Following a very strong performance in the first six months of the current financial year (to December 2008) market conditions in the third quarter to March 2009 saw a significant drop in revenue across our Consulting and Project Management divisions, only partly offset by a continuing strong performance of the International Development division.
Some of the revenue drop resulted from project delays and cancellations, but others were a result of temporary events such as cyclonic weather in northern Australia.
Management responded by reducing staff numbers and focusing on lowering expenditure, resulting in some one-off costs relating to redundancy payments.
We have seen improved performance in April and May and expect June to continue to improve, albeit still below the levels achieved in the last quarter of FY08.
Profit expectation for the full year to June 2009 is for an operating EBITDA (pre vendor earn-out and share-based payment expense) range of $54 million to $57 million, including one-off costs of some $2 million associated with the above mentioned cost reduction exercise. This compares to a full year result to June 2008 of $49.7 million.
The recent Federal Government stimulus packages are now having a positive impact. The Company has won several major contracts in the education and housing sectors and we are currently involved in many other major project bids being delivered under the infrastructure spending packages, much of which is still planned for the months to come. We have also won numerous other projects with governments around the world, and in the LNG industry, where several major projects are under development.
There is significant upcoming work in the road and rail sectors. Managing director Roger Olds comments: “We are also pleased to announce that in the UK, the team of which we are part, has won a major piece of geotechnical work on the Crossrail Project in London. It is also pleasing that the UK Geotechnics business, in the last month, has almost returned to a break-even position after suffering losses for all of this year to date. We believe this contract will support continuing improvement in this business. The commercial property and mining sectors are still slow but we remain optimistic about our strategies in these sectors, as we work with clients to assist them during these challenging times.”
The International Development business continues to perform very strongly and it is expected that this business will deliver improved contributions into the future. It continues to win major projects around the globe. The performance of the International Development business highlights the success of our diversified business model in supporting our growth plans.
The directors of the Company have recently approved the next three year plan, which will see an emphasis on building the company within its current geographies. Mr Olds comments: “We will focus on organic growth and plan to fund this from existing capital and debt facilities. We expect to see significant efficiencies as we build an increasingly unified Coffey.
“The cost reduction program commenced in January 2009 and to date some $8 million of annual cost savings have been achieved. An internal focus remains on reducing expenditure, with plans to save $20 million of annual costs through common systems, and other efficiency gains.
“While the global economic outlook remains uncertain, the above-mentioned focus on cost savings and our ability to respond quickly to changing market conditions, combined with our plans to organically grow revenue, creates an excellent position for Coffey to move forward.”
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Investor and media contacts:
Diana Krause, Communications Manager, Coffey International Limited
P: (+61) (3) 9473 1300; M: (+61) 420 959 942; E: diana_krause@coffey.com
