Engineering services group Emerson Stewart has announced an unaudited net loss after tax of $1.72 million for the 2010 financial year.
Engineering services group Emerson Stewart has announced an unaudited net loss after tax of $1.72 million for the 2010 financial year.
The result compares to an $800,000 profit during the 2009 financial year.
The 2010 loss included costs associated with its merger with Whelans and writing off bad debt associated with the Windimurra Vanadium project.
"Despite this negative profit result for shareholders, I believe that the work being done to drive shareholder value for the future is now starting to have effect" said CEO and major shareholder Dario Amara.
Looking forward Emerson Stewart expects to record earnings before interest and tax of $2 million to $2.3 million this financial year.
The outlook is based on FY11 revenue in the range of $28 million to $30 million, which is up 30 per cent on the 2010 financial year.
See company statement below:
Emerson Stewart Group Limited (ASX: ESW) provides the following guidance with respect to its FY10 result and outlook for FY11:
FY10 proved to be a challenging year for ESW resulting in an unaudited net loss after tax of $1.72m. This included pre-tax non recurrent expenses associated with M&A activities ($0.58m) and the previously reported Windimurra Vanadium Limited remaining bad debt write off ($0.24m).
It also included pre-tax expense amortisation on Whelans "customer relationship" acquisition of $0.05m ($0.69m over 5 years), as well as linking future management remuneration to business performance, through share based remuneration expenses ($0.37m). Although these costs negatively impact the Profit & Loss due to accounting treatment, both are positive steps for the future.
As stated in ESW's first half report, despite a recovering order book, strengthening executive team, and active business development initiatives, the Group was impacted by project deferrals and an extremely competitive market resulting in downward pressure on margins as a consequence of the GFC and uncertain global economic outlook.
"Despite this negative profit result for shareholders, I believe that the work being done to drive shareholder value for the future is now starting to have effect" said CEO and major shareholder Dario Amara. "The Whelans business has performed to pre-merger expectations and May, June and July 2010 have shown encouraging improvement in activity levels with profitability returning across the whole Group. The integration of Whelans which joined the Group in March has been successfully completed with benefits now and in the future to be realised through cross selling and savings associated with sharing of business support across a wider revenue base. This is expected to continue for FY11 as business synergies between the two main operating units continue to be realised."
Since the merger the Group has;
» Grown from 40 to 160 employees
» Diversified service offerings from 3 to 6 business lines.
» Expanded its revenue base by a notional 140%
so as to become a more robust platform for the future.
The Group has recently completed its strategic planning and budgeting process and projects FY11 revenue in the range of $28m to $30m (up approximately 30% on notional FY10 performance had the Whelans acquisition been effected as 1 July 2009), and EBIT in the range of $2m to $2.3m, with continuing strengthening performance throughout FY11 and with EBIT for Q4 of FY11 projected to be approximately 11%.
The Group will continue to drive organic growth following the Whelans integration, as well as seek expansion into broader national Australian markets, especially Victoria and Queensland, either through leveraging from existing client east coast project opportunities, or through "infill" acquisitions or merger opportunities.
