Oil services firm Kentz (KENZ) gushes up 7.1% to 785p as full-year results reveal a 17% increase in the order book to a new record of $4.1 billion.


The company's backlog of contracts (as at the end of February) is up sharply on its year-end total of $3.5 billion – boosted by the company's $435 million acquisition of Valerus Field Solutions. Thanks to the strong order intake the company says 2014 performance will be ahead of its previous expectations. In response broker Investec reiterates its 'buy' rating, increases its price target to 810p and ups its earnings per share forecasts by 5% for 2014 and 2015 respectively.


In our detailed look at the wider sector in December we suggested Kentz's valuation was stretched. This now looks excessively cautious – though in fairness we did note the company's excellent track record of turning a pipeline of opportunities into contract wins and ultimately translating this into cashflow.


The numbers for last year were broadly in line with expectations – revenues of $1.66 billion down 3% on consensus but profit before tax 4% ahead at $118 million. Free cashflow comes in at $30.9 million – with the dividend up 21% to 17.5 cents per share. The bid pipeline for new work stands at $15.6 billion.


Investec analyst Neill Morton comments: 'Yet another textbook update from Kentz. Full-year results are in line with consensus but the standout figure is its order book. This was $3.5 billion at end-2013 (including Valerus) but has already increased by 17% to $4.1 billion by end-Feb, with further potential awards in the pipeline.'


VSA Capital says: 'All in all these are positive results and in line with consensus. Kentz was able to secure its growth through a strong pipeline of projects and the proposed final dividend rewards investor patience.'


Issue Date: 24 Mar 2014