MINING LOSES SPARKLE, BUT CONSTRUCTION SHINES ON FOR WATPAC
Written on the 18 February 2016 by Brisbane Business News
WATPAC'S (ASX: WTP) move away from mining and civil into construction is starting to take shape on its bottom line.
The Brisbane business reported its half year results today, revealing a revenue rise of 4.5 per cent to $621.9 million and a $500,000 boost in underlying net profit after tax to $6.7 million.
Watpac managing director Martin Monro says 85 per cent of the group's revenue is now derived from its construction business to offset a turn for the worse in mining and civil. These divisions were responsible for more than $40 million in impairment charges.
"The strong financial performance of the group's construction businesses is reflective of Watpac's reputation for delivering quality projects and innovative outcomes for our clients," says Monro.
"We had a number of significant contract wins over the half year, which is consistent with the improved market conditions in the sector and demonstrative of the successful execution of a number of strategies aimed at improving the depth and quality of our workbook.
"Whilst it was extremely disappointing to realise large impairments in the mining and civil business, these were necessary given the challenges impacting the resources sector."
The group's construction businesses took in a pre-tax profit of $20.6 million, up from $15.8 million the previous corresponding period.
Watpac's reputation in this division put the company in good stead to secure approximately $320 million of work in hand for the last six months, which totalled almost $1.5 billion at the end of last year.
Monro says this reputation carries through into Watpac's mining and civil business too, supported by a healthy balance sheet that will leverage the company should market conditions improve.
Even still, the company is still securing sizeable work in these divisions, such as an $80 million contract with existing client Hanking Gold at its Axehandle Gold project and a $9.3 million contract with Main Roads WA to deliver the South Western Highway Realignment project at Burekup.
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