09/06/2008
Guided by no-nonsense chairman and chief executive David Jackson (and strongly recommended by Growth Company Investor at 248.5p last year), engineering support services specialist Redhall is growing in stature and delivering stellar growth rates.
Pre-tax profits surged 116% north to £1.9m during the half to March, from sales increased 86% to £41.5m, reflecting strong organic growth as well as full six-month contributions from the highly successful Jex and Steels acquisitions. Within the nuclear services division, Redhall reported 46% growth in operating profits to £1.3m and expanded operating margins of 7.4% (2007: 7%), whilst the engineering services arm grew operating profits by 180% to £1.7m, with margins widening to 7.5% (2007: 6.7%).
Serving regulation-driven sectors with very high entry barriers – nuclear, oil and gas, food manufacturing – Redhall is receiving increasing acclaim among its client base as a quality contractor, nowhere more so than at safety-critical nuclear sites such as Sellafield and Aldermaston. Rising recognition is in turn leading to larger tenders and contract wins, as evidenced by its growing order book of £85m (2007: £60m).
Upgraded forecasts for September 2008 and 2009 point to pre-tax profits of £4.3m and £5m respectively, giving earnings of 13.7p and 16.1p. Investors might also expect dividend payments of 3.8p and 4.3p per share this year and next.
Strong performers on AIM, the shares aren’t cheap, trading on prospective multiples of 21 and 17.9, but Redhall is an ambitiously managed operator unfettered by debt and its markets are showing no signs of slowdown. With plenty more growth to come, we consider that Redhall more than merits its premium rating. Keep buying.
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| Market cap: | £61.52m |
| PE Forecast: | 21 |
| Share price: | 288.5p |
| AIM | £56.17m |
190.50p
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-3.00p
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