23/02/2009 - 11:14

Project delays hamper RCR earnings

23/02/2009 - 11:14

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Project delays as a result of the global economic crisis have impacted RCR Tomlinson's half-year net profit despite the company booking a record revenue result.

Project delays hamper RCR earnings

Project delays as a result of the global economic crisis have impacted RCR Tomlinson's half-year net profit despite the company booking a record revenue result.

The engineering company reported an interim net profit of $7.6 million, down 16.5 per cent on the previous corresponding period.

Revenue for the six months to the end of December was up 41 per cent to $315.8 million.

"The directors are pleased at the growth and positioning of the business but disappointed that it did not translate to a similar growth in profits," RCR said in its report.

"The Company has been affected by project delays with some clients as a result of the present uncertain global markets, which has placed pressure on operating margins."

RCR said it was on track to deliver 15 per cent revenue growth for the current financial year with its order book, as at the end of December 2008 standing at $300 million, of which $80 million will carry through to the 2010 financial year.

Cash at the end of the reporting period was $1.7 million, down from the previous corresponding period's $13.1 million.

 

 

The announcement is below:

 

 

Overview

RCR's record first half revenue of $315.8 million represents an increase of 41% over the previous corresponding period. The directors are pleased at the growth and positioning of the business but disappointed that it did not translate to a similar growth in profits.

The result includes a strong contribution from recurring maintenance, repair work and equipment manufacture that is undertaken across business units. RCR Engineering has performed well with high capacity utilisation particularly in the Bunbury workshop.

RCR Construction and Maintenance has now commenced work on the mechanical works and warehouse services contract for Woodside's Pluto LNG Project. This two-year contract has an estimated value of in excess of $60 million.

The Company has been affected by project delays with some clients as a result of the present uncertain global markets, which has placed pressure on operating margins.

The Company continues to strive for improved earnings through seeking new contracts and orders, commitment to quality and service, and delivering on cost efficiencies.

Contracts completed in New South Wales by RCR Positron resulted in net loss recognition from the business unit of $2.1 million for the half year. The New South Wales division has been restructured with new management and the future is improved for this division going forward. The overall outlook for Positron is positive with visibility of earnings and financial controls significantly improved following the completion of the integration process and the implementation of SAP. The business unit's order book stands at $30 million and with expected project orders of another $50 million due prior to June 30th.

The next SAP roll out will encompass RCR Construction and Maintenance and those divisions that are not on the existing ERP system including Eagle Engineering. The SAP implementation cost has impacted the bottom line by $1.5 million in the first half with a similar impact expected in the second half. While these costs are significant the improved efficiencies to be delivered through the SAP integration process will be appreciated from 09/10 onwards.

Outlook

RCR has a solid order book. RCR's order book at December 31st stands at $300 million of which $80 million will carry through to the 2009/10 financial year. Given the current economic uncertainty RCR is actively managing cost and cash flows. RCR continues to direct resources towards growing the Company's already substantial ongoing maintenance and repairs businesses, which provide a solid platform of stable, recurring revenue.

RCR remains on track to deliver 15% revenue growth for the financial year ending 30 June 2009.

During the December half, RCR announced the appointment of Mr Paul Dalgleish as Chief Executive Officer. The Company looks forward to Mr Dalgleish commencing with the Company once the terms of his employment obligations to his present employer are finished.

Commentary

RCR Chief Executive Officer, Mr John Noordhoek, said "The revenue outlook for RCR remains robust. The continued focus on recurring maintenance and repair work and the expectation that some delayed projects will ultimately transfer to revenue once those projects come back on stream, contribute to continuing solid revenue streams. RCR Positron has now been fully integrated and we are expecting improved financial results from this business unit going forward."

 

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