Managing director: Brett Godfrey (outgoing)
Market capitalisation: $1.3 billion
Forecast Growth ’10: 9% adjusted
Revenue ’09: $2.64 billion
Loss ’09: $160 million
VIRGIN Blue Holdings Limited (VBA) managing director Brett Godfrey has a ‘bucket list’ to complete before leaving the company he co-founded, but he is yet to reveal what it entails.
On May 8 he will hand over the reigns to former rival John Borghetti, who was general manager of QANTAS for six years until his departure in May 2008.
Two years on, Borghetti is modest about his experience when asked whether he will bring ‘inside knowledge’ to the company.
“If you call experience in the industry inside knowledge than yes, but aviation changes quickly and the things I learned before are now old hat,” he says.
“I must say Brett has left some pretty tough shoes to fill — if you look at Virgin Blue’s work over the years it’s nothing short of remarkable.
“The culture is just unbelievable – it is one of the things that really drew me to this company, apart from the fact that it is very financially robust.”
Godfrey has previously forecast a profit guidance between $80 million and $110 million, compared to a ‘disappointing’ loss last year.
“Out of ten years it was the first and only year we recorded a loss, which was disappointing, but we did relatively well - so many airlines failed last year that the fact I’m still sitting here is a good result,” he says.
“Airlines struggled because they are very much at the forefront of discretionary spending, but they’re also the first to spring back.”
He says V Australia will be ‘formidable’ once the US Department of Transport approves an extension of its partnership with Delta Airlines, which is likely to occur this calendar year.
“At the moment we’re halfway through a joint venture where we’ll be able to pull our planes, resources and people together to give a better product and service to customers – the ACCC has already approved it.”
Godfrey says he always planned to leave the company and after ten years he is need of a break.
“It’s tough to be on top of your game sometimes, to pull a brave face in tough times is not as easy as just smiling. But this year we will see a turnaround and there will be better times ahead.
“There’s a few things in the pipes I hope to get done before I leave — I set myself four or five things I want to complete, a sort of bucket list before I leave.
“I’ll remain on the board for a vetting period because Virgin’s been a life commitment for me, and after that I will stay in an advisory role — this is the job I always wanted and I’m not leaving it do anything else.”
Godfrey expects to hire 300 more staff this year.
CEO: Trevor Coonan
Market capitalisation: $1.3 billion
Revenue ’09: $2.2 billion
Loss ’09: $237.4 million
Staff: 1800 (2009 figure)
Established: Went public in 2006
WASTE management company Transpacific Industries Group Limited (TPI) recorded a year-on-year rise in net profit to $24.3 million for the December half, compared to a loss of $52 million in H1FY09.
This increase in profitability came despite a 16 per cent fall in revenues for the half, with mixed operating conditions and strong performance from the group’s municipal business.
In its half year presentation, the company indicated a strong balance sheet, with the majority of debt now dated and a commitment to continue reducing debt levels.
As the group’s financial position gets back on track, the search is now on to replace outgoing CFO Glenn Battershill, who indicated he would leave the company this month.
CEO Trevor Coonan wishes Battershill luck in his future endeavours.
Coonan also notes that TPI has reviewed its management ranks and risk management, hiring new general counsel Murray Floyd and chief risk officer Steven Johnstone.
“We’re excited about these changes and believe that the organisation will be better positioned to capitalise on the future,” says Coonan.
“TPI continues to critically assess its business and organisation in a bid to enhance its leadership position in the industry.”
In August the company engaged in a recapitalisation process, with private equity firm Warburg Pincus (WP) investing $376 million in the company.
In September chairman Terry Peabody offloaded around $1.77 million worth of shares in associated entity Filmore Ltd.
Managing director: Peter Crowley
Market capitalisation: $953 million
Revenue ’09: $678.3 million
Profit ’09: $48.3 million
HOUSEHOLD products distributor GWA International Limited (GWA) sold its Rover Mowers business for more than $10 million last month, as the company recorded a 3.9 per cent after tax profit fall last half.
The profit decrease is a result of a loss from discontinued operations of Rover, due to asset write-downs and the company’s trading result.
But managing director Peter Crowley, expects profit to increase this financial year, with profit from ordinary activities up 7.8 per cent, following an 11 per cent surge in sales for its fixtures and fittings products.
“In the past six months we have implemented the Movex ERP system, continued to grow sales in the DIY market, integrated the Austral business, and entered into a binding agreement to sell Rover,” says Crowley.
“Our focus for the next half year is to improve supply chain management and overhead efficiency through systems optimisation, to reduce working capital, and to search for growth opportunities.
“We do however expect that trading profit for 2009/10 will exceed the prior year.”
But Crowley does not see any underlying signs of improvement in the market and expect sales to decline in this half due to an expected fall in environmental product sales.
“We will be working to improve the business to offset this anticipated decline in revenue,” he says.
Ross Munro from Genesys Wealth Advisers named GWA as a company to watch this year.
