Investors take dim view of cautious outlook from Monadelphous
A CAUTIOUS outlook for the 2014 financial year has put a damper on engineering and mining services firm Monadelphous's bumper interim result following a surge in demand from resources and energy projects.
Monadelphous clocked up a record $79.1 million net profit in the six months to December, a 37.5 per cent increase from the previous corresponding period, and revised its year-on-year revenue growth up to about 35 per cent for the 2013 financial year.
The firm reported revenue of $1.29 billion, up 46.6 per cent, and declared a fully franked interim dividend of 62¢ per share.
"The outstanding result for the latest period was due to an extraordinary surge in construction work," Monadelphous managing director, Rob Velletri, told an investor briefing.
"We saw a large number of projects ramping up and accelerating concurrently this period, which generated a greater-than-anticipated surge in construction activity."
Mr Velletri said the $1 billion secured in new contracts and contract extensions would help to give Monadelphous revenue visibility for 2013 and beyond.
However, Monadelphous shares slid by just over 6 per cent on Tuesday, closing at $26.17, with the market expressing surprise at the firm's uncertain growth outlook around approvals of new projects as mining and energy companies tighten their belts.
Mr Velletri said his company was "just being realistic about our prospects of seeing significant growth" when it flagged that the 2014 financial year would be a period of consolidation and of challenging revenue growth.
"We are still seeing growth in our contracts and we've still got significant visibility over probably a 12-month period, but beyond that ... we need to just keep winning work."
Deutsche Bank analyst Craig Wong-Pan said the cautious commentary from management was not unexpected, with its customers focused on reducing costs and reducing discretionary expenditure.
"You're seeing mining companies being cautious with what they spend and looking at their costs, and you are seeing the same thing occurring with oil and gas companies," Mr Wong-Pan said.
"This company is going to be exposed to that, so I think their cautious commentary isn't unreasonable given their market conditions."