Civmec

Civmec’s 4Q15 net profit plunged 43.5% y/y to $6.5m, mainly undermined by a lower revenue of $114.7m (-31.2%) and a bad debt of $2.9m.

Full year FY15 earnings fell 13.6% to $30.3m although top-line grew 15.1% to $499.2m on new contracts. On a constant currency basis, the group recorded a 20.9% growth in revenue to A$453.4m.

Gross margin slid 2.3ppt to 12.4%, mainly due to increase in number of large scale projects, which typically yield lower margins.

The hit on bottom line was exacerbated by a 31.8% spike in administrative expenses to $25.2m, largely due to a $2.9m bad debt and higher staff costs.

Cash position improved 15.6% to $37.6m, while total borrowings were slashed by 50% to $25.4m.

A final DPS of 0.7¢ was maintained.

In FY15, the group set up a refractory division to install linings, which are able to withstand extremely hot temperatures and conditions, and has since secured two refractory contracts.

Despite a downfall in commodity and energy prices, management is sanguine about the group’s outlook as they leverage existing capabilities from resources sector to help secure infrastructure-related projects.

In addition, Civmec is pursuing new engineering and construction services opportunities within the Australian defence sector.

As of 2 Jun, Civmec has secured A$68m worth of contracts, spanning across multiple sectors from leading companies, including Rio Tinto and GE Oil & Gas.

The counter is currently trading at 4.9x FY15 trailing P/E and 1x P/B.