Monadelphous's great mistake

Markets demand not just performance but clarity. Monadeplhous has failed to keep its owners informed

Whatever happened to guidance, to transparency and the concept of keeping markets informed?

That’s the question that will be put to Monadelphous management this morning.

Since February, the company has been quiet as a mouse, even as its competitors have issued dire warnings about earnings and as its major customers have shifted gear on the investment front firmly into reverse.

Its share price has plunged from north of $27 to below $15 and then bounced back to around $19 during that time. And still not a peep, apart from a few glowing missives on a couple of tiddler contracts.

On the surface, this morning’s result wasn’t too shabby.  Net earnings rose 13.8% to $156.32 million with a 9.6% rise in the full-year dividend to $1.37.

The problem is that the wide range of estimates swirling through the market on the result created a great deal of angst and speculation and led to the company becoming the fifth most shorted stock on the Australian Securities Exchange.

The short sellers may now have their day in the sun. For there appears to be a significant miss in expectations on the final dividend.  Consensus among most brokers was that the final payment would be 84c or more, well above the 75c payout.

Given the obsession among investors on dividends in the past year, that is unforgiveable and no doubt will see Monadelphous shares punished this morning and after yesterday’s disappointing result from Fleetwood, will see the entire sector under pressure.

Monadelphous is one of the best run mining services operations on the ASX (see Inside the mining services disaster).  This morning, it warned that investment in mineral projects are expected to peak in 2013 and downgraded forecasts for the next few years.

While it estimates that this will be offset by increased revenue from energy projects, it is all a little too late.

In a volatile environment, as has been the case in the past six months, keeping investors informed should be a priority not an afterthought.

Related Articles