Decmil Group has lowered its revenue guidance after announcing a number of one-off costs relating to the closure of one of its local business divisions, coupled with delays to a project and further restructuring, as it seeks to direct its business away from the resources sector.
The local contractor is closing down a section of its SAS Telecom business, which focused on entertainment, surveillance security and fire detection systems, predominantly to resources companies.
SAS Telecom’s cabling and managed services divisions will not be discontinued.
Decmil bought Balcatta-based SAS Telecom in late 2014 for $1 million.
Decmil said further management restructuring, cost reduction and rationalisation in parts of the group’s construction and engineering business (particularly those exposed to the resources sector) was being undertaken during the second half of FY16, while one-off costs incurred from the establishment of an office in New Zealand would also have an impact on earnings for the financial year.
The company also announced today it had been hit by operational issues at United Petroleum’s Hastings Terminal in Victoria in the past few weeks, resulting in delays to the project and increased costs.
“Following a thorough review, the project is now expected to achieve its critical milestones by June 30,” the company said in a statement.
“However, as a result of the issues, the project will have a $6 million to $6.5 million negative impact on the group’s previously expected earnings before interest, tax, depreciation and amortisation for FY16 and cash position at June 30.”
As a result, Decmil has lowered its revenue guidance range for FY16 down to between $300 million and $320 million.
The company hasn't previously provided a group revenue guidance target, but in its half-year report (released in February), Decmil expected to bring in between $320 million and $355 million from both its construction and engineering and its telecoms divisions.
The restructuring of the business is expected to be completed by the start of the 2017 financial year.
Decmil managing director Scott Criddle said the business had continually adapted to capture new opportunities and navigate the challenges of changing markets.
“This agility will ensure our future growth and success, for the benefit of our customers, investors and staff,” he said.
Decmil expects to grow revenue to over $400 million in FY17.
Decmil shares were 6.7 per cent lower to 69 cents each at 10:45am.
