Tax break puts AusGroup into black

Maintenance and construction contractor AusGroup has returned to the black in the December quarter, with a tax credit offsetting the adverse impact of falling revenue.

The Perth-based but Singapore-listed company has reported a net profit of $A2.3 million for the December 2013 quarter, compared with a loss of $A15.1 million in the September quarter.

The company said the quarterly profit was mainly due to research and development tax incentives of $A2.8 million and cost savings in operating and administration expenses.

It cut operating expenses by 19.3 per cent to $A10.6 million.

Revenue continued to weaken, due to the slowdown in the mining sector, slumping 11.9 per cent to $A68 million in the December quarter.

“While we expect that trend will continue, the next 12 to 24 months will see increased opportunities arising from LNG construction projects, which should offer some balance,” the company said in a statement.

“The group continues to see significant interest coming from the mining and LNG customers for the provision of maintenance services as the market transition from Capex to Opex spend.

“The group strategy is to focus on expanding its maintenance offering, which provides long-term recurring revenue. This restructuring will also result in a lower cost base to provide improved profit margin quality.”

AusGroup said its order book stands at $226 million, as of February 11 2014.

The company reported cash and cash equivalents of $31.4 million as at December 31 2013 with no debt.

It has subsequently completed a $S15.2million ($A13.4 million) capital raising to strengthen its balance sheet.

It said the Supreme Court legal action between its subsidiary, AGC Industries, and Gindalbie Metals’ subsidiary Karara Mining “remains on foot”.

A strategic conference was held on December 20 2013 but was adjourned to enable the parties to confer further as to the particulars for planned discovery.