02/09/2015 - 16:01

AusGroup joins Civmec on growth path

02/09/2015 - 16:01


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Perth-based construction, fabrication and maintenance companies AusGroup and Civmec have proved resilient in the face of the resource sector slowdown, with AusGroup today joining its competitor in reporting solid growth over the past year.

AusGroup joins Civmec on growth path
Civmec's main engineering workshop in Henderson.

Perth-based construction, fabrication and maintenance companies AusGroup and Civmec have proved resilient in the face of the resources sector slowdown, with AusGroup today joining its competitor in reporting solid growth during the past year.

The lower Australian dollar has helped both companies, which are listed on the Singapore stock exchange but have their operational base near the Kwinana industrial strip.

AusGroup announced late yesterday that it had achieved a 41 per cent lift in annual revenue to $427 million in the year to June 2015, while its bottom line result went from an $11.9 million loss in FY14 to a $6.2 million net profit in FY15.

It wasn’t all good news, with the company posting a June quarter profit of just $261,000.

That was after writing down the value of its fabrication facilities in Singapore by $2.9 million, and Kwinana by $0.6 million.

The company said this was a result of decreased certainty in capital expenditure spend across the energy sector.

The slowdown in the oil and gas sector, following the sharp fall in oil prices, has also affected Civmec, which announced last Friday it would not proceed with the planned purchase of a site on Batam, Indonesia.

Civmec had planned to develop facilities on Batam for its heavy engineering, modularisation and pre-cast concrete services, similar to what it has at its expansive Henderson headquarters.

Chief executive Pat Tallon said the company had withdrawn from the deal because of the changed market conditions.

This had also affected the pipeline of work likely to come through the vendor, engineering group Technip.

“To me it shows a maturity in the business, that we weren’t pressured into it just because we’d entered into the due diligence phase,” Mr Tallon told Business News.

In a briefing today, Mr Tallon was positive about growth opportunities for Civmec, particularly in the infrastructure and defence sectors.

It has already made substantial inroads, with major contracts at Elizabeth Quay, Perth Airport and Perth Stadium.

In addition, its recently established sales office in Sydney had attracted a lot of interest relating to east coast projects.

Mr Tallon said currency movements had made steel fabrication more competitive in Australia, as evidenced by its recent contract wins.

“There was a huge gap, now that gap is definitely closer,” he said.

“It makes it worthwhile to seriously consider doing the work here.”

Mr Tallon said astute clients recognised the multiple benefits of fabrication work and module assembly being undertaken in Perth, including quality control and increased flexibility.

Civmec announced last month a net profit of $30.3 million (down 13.6 per cent) after lifting revenue 15.1 per cent to $499 million.

(Civmec reports in Singapore dollars, which are currently trading at parity with Australian dollars.)

Its June quarter results showed a 23 per cent lift in net profit to $6.5 million on revenue of $114.7 million.

AusGroup managing director Gerard Hutchinson said his company's full-year result showed significant progress had been made rebuilding its engineering services business and diversifying into ports and marine services.

“We are confident that our strategy of focusing on building long-term and recurring contracts continues to take shape and will provide a sustainable revenue base through FY2016 and beyond," Mr Hutchinson said in a statement.

"This was underpinned by the maintenance business with $39.5 million of additional orders during 4Q 2015.

"The order book of $A466.6m continues to support sustainable revenue growth in our legacy business of engineering services.”

The company said activities under its painting, insulation and scaffolding package on Inpex's Ichthys LNG project had continued to increase following a slow start.

Mr Hutchinson said the company had completed the construction of a port and fuel facility at Port Melville, which was aiming to service the oil and gas sector off Australia's northern coast.

"We continue to work with the relevant regulatory and stakeholder bodies to finalise operating approvals to expand activities within the environmental considerations," he said.

“Finally, we have implemented a transformation program internally which will improve our efficiency and effectiveness and combat competitive pricing pressures.”

Ausgroup's accounts also revealed a big increase in the comany's debt, as a result of a medium term note issue during 2014 and debt assumed as part of its acquisition of the Port Melville facility.


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