FKP Property Group
Managing director: Peter Brown
Market capitalisation: $853 million
Revenue ’09: $284.7 million
Loss ’09: $268 million
Established: Listed in 1993
FKP Property Group (FKP) recorded a 40 per cent profit boost in the December half, despite a cycle of write downs in the valuation of investment properties and development assets.
Managing director Peter Brown, says the company had limited developments in the last six months, but NPAT was still up to $49.2 million.
“The first half result was solid, and showed the group is back on track, but more importantly the outlook in the short to medium term is positive,” says Brown.
He says the company’s property portfolio is at the heart of its 30-year history, with 12,500 residents living in its retirement villages around the country.
Brown says the business is well positioned to grow in 2010, with strong signs of recovery and several residential developments launched last year.
“We are set to capitalise on the recovery cycle, with significant leverage to the residential sector through our retirement assets, master-planned communities and apartment developments,” he says.
In November the company launched its Aerial residential complex in east Melbourne and recorded strong sales for its offering at Saltwater Coast Estate in west Melbourne.
“Aerial has the potential to become one of Melbourne’s most iconic buildings, while at Saltwater Coast we have sold 200 lots,” he says.
“These two projects in the strongly performing Melbourne market along with continued interest in our Norwest residential and commercial opportunities have helped continue to drive positive energy at FKP.”
FKP is developing the Energex Building in Newstead, which has achieved a 6 Star Green Star Office Design v2 rating, within Gasworks – a master-planned mixed use development.
The company is also developing the master planned community Peregian Springs on the Sunshine Coast, as well as a business park called Circa in north-west Sydney.
FKP has $2 billion under funds management, as well as a foothold in the US and New Zealand markets.
Linc Energy Managing director: Peter Bond
Market capitalisation: $690 million
Revenue ’09: $2 million
Loss ’09: $42 million
Established: Listed in 2006
UNDERGROUND Coal Gasification (UCG) company Linc Energy Limited (LNC) now has another UCG generator up and running in Chinchilla, bringing it another step closer to commercialisation.
Managing director Peter Bond, says the generator is now producing synthesis gas (syngas), adding to a year of technology development that was ‘beyond even his very high expectations’.
“The UCG generator 4 represents so much hard work and to complete this work on budget and in less than five months since project conception is a fantastic result which demonstrates the capability we are developing in this business,” he says.
“This UCG Generator 4 will not only provide the technology template for our commercial production model at Orroroo in South Australia which Linc Energy will start later this year, but will also provide an ongoing supply of high quality synthesis gas.”
He says this syngas will enable the company to complete its remaining gas to liquids (GTL) development work in Chinchilla.
“In the next 90 days, Linc Energy will complete a technical report outlining the achievements of Generator 4 and report this to the market,” he says.
LNC signed an exclusive agreement with a British fuel cell technology company in December, as the company also boosted its coal tonnage and lease holdings.
Linc signed the agreement with AFC Energy and related entity B9 Coal, which gives it the rights to use AFC fuel cells in its UCG works for the next two years.
The contract came after several milestones including an up tick in coal tonnage in the Galilee Basin to 7.8 billion tonnes, as well the continuation of a memorandum of understanding (MoU) with BP Australia, as the first major customer of its cleaner synthetic fuels.
Cromwell Group Managing director: Paul Weightman
Market capitalisation: $565 million
Revenue ’09: $139.1 million
Loss ’09: $113.5 million
Established: Early 1970’s as White River Corporation before becoming Cromwell Group in 1998
PROPERTY investor Cromwell Group Limited (CMW) is cashed up and ready to make acquisitions before the end of FY10, with targets most likely in the Sydney market.
After recording a $4.2 million profit in the half to December 31 last year, managing director Paul Weightman, says CMW has sold down enough assets and debt to be back on the market.
“We’ve got about $100 million in the bank, we’ve paid down debt and we’re cashed up for acquisitions in property funds and funds management businesses,” says Weightman.
“I think by June 30 we will be actively looking for opportunities and we’ll be looking to deals with scrip where possible.
Weightman says it will still be a few years before the commercial property oversupply in Brisbane starts to clear.
The company however still has strong prospects in Canberra, Melbourne and potentially Sydney.
“Our focus is on commercial property and I think the Brisbane market will still have issues because of the degree of oversupply, but we’ve got good absorption from Melbourne – we’ve got a lot of assets there,” he says.
“We’ve also got good absorption in Canberra, which is our second largest market, but for acquisitions our focus will be on Sydney.”
Cromwell recorded operating earnings of $33.4 million for the last half, but Weightman notes that revenue fluctuates because of accounting standards requiring the adjustment of assets based on valuations.
“What that means is with a property trust values can be very volatile – we’re effectively in a similar position as we were last year, but we’ve paid down debt and have good access to funding,” he says.
