Decmil extends NZ contract, flags cost pressures

Decmil Group has announced a $NZ125 million ($116 million) contract extension in New Zealand, while also flagging a number of cost pressures expected to impact earnings.

The company said today it had extended its contract with the New Zealand Department of Corrections, which relates to the design, procurement and onsite installation of modular prison cells.

Perth-based Decmil also forecast revenue growth of about 50 per cent in the second half of the 2018 financial year, compared to the first half ($140.8 million), to around $210 million.

The company said increased bidding activity and bid costs in the second half would impact earnings, while new accounting standards and subdued occupancy at the company’s Gladstone accommodation village would also affect revenue.

Decmil also indicated that contracts with BHP and Rio Tinto had been altered.

“Currently, the first phase of the (BHP) project continues, however it is now expected that the second separable proportion will be less than the $30 million value previously estimated, with award subject to BHP approval,” the group said.

In early 2017, Decmil commenced a contract with RTA Weipa Pty Ltd, a wholly owned subsidiary of Rio Tinto Group, for design and construction of the mine infrastructure area at the Amrun project near Weipa, Queensland.

“Finalisation and completion of Decmil’s contract has been impacted by wet weather events and related logistical challenges impacting operations on site. Decmil is currently reviewing the impact on the final project margin as part of its FY18 financial year-end process,” Decmil said.

Shares in Decmil finished off 3.2 per cent at $1.06 each today.