Coffey today advised that the Operating EBITDA before one-off costs for the year ending 30 June 2010 is expected to be within the range of $45 million to $50 million, and that management do not anticipate any goodwill impairment impacts. Implementation of a business right-sizing plan, discussed below, is expected to incur one-off costs of between $3 million and $4 million for the year ending 30 June 2010.
Business right-sizing
As a result of the ongoing uncertainty caused by financial volatility in Europe, the Australian Government’s announcement of the Resources Super Profit Tax, and the consequent postponement or slowing of projects, Coffey has instigated a plan to right-size the business to meet the anticipated trading conditions and deliver an improved financial performance for FY11. The cost of implementing this plan is expected to be between $3 million and $4 million in FY10, but importantly this will lead to cost savings of between $12 million and $15 million in FY11.
Managing Director Roger Olds said: “While we have seen improved fee revenue during May and June 2010, after experiencing a decline in the first four months of the 2010 calendar year, we have not yet seen adequate recovery to give us confidence that it will be sustained in each of our business sectors.
“Coffey is continuing to observe a number of project delays and uncertainty in its markets. We are taking a prudent approach to financial management, focusing on right-sizing the business for the current conditions. Unfortunately, this will result in a number of job losses, but we are, where possible, implementing a series of flexible work arrangements to reduce the number of staff impacted.
“We believe we will then be poised to continue our growth plan as and when revenues show signs of sustainable improvement.”
Bank facility review
Coffey also confirmed that its banker, ANZ, in support of Coffey’s strategy and future expected business activities, has confirmed variations to Coffey’s borrowing facilities, including:
- restructuring the existing loan facilities to increase the working capital facility by $60 million for planned organic growth, with a corresponding reduction in the acquisition facility and no change in the overall facility limit; and
- providing sufficient headroom in the financial undertakings to support Coffey’s future expected trading performance.
Impairment review
Coffey has completed its annual goodwill impairment review based on the unaudited projected trading performance of its businesses. While the impairment review has not yet been audited, management does not anticipate any impairment of goodwill will be required.
Outlook
Mr Olds said: “These are uncertain times and there is a lack of confidence among investors due to the various political and financial circumstances described above. Economic data suggests a global recovery is in place, but the continuing economic and political surprises are causing a lack of confidence, with investment commonly being deferred until there is more certainty.
“Coffey is actively pursuing many exciting prospects and is growing parts of the business where there is strong demand, such as the oil and gas sector. We are also expecting to see our investment in business development generate an increase in market share and revenue. However, even when projects are won, they can be slow to proceed in the present uncertain environment.
“There are still major opportunities. The Middle East – Iraq, Saudi Arabia, Oman and Qatar in particular – is a focus area for us with projects proceeding. We expect these will lead a turnaround in Coffey’s Europe and Middle East region’s financial performance in FY11. Canada is also seeing a good level of activity, and in the Asia Pacific region, we are still seeing opportunities in coal, liquid natural gas and major infrastructure such as roads, rail and ports. We will continue to invest in the growth of our mining business, and expect to see continued improvement, including a turnaround in our Brazilian business in FY11.
“Overall, we are optimistic about the future, while recognising the need to manage the business carefully until greater investor confidence and global stability is evident, when we can plan growth with greater certainty.”
Investor contacts:
Roger Olds, Managing Director
Urs Meyerhans, Chief Financial Officer
Media contact:
Diana Krause, Global Manager External Communication, Coffey International Limited
T: (+61) (3) 9473 1300; M: (+61) 420 959 942; E: diana_krause@coffey.com
