Gladstone decline forecast

DECMIL Group could do with some growth as utilisation rates at one of its cash cows, Gladstone village, is expected to fall in the second half of this year and again by final year 2016, Hartleys said.

Anthony Barich

Homeground Gladstone, Demcil’s flagship accommodation village, achieved steady occupancy last year, averaging 79% during FY14, but chairman Bill Healy told the company’s AGM last November that the company would keep looking for opportunities with the government, civil, upstream, CSG and infrastructure ownership.

Homeground’s current tenancy includes more than 30 organisations operating in Gladstone in coal, LNG, port, civil and shutdown maintenance work.

The company’s forward-looking strategy is to position the village to capture long term tenancy as the Curtis Island LNG and Wiggins Island Coal Export Terminal (WICET) projects move from the construction to operations and maintenance phases.

Its key projects recently completed include the QGC Wellhead Installation Services project in Queensland’s Surat Basin worth about $200 million; and Origin’s Spring gully pre-assembled units, also in Queensland, worth $9.3 million. Both were completed in the December quarter 2014.

The company delivered another record year of revenue of $617 million last year and a profit of $49.7 million, though Healy conceded the climate in Decmil’s traditional industry has changed over the past 12 months, with some businesses in difficulty or downgrading their profit.

“We are continuing to pursue government, civil and upstream LNG opportunities with margins returning to long term sustainable levels,” Healy said.

Decmil reported net profit after tax (NPAT) of $24.3 million when Hartleys expected $26.3 million while a 4.5c per share DPS (dividends per share) was declared, which met Hartleys’ expectations.

The group’s EBITDA was $38.4 million, which fell short of Hartleys’ expectation of $40.9 million; while operating cash flow was $15.6 million, also worse than Hartleys’ expected $25 million.

Decmil’s net cash was $55.2 million, also lower than Hartleys’ $63 million forecast while Gladstone village EBITDA was about $19.8 million pre-corporate overheads.

And while the Gladstone village reported 1H revenue of $31.6 million, up from its 2H14 figure of $25.5 million and utilisation rose to 81% in 1H from 71% in 2H, Hartleys expects utilisation to fall in the second half and then fall again in FY16.

“We estimate that room rates were [approximately] $156/night for a rented room in 1H, which is up from $143 in 2H,” Hartleys said.

“Unit costs look like they jumped to [about] $58/night in 1H from an estimated $50/night in 2H14.”

Reported village EBITDA was $13.7m, but that includes one-off costs and an overhead allocation of about $2.4 million.

Hartleys estimates that normalised village EBITDA, excluding overheads, was $19.8 million and expects FY15 EBITDA of $36.3 million.

“We expect 2H utilisation to reduce to 77% and then 65% in FY16,” Hartleys said.

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