Applecross-based engineering company Monadelphous Group Ltd has recorded a first half profit of $31.4 million, up 152 per cent on the previous corresponding period.
Applecross-based engineering company Monadelphous Group Ltd has recorded a first half profit of $31.4 million, up 152 per cent on the previous corresponding period.
The company's consolidated sales revenues were $499.4 million, up 105 per cent on the interim result last financial year, with earnign per share increasing 147 per cent to 38.5c. The company's earnings before interest, tax, depreciation and amortisation were $48.7 million, a rise of 134 per cent.
Monadelphous managing director Rob Velletri attributed the rise to a surge in construction activity related to the resources boom, which saw a large number of projects come on-stream together.
"This resulted in a revenue peak for the first half and icnreased fixed economies of scale which delivered substantial improvements in profit margins," he said.
"However, with the number of projects ramping down, the second half is expected to see a return to a more normalised level of activity."
The full text of a company announcement is pasted below
The booming resources sector coupled with its strong competitive situation has seen national engineering company Monadelphous Group Ltd generate sharply increased workload levels for the six months ended December 31, 2006, driving after tax profit up to a record $31.4 million. This was an increase of 152 per cent on the previous corresponding period - which had also been a record result.
Consolidated sales revenues were $499.4 million - more than double the last financial year's interim result. Earnings before interest, tax, depreciation and amortisation were $48.7 million, a rise of 134 per cent. Earnings per share increased 147 per cent to 38.5 cents per share.
"The surge in construction activity related to the resources industry saw a large number of projects come on-stream together, generating accelerated work rates. This resulted in a revenue peak for the first half and increased fixed economies of scale which delivered substantial improvements in profit margins. The company also successfully managed a significant increase in capacity, with workforce numbers reaching around 3,500 - up from about 3,000 at the end of 2005/06," Mr Rob Velletri, Managing Director of Monadelphous, said.
"However, with a number of projects ramping down, the second half is expected to see a return to a more normalised level of activity. Full year revenues for 2006/07 are expected to exceed $800 million - over 50 percent up on the 2005/06 trading result of $532 million.
"The extraordinary levels of engineering construction activity in the first half, in particular flowed from iron ore industry expansions in Western Australia. But the company's long-term sustainable growth continues to focus on growing its recurring revenue base, geographical expansion of its electrical services business and further development of new work in the oil and gas, power and water markets. The half year has seen considerable progress on these fronts and we remain confident of further growth in these sectors."
In addition to the growth in revenues from the engineering and construction division, the electrical and instrumentation division also provided a significant contribution during the period. The division achieved sales revenues for the period totalling $40.4 million, a 274 per cent increase on the previous corresponding period.
Dividend Payouts Simplification
Monadelphous' directors declared an interim dividend of 22 cents per share fully franked, an increase of 144 per cent over the previous corresponding period.
For the third consecutive year, the company intends to pay a special dividend together with the September final dividend for the 2006/07 financial year. The special dividend payments, in addition to interim and final dividends, have to date resulted in a total annual payout ratio of around 90 per cent of net profit.
Looking forward to the 2007/08 financial year and beyond, the board has resolved to simplify the dividend payment policy by increasing the interim and final dividend payout ratio from a range of 60% to 70% to a range of 80% to 100% and ceasing the payment of special dividends. This policy will continue to be subject to ongoing strong trading conditions and the need for any significant cash requirement for investment opportunities.
Outlook
"Monadelphous' core business remains robust and healthy. The pipeline of projects continues to be strong. In particular, iron ore expansions in Western Australia are providing major opportunities for the company and are projected to continue for the next few years. However, we have to continue to be competitive and win the new work," Mr Velletri said.
"The massive increase in engineering construction revenue in the first half should be viewed as an extraordinary spike in workload brought about by concurrent and accelerated project timing, together with the successful achievement of the company's expanded workforce capacity.
"The flow of revenues from engineering construction projects will, however, continue to be heavily impacted by project timing and capacity utilisation. Any expectations of continuous year-on-year growth for this part of the business should be treated with caution."
Subsequent to the interim reporting period, Monadelphous has announced three new major construction contracts with a combined value of $70 million.
Dividend Entitlements
The interim dividend of 22 cents per share fully franked will be paid to shareholders on March 16,
2007, with the record date for entitlements being March 9, 2007.