“We got through the last two years without having to capital raise, unlike virtually all our peers. In December we had a placement with Redefine Australia for $73.3 million – this raises my view that we’re an attractive proposition.”
Managing director: Peter Birtles
Market capitalisation: $555 million
Revenue ’09: $829.7 million
Profit ’09: $32.135 million
SUPERCHEAP Auto Group Limited (SUL) has hit a few speed bumps with its bicycle retail arm, but managing director Peter Birtles says the underlying trends for the core business are positive.
The group recorded a first half profit jump of 14.5 per cent on the back of strong sales and store growth for its Supercheap Auto and BCF Boating Camping Fishing businesses.
“With Supercheap Auto, a contributing factor would be the refurbishment program, as we’ve been refurbishing 30 to 40 stores a year, and the results show sales increases in every store where we do it,” says Birtles.
“With BCF the new stores have factored into it, but there’s also with like-for-like growth across all parts of the business and you have to remember it’s only four years old so it can continue to do better.”
SUL plans to open four new BCF stores and two new Supercheap stores this half.
“We will still be opening stores through the second half – we’ve opened a BCF in Warrnambool in Victoria, will build another one in Adelaide in March, as well as a Supercheap store in central Queensland,” he says.
But the company’s bicycle arm Goldcross Cycles ran at a $3.5 million EBIT loss in the December half, with lower margins from price discounting offsetting a 40.5 per cent sales increase.
“There’s probably a couple of internal and external factors, but if we focus on the internal factors first of all, we can start from scratch and can apply some good ideas based on the experience we have,” he says.
“The first thing we felt was to market the business in a similar way to BCF and Supercheap Auto, but customers have a purchasing cycle that is less frequent, it takes much longer for customer transactions.
“There’s been a slowdown in customer demand for bikes with some other stores we’ve spoken to seeing a 20 per cent sales fall year-on-year, so we’ve got a lot of work to do. It’s not just a sales game, it’s a profits game.”
SUL is developing a strategic review of Goldcross based on reducing store sizes and direct marketing.
“The key is to base it on performance and customer traffic, as a lot of our stores are probably too big at around 700 sqm.
“We think it’s suitable to have 400 sqm to 600 sqm, so we will take action to move stores for about eight out of the 18, depending on the property opportunities.”
Birtles is concerned about the effects of interest rate rises in petrol prices over the course this year.
“The underlying trend is quite positive, but we expect one or two speed bumps over the next year. I think customers are a bit uncertain at the moment with interest rates set to rise and petrol rises getting people to think about their expenditures,” he says.
“Increased levels in mortgage rates would affect our customers, but the recovery will still be positive for employment growth there, and with population growth those trends will balance out any interest rate changes.”
For the first seven weeks of this half, BCF recorded like-for-like growth of 5 per cent, with Supercheap Auto clocking in at 5 per cent.
CEO: Zimi Meka
Market Capitalisation: $481million
Revenue ’09: $432.5 million
Profit ’09: $20.1 million
AUSENCO Limited (AAX) is making moves on many global fronts, from a recent $130 million contract in the Democratic Republic of Congo to a number of tenders and expansions in South America and Papua New Guinea.
CEO Zimi Meka says since moving Ausenco’s headquarters to South Brisbane, the team has boosted morale with a $24.8 billion project and tender pipeline.
“Before we had seven offices around town, so it was good to get all our Brisbane operations under one roof. It’s central, there’s good public transport and a lot of staff ride and walk to work so it’s good in that sense as well – morale is high,” says Meka.
“You need something like a new office or some other catalyst for office morale sometimes.
“What we’ll see is the continuation of projects getting executed and clients making decisions on projects, as opposed to last year where it was the opposite.”
He says a lot of clients have requested proposals for projects in South America and Africa.
“We’ve got a lot of tenders actually at the moment in South America in Chile, Peru, Brazil and Colombia, with a lot of clients requesting proposals for projects in that area, so we hope to secure some more action for us in the next few months.
“Africa will continue to be the same, there’s a lot of opportunities there as well, and in the Australian and Asian markets we’re looking at similar level historically that we’re used to.”
With several new gas projects underway in Papua New Guinea with large multinational corporations, Meka is excited about Ausenco’s opportunities there following the 50 per cent acquisition of Kramer Group.
“I’m quite excited about the opportunities in Port Moresby,” he says.
“There’s obviously the gas projects everyone knows about, but a whole lot of infrastructure spin off projects as a result, and we’re in a really good position to take advantage of that situation.”
He says the outlook is more positive now than six months ago, but doesn’t expect it to be all smooth sailing.
“You have to remember that this time last year everything had stopped, but now as things start to move in the economy, it’s likely this inertia and momentum will keep going — we’re still going to expect some rocky periods ahead through,” he says.
“We’re working on a significant number of feasibility studies, more than we’ve ever worked on before and that’s a leading indicator for us, so it’s all very positive.”
Meka says with expansion, the company is now taking on larger and more complex projects than it has historically.
