07/05/2009 - 00:00

Debt-free Paladio outshines rivals

07/05/2009 - 00:00


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A debt-free Belmont-based Paladio Group has outshone its rivals in the listed mining contractor sector by avoiding the use of leverage.

Debt-free Paladio outshines rivals

A debt-free Belmont-based Paladio Group has outshone its rivals in the listed mining contractor sector by avoiding the use of leverage.

The company has also profited from some personnel additions, with former Nomad Building Solutions managing director Phil Guy now working as an adviser to Paladio's most important subsidiary, Decmil Australia.

Paladio chief executive Victor Kuss said a long-term strategy of avoiding debt and maintaining tight cost controls had helped the integrated services company thrive in a tough climate.

"It's been a strategic view that we shouldn't have a debt position," Mr Kuss said.

"You can never rule out what you do in the future but we have a strong culture to fund growth internally."

Paladio has no net debt and enjoyed a double-digit share price increase during the past volatile 12 months, despite trading well below 2006 highs.

By comparison, Macmahon Holdings (share price down 75 per cent over 12 months) and VDM Group (down 85 per cent) are each carrying more than $80 million of net debt, according to brokers.

After being awarded more than $300 million worth of contracts with large miners like BHP Billiton and Rio Tinto during the past 12 months, Decmil is providing the bulk of revenue to listed entity Paladio.

Mr Guy, who resigned from Nomad earlier this year, has been hired in a part-time advisory role at Decmil to give advice on issues like corporate governance.

The civil and mechanical construction division of Paladio - which includes Decmil - generated revenue of $118 million for the half-year ending 31 December, compared to just over $6 million for the engineering services division.

"The [construction division] was restructured during the period with the Western Australian operations of McFee and Fabcon being placed on hold. These resources together with additional funding were allocated to support the growth of the Decmil operation as the entity had significant projects gearing up or getting underway in the latter part of this financial period."

The hiring of Mr Guy roughly coincides with the appointment of former Nomad chairman Geoff Allen to the Paladio board.

Paladio recently announced it would forgo ambitions of creating a national engineering company, and instead concentrate on the mining, oil and gas and infrastructure sectors, which includes tendering for major projects linked to the Gorgon gas development.

The company is forecasting a full year profit of up to $12 million, excluding write-downs linked to the collapse of Windimurra Vanadium mine, located 600km north-east of Perth.

Hartleys head of research Trent Barnett said it was rare to find a company with positive earnings momentum and no debt in the construction space.

"It was a surprise they are doing better than ok," he said.


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