Unfortunately, the half year results for Monadelphous Group Limited (ASX: MND) continue to look bad and don't give much hope for a quick turnaround in financial year 2015. The engineering, construction and maintenance service provider reported half year revenue and net profit after tax declined 17.6% and 23.4% respectively.
On top of the depressed iron ore and coal markets, the collapse in world crude oil prices has adversely affected the energy industry, where Monadelphous generates about 47% of its revenue. The one bright spot for the half year was a slight 1.8% revenue increase in the maintenance and industrial services division. More contracts for maintenance work are anticipated from the LNG projects in Queensland, Northern Territory and WA due to new production and exporting in 2015 – 2016.
Here are the half year results highlights:
Sales $1.05 billion, down 17.6%
Earnings before interest and tax, depreciation and amortisation (EBITDA) $95.1 million
Net profit after tax (NPAT) underlying NPAT declined 23.4% to $60.7 million
Earnings per share 65.4 cents per share, down 24.3% from 86.3 cps
Dividends per share a 46 cents per share fully franked dividend was declared, down 23.3% from 60 cps
Outlook
Monadelphous is projecting financial year 2015 full year revenue to be 15% – 20% lower than the previous year. In FY 2014, annual revenue was $2.33 billion. The company intends to continue cost cutting and adjusting workforce numbers to protect margins.
Maintenance work could stay in the plus category, but further weakness in the minerals resources sector is expected. As a number of LNG projects around Australia move from the development to production stage in 2015, construction engineering will decline and maintenance services work is forecast to rise. Mining capex is forecast by BIS Shrapnel to slide until around 2017 as the mining industry moderates to pre-mining boom levels.
Share price and dividend
Monadelphous shares jumped as much as 7% in morning trading to $10.30, yet have settled back to 1% up at $9.63. That is still more than 50% down from early 2013 highs. The dividend yield is around 11.8% fully franked. As much as that may seem attractive, with further revenue decreases forecast, future earnings and dividends could decline as well.
It would only be a real bargain if the stock was at a true cyclical bottom. The stock is still above its GFC lows of around $6 a share, so no one can say where the real bottom is yet. Foolish investors will probably want to tread very lightly.
