18/02/2020 - 15:17

Monadelphous, Emeco up on first-half results

18/02/2020 - 15:17

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Contractors Monadelphous and Emeco Holdings enjoyed solid share price gains today after reporting their interim results, with Emeco posting higher profits and improved margins while Monadelphous forecast a 10 per cent increase in revenue for the full financial year after a soft first-half.

Monadelphous, Emeco up on first-half results
Monadelphous is forecasting around 10 per cent revenue growth for FY20.

Contractors Monadelphous and Emeco Holdings enjoyed solid share price gains today after reporting their interim results, with Emeco posting higher profits and improved margins while Monadelphous forecast a 10 per cent increase in revenue for the full financial year after a soft first half.

Monadelphous reported a 2.6 per cent uptick in revenue to $825 million for the six months to December 31, on the back of strong performance from its maintenance and industrial services division.

The company said the division had achieved a record half-year revenue of $584.5 million, up 16 per cent on the prior year.

Its share price closed up 5.5 per cent on the news to trade at $17.28 per share.

However, Monadelphous's engineering construction division reported revenue of $273.4 million, down 17.6 per cent from around $320 million.

Group net profit after tax was also down, falling by 7.4 per cent to $28.5 million (previously $30.7 million).

Monadelphous attributed the result to a lower revenue contribution from its construction division and an increase in the company’s depreciation and financing charges.

It said, however, its forward workload would continue to strengthen, with $850 million in new contracts and extensions secured since the beginning of the year.

In the Pilbara, Monadelphous was awarded a $100 million construction contract for Rio Tinto’s West Angelas project, where it will build a number of iron ore facilities, and a five-year maintenance and shutdown services contract for Rio’s iron ore operations.

Further, Monadelphous secured works at Albemarle’s Kemerton lithium hydroxide plant.

Its joint venture company, Mondium, was also recently awarded a $400 million engineering, procurement and construction contract for Rio’s Western Turner Syncline phase 2 mine.

Monadelphous managing director Rob Velletri said favourable market conditions in the resources sector were expected to provide a solid pipeline of opportunities for the company across its services divisions.

“Renewed confidence in the resources sector and our proven track record of successfully delivering large-scale multidisciplinary construction projects and maintenance services culminated in the award of a number of major contracts during the period, positioning us well for growth,” he said.

Monadelphous is forecasting around 10 per cent revenue growth for FY20.

The company ended the year with a cash balance of $163.3 million, down from $193.5 million a year earlier, and a cash flow from operations of $38.6 million, up from $15.5 million.

Its cash flow conversion rate also increased, from 72 to per cent to 78 per cent.

Meanwhile, earthmoving equipment provider Emeco Holdings also reported its first-half results today, revealing strong growth in earnings driven by demand from customers in metallurgical coal.

The company recorded $42.1 million in net profit after tax, representing a 33 per cent increase on the prior year, which it also attributed to improved conditions in Western Australia and the earnings contribution from growth assets purchased in 2019.

Emeco also recorded a 91 per cent increase in workshops activity to $82.6 million.

Managing director Ian Testrow said the company was focused on growing its presence in WA, partly driven by its strategy to diversify its service offering.

Last month, Emeco announced it would purchase underground mining equipment and services provider, Pit N Portal, for $62 million cash - funded by a capital raising - and a further $10 million in company shares.

Mr Testrow said completion of the acquisition was expected in February.

“We believe this strategic acquisition will not only significantly grow our gold exposure and reduce our reliance on coal, but also provide us with greater project tenure,” he said.

Emeco shares closed up 6.67 per cent to trade at $2.24 per share.

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