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Watpac sells property assets, east coast civil works to trim down to new size

The construction, civil engineering and property developer Watpac (ASX: WTP) has been making changes to its business to align itself better with the depressed construction industry. Still, it announced another net loss for the year, $4.7 million, continuing from last year’s loss of $50.2 million. Total revenue rose 21.37% from $1.35 billion to $1.64 billion.

There was a $15.6 million impairment write-down, which itself was reduced by $78.1 million in relation to its property development inventory and land and building assets. Another announcement made by the company was the closure of its Australian east coast civil operations. Underlying profit of the continuing operations, excluding the loss from discontinued operations and the impairment charges, was $17.2 million, down from $23.3 million last year.

The company has been selling off its property assets, having more than $120 million settled this year or subject to unconditional agreements. This lead to the repayment of all remaining property debt. Its property development assets now stand at less than $100 million.

The construction and infrastructure business realised a pre-tax profit of $19.4 million, down 52% from $40.5 million last year. A number of new projects were awarded this year, the largest of which are the $206 million commercial tower development in Brisbane’s CBD and $146 million worth of building/infrastructure upgrades for 16 Defence Force bases along the Australian east coast.

In mining, a major award was won for the $93 million Cockatoo Island iron ore project in WA. Together with other long-term mining contracts, the company is well positioned to work profitably and capitalise on future opportunities due to its expertise in remote project delivery.

The company’s industry peers, Macmahon Holdings (ASX: MAH), Boart Longyear (ASX: BLY) and Monadelphous Group (ASX: MND), are all making changes to their business structures and trying to improve their financial positions to meet the challenges of the downturn in mining.

No dividend was declared for this period, as was the case in the previous period. The share price is currently around $0.63, and has been in a trading range of $0.50 – $0.80 since Aug 2012.

Foolish takeaway

Continuing economic conditions are troublesome, and could lead to further industry consolidation. Returning to core assets and business for the time being is only way to survive, and as they get rid of cost and waste, what hopefully remains will be much better value for investors.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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