Hydro beats expectations

AIM-quoted Hydro International reported 2010 figures well above expectations. The stormwater and wastewater equipment supplier's revenues edged up by 3% to £28.2m, while pre-tax profit was one-third higher at £2.38m. Excluding amortisation and exceptionals, profit improved from £1.93m to £2.64m. Net cash was £4.07m, thanks to strong cash generation last year. The dividend was increased by 10% to 3.3p a share. UK revenues were lower last year but there was growth in the US. One UK customer accounted for £4.4m of revenues. A new distribution agreement has enabled Hydro's stormwater business to enter the Mexican market. The UK should be stronger this year because spending is building up following the start of AMP5, the latest five year investment cycle. Contracts have already been won. The UK Flood & Water Management Act 2010 and EU Water Framework Directive provide legislative drivers for demand. Water and flooding issues will help to offset government spending cuts in the UK. There is more growth to come in the US and the Middle East. Management wants to sell more products through its US distribution network. House broker Arden forecasts a 2011 profit of £2.52m, with a rise to £2.8m in 2012. If further contracts are won there could be room for upgrades.