It recently sealed a $9.6 million Engineering, Procurement and Construction Management (EPCM) contract for the magnetite extraction plant at Xstrata Copper’s Ernest Henry Mining (EHM) operation located near Cloncurry in north west Queensland.
The company is also diversifying into renewable and clean energy operations in the region around Saudi Arabia and North Africa.
AAX has given profit guidance between $26 million and $30 million for 2010.
CEO: Martin Ward
Market capitalisation: $379 million
Revenue ’09: $1.66 billion
Profit ’09: $36.6 million
Staff: 2000 (1350 Queensland)
BRISBANE car dealership AP Eagers could double in size by the time it reaches a century in operation, but that’s only three years away.
CEO Martin Ward says following the $10.5 million purchase of Caloundra City Autos last month, the franchise plans more acquisitions interstate.
“By the time we have our 100 year anniversary we expect to be 50 to 100 per cent bigger, given in the past three years we’ve grown 50 per cent,” says Ward.
“But most of that growth won’t happen in Queensland, apart from Caloundra — it will happen in New South Wales, Victoria and South Australia.
“As long as we keep making sure we’ve got the right processes and procedures, training and as long as we keep that at a reasonable level, the only constraint is finding the right businesses to buy and the right managers.”
AP Eagers has been looking for a reasonable acquisition on the Sunshine Coast for the last four years, so Ward is optimistic that Caloundra City Autos will bring positive results.
“A normal car dealership makes a 2 per cent return as profit, so for someone like Caloundra City Autos that makes $65 million in revenue, that would only be $1.3 million profit, but they are producing better than average benchmarks,” he says.
“I absolutely believe that we can add value to it immediately with our buying power with different contractors, for oils, telephone services, financial services and the like.
“The truth is, even if we don’t improve it by one cent we would still benefit from it. It’s still a safe purchase given the environment, given the world economy – it fits our sweet spot perfectly.”
Ward is proud that the company has given out a dividend for all of its 53 years on the share market, even reversing current industry trends in a share buyback scheme.
“In 2009 we announced a 62 per cent share dividend – there are not many companies who increased dividends in the crisis, so to do that we were very proud,” he says.
“The core reasons are that in the last 12 months we’ve also halved our debts, and we’ve also done a share buyback scheme which is very rare, when most others are issuing capital.”
The company has recently moved from its centre in the Valley to a new office in Newstead, holding plans to target acquisitions in areas with populations of more than 100,000.
Industrea CEO: Robin Levison
Market capitalisation: $377 million
Forecast Growth ’10: 20%
Revenue ’09: $259.5 million
Profit ’09: $45.4 million
Staff: Approx 400
Established: Listed 1999
AS the global coal industry moves from open-cut to underground mines, Brisbane’s Industrea Limited (IDL) is in ‘the right place at the right time’ as CEO Robin Levison expects revenue of more than $300 million this year.
Levison says demand is growing for the company’s patented methane gas drainage product and flame-proof and explosion-proof underground mine vehicles.
“I think the outlook for Industrea is positive and that’s done by the IP of our product manufacturing as the world works towards a more safety-conscious environment – no one wants injured workers,” says Levison.
“What’s happening globally is that a lot of countries are shifting from open cut mines to underground mines.
“What we can say is that we’re going to increase our profit and revenue, and we have a strong expectation to continue the deal flow we’ve had recently in China, South America, Australia and the US, as well as in the emerging markets of Russia and Japan.”
Levison expects the run of $10 million worth of contracts every month in China to continue, as safety standards increase along with consolidation of the smaller players.
“We see opportunities also as the Chinese markets continue to consolidate and smaller mines are being brought under the jurisdictions of larger bureaus with a strong safety focus, as well as the capacity to buy our equipment,” he says.
“As we gain penetration into the Chinese market, for every dollar we put in there’s an increase in equipment there which increases the demand for spare parts and services, and thirdly we’re still developing products that we own under our R&D.
“Last year we opened a product support centre in China and that’s starting to gain traction now, as demand for spare parts has grown significantly.”
Levison is not concerned with speculation about Chinese market jitters and cites strong relationships in the market as another key to further growth.
“The current jitters in the Chinese market won’t affect Industrea as we provide safety equipment to that market – we will certainly increase sales,” he says.
“In the last three months we’ve signed with two original equipment manufacturers (OEMs) to distribute their products exclusively in Mongolia and China.”
Levison forecasts a FY10 after-tax adjusted profit between $48 million and $54 million, compared to $45 million last year.
While the majority of the growth will be abroad, IDL subsidiary Huddy Mining Services has projects with Xstrata at Handlebar Hill, as well as Rio Tinto and Cockatoo Coal in the Hunter Valley – both are expanding production significantly.
“In the product market Australia is quite mature but there’s still very strong growth potential here,” says Levison.
IDL recorded first half profit after tax of $17.7 million and revenue of $141.5 million.
