04/06/2008 - 13:38

Neptune cuts profit outlook

04/06/2008 - 13:38

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Neptune Marine Services Ltd has downgraded its net profit after tax expectations to between $10 and $12 million before non-cash adjustments, for the year ended June 30, 2008.

Neptune Marine Services Ltd has downgraded its net profit after tax expectations to between $10 and $12 million before non-cash adjustments, for the year ended June 30, 2008.

This is against a $6.7 million loss in FY07 and a net profit after tax in the first half of FY08 of $2.2 million before non-cash adjustments.

While this represents a significant turnaround for Neptune, the group previously forecast after tax
profit for the full year of $14 million before non-cash items.

The revised forecast is wholly attributable to changes in client scheduling for two large NEPSYS projects that were expected to be completed in June of this year.

Despite the delays, Managing Director and CEO Christian Lange said Neptune was performing above expectations and experiencing very strong organic growth. Cash flow is strong and FY08 revenue will be at the upper end of forecasts.

"The delay in the completion of the NEPSYS projects is a timing issue only and we will capture the revenue and profit from these contracts in the first half of FY09. We expect to mobilise on both projects in July/August. Future profits will also be a lot less dependent on NEPSYS as revenue and profit from our other businesses increases, as we are now witnessing," he explained.

"Neptune has grown significantly in the current half. Compared to the first half, we will almost double our revenue, and profit will increase more than fourfold. Normalised NPAT in the first half was $2.2 million, so a minimum $8 million NPAT in the second half reflects our strong growth.

"All our divisions are winning new work, the businesses we have acquired are performing above expectation and experiencing strong organic growth, and customer demand for Neptune's services is at a record level.

"Neptune's immediate focus is to build on its integrated services strategy and benefit from the increase in spending currently occurring in the subsea oil & gas services market.

The growth in this half is absolute proof that we have the right service model in place, that our customers recognise the value of having a partner that can provide multiple services, and that we can now achieve significant organic growth across our comprehensive suite of services."

Neptune recently announced that it had entered into an agreement to acquire a second vessel to accelerate its integrated service model and support its ROV operations. The company is in discussions with a number of financial institutions regarding funding, with a mix of cash and a debt instrument the most likely scenario.

"Neptune is currently well funded with $23 million of cash and minimal debt. Our cash flow is strong, and coupled with the significant increase in revenue that our vessels and ROVs will generate, we have the flexibility to continue our strategy for growth, while remaining conservatively geared and profitable," Mr Lange said.

"Neptune is well placed for the remainder of FY2008 and we are witnessing strong demand for our services well into FY2009. As an example, we have had more than 25 enquiries for our new ROVs, our current projects are increasing in scope, and we have a pipeline of new project opportunities across all our markets some of which we will announce shortly."

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