Perth contractor Otoc has flagged a likely loss for the 2015 financial year after disclosing that impairment, restructuring and acquisition costs of about $10 million would outweigh its operating profit.
Perth contractor OTOC has flagged a likely loss for the 2015 financial year after disclosing that impairment, restructuring and acquisition costs of about $10 million would outweigh its operating profit.
In a statement today, the company said the impairment reflected a conservative reassessment of the carrying value of property, plant and equipment, as well as capitalised expenditure of its construction and surveying divisions.
It has also reduced its cost base and re-positioned itself as a smaller infrastructure solutions company to strengthen its earnings before interest, tax, depreciation and amortisation, which it estimates to be around $3 million to $4 million, before the impairment.
“The impairment charge will not affect Otoc’s cash position, with the company remaining in a strong financial position, supported by solid operating cash flow in FY2015 and a cash balance of $10 million at 30 June,” the company said in a statement.
Otoc also incurred $1 million in acquisition costs during the financial year in order to complete its purchase of surveying businesses Bosco Jonson, Geo-Metric and THG.
The company’s surveying subsidiary, Whelans, has been restructured to focus on land development and civil infrastructure segments, while its construction arm, Otoc Australia, has been restructured to focus on delivering government and civil infrastructure work, in response to prolonged delays in expected project awards and execution in the resources sector.
Otoc also announced the appointment of former Monadelphous Group project director and manager Simon Lukan as the new general manager of its Otoc Australia business.
Chief executive Simon Thomas said the earnings deterioration in Otoc’s businesses exposed to the weak Western Australian resources sector was disappointing.
“However, the strategic initiatives we have implemented at Otoc Australia are set to deliver a refreshed business plan targeting a smaller but higher-margin business, with reduced exposure to the resources sector and operational risk,” he said.
“The success of the national surveying strategy provides confidence in FY16. We are excited by the opportunities presented by our acquired business, including synergistic growth opportunities such as a joint service offering for national land and property developers.
“We will continue to pursue earnings accretive acquisitions that complement our market presence and growth ambitions, while ensuring a strong balance sheet to fund our growth plans.”
Yesterday, Business News reported Otoc had won a $10 million contract for work on Sandfire Resources’ DeGrussa solar power project in the Mid West.
Otoc shares closed 12.5 per cent higher to 9 cents each.
