04/07/2006 - 22:00

Mermaid figures lure investors

04/07/2006 - 22:00

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Mermaid Marine has enjoyed a strong recovery in its share price during the past fortnight after forecasting an increase in full-year pre-tax profit to $12 million.

Mermaid figures lure investors

Mermaid Marine has enjoyed a strong recovery in its share price during the past fortnight after forecasting an increase in full-year pre-tax profit to $12 million.

Based around the success of its core vessel business, the Fremantle-based diversified marine group is set to announce a significant earnings increase for the second half of the financial year.

Mermaid chief executive Jeff Weber told WA Business News the company had been building its strong position over the past three years.

 “The new infrastructure we have taken on in recent years is just starting to hit the bottom line,” Mr Weber said.

That infrastructure includes a number of additions to the Mermaid fleet and the establishment of a main supply base at Dampier in the Pilbara.

The company’s pre-tax operating profit has been revised and is now expected to be around $5.5 million for the second half.

Combined with the one-off profit of $4.4 million on the sale of its manning operation to the Integrated Group, the company predicts a strong year-end profit result, about $9 million after tax.

This will equate to earnings of around six cents per share.

“It’s an exciting time for us and the biggest news is the $5.5 million trading profit for the second half and we believe we can continue this type of growth,” Mr Weber said.

Mermaid’s vessel business has benefited from the addition of the newly constructed Mermaid Investigator, and five other vessels acquired through the Integrated transaction. The vessel business is a key driver for Mermaid.

 Its fleet will further benefit from the introduction early next year of a new $13.5 million off-shore support vessel, currently under construction in China, which will be deployed at Woodside’s $1.5 billion Enfield oil project off the Exmouth coast. 

The next challenge for the group is to generate a reasonable return on capital on its supply base assets, which in addition to the Dampier facility includes a new supply base at Broome.

The Broome base will be developed in an alliance with the Toll Group, with work to begin on the facility next month.

It will be used to support a number of upcoming off-shore drilling programs in the Browse Basin off WA’s Kimberley coast from the likes of oil and gas majors Woodside and Shell, which are due to commence in September.

But the Dampier base is the key to Mermaid’s next level of profitability.

“The Dampier base was completed in late 2002, and we have spent about $40 million on it to date to support offshore infrastructure needs of the North West Shelf,” Mr Farrell said.

Although it is now enjoying buoyant times, it hasn’t always been plain sailing for Mermaid.

Around the middle of 2003 the company’s share price reached a low of about 15 cents, and it was struggling with the then recently completed Dampier supply base and an ageing fleet.

Since then, Mermaid’s share price has steadily improved as its infrastructure investments have begun to have an impact on the bottom line.

This has coincided with the average age of its fleet of vessels being reduced to about 10 years.

Also, over the past year previous supporters of the business, Clough and Singapore-based PSA Marine, have sold down their shareholdings in Mermaid, a situation that has given institutional investors greater access to the stock. 

Mermaid’s share price is currently around 57 cents.

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