Leading mining and civil contractor NRW Holdings has signed off on a record-breaking year with a higher-than-expected dividend and a bullish outlook, sending shares in the Perth stock to their best levels since the industry wide COVID-19 panic selling earlier this year.
“Growing record revenues to over $2 billion during the year is a great achievement,” NRW managing director Jules Pemberton said alongside announcing a 122% jump in normalised net profit to $89.7 million.
“Doubling the earnings from (FY19) also demonstrates that we can deliver work profitably and, through our disciplined approach, produce outstanding cash conversion despite the magnitude of the challenges faced over the last 12 months.
“As a consequence of strong organic growth and the acquisitions completed over the last three years, NRW is very well positioned to address a growing set of opportunities”, Pemberton added, pointing to increasing public infrastructure activity, Pilbara iron ore growth and rising maintenance and mechanical construction work.
In addition to record full-year revenue of $2.06 billion, up 83% on FY19, NRW’s cash conversion hit a record 97% as net cash from operating activities soared to $215.7 million.
NRW (ASX: NWH) has begun FY21 in strong fashion and is forecasting revenue this financial year of between $2.2 billion and $2.3 billion. The order book stands at $3.5 billion and includes NRW’s 40% stake in the $852 million Bunbury Outer Ring Road construction alliance, which is the preferred proponent for the project in WA’s South West.
The records achieved by NRW marked one of three important corporate milestones reported this week, with Core Lithium (ASX: CXO) and Cardinal Resources (ASX: CDV) also attracting positive headlines.
It has been a rollercoaster year for NRW, which included the well-timed and priced acquisition of the BGC Contracting business before COVID-19 shocked markets worldwide and sent the company’s shares as low as $1 in late March.
By the end of this week, with the strong profit for the year to June 30 under its belt, NRW’s stock was back trading at $2.23 – or slightly over 10 times its FY20 normalised earnings per share of 21c.
NRW declared a final fully franked dividend of 4c a share to go with the interim return of 2.5c.
“NRW has delivered a solid set of 2020 results beyond our expectations,” Euroz analyst Gavin Allen said as he increased his 12-month price target from $3.50 to $3.65.
“All metrics were well up on (the previous year). A highlight was generation of $215 million in operating cashflows and consequently the net debt position is well down on levels at December 2019 when BGC was purchased. This acquisition has proved instrumental in accessing significant infrastructure opportunities, of which the Bunbury Outer Ring is a nameplate example.
“Our earnings growth and therefore cash generation expectations remain intact.”
NRW was not the only stock to achieve a milestone this week.
Advanced lithium developer Core Lithium signed a non-binding memorandum of understanding with Chinese company Xinfeng for between 20,000-30,000tpa of spodumene from the Finniss project near Darwin in the Northern Territory.
This latest offtake, in addition to previous Core deals of 75,000tpa with Yahua and 50,000tpa with Transamine, means 85% of Finniss’ 175,000tpa start-up production capacity is now covered.
Core said the term sheet with Xinfeng could also pave the way for potential project finance talks.
Core closed the week at 4.4¢ per share.
The week’s third notable milestone was achieved in the takeover tussle for quality gold growth stock Cardinal Resources.
Preferred takeover suitor Shandong Gold received sign-off from the Foreign Investment Review Board to complete its 70c a share cash takeover of Cardinal.
The key bid condition puts Shandong in front of rival suitor Nord Gold’s unconditional 66c cash offer.
Cardinal shares closed the week at 72c – clearly some investors believe there could be another round of bid-to-bid between Shandong and Nord Gold, given the size of the ultimate prize: Cardinal’s 5.01Moz Namdini gold project in Ghana.