting a more sizable increase in full year profit guidance.

Going forward, Chairman Verdes pointed out that:

‘CIMIC is in an advantageous position and remains on track to achieve our full year guidance and to deliver strong cash performance, supporting continued returns to shareholders.’

Ultimately, the CIMIC Group Ltd share price has been a mixed performer this year, rising almost 19% from January to April, before pulling back 10% following a report from the Hong Kong-based firm, GMT Research, who alleged that ‘CIMIC has inflated profits by around 100% in the last two years through aggressive revenue recognition.’

The 17.10% decline in CIMIC's share price during morning trade may suggest that investors still remain concerned over the issues raised by GMT Research.

Year-to-date, the value of CIMIC's stock has now fallen 11%.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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