Reduced business activity, increased costs on contracts and one-off restructuring costs have weighed on RCR Tomlinson's first half profit which has fallen 14 per cent on the previous corresponding period.
Reduced business activity, increased costs on contracts and one-off restructuring costs have weighed on RCR Tomlinson's first half profit which has fallen 14 per cent on the previous corresponding period.
The engineering services provider today announced a net profit after tax of $6.6 million for the half-year ending December 2009.
The result, the first under the new executive leadership team led by chief executive, Paul Dalgleish, reflects the key management focus of restructuring RCR for future growth through tighter financial management, eliminating underperforming business streams and systematically reducing onerous legacy contracts.
Revenues of $266 million were below both the previous six months and the six months to June 2009 reflecting the downturn in customer ordering in the early part of 2009.
Net Earnings were impacted by the reduced activity level across the business, increased costs on contracts commenced last year in excess of 2009 year-end expectations and one-off restructuring costs. Earnings included a tax benefit of $3.7 million from strategic R&D investment mostly targeted at innovative mobile mining equipment.
Net Debt of $43.8 million improved by $4.6 million in the six months which was considered to be an encouraging result given the ongoing investment in SAP to support the overhaul of core business processes and project work-in-progress reductions.
Dr Dalgleish said the results reflect prudent decisions to restructure RCR and focus on the Company's core business strengths in the areas of mining, resources, energy and power.
"As part of these priorities, we have undergone significant restructuring of the business and the executive leadership team, and focussed on improving financial controls," Dr Dalgleish said.
"Importantly, these initiatives, key contract awards secured in the last six months and an increasing order pipeline have set the foundations at RCR for an improved second half performance which should translate into higher ongoing margins."
Recent contract wins nearing $100 million include new orders for Mining equipment from blue chip clients, Power project wins in New South Wales, Resources projects in Queensland and Energy contracts off-shore in South America and Asia. The orders reflect the success of focusing on RCR's four core business streams and lay the foundation for an improvement in the quality of earnings.
OUTLOOK
The first half was characterised by a renewed focus on RCR's core business, a more robust order book, a movement towards larger contracts and continuous revenue streams.
With the majority of restructuring complete and a new management team in place, the foundation for revenue growth has been established.
"We have worked hard over the past six months to reduce overhead and jettison many of the legacy issues and loss making activities. Going forward, with the added support of our new Chief Financial Officer, Mr Andrew Walsh, we are focussing on improving margins, operational transparency and business predictability." Dr Dalgleish said.
