01/09/2015 - 06:01

Big NRW loss caps tough reporting season

01/09/2015 - 06:01

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The last day of the profit reporting season delivered a few surprises for Western Australia-based mining services companies, with NRW Holdings incurring a bigger-than-expected loss, VDM Group shrinking at a rapid rate, Swick Mining Services showing some promise, and Resource Development Group staying in the black.

Big NRW loss caps tough reporting season

The last day of the profit reporting season delivered a few surprises for Western Australia-based mining services companies, with NRW Holdings incurring a bigger-than-expected loss, VDM Group shrinking at a rapid rate, Swick Mining Services showing some promise, and Resource Development Group staying in the black.

The annual results for these companies for the year to June 30 were all lodged with the ASX in the last hour or so of trade yesterday.

NRW reported a net loss of $229.8 million, exceeding the big losses recently disclosed by the likes of Macmahon Holdings, Ausdrill, Calibre Group and Emeco Holdings.

This was on the back of a 31 per cent drop in revenue to $775 million, $570 million of which was earned in the first half.

The loss was due only in part to full-year impairments of $157.3 million, up from the first-half impairment of $134.9 million.

The company attributed this to falling equipment values, a goodwill write-off, and a loss on the Roy Hill rail project.

NRW is embroiled in a legal dispute with Roy Hill’s lead contractor, Samsung C&T, which appears some way from resolution.

It has won awards totalling $26 million under the Construction Contacts Act adjudication process, but said Samsung has responded by contesting payments though either judicial review or by resisting enforcement.

NRW said its banks had remained supportive and had agreed to a revised covenant reporting regime with which the company expects to comply.

The company has taken drastic steps to adapt to the tighter business environment, with staff numbers cut from 3,092 to 846 over the year to June 30.

However, it has not cut executive salaries, with chief executive Jules Pemberton continuing to get a higher salary than his peers, according to Business News research.

His base salary for the year to June was $1.31 million – higher than any other chief executive at a Perth-based mining services company.

Mr Pemberton's total remuneration was $1.49 million, which was beaten only by Paul Dalgleish, who runs the larger and profitable contractor RCR Tomlinson.

Looking ahead, the company has a forward order book of $663 million, helped by big contact wins at the Middlemount coal mine in Queensland ($330 million) and Rio Tinto’s Nammuldi iron ore mine in the Pilbara ($140 million).

Mr Pemberton said these wins provided a level of confidence that the business could returrn to profitability in FY16.

As well as targeting mining sector work, NRW is chasing work on roads and other infrastructure projects.

VDM Group has posted a net loss of $12.4 million on revenue of just $1 million.

That is down from $24 million in FYY14, and $272 million at the engineering contactor’s peak in FY12.

Now led by managing director Dongyi Hua, and with a total of 30 staff, the company admitted it did not enter any new construction contracts during the year.

It has been looking to build new business lines, with its main focus being a copper exploration project in Angola.

Swick Mining Services achieved an increase in revenue to $131 million and posted what it called a strong underlying result for the 2015 financial year.

However, after $19.6 million of impairments of equipment, goodwill and inventory, the company reported a net loss after-tax of $17.5 million.

It said the focus on brownfields mining projects – as opposed to greenfields exploration – had helped the company remain in a solid financial position.

With a forward order book of $128 million, Swick said its fleet utilisation was expected to dip from 72 per cent to around 68 per cent.

Resource Development Group outperformed its peers, with the company posting a net profit of $8.2 million on revenue of $232 million.

The profit was after a loss of $2.8 million on the Engenium, Intellect Systems and Ecologia consulting businesses, which were sold during the year to their management teams.

That left RDG focused on its Central Systems engineering and contracting arm.

RDG said its FY15 performance was broadly in line with budget but: “It was evident during the second half that a reducing market in terms of available opportunities coupled with increasing competitiveness for these opportunities would have an earnings impact on the group”.

It has responded by making significant cost cuts and staff reductions.

RDG is also looking to diversify, having moved into residential construction and prequalifying with Main Roads, the Water Corporation and the Department of Defence.

 

 

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