AusGroup's 3Q FY2010 Earnings at AUD$2.6 million

04 May 2010

• Net cash flow of AUD$12.0 million from operating activities for the quarter
• Cash and cash equivalents of AUD$30.5 million at end of quarter
• Order Book stands at AUD$456 million (end March 2010) 
   

AusGroup Limited (‘AGL’ or ‘AusGroup’ or the 'Group') today announced its results for the three months ended 31 March 2010 (‘3Q FY2010’).

Financial Highlights/Summary	3Q FY2010 (AUD$'000)	3Q FY2009 (AUD$'000)	Change %
Revenue	83,842	99,555	(15.8)
Gross Profit	10,497	15,097	(30.5)
Gross Profit Margin	12.5%	15.2%	-
Other Operating Income	2,253	295	663.7
Expenses	(8,952)	(8,596)	4.1
Net Profit Attributable to Equity Holders	2,587	4,139	(37.5)
Net Profit Margin	3.1%	4.2%	-
Net Cash from Operations	11,996	14,252	-

 
Revenue for 3Q FY2010 decreased by 15.8% to AUD$83.8 million mainly due to the continued impact of lower activity levels in the Group’s manufacturing and fabrication segments in Australia and Singapore and the construction segment in Australia. Delays in projects by some clients further contributed to the lower revenues registered during the quarter.

The acquisition of Modern Access Services (‘MAS’) was completed in Q4 FY2009. MAS registered revenue of AUD$15.8 million for 3Q FY2010 (as compared with AUD$14.0 million for 2Q FY2010 and AUD$9.9 million for 1Q FY2010).

The Group’s gross profit declined by 30.5% in 3Q FY2010 to AUD$10.5 million, with gross profit margin declining from 15.2% to 12.5%.This decrease is partly due to the lower margin work secured since the onset of the Global Financial Crisis (GFC) and its ongoing tail effects and some cost increases in Australian project delivery.

Expenses (comprising administrative expenses, marketing and distribution expenses and other operating expenses) increased by 4.1% in 3Q FY2010 to AUD$9.0 million. The small increase was mainly due to the administrative expenses associated with MAS. This increase was offset by comparatively lower indirect salaries and staff recruitment costs in the quarter due to lower activity levels experienced by the Group.

The Group’s net profit attributable to equity holders for 3Q FY2010 decreased by 37.5% to AUD$2.6 million.

Financial Position as at:	31 Mar 2010 (AUD$'000)	30 June 2009 (AUD$'000)
Property, Plant & Equipment	103,373	94,385
Cash & Cash Equivalents	30,468	25,185
Total Debt	29,557	24,238
Equity	117,909	116,052
Gross Gearing (Debt/Equity)	25.1%	20.9%
Net Gearing (Net Debt/Equity)	Net Cash	Net Cash

The net cash generated from operating activities for 3Q FY2010 was AUD$12.0 million. The Group’s cash and cash equivalents stood at AUD$30.5 million as at 31 March 2010 and the Group has a net cash position gearing-wise.

Outlook

For the two sectors that AusGroup operates in:

Oil & Gas Sector - Within the Australian oil and gas markets, the Group believes that over the next 12 months, demand for the Group’s Australian based services will improve, driven largely by Western Australian LNG and oil and gas project developments. The Group expects margins to remain at normal levels driven by the strong demand outlook on the back of Western Australian LNG.

Mineral Resources Sector - The Group continues to see a steady but slow improvement in the Western Australian mineral resources sector, however the expected recovery is taking longer than previously anticipated. The Group believes this slower than expected recovery is due to residual impacts from the GFC. Activity levels remain well below the pre GFC highs.

Order Book

Overall, the Group has an order book of AUD$456 million (as of March end, 2010) and is well positioned to continue to secure opportunities in the sectors it operates in for the next reporting period and the 12 month outlook.

Next Reporting Period

For the next reporting, the Group expects revenue levels to increase, however earnings are expected to remain weak due to lower than expected activity levels in Australian and Singaporean fabrication and manufacturing operations, timing related profit recognition issues on some projects and continued tight margin pressures across the business.

Note: The Group expects, from time to time, delays in the finalising of variations around certain types of construction projects. This will create a degree of variability in the Group results from quarter to quarter. The Group’s accounting policy is to recognise costs as they are incurred, which may not match revenue from variations, as these have to be negotiated (sometimes protracted) with clients. In accordance with the Group’s accounting policy, revenue is only recognised when the outcome of work done under variation is reasonably certain.

Additional Information

• Financial Statements and Dividend Announcement For the Third Quarter Ended 31 March 2010 [108KB]