PIPE Networks CEO: Bevan Slattery
Market capitalisation: $367 million
Revenue ’09: $50.4 million
Profit ’09: $10.5 million
Established: Listed 2005
BRISBANE’S Pipe Networks Limited (PWK) is set to change hands to Sydney-based SP Telemedia on March 31, following a $373 million takeover offer last year.
But co-founder and Brisbane Business News Young Entrepreneur of the Year 2009 winner Bevan Slattery will remain at the helm as CEO.
Leading up to the takeover the company has announced a strong first half profit result of $16.6 million, which is a 58 per cent rise on the entire financial year of 2009.
“Pipe’s domestic operations contributed $29.8 million in revenue and $6.5 million NPAT in the first half of FY10. International operations contributed $25.7 million revenue and $10.1 million NPAT,” says Slattery.
Last year PWK completed its PPC-1 undersea cable from Sydney to Guam, which will lead to faster internet connections and hopefully a lower cost burden for customers.
“The PPC-1 leasing customers contributed minimal revenue and NPAT contribution in the first half as the submarine cable system was only completed in October 2009, however it is expected to make solid contributions in the second half of FY10,” he says.
“Furthermore, our strong cash management contributed $1.5 million of net fair value gains from financial assets which the company recently invested in.
The company forecasts revenue of $94 million and profit between $23 million and $25 million for the 2010 financial year.
Since it started in 2002 PIPE Networks has built Australia’s third largest metropolitan and domestic fibre network, working towards a more competitive national internet landscape.
“Our vision is to improve competition and connectivity choice at the infrastructure layer through strategic investment in new infrastructure assets,” says Slattery.
Pipe Networks has been a truly innovative Brisbane company, but with a takeover set in motion this could be its last appearance in our Top Public Companies edition.
Australian Agricultural Company
CEO: David Farley
Market capitalisation: $359 million
Revenue ’09: $156.3 million
Loss ’09: $53.7 million
AUSTRALIAN Agricultural Company (AAC) recorded a $53.7 million after tax loss for the 2009 calendar year, as natural disasters led to cattle losses and reduced weight gain for surviving stock.
Queensland’s oldest company has also struggled with a high Australian dollar, making international competition difficult in already challenging conditions.
Newly appointed CEO David Farley, says AAC faced a uniquely adverse trading outcome.
“AAco faced a ‘perfect storm’ of external factors during the period that led to an extremely poor financial result. Droughts and flooding led to serious cattle losses, significantly higher rates of calf mortality and reduced weight gains,” says Farley.
“AAco also faced below average cattle prices during this year, and the negative impact of the strong appreciation of the Australian dollar.”
Farley cites a positive in the value of land assets holding up well, with an NTA backing of $2.42 a share.
The result adds to the woes of a $38.7 million loss in 2008, but the fall could have been greater if operating expenses weren’t cut by $14.6 million.
Despite high restocking costs, AAC will hope to recover this year by capitalising on predicted red meat market growth in Asia, with markets like China and Indonesia expected to grow by 9.4 per cent and 5.55 per cent respectively.
The lucrative red meat market in Japan is forecast to contract by 1.15 per cent this year.
Farley was appointed in December and is working with the board on a strategic review, with details expected to be released before the company’s AGM in May.
AAC had previously forecast a full year guidance loss between $53 million and $60 million.
DOMINO’S CEO: Don Meij
Market Capitalisation: $358 million
Forecast Growth ’10: 15% NPAT
Revenue ’09: $676.4 million
Profit ’09: $15.4 million
Staff: 16,000 total, 11,000+ Australia
DOMINO’S Pizza Enterprises Limited (DMP) expects 15 per cent profit growth this FY, following higher than expected store growth and the introduction of new products.
CEO Don Meij, says the December half profit of $8.7 million exceeds guidance by four percentage points, on the back of the successful launch of an iPhone application and a new oven baked sandwiches range.
“The iPhone application was seven times more successful than our business model justified, because you don’t always know how these things will go — it was a relatively new development, you’re out there pioneering,” says Meij.
“The reason is that when you order a pizza over the phone there’s noise in the background, it’s not exactly a relaxing environment, but with this application you can order in your own time.
“You can even track the order – now it’s being made, then it’s in the oven and look, it’s just left the store.”
He says the application and new product range led towards same store sales growth of 4.57 per cent in Australia and New Zealand.
The pizza franchise has also upgraded its forecast store growth for FY10 and the calendar year.
“Last year we forecast 40 to 50 new stores for this financial year, but now it will be in excess of 50 and for the calendar year it will be 70,” he says.
Meij says the store growth will be in Australia and abroad, with Domino’s 300th European store expected in FY10.
The franchise’s European presence received a boost in December when the company acquired Belgian chain Pizza Company, which Domino’s has re-branded under its own name along with plans to double the amount of stores.
“You have to remember we’re in five countries so it’s not just growth in Australia – we’ve got development units in the Netherlands and France too,” says Meij.
