net profit up 30%, page-7

comments from huntleys 25/11/09

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Recommendation: Hold

NFK reported 1H10 NPAT of $5.7m, up 16% from 1H09 excluding abnormals. Despite improving, NPAT remains weak and is still down 35% from 1H08. EBIT rose 10% to $11.5m and margin firmed 20bps to 3.0%, still very low. Operating cash flow was strong at $7.5m and net debt reduced 24% to $45.4m. Debt reduction remains a key focus and no dividends will be paid this year. The company’s senior debt facility matures in July 2010, presenting some refinancing risk. Conditions remain uncertain in some markets, with project deferral in some sectors and a slow recovery in New Zealand. NFK is focusing on the stronger sectors like infrastructure and oil & gas. Order book is at a record $820m. A total of $740m of FY10 revenue is underpinned by current contracts, work orders and ongoing service commitments. No guidance was given.

Business Impact: The result is generally in line with expectations. Pleasingly, net debt continues to fall making refinancing easier. Forecasts and valuation are unlikely to change materially.