AUSENCO PROFITS PLUMMET

AUSENCO (ASX:AAX) has laid bare its difficult 2013, announcing drops in all significant business measurements in its full-year results today.

Comparing the figures for the latest report compared to the previous year makes for ugly reading.

Revenue dropped to $453.9 million from $619.5 million, underlying EBITDA is $27.1 million compared to $67.0 million, while the company recorded a loss after tax of $35.2 million, compared to a $41.4 million profit.

Ausenco CEO Zimi Meka (pictured) says the result was impacted by the significant deterioration in market conditions during the year.

There were a number of projects deferred, compounded by increased peer competition, delayed client payments and pressure on margins for new work.

Meka has not been sitting on his hands waiting for the difficulties to blow over and the company has refocused the business for 2014.

“Ausenco took decisive action throughout 2013 to respond to market conditions by right-sizing the business, flattening the leadership structure to support a sharper focus on project delivery and business development, and reducing fixed costs to suit the business environment,” says Meka.

“We are starting to see early positive results from the actions we took in 2013 and have been awarded $26 million in new work to date in 2014.

“Importantly, we are winning an increasing number of assignments in sectors or for services that we consider to be growth areas and which have been a key focus of our strategy, in particular in the asset management and project optimisation area.”

The company restructured the APAC/Africa business to ensure it could deliver its full range of services to the region and this has resulted in some recent new contracts.

“In the present business environment, companies in the global resources and energy sectors are focusing on optimising the performance of their assets and lowering the capital intensity of new projects,” says Meka.

Restructuring resulted in a $10.7 million redundancy bill, but is expected to deliver $35 million in savings annually from 2014.

Underperforming contracts impacted margins by $8.8 million, while write offs in a variety of areas cost a total of $28.4 million.

New investments cost $26.2 million. These included the $16.3 million acquisition of the Projex oil sands business in Canada and completion of the roll-out of the Oracle Enterprise Resource Planning (ERP) system across the company’s global offices totalling $7.8 million in 2013.

Ausenco also successfully completed a rights issue that raised $31.4 million to lower debt and provide balance sheet strength.

Meka expects conditions to remain largely unchanged throughout the first half of 2014, with a modest improvement expected in the second half.

Financial results for the last two months of 2013 were ahead of plan, with January seeing the highest levels of new work won over the last six months.

“We entered 2014 with a renewed strategy, a strengthened balance sheet, a flatter organisational structure and a reduced cost base. While market conditions remain subdued, we are starting to see early benefits from the actions we took during 2013, most notably the APAC/Africa restructure and the strengthening of our asset management and project optimisation service offering,” he says.

“The bulk of opportunities in the near term will come from the Americas and tender activity in this region is very strong. In particular, we see promising opportunities for our Oil & Gas, Power business in Canada where we now have a much greater client base and enhanced service offering to drive organic growth. 4

Ausenco anticipates 2014 full year revenues of between $450 and $460 million and EBITDA of between $24 and $28 million.

AAX is trading down 8.51 per cent at $0.645 per unit.