“And we’ve basically got zero debt, which is even after announcing a dividend of six cents a share.”
Meij hints at a new significant product launch in May but could not reveal its nature at this stage.
“We’re going to speed up with strong growth this year, continue investing in innovation and all our units have got growth in cash,” he says.
Since last year’s edition the pizza chain has increased its staff numbers by 2000.
CARDNO Limited (CDD) recorded a slight profit drop to $16 million in the December half, but managing director Andrew Buckley expects stronger results for the remainder of FY10.
“Given the extraordinary market circumstances of the past 18 months, Cardno has performed well by any measure,” says Buckley.
“The other factor impacting our half year results is that the market cycle has been at its lowest point through the calendar year 2009, while the current recovery will result in a stronger second half of the 2010
“Cardno has also had a number of major projects in the aid area finish in the first half, and it is expected that replacement projects will commence in the next six months.”
Buckley notes government stimulus packages worldwide have helped Cardno secure engineering projects.
“Investment by government through stimulus packages — in Australia and internationally — has resulted in continuing strong workloads in our core engineering markets,” he says.
“Projects such as the I-4 Connector in Florida, the Logan Water Alliance in Queensland and an additional Indonesian school reconstruction project will add to Cardno’s second half workload.”
Buckley highlights CDD has recorded growth every year since listing in 2004, with compound revenue and profit growth of 50 per cent.
In February, Cardno announced the acquisition of building services firm ITC Group, which Buckley says will help the company reach a more environmentally-conscious market.
“On the basis that there is increased demand for ‘green’ building services, I anticipate growth from this business and opportunities to cross-sell with our existing Cardno businesses,” he says.
“With the acquisition of ITC, Cardno will now offer a broad range of new engineering disciplines including electrical, mechanical, fire, hydraulic, sustainability, facility solutions, audiovisual, asset auditing, security, vertical transportation, lighting, acoustic, telecommunications and environmental auditing.”
It’s a long list, but Buckley expects further growth and expansion into complementary and social infrastructure disciplines in 2010.
Cardno is owed around $4 million from development companies in the UAE, where it has an office in Abu Dhabi.
“In terms of the Middle East, we have a good relationship with our UAE clients, and although the property market in the UAE has been impacted recently, we expect to recover our debts,” he says.
Buckley says Cardno has a strong balance sheet and low gearing which will provide the perfect base for further acquisitions locally and in North America.
It has 19 offices in Queensland and 97 worldwide, with its headquarters based in Fortitude Valley.
Managing director: Mark Read
Market capitalisation: $316million
Revenue ’09: $355.2 million
Profit ’09: $7.1 million
DELAYS have pushed down 2010 profit guidance for mining services company Sedgman Limited (SDM), but managing director Mark Read, predicts $5.5 billion project pipeline for the next three to four years.
Read says Sedgman had construction projects it expected to start in January and February, but because of delays those profits will be recorded in FY2011.
“2011 looks strong and in our pipeline we have the highest number of studies ever, with key opportunities that we have a good chance of completing worth $5.5 billion over a three or four year time frame,” he says.
“We’ve seen more market activity over the last few months as the market recovers, commodity prices are up and volumes are going up.
“The other reason is our strategic direction to grow our geographic footprint in emerging markets, and we’ve been doing that in South Africa, Mozambique, Mongolia and Latin America.”
He says 30 per cent of projects in the pipeline are from emerging markets, compared to 20 per cent six months ago.
“The most potential for us is in South Africa, particularly Mozambique which has the potential to be the next Bowen Basin of the world – they’ve got infrastructure issues but the government is sorting that out,” he says.
Sedgman maintained its 700 staff during the financial crisis and next year there will be employment growth opportunities due to forecast pressures on resourcing.
Read says the company will be boosting its staff base in its Santiago office in Chile, to gain access to highly-talented employees to help offset the skills shortage in Australia.
He says mergers this year are most likely to be for Sedgman’s metals business.
“In coal we’re the market leaders in process so our growth tends to be organic, so maybe we could make one or two moves in the field of acquisitions and mergers, but in metals we are not the technological leader that we are in coal, so it’s more likely there.
“But the business is not only about building projects but with so many plants in the pipeline we learn from them and can go from project design, engineering and construction to potentially operational control for us as well.”
He says the company’s aspiration is to increase processing 20 million tonnes of coal annually to 60 million tonnes.
Bow Energy CEO: John De Stefani
Market capitalisation: $267 million
Revenue ’09: $718, 541
Loss ’09: $772,034
Established: Listed 2005
HOLDING $95 million in hand after a successful capital raising last quarter, coal seam gas company Bow Energy Limited (BOW) is spending big, with construction on a 30MW power plant expected to start mid-year.
The Brisbane-based company’s share price has gone up three-fold in the last 12 months – four-fold at times — while its projects in the Bowen Basin continue with healthy levels of production.
But that’s not enough for CEO John De Stefani.
