'We believe we will be fully paid over time. That’s why no impairment has been made to our balance sheet,' said CEO Laurie-Barlow. NextInsight file photoSTRONG SCAFFOLDING SALES and progress in a claim against Karara Mining were bright sparks in what was otherwise a difficult FY2013 for Ausgroup.
On 14 June, it announced that it had secured an initial scaffolding contract of A$34.5 million with CB&I and Kentze Joint Venture on the Chevron-operated Gorgon gas project in Western Australia.
"We believe this is the start of a much larger and longer revenue stream for scaffolding work," said CEO Laurie Barlow at its results briefing held at Mandarin Oriental Hotel last Tuesday.
On 25 June 2013, the Group issued a writ of summons against Karara Mining for withholding progress payments of A$43.5 million for structural, mechanical and piping installation works done at its Karara Iron Ore Project in Western Australia under a 2012 contract.
In July 2013, Karara made a partial progress payment of A$13.0 million and returned a banker’s guarantee of A$10.9 million. It owes Ausgroup another A$11.2 million in performance incentive for completion of milestones.
A consequence is, no final dividend is proposed for AusGroup shareholders.
”No dividend will be paid until the Karara issue is resolved,” said CFO Anthony Hardwick.
(The company has paid dividends for the past 6 consecutive years.)
Yesterday (Sept 2), AusGroup announced that a further A$18.3 million has now been certified by KML, which is expected to be paid under the terms of the contract this week.
The management of both companies continue to work through the remaining matters in dispute, which if unresolved will be the subject of a court-supervised mediation on 27 September 2013.
Mr Barlow said: “AGC is pleased that KML has agreed to make additional certifications on our outstanding claims and that we believe a successful outcome remains achievable.”
Ausgroup's scaffolding work on CBH shiploader at a grain terminal. Company photoAusGroup's FY2013 revenue dipped 7.8% year-on-year to A$582.7 million as major resource companies scaled back on capital expenditure in response to volatility in commodity prices.
For example, iron ore prices have fluctuated over the past year from below US$100 a ton to above US$130 a ton.
Net profit attributable to shareholders tumbled 58.4% at A$9.7 million. AusGroup's order book stood at A$200 million as at 27 August 2013.
For more information on its FY2013 results, refer to its media release here.
OSK-DMG analyst Lee Yue Jer maintained his ‘Sell’ rating on AusGroup with a target price of 30 cents after it posted profits that were 9% below his expectations, didn't declare a dividend, and swung to a net debt position.
From a closing price of 35 cents on 27 August when it posted it FY2013 results, its stock price came down to 30.5 cents on 30 August.
According to Mr Lee, “the minerals sector is slowing down. With most jobs in its major projects segment completed, Ausgroup has little work left in this segment.
"The oil & gas sector remains active, but cost overruns have resulted in massive delays in order flow and cancellations of some projects."
Mr Lee sees a positive though: "We see a chance of an interim dividend when Ausgroup collects Karara’s receivables in full and returns to net cash.”
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