Perth-based engineering, construction, and maintenance services group Forge Group (ASX: FGE) has reported a solid result with revenues rising 123% to a half yearly record of $503 million, helped along by the acquisition of CTEC, which added $202.5 million for the half year. Meanwhile net profit after tax grew 60% to $33.9 million and diluted earnings per share increased 59%, suggesting the acquisition wasn't a drain on returns to shareholders.
It looks like the board made a sound decision acquiring CTEC and thereby creating the new Forge Power division. At approximately 2.6 times earnings before interest, tax, depreciation and amortisation (EBITDA) the purchase price was cheap and looks to be performing well. It has also diversified its revenue stream away from Forge's previous reliance on coal mining.
It's shaping up to be a very mixed bag of results from the mining and contracting services sector this reporting season. Downer EDI (ASX: DOW) and Clough (ASX: CLO) have both reported market-pleasing profit results and seen their share prices head higher in response. While debt-laden Boart Longyear's (ASX: BLY) results show what happen when you find yourself between a rock and a hard place! With Matrix Composites and Engineering (ASX: MCE), Mondelphous (ASX: MND), and Calibre Group (ASX: CGH) amongst many other mining service and contracting companies to still report, insights into how the sector is travelling will continue to improve.
The Foolish bottom line
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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Tim McArthur doesn't own any of the stocks mentioned.
