Diversified contractor AusGroup has shocked the market with a $69.8 million quarterly loss, admitting it has been forced to write off long-standing contractual claims in order to boost its cash reserves.
Diversified contractor AusGroup has shocked the market with a $69.8 million quarterly loss, admitting it has been forced to write off long-standing contractual claims in order to boost its cash reserves.
Gerard Hutchinson, who was promoted to managing director in May last year after joining AusGroup in 2012, has resigned.
The Singapore-listed company said its quarterly result was significantly impacted by continued delays in the commercialisation of its Port Melville facility north of Darwin.
AusGroup said the worse than anticipated reduction in capital expenditure in the oil and gas industry had also affected its fabrication and manufacturing businesses in Australia and Singapore.
“Due to these impacts AusGroup had to increase its focus on resolving long outstanding contractual claims so as to improve its cash reserves,” the company said.
“These resolutions led to significant impairment write-downs in relation to receivable balances.”
Specifically the company wrote down the recoverability of work in progress by $44.6 million for an anticipated immediate cash settlement of $21.9 million.
The company also reviewed its deferred tax asset relating to research and development credits.
“As it is no longer probable that these will be offset against future profits they have been reversed,” it announced.
That decision led to a $16.3 million write-back.
Singapore-based Eng Chiaw Koon, who was already an executive director, has replaced Mr Hutchinson, who was appointed managing director in November 2014.
The changes come shortly after former Southern Cross Electrical Engineering managing director Simon High joined AusGroup as Perth-based chief executive of its engineering services arm.
The big net loss came despite a 5.6 per cent lift in revenue to $126.1 million in the three months to December 2015, and followed a $1.1 million net profit in the previous corresponding period.
As well as the impairments and write-downs mentioned above, the group’s earnings were adversely affected by increased operating costs mainly related to Port Melville and ongoing restructuring.
The Port Melville facility has been navigating regulatory and environment approvals, since bring commissioned in July last year.
It received its first vessel in the December quarter, carrying the first shipment of woodchips from the Tiwi Islands.
However, the fuel distribution operation is awaiting the finalisation of a fuel supply agreement.
AusGroup said its work-in-hand at the end of December was $376 million, from $466 million at the end of June.
In addition, the group said it received an extension to one of its existing contracts to the value of $73 million.
