Engineering company reports solid growth

Monadelphous Group Limited has announced a record after tax profit of $36.8 million for the half year ended 31 December 2008, up 14.9% on the previous corresponding period, with mining still an important growth area for the company.

Managing Director Rob Velletri said while the global financial crisis and falls in commodity prices had rapidly changed market conditions, with a number of customers deferring projects and cutting back capital expenditure, the vast majority of the company’s committed projects are proceeding as planned.

“The direct business impact of the global financial environment has to date not been of sufficient significance to revise the second half outlook. Monadelphous continues to expect to deliver on its forecast for double digit growth in normalised full year profit after tax,” Velletri said.

Solid revenue growth was achieved from the high value of contracts won in the previous financial year, coupled with volume growth on established contracts.

The company continued to win work, with around $400 million worth of new contracts and contract extensions secured during the interim period.

The Board of Monadelphous believes that while the global financial scenario has created significant uncertainties for growth prospects in the medium term, there remains customer confidence in long term resources and energy demand with a number of core customers continuing their development plans.

This has been evident in the bulk commodity markets of oil and gas, coal and iron ore.

BHP Billiton’s recent announcement committing to their next iron ore expansion in Western Australia’s Pilbara region, Rapid Growth Project 5 (RGP5), is particularly encouraging, according to the company’s Board.

With the broader minerals sector slowing, Velletri said the company will be accelerating efforts to grow its recurring revenue base and expand further into the oil and gas and infrastructure markets.

Velletri said in light of the challenges of a more uncertain economic outlook, the company’s annual in-house strategic review has switched from the previous focus on panding capacity, to one of maximising efficiency.

He said market financial realities dictated that pressure was likely to be placed on operating margins.

In response, with the significant easing in labour and supply constraints, the review would be aimed at reducing operating and fixed costs and improving productivity.

The review would also focus on opportunities to consolidate the organisational structure, with the goal of improving operating efficiencies.

In November 2008, the company announced its intention to buy-back up to two million shares over the coming 12 month period.

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