CIMIC Group Provides HY20 Performance Update

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CIMIC Group Reports HY20 Performance

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CIMIC Group Limited (ASX:CIM) releases its half-year performance for the six months to 30 June 2020, highlighting net profit after tax of A$317 million, and revenues of A$6.2 billion. Revenues are down A$800 million from HY19, representing an 11.42 per cent decline in revenue.

The company reports that due to the complications arising from Covid-19, temporary delays in the awarding of new projects and slowdowns partially reflects the decrease in revenues. Despite this downturn, CIMIC Group announces a stable operating profit, profits before tax, and profits after tax of 8.6, 6.9 and 5.1 per cent respectively.

The group also promotes its strong liquidity position with gross cash of A$4 billion and debt repayments expected in the next twelve months of A$264 million. In conjunction with this, the group states cash-flow pre-factoring in the last twelve months of A$1.3 billion, which is an increase of A$495 million year on year. Furthermore, promulgating this cash position, the company reports an EBITDA cash conversion pre-factoring in the last twelve months of 61 per cent, which is an increase of 22 per cent. This is relative to 39 per cent in HY19.

CIMIC Group further emphasizes its contractual acquisitions, of A$4.9 billion worth of new contracts secured in HY20. This is despite delays in contract awarding as a result of Covid-19. As a result of this positive overall image, the company maintains a positive outlook on its core businesses. Moving forward in the Covid-19 environment, the business is continuing to monitor the impacts of the pandemic on its finances and operations.

Furthermore, the group highlights the resilience of its mining operations, signing an exclusivity agreement with an investor to facilitate growth in these operations. Additionally, CIMIC Group reports the removal of tendering restrictions in Hong Kong.

CIMIC Group’s Executive Chairman, Marcelino Fernández Verdes, proudly reinforces the positive outlook for the business, as well as its equity partner introduction to Thiess. Consequently, this introduction will facilitate the capitalization of the growing mining sector as well as providing capital to develop Thiess further, while strengthening CIMIC’s balance sheet.

In terms of contractual arrangements, the company affirms its steady work in hand arrangements, totalling A$38.1 billion. Moreover, the business achieved project wins, including a mining services extension at Lake Vermont in Queensland, as well as an upgrade to the South Gippsland Highway in Victoria, amongst several others.

Additionally, CIMIC Group reports its 50:50 investment partnership with Ventia has completed its purchase of Broadspectrum on 30 June 2020. This acquisition would potentially provide CIMIC Group with combined additional annual revenue of more than A$5 billion. Moreover, this acquisition supplemented A$3.1 billion in CIMIC Group’s work in hand.

With the acquisition of additional work in hand, as well as stable current projects, the temporary reduction in contract issuance may not overly affect the company in the long-term. As such, the group is well-positioned for further growth moving forward.

Caroline Wong

Caroline Wong is a Research Analyst at KOSEC – Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at c.wong@kosec.com.au.

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