MDM Engineering Group

Mining industry-focused MDM Engineering has more than trebled annual profits to $11.6m (£7.2m) pre-tax.

Based near Johannesburg and quoted on AIM, MDM, which handles project management, process evaluation and engineering in Africa, generated revenues of $35.9m in the year to March, an increase of 164% over the 16 months to March 2008. The company, which ended the financial year with cash up from $5.2m to $14m, proposes a final dividend of 7.5 cents a share, for an annual payout up from 4 cents to 11.25 cents a share.

Chaired by Bill Nairn and steered by chief executive officer Grant Lowman, MDM says it had projects to the value of $300m under execution at the end of its financial year. Lowman concedes the last six months have brought ‘stalling and cancellation’ of mining projects and says that, though the company is now seeing ‘some activity pick up’, the commodity market, on which its clients depend, ‘will probably continue to reflect difficult trading conditions for some time’.

However, he maintains MDM is adaptable and ‘well entrenched as a niche provider of process and project management solutions’ and is ‘well placed to capitalise on a recovery in the sector when it occurs’. The shares have traded between a year’s high of 196.5p and a low of 40p, but we think, with the commodity market remaining difficult, investors can afford to wait before getting on board.

Avoid for now.