In late October WDS forecast a net profit after tax in the range of $A22-24 million for this financial year but this morning cut it down to $7 million.
While the mining division met expectations, WDS was disappointed with the results from the infrastructure and services, and oil and gas divisions.
Factors at play included increased tender competition, reduced margins, delays in project start-ups – especially in the gas sector – along with “project management and execution issues primarily within the micro-tunnelling business unit” that caused completion delays and cost overruns.
WDS said the increased costs were associated with the upturn in bidding activity, to which it responded by doubling the number of projects in this half versus the previous half-year period.
The contractor does not expect to see the revenue benefit of its larger projects this financial year.
For the first-half results, including the performance of coal seam gas drilling services company Titeline Energy acquired in October, WDS expects earnings before interest, tax, depreciation and amortisation of $9.9 million and its net profit after tax to “break even”
WDS will now embark on delivery of operational savings, changes in organisational structure and diversification, “such as expansion of facilities in WA and the growth of pipeline and tunnelling businesses in the Middle East”
On a positive note, WDS said the recent Titeline contract for methane drainage drilling at Whitehaven’s North Narrabri mine resulted in the fleet being fully deployed.
The contractor also started tunnelling activities on a sewerage improvement project in Kuwait and received credit approval to extend its debt facility with GE Capital until the second half of the 2012-13 financial year.
WDS shares are down by 96.5c to 55c this morning.