He says the company will spend half of the $95 million on 52 wells to bolster BOW’s gas reserves, with the other half going towards the Blackwater 30MW Power Project.
“We plan for construction to start mid-year - we’re going through the approvals process and if it proceeds mid-year we’ll start commercialising in the first quarter of next year,” he says.
“It’s a relatively quick process, we’ve got 10 by three megawatt units so they are very easily installed, so in the first quarter of next year we should have the first electrons through the door.
“In 2010 we’re focused on developing the power station and secondly those 52 wells to increase our reserve position, in parallel to off-take arrangements domestically and with the proposed projects in Gladstone – we’re looking at gas supply in 2014 onwards.”
De Stefani is adamant that BOW has no intention to invest in LNG plants, but to provide gas to those facilities proposed in Gladstone.
“There’s always uncertainty. In the proposed LNG projects in Gladstone there are key dates, but my promise is longer term, as gas will be in demand and LNG is a cleaner resource,” he says.
“We see opportunities to supply gas domestically and the upside of that is to sell overseas for the LNGs too.”
De Stefani expects his company is now at a reasonable level to make the transition from an exploration company to one of the leading energy companies in Australia.
“Arrow’s got somewhere around $3 billion for their market cap. I don’t expect we’ll get there just yet, but we expect to double our production.”
Compared to the $95 million capital raising the sale of minor tenement ATP 574P in the Surat Basin for $8 million was small, but follows a focus shift towards core assets.
“It’s a non-core asset - we’d prefer our cash invested elsewhere where we have high control,” he says.
BOW also holds a 55 per cent stake in the Don Juan Project in the Surat Basin, with Victoria Petroleum holding the rest.
“Apart from that have 100 per cent control of our assets,” he says.
Watpac Managing director: Greg Kempton
Market capitalisation: $242 million
Forecast Growth ’10: 30%
Revenue ’09: $997.2 million
Profit ’09: $11.3 million
Staff: 880 total, 500 Queensland
WATPAC Limited (WTP) expects to grow revenue by 30 per cent this year, but it’s a rate that managing director Greg Kempton says will take a consistent stream of contracts to keep.
“The more you spread your wings the more space you can work with — the larger we get and the more success we have, more opportunities are presented to us,” says Kempton.
“Our business is set to have revenue of $1.3 billion this year, maybe higher than that, as we’ve got our civil and mining business revamped.
“But if you take $1.3 billion and divide it by 12 months then we need $100 to $110 million every month to maintain our rate.”
He says the construction company has quite a few tenders at the moment, but despite the uncertainty as to whether they will come to fruition Kempton is confident for the year ahead.
“What we’ve done as a developer is have three or four profit centres that operate in different markets but have the same skill sets – construction of high rises, special design and construction services, civil and mining construction, as well as our property portfolio,” he says.
“In our construction business we have highly technical projects on time or before time, within budget and often below budget.
“We’ve got a good reputation building in mining, retail, universities and for government, because those people build for the long term. We don’t build for the short term.”
He says Watpac also has a strong reputation with stadiums with a portfolio including Ballymore, Suncorp Stadium, the Gabba, Skilled Park and a contract for the new Carrara Stadium.
He cites Watpac’s property portfolio as challenging this year.
“Our market capitalisation has gone down probably because of our property portfolio – anyone with a property portfolio has been battered.”
Kempton says the company’s five-year strategy to diversify its products and geographical scope is 80 per cent through and on track, but that won’t be where the company stops by any means.
“A lot of people don’t realise that we’re in the top end of town – we started off as a small Brisbane company but now we’re up there with Abigroup and Matrix,” he says.
Technology One CEO: Adrian Di Marco
Market capitalisation: $222 million
Revenue ’09: $122.5 million
Profit ’09: $15.68 million
Staff: 750 (470 in Brisbane)
IN a year when the world’s largest software companies like Oracle and Microsoft fell behind, Brisbane’s Technology One (TNE) recorded 11 per cent revenue growth in FY09.
Technology One CEO Adrian Di Marco, says following this achievement the company will invest in a new $12 million R&D centre, expecting to spend more than $120 million on skilled labour.
“Our new R&D centre will be opening in April or May, which I’d say will cost between $12 million and $15 million for the fit-out. We’ll build a next generation range and product there – it’s a key commitment to Brisbane and Queensland,” he says.
“A lot of the industry is going to India and other countries where there is a much lower cost and lower taxes, but we’re investing here because we believe Australia has the best innovation in the world.
“As an IT company we give shareholders a good return, but there comes a time when you have to make decisions and focus on the medium to long term. It’s important to keep shareholders investing, but if profit goes down a bit so be it – they will still get a good return.”
Di Marco says last year’s results are testament to TNE’s strength and products, but he has no intent of resting on his laurels.
“Generally speaking it was a very hard year last year, but we were strengthening with our revenue up 11 per cent, while our large competitors like Oracle and Microsoft had their revenue down – I think that’s a very strong achievement for us.
