AusGroup is focusing on maintenance support such as the provision of scaffolding services, now that customers are holding back capital expenditure and seeking cost efficiency.
Above: Ausgroup's scaffolding contract at INPEX-operated Ichthys LNG project at Darwin. Photo: Company
INTEGRATED RESOURCES infrastructure service provider, AusGroup Ltd, has reversed its losses of a year ago in a set of positive 1HFY2015 results posted on Monday.
» Group revenue was up 72.1% year-on-year at A$249.9 million, boosted by maintenance services contracts.
» Net profit was A$3.9 million, reversing a A$12.8 million loss in the previous period.
» Order book was AU$466.0 million as at 31 December 2014
The Group secured an additional A$143.3 million of orders during 2QFY2015 from a number of new maintenance contracts and extensions within its scaffolding business.
» Cash and cash equivalents were AU$62.7 million as at December 2014, up from AU$38.0 million at September 2014.
The major source of funds was the Multicurrency Debt Issuance Programme issued in October 2014.
During 1HFY2015, funds were used to complete the acquisition of Ezion’s port and marine logistics business in Australia and continue a capital works programme related to the Port Melville facility.
Details of its financial results can be found on SGXNet.
At its 1HFY2015 results briefing yesterday (Tuesday), CEO Stuart Kenny and executive director / CFO Gerard Hutchinson explained the Group’s strategy in the light of the sharp plunge in oil prices.
"We expect demand for our contract services to improve as customers emphasize cost efficiency and competitiveness in the current economic climate," said CEO Stuart Kenny.
NextInsight file photo
Shift from construction & manufacturing to repairs & maintenance
Gerard: “We believe that capital expenditure on LNG projects will decrease but maintenance demand will increase. We have some waterfront capacity that can be used to provide maintenance support.”
“We are also looking at other industries where we can use our core capability in hi-precision manufacturing.”
Stuart: "Our manufacturing facility in Singapore is refocusing on repairs and maintenance. While the nature of work changes, the volume of work ensures that our manufacturing business in Singapore will continue.
“There are also services outside of construction that will continue to be in demand at resource production sites under operation.”
“For example, we have a large contract in Darwin for industrial coatings. Industrial coatings fits very well with our asset maintenance business. We can provide this service under our asset management umbrella.
“Demand for rope access (for workers to reach difficult places) is also continuing to emerge. Rope access and scaffolding access fits very well into our maintenance businesses.”
Foray into marine logistics
“Our collaboration with Ezion is very important. The range of capabilities we now have to move into the marine logistics business puts us well ahead of competitors in the Australian market."
Gerard:“Our marine services generated revenue of A$1.9 million in the first 8 to 9 weeks of operations. We have got 2 barges now. A 3rd barge will come in by March. We expect to break even within 3 to 4 months of operations.
CFO Gerard Hutchinson.
Photo: Company"The Port of Darwin is very congested and it is very frustrating for shipping vessels to have to wait 2 or 3 days to get in to replenish fuel and to deliver their goods.
"To provide an alternative to Port Darwin, our Port Melville facility has to provide a fuel stop, a potential landing and waylay area.
"At the moment, some vessels sailing from Japan and South Korea to Australia go to Melbourne to refuel. That is very far away.
"China, Japan and South Korea are Australia's biggest trading partners and there is a lot of opportunity for us if we get the word out that Port Melville is actually just a hop, skip and a jump from what they actually need.
"The lay down areas are ready. Currently, we are able to take things off vessels and store them. We think it is really Port Melville's fuel capability that will drive traffic there."
One-stop solutions
Stuart: “Refractory is a specialist service that we provide that is a little different compared to our services for oil & gas and LNG customers.
“It focuses on industrial tertiary processing of minerals. Industries that use this process include glass manufacturing and lead refining.
“As the kilns are very hot, the refractory lining inside break down over time. Last year, we performed 25 shutdowns across Australia for refractories.
“In the past, the client would separately award a refractory service contract, a mechanical work contract and a scaffolding contract.
“Now, we are moving in to demonstrate to the customer that we can perform a suite of skills under one project management team and under one safety regime.
“It is saving the customer cost as they no longer need a management team in place to manage our services.”
Recent story: AUSGROUP: LNG Projects Buffered From Oil Price Volatility
