Engineering and construction contractor Monadelphous Group is continuing to look overseas for growth opportunities, after reporting a drop in interim profit and foreshadowing a substantial slide in full-year revenue.
Engineering and construction contractor Monadelphous Group is continuing to look overseas for growth opportunities, after reporting a drop in interim profit and foreshadowing a substantial slide in full-year revenue.
The Perth company today reported net profit after tax of $60.7 million for the half year to December, down 23.4 per cent on an underlying basis compared with the previous corresponding period.
Earnings per share fell by 24.3 per cent to 65.4 cents, leading to a corresponding cut in the interim dividend to 46.0 cents.
The lower profit reflected a 17.6 per cent drop in sales revenue to $1,052 million, and a narrowing of margins.
The company said sales revenue reflected the impact of tighter market conditions, and a reduction in capital spending by customers.
Given the current workload and tight market conditions, the company expects 2014-15 full-year revenue will be around 15 to 20 per cent lower than the previous year.
The slowdown in work volumes led to a reduction in employee numbers to 4,520 at the end of December.
That was down from 5,321 six months earlier and a peak of 7,606 at the end of December 2013.
Managing director Rob Velletri said the company had maintained a strong balance sheet, and continued to focus on productivity improvements and cost reduction.
“Despite challenging market conditions, we strengthened our position in new service markets, winning contracts in both water and pipelines,” Mr Velletri said in a statement.
Hesaid the mining and oil and gas sectors were both adversely affected by the fall in commodity prices, leading to reduced opportunities for major construction contracts.
However the company has won some smaller contracts, having been awarded preferred contractor status on construction work valued at $150 million.
Mr Velletri said maintenance prospects remained positive in the oil and gas sector, with the company tendering for service contracts associated with new LNG facilities.
The company is aiming to get more work through its Chinese fabrication arm, SinoStruct, which was initially set-up to provide additional capacity for local projects.
Mr Velletri said Monadelphous has built a competitive advantage through its China-based fabrication services, and this capability was easily transferable to service projects globally.
The company is also evaluating “entry options” in the North American oil and gas sector, despite the recent sharp slowdown in activity in that sector.
"The recent change in the oil price has obviously had an impact on the current potential of this market, but we consider that it still warrants further investigation and consideration," Mr Velletri told Business News.
The company noted that its strong balance sheet provided the capacity to pursue investment and acquisition opportunities to support its diversification, but did not provide any details.