AusGroup’s 1Q FY2010 earnings at AUD$1.7 million

03 November 2009

• Revenue of AUD$73.9 million
• Modern Access Services contributed positively
• Order book of AUD$347 million in hand

AusGroup Limited (‘AGL’ or ‘AusGroup’ or the 'Group'), a specialist service provider to the natural resources sector, today announced its set of results for the three months ended 30 September 2009 (‘1Q FY2010’).

Financial Highlights:	1Q FY2010 (AUD$'000)	1Q FY2009 (AUD$'000)	Change %
Revenue	73,888	130,405	(43.3)
Gross Profit	10,091	16,733	(39.7)
Gross Profit Margin	13.7%	12.8%	-
Other Operating Income	1,750	527	232.1
Other Operating Expenses	(2,743)	(3,352)	(18.2)
Administrative Expenses	(5,005)	(4,294)	16.6
Net Profit Attributable to Equity Holders	1,720	5,802	(70.4)
Net Profit Margin	2.3%	4.4%	-

Revenue for 1Q FY2010 decreased by 43% to AUD$73.9 million due to:

• The impact of reduced activity levels in the Group’s Australian operations caused by the Global Financial Crisis; and
• Client driven schedule changes resulting in delays to several Australian contracts.

Modern Access Services (‘MAS’), which was acquired in May 2009, registered its maiden quarterly contribution of AUD$9.9 million in revenue for 1Q FY2010.

In line with the revenue drop, the Group’s gross profit declined by 40% in 1Q FY2010 to AUD$10.1 million. However, the gross profit margin improved from 12.8% to 13.7% due to productivity enhancements that have been implemented in the Australian operations.

The other operating expenses decreased by 18% to AUD$2.7 million in 1Q FY2010 as indirect salaries and staff recruiting costs were lower in the reporting quarter, partially offset by the increased spending in consultants used to assist the management in implementing productivity enhancements.

The net profit attributable to equity holders was AUD$1.7 million.

Financial Position As At:	30 Sep 09 (AUD'000)	30 Jun 09 (AUD'000)
Property, Plant & Equipment	96,299	94,385
Cash & Cash Equivalents	18,795	25,185
Total Debt	27,573	24,238
Equity	114,798	116,052
Gearing (Debt/Equity)	0.24	0.21
Net gearing (Debt/Equity)	0.08	Cash

The net cash generated from operations was AUD$0.5 million for 1Q FY2010. The cash and cash equivalents as at 30 September 2009 stood at AUD$18.8 million and net gearing was approximately 8%.

AUD Impact
The Group has observed the appreciation of the AUD against the USD and most Asian currencies since June 2009. The strengthening of the AUD has impacted the competitiveness of the Group’s Australian fabrication activities relative to Asian based competitors. As a result the Group is now facing strong downward margin pressure and lower activity levels in this division.

The AUD may appreciate further in the short term as per some independent forecasts. The Group is currently implementing a comprehensive productivity improvement program within its Australian fabrication operations. This initiative was started in January 2009 and is part of the Group’s strategic plan.

“In line with our previous quarterly statements to the SGX we are now being firmly impacted by the fall out of the Global Financial Crisis which has resulted in lower activity levels in the Group’s Australian operations. In addition we have been impacted by client initiated delays on several Australian based contracts which have resulted in lower revenues than previously expected.

We expect a progressive improvement in revenue levels over the next four quarters as the impacts of the GFC dissipate out of the Group’s Natural Resources markets.

We are pleased with the progress being made with our MAS acquisition. The MAS integration is continuing as planned and the business is now making solid contributions in both revenue and earnings.

Whilst we are continuing to see strong downward margin pressures, particularly in the Mineral Resources sector, demand for our LNG related services remains satisfactory and the Group has commenced tendering activities on several Gorgon LNG related opportunities.”

John Sheridan, CEO and Managing Director, AusGroup Limited

Overall
The Group currently has an order book of AUD$347 million and is well positioned to continue to secure opportunities in both the Mineral Resources and Oil and Gas sectors in the next 12 months.

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 accounting policy is to recognize costs as they are incurred, which may not match revenue from variations, as these have to be negotiated (sometimes protracted) with clients.

Additional Information

• Financial Statements And Dividend Announcement For The First Quarter Ended 30 September 2009 [1MB]
• Investor Update Presentation [2.3MB]