Rising margins and NAV bode well
The recent results for the six months to June reflected the positive contributions from the HIOS price adjustment, Group Properties, and a return to profit at Slingsby Advanced Composites. Margins at the gross and EBIT levels rose markedly to 32.7% and 4.6%, respectively. Cash levels remain high, even following the investment in working capital and capex spend on the business units.The five-year strategic plan includes profitably growing the top-and-bottom lines, not least the margin contributions. With orders books high and on average equating to 1.3x annual sales and a potential pipeline of orders at c.£4bn, we think the outlook remains hugely encouraging.
The cash built up will be used to benefit all divisions and thus result in a ‘future proofing’ of the Group as relocations occur and investment in technology is made. Additionally, in the shorter term the new ERP system is likely to result in improved operational efficiency.
As cash is deployed, we anticipate the returns on the investment to far outweigh the cost and have increased our fair value / share to 478p, which reflects the growing NAV.
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