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Cimic Group (CIM) shares snap back on report

The Cimic Group Ltd (ASX:CIM) share price was trading 5.43% higher today following the release of its annual report.

For context, the broader Australian share market or S&P/ASX 200 (INDEXASX: XJO) was trading at 6989.4, up 0.59%.

About Cimic Group Ltd

Cimic Group was formerly called Leighton Holdings. The company changed its name shortly after some bribery scandals emerged in the news and it was acquired by its majority shareholder, Spanish firm Grupo ACS.

On a more positive note, Cimic is today a major international construction and mining contractor with brands like UGL, CPB Contractors, Thiess, Broad and Sedgman under its banner. 

Cimic Group Ltd’s annual report

The video above, taken from Rask Australia’s YouTube channel, explains how to read an annual report in just a few minutes, including what to look for when you’re trying to understand if a company is giving you the full picture.

Cimic’s Key Results

This period Last period Change
Revenue 14,701 14,670 0.21%
Profit -1039 771.7 -234.64%
Cash flow 1,249.5 1,900.3 -34.25%
Dividends 0 86 -100%

Source: Cimic Group Ltd announcements; author calculations.

As can be seen above, the company’s revenue came in at $14,701 million, up $31 million. Futher down the income statement, Cimic Group Ltd’s profit turned into a sharp loss of $1,039 million thanks to the group’s recent impairment of its BIC Contracting business in the Middle East. We reported Cimic’s latest divestment and write-down here.

On the cash flow statement, which is an important financial statement since it represents the underlying health of a business, operating cash flow was $1,249.5 million, down $650.8 million.

Finally, the company chose not to pay a dividend because of the write-offs associated with the recent divestment. 

Cimic’s Executive Chairman Marcelino Fernández Verdes said the company’s decision to exit its Middle East investment (BICC) will enable it to refocus resources in Australia, New Zealand and the Asia Pacific.

“Notwithstanding the one-off impact on our 2019 financial results, leaving the region is the appropriate long-term decision for our business and our shareholders,” Fernández Verdes said. Excluding the impact of its divestment, Cimic said its profit would have risen 3% year over year.

“Looking forward, our prospects are positive, and we are confident about the outlook for our business and our markets, with strong work in hand of $37.5 billion.”

What Happens Next?

Looking towards 2020, Cimic is eying off $160 billion of tenders, with a further $380 billion of works due to come to market in 2021 and beyond.

“Looking ahead, our focus for 2020 is sustainable growth and returns. Our opportunities continue to strengthen, as governments and private clients in our markets further prioritise social and economic infrastructure projects to support the growth in urbanisation and respond to environmental challenges globally,” Fernández Verdes concluded.

The company has set its profit guidance at between $810 and $850 million. For context, adjusting for write-downs, its 2019 profit stood at $800 million.

Cimic Group shares were last seen trading at $29.67, giving the company a market capitalisation of nearly $10 billion.

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