Redhall Group

Engineering support services star Redhall has reaffirmed investors’ faith with a confident trading statement and key contract wins.

Executive chairman David Jackson said Redhall, a recipient of forecast downgrades last year, traded in line with expectations and ahead of the comparative period in the six months to March 2010 (interims are out in June).

Despite prevailing economic challenges, Redhall has seen growth in the regulated energy and defence sectors and the first half’s contract highlight was a £30m award (worth significantly more than originally expected) with Vivergo Fuels. Involving fabrication provision and the mechanical installation of pipe work for a new bio-ethanol plant at BP, Salt End, which will be one of the largest bio-ethanol plants in the UK, the win strengthens Redhall’s energy market positioning. Jackson also regaled followers with news of £15m worth of tankage and engineering work secured with Chevron, as well as a £3.2m civil nuclear win entailing the commission of the new boiler park at Sellafield.

Closing the half-year with £7.4m net cash in the coffers, Redhall has the financial firepower for earnings-accretive acquisitions to augment organic development and with its order book having burgeoned from £115m to £130m over the first six months, is confident it can achieve annual forecasts.

For September 2010, growth in pre-tax profits from £6.5m to £6.9m is expected as turnover swells to circa £137m (2009: £129m). And on forecast earnings of 16.6p, the dividend-yielding shares, first backed by Growth Company Investor at 248.5p in 2007, trade on a paltry prospective p/e of 9 (lower if you strip out cash).

With proven, ambitious management on a mission to transform Redhall from niche player to national operator, that rating looks undemanding to say the least and the shares are in strong buy territory.