“It shows we’re competitive and that’s reflected in the high profile contracts we signed last year like the New Zealand Stock Exchange, Lifeline Australia, Arab Bank, Bank Negara in Malaysia, Sunsuper and the University of Tasmania.
“We have signed a number of contracts this financial year, but it’s not about saying what we did last year was good, it’s about the bar being raised.”
TNE’s operations in the UK have been struggling recently due to a difficult market, but Di Marco is confident of a good market presence within four years.
“The UK and the US are really train wrecks and I don’t know if we in Australia really appreciate how bad it is, we’re insulated from that here. Our UK office is in early stage development which is challenging, but we still expect a three or four year horizon before we find our place in the market there.”
Di Marco has been critical of the Queensland Government in the past for choosing multinationals for software contracts rather than locally-grown talent.
“We remain ever hopeful that we will be able to do more of our business with the Queensland Government – it’s one of those things, you just keep pegging away,” he says.
Managing director: Gerry Grove-White
Market capitalisation: $207million
Revenue ’09: $6.49 million
Loss ’09: $15.3 million
GEODYNAMICS Limited (GDY) received a $90 million vote of confidence from the Federal Government last year for a project in the Cooper Basin, but CEO Gerry Grove-White says it was a year of ‘highs and lows’.
“The company, since it was founded in 2000 and went public in 2002, has achieved a number of firsts, clearly last year with our proof of concept test that we could pull 15MW to 20MW of thermal energy from 4.3km below the ground,” he says.
“But the Habanero 3 well issue was a setback and its principal implication has been a delay that’s put us back about a year.”
The incident involved water and steam rising to the surface of the well in Innamincka, as part of a joint venture operation with a subsidiary of Origin Energy.
“This (GDY) is a venture that the faint-hearted shouldn’t join in. We have highs and lows but every time we learn from it and that adds to our base of knowledge,” he says.
“Geodynamics is a development company so we don’t have any income and certainly for the next few years we’re going to have losses, which is the case for any start-up and particularly if you’re taking extra heat out of the Cooper Basin.”
But for a successful proof-of-concept test, the geothermal energy developer received $90 million in funding, as part of the Renewable Energy Demonstration Program (REDP).
In December the company was issued a further $7 million from the Federal Government to fund a geothermal drilling program in the Hunter Valley.
“It’s been a great vote of confidence from the government, but what they give us we don’t count as revenue — when we achieve certain milestones they pay us $1 for every $2 we spend.”
Grove-White expects GDY to be operating in its fields this month or in April, further demonstrations in 18 to 24 months time and the sale of electricity in 2013.
With positive results from the company’s operations, Grove-White is concerned about continuing uncertainty surrounding the Federal Government’s Emissions Trading Scheme (ETS).
“One drawback is the continued uncertainty of the ETS, which we believe is absolutely essential if we want to cut our carbon footprint. The alternative that the Opposition is proposing is quite frankly, deeply flawed for all the reasons that the experts have enunciated,” he says.
Austin Engineering Managing director: Michael Buckland
Market capitalisation: $196 million
Revenue ’09: $179.3 million
Profit ’09: $14.8 million
AUSTIN Engineering Limited (ANG) will continue its expansion this year with a strong balance sheet, while managing director Michael Buckland expects another record result this year.
Buckland says while the EBIT result for the December half was up 16 per cent to $11 million, an even stronger result is expected in the June half.
“We have also been successful in securing $41 million of new orders over December 2009 to early February 2010,” he says.
“We are continuing our business development and expansion plans across South America, Indonesia and here in Australia in order to widen our product offerings to our existing and new customer bases whilst at the same time broadening and strengthening our revenue streams and profitability.
“Our strong balance sheet and low gearing levels enable us to accommodate further acquisition opportunities, a number of which are in the process of being considered.”
Buckland expects Austin Engineering to further its market capitalisation growth from organic and business development growth, as the company expands domestically and abroad.
“We are already the world’s largest non-OEM (original equipment manufacturer) designer and manufacturer of mining dump truck bodies and our aim is to consolidate this position further by further expansion,” he says.
“In August 2009 we commenced an expansion program into the South American mining market when we purchased the steel dump truck body business of Conymet Limitada, based in Northern Chile.
“We are also currently pursuing further growth in South America by establishing a joint venture with another engineering partner in Brazil in order to meet the needs of the major miners in that region.”
ANG’s US-based business Westech recorded a record year in FY09, but Buckland forecasts productivity below historical average levels for the remainder of FY10, with any significant improvements likely in FY11.
“Current post-GFC economic recovery in North America is still underway but at a much slower pace than the other key mining regions in which we have a presence.
“Whilst activity is beginning to pick up, customers remain very cautious with their forward equipment requirements, which are for smaller quantities over shorter periods of time.”
Group revenue for the December half was $67 million and NPAT was up 22.4 per cent to $8.2 million.