Monadelphous shares surge to a new record as profits trounce expectations

Shares in Monadelphous Group Ltd (ASX: MND) have piled on the gains to hit a new record high after the company comfortably beat expectations with its earnings result.

The company, which provides mining and engineering services, posted record revenue of $1.53 billion for the first half of the year, up 45.6% on the previous corresponding period, while EBITDA was up $116.2 million, also 45.6% higher.

Expectations surpassed

RBC Capital Markets, which has an outperform rating on Monadelphous, said the earnings result was a 15% beat to consensus estimates, and the result quality was “strong”.

Monadelphous said in its statement to the ASX on Tuesday that the business performed strongly across the board.

As it said:

The company experienced strong operating conditions across all sectors, with activity levels supported by the record level of work secured during the previous financial year. The Engineering Construction division delivered revenue of $677.8 million1 for the six months, an increase of around 67 per cent on the prior corresponding period, supported by service expansion and growing capability in end-to-end delivery. Zenviron, the Company’s renewable energy business, also experienced increased activity from larger wind and battery energy storage projects. The Maintenance and Industrial Services division reported half year revenue of $852 million, up 32.1 per cent, driven by an increase in energy sector activity, together with sustained strong demand from iron ore customers.

The company said it finished the half-year with a cash balance of $322 million after strong cash flow from operations of $171.1 million for the half.

The company said its order book also remained strong with $1.4 billion in new work secured since the start of the financial year.

Management confident

Monadelphous Managing Director Zoran Bebic said the expectation was that full-year revenue would be about 30% up on the previous year.

He added:

Long-term demand in the resources and energy sectors is expected to continue, supported by an improved global economic growth outlook. Continued investment in new and existing operations in Western Australia’s iron ore sector is driving demand for both maintenance and construction services, with the energy sector to offer substantial prospects. The outlook for energy transition metals is strengthening, and Australia’s Net Zero emissions objective continues to drive long-term investment in energy generation, storage and transmission infrastructure. Leveraging its broad services capability, Monadelphous is well positioned to capitalise on the growing pipeline of opportunities.

RBC said the revenue guidance was up from previous expectations of 20% to 25% growth.

Monadelphous declared an interim dividend of 49 cents per share, fully franked, compared with 33 cents for the same period last year.

Monadelphous shares were trading 15.7% higher in early trade at a record high of $35.43.

The post Monadelphous shares surge to a new record as profits trounce expectations appeared first on The Motley Fool Australia.

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Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.