News blog
Hydro International
- BY: Andrew Hore |
- POSTED: 06/09/2011 |
Wastewater and stormwater equipment supplier Hydro International performed strongly in the first half despite weak construction markets and a lack of capital investment in the UK water sector.
The UK and US operations have both increased their revenues. Most of that growth came in the wastewater operations as weak construction demand held back the growth of the stormwater businesses.
Water company capital spending is not increasing as expected in the UK, following the AMP5 regulatory review. This is in its second year and spending is normally ramping up by now but projects are being rescoped to reduce costs. The AMP5 review is for a five year period and it may mean that spending will be skewed more to the second half of the period.
Over the past year Hydro has won orders totalling £24.9m for Zickert Scraper projects with Thames Water and these will continue to contribute until 2013.
Revenues rose 24% to £13.7m in the six months to June 2011, while pre-tax profit jumped 54% to £951,000. The profit improvement came from the wastewater operations, which also benefited from the write back of a previous provision. Net cash was £3.4m at the end of June 2011.
Middle East sales have been hit by the conflicts in the region but management is confident that they will recover. A contract in Qatar has been secured. Brazil and additional European markets are being targeted. New products will also help to grow revenues.
Hydro’s order book is worth £25.2m, which is a record.
House broker Arden remains cautious and still forecasts a flat profit of £2.52m for 2011. Arden wants a clearer picture of the pace and timing of the recovery before making any change. Even so, there appears scope for an upgrade given the first half performance and the ongoing work for Thames Water.
At 135p a share, Hydro is valued at £19.4m.
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