At the end of the year, I am making a list of UK stocks to buy next year. One of the ways I do so, is by going over the recent performance of companies. While many struggled in the last couple of years because of Covid-19, numbers are beginning to show improvements now. One of them is the AIM-listed infrastructure services provider Nexus Infrastructure (LSE: NEXS).
Nexus Infrastructure reports strong results
In its recent full-year results for the year ending 30 September 2021, the company showed an increase in revenue from last year. Also, it recorded a net profit, after falling into a loss last year. And it has resumed its dividends. It also appears optimistic for the next year on account of expected growth across its segments.
The company has three business segments. The biggest in terms of revenue generation is its civil engineering business. It provides a range of services like drainage systems and high-rise construction for segments like housebuilding. Next is the segment providing a range of utility services. These include installation of gas, electricity, water, fibre network, and electric vehicle (EV) charging infrastructure. And finally there is its energy transition business, which provides infrastructure for public charging of EVs. It also provides smart energy infrastructure.
Future positive
I think the fact that it caters to EVs is a big positive for the future, as the country and indeed the world transitions towards clean energy sources. Even though it is still quite a small part of its total revenue, the energy transition business has seen a big increase in the past year. And I reckon that could be a sign of things to come, considering that there is expected to be a significant increase in EV ownership during this decade.
However, for the near future, I think the possibility of another financial wobble exists. In 2020 and until earlier this year, the housebuilding sector got a boost because of the stamp duty holiday. However, its rollback means that the housing market might not boom quite like it has in recent times. In fact, the latest print on the UK economy shows that construction activity actually declined in October compared to the previous month. Considering that two of Nexus Infrastructure’s biggest segments address the residential housing, I would not rule out a slowdown there.
This is especially so since we might just be headed for another lockdown, which would have negative repercussions for the economy. If the housing market does not quite receive the same boost as it did last year, than Nexus Infrastructure could be impacted as well.
What I’d do about the UK stock
Keeping this in mind, I would keep the stock on my investing watchlist for 2022 for now. I want to see how the Omicron variant situation develops and also how the company’s next update looks. If the situation improves fast, I could buy this UK stock because it could make a great investment. Until then, I will focus on safer stocks.
