AusGroup stock surged 14.9% yesterday (14 Feb) to 5.4 cents after it reported a turnaround in profitability (A$1.1 million) for 2QFY17 ended Dec 2016. 

Q2 2017 AU$'000

Q2 2016 AU$'000

+/(-) %

Revenue

106,284

122,848

(13.5)

Gross profit

9,511

(4,195)

n.m

Net profit/(loss)

1,094

(69,766)

n.m.

2QFY17's profit ends a streak of losses in the past 4 quarters.

More significantly, the company gave several thumbs up to its future prospects, and expected sustained profitability.

Its press release said its core projects in the Northern Territory and Western Australian oil & gas sector have enjoyed profitability "returning to more normalised levels" following the completion of a restructuring of the business in FY2016. 


"It is expected that the return to profitability will continue through the next half of FY2017 and into FY2018 and FY2019 as our core projects grow in scale and complexity, providing opportunities for organic growth."

AusGroup added that its port & marine business is now able to operate freely following the Federal Environmental approval granted in Q2 2017. This allows for commercialisation activities at Port Melville to be implemented and executed.

Managing Director Eng Chiaw Koon said: “The results from the second quarter of FY 2017 demonstrate that the Group is well on the path to a sustainably profitable future following solid performances from all of the projects we are currently engaged on, in the Northern Territory and Western Australia.

"The Q2 2017 profit of $1.1m, although modest, demonstrates that the Group has now returned to a normal operating model with a key focus on the future to improve our results further and also to strengthen our relationships by working closely with our valued key clients."

EngChiauKoon 2.2016"The operating environment still offers many challenges for the Group but the return to consistent profitability instils confidence that the Group is on the path to a sustainable future, which will only be achieved by working closely with our key clients and executing our key contracts to a mutually beneficial outcome.”

-- Eng Chiaw Koon, MD of AusGroup
NextInsight file photo

Cash and cash equivalents for the Group as at 31 December 2016 have risen by 63.1% to $36m.

This was mainly due to accelerated receipts of contract progress claims from customers in Q2 2017 offset by payments to suppliers.

Borrowings have reduced marginally since Q4 2016 to $176m.

The main change to the AusGroup borrowing profile revolves around the re-classification of the Medium Term Notes loan to non-current following the completion of the Notes Consent Solicitation Exercise on 5 October 2016.

The debt is now secured against Port Melville assets.

AusGroup signalled that some of its debts may be  converted into equity.

"SOLID FORWARD PIPELINE"
The Group had work in hand valued at A$351.3 million as at 31 December 2016. 

Stock price 

5.4 c

52-week range

3.5 – 14.5 c

PE (ttm)

--

Market cap

S$40 m

Shares outstanding

740.4 m

Dividend yield
(ttm)

--

Year-to-date return

17.4%

Source: Bloomberg

The main business in the short term will be providing multi-disciplinary services of scaffolding, insulation, refractory and fabrication.

AusGroup will also develop its capability in the marine sector through commercialisation of its port and marine business.


"The forward pipeline remains solid, with core projects expected to grow in scale and complexity to provide opportunities for organic growth in the Northern Territory and Western Australia oil and gas sector," said AusGroup.


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