Investment: Tarmac bucks trend in dull construction sector
Wednesday 23 September 1998
The Square Mile was expecting a dull, RMC-style performance to confirm the gloom in the building materials sector. Moreover, the rumour mill was pointing to a demerger of Tarmac's construction division from the heavy materials' side, with a possible further split between building and supply services.
Wrong on both counts. Tarmac came up with sparkling results, with interim pre-tax profits up 29 per cent to pounds 49.7m and turnover up 5.1 per cent to pounds 1.5bn, well ahead of analysts' expectations. As for the demerger, Sir Neville Simms said that there was no reason to dismantle a successful group.
On yesterday's performance, it is hard to disagree. Margins went up in both building materials and construction. In materials, where Tarmac makes most of its profits, they rose to a healthy 10.2 per cent, as Tarmac managed to counteract a fall in volumes in most of its products with robust price increases.
In construction, which makes up the bulk of turnover, margins rose slightly but are still a wafer-thin 1.4 per cent. The company is working hard to move away from cut-throat project work to higher-quality maintenance jobs, where longer-term contracts ensure margins in the 5 per cent region. But there is still a long way to go to push up profitability in the construction division.
Sceptics point out that seasonal factors will make for a worse second half. The UK economic downturn also means price rises in building materials are harder to sustain. Tarmac's shares, up 2.5p to 87.5p yesterday, trade on nine-times forward earnings of around pounds 135m. Given the uncertainties about Tarmac's markets, they are no more than a hold but any further weakness is an opportunity to buy.
Dennis Rodman will coach the North Korea basketball team
Jennifer Lawrence attacks mass media again over body image
Jennifer Lawrence: 'It should be illegal to call someone fat on TV'
Ian Watkins: Police probed over earlier allegations as paedophile Lostprophets singer sentenced to 35 years for child sex offences
Iain Duncan Smith leaves Commons food banks debate early
Paul Walker death caused by speed alone
Devyani Khobragade: India-US row escalates over arrest of diplomat in New York
- 1 America's 'virgin births'? One in 200 mothers 'became pregnant without having sex'
- 2 Sun will 'flip upside down' within weeks, says Nasa
- 3 Christmas comes early: Justin Bieber is 'retiring from music'
- 4 Iain Duncan Smith leaves Commons food banks debate early
- 5 Children evacuated from swimming pool after prosthetic leg mistaken for paedophile
- < Previous
- Next >
iJobs Money & Business
£500 - £550 per day: Cornwallis Elt : Business Analyst Target Operating Mod...
£500 - £680 per day: Harrington Starr: Murex Business Analyst - 1000 CHF per d...
£60000 - £75000 per annum + Bonus and Benefits: Harrington Starr: A leading au...
£25000 - £32000 per annum: Harrington Starr: Junior Business Analyst - Banking...