Monadelphous Group Limited (ASX: MND) shares fell more than 5% this morning following the release of the company’s FY19 results. Here’s what you need to know.
About Monadelphous
Monadelphous Group is a Perth-headquartered engineering group providing construction, maintenance and industrial services. Monadelphous has a major office in Brisbane and projects, facilities and workshops across Australia, New Zealand, China, Mongolia, Papua New Guinea and the US.
The 5 Key Points
- $1.35 billion of new contracts was secured during FY19
- Revenue fell 9.85% to $1.608 billion
- EBITDA was $106.8 million, down 10.3% from FY18
- Underlying net profit after tax (NPAT) declined by 19.6% to $57.45 million
- A final dividend of 23 cps, fully-franked was declared, bringing the total full-year dividend to 48 cps, down from 62 cps in FY18
Analyst Estimates
According to Bloomberg, analysts were estimating $62.05 million for NPAT and a final dividend of 31 cps. Monadelphous missed both of these estimates by some margin with an underlying NPAT of $57.45 million and a dividend of 23 cps.
What Caused The Decline?
There were several factors impacting growth in FY19. Monadelphous said revenue was down as a result of a reduction in resources construction activity levels. The reduction was due to the timing of the award and commencement of several major construction contracts.
NPAT was affected by a one-off provision of approximately $7 million which resulted from Notices of Amended Assessments from the ATO.
The maintenance and industrial services division actually reported a record result, with revenue up 19%. However, it was weighed down by a 34% decline in the engineering construction division.
Outlook
Monadelphous indicated that more favourable market conditions are returning, stating: “Project development activity has been increasing with a number of resources construction opportunities coming to market, particularly in the iron ore and lithium sectors”.
While several new contracts have been secured this year, Monadelphous said that FY20 performance will be dependant on the timing of the execution of these contracts. Increasing market competition, price sensitivity and customer expectations were also flagged as possible headwinds in the report.
Is Monadelphous A Buy?
While the number of new contracts is promising, the decline in engineering construction revenue and the headwinds outlined in the annual report don’t fill me with confidence for FY20. For now, I’d rather invest in one of the businesses in the free report below.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
