Neptune Marine Ends 2009 on Solid Financial Footing
Neptune Marine Services today reported normalized net profit after tax of $1.3 million for the half year to December 31, 2009, in line with the earnings guidance provided by the company on January 21, 2010. Revenue for the half was $84 million.
As reported earlier in the year, performance for the first half of FY2010 was impacted by a number of macro issues, however the company is witnessing a return to robust bidding activity across its key markets. Neptune's Managing Director and CEO Christian Lange said the main impact on first half profitability was the sharp decline in activity in the USA and South East Asia and low utilization rates on Neptune's two vessels. Subsequently the Neptune Trident has been contracted in Qatar for three years and the Neptune ROV Supporter is operating in Thailand. "Activity in the US and South East Asia is also improving and we expect a significant increase in
profitability in the second half," he added. "Additionally, we have strengthened both our senior management team and processes to enhance Neptune's commercial operations and risk management. We have recently appointed two highly experienced oil and gas industry executives in North America and the UK to manage our operations in those regions and we have also made a number of senior appointments in finance, treasury and risk management to bolster our skill base in these critical areas."
Neptune reported a solid balance sheet with cash at bank of $37 million and a net debt to net debt plus equity ratio of 8%. "This supports our near term organic growth opportunities and puts us on a solid financial footing," Mr. Lange said.
Offshore Services: Revenue was $39.0 million and EBIT was $6.3 million. The Offshore Services division was strengthened with the acquisition of Aberdeen based Submersible Technology Services (Holdings) Limited (STS), a leading provider of remotely operated vehicle (ROV) and survey support services to the offshore oil and gas industry. The business adds to Neptune's capabilities in the North Sea, as well as in Singapore and Bahrain.
During the period the division continued to secure work in Australia, Europe and the Middle East with a range of new and existing customers, including some of the oil and gas industry's major multinationals.
Engineering Services: Revenue was $45.3 million and EBIT was $2.0 million. While revenue was stable, earnings were impacted by margin erosion, significant discounting in some markets and currency fluctuations. With the broader pick up in activity, margins have improved and Neptune is only bidding projects on acceptable terms. During the year, the business secured a number of combined engineering and fabrication projects, it successfully completed its second NEYSYS® project in the North Sea and it continued to support the development of a wave energy project in Scotland, giving it exposure to the growing renewable energy sector.
Neptune reiterates a strong recovery in profit for the second half and a return to growth from FY2011 onwards. The second half performance will be driven by improved vessel utilisation rates, improving US market activity and a pick up in Australia's domestic drilling and LNG markets. Evidence of this return to activity can be seen in the recommencement of several inspection, repair and maintenance (IRM) projects that were shelved in 2008. The company is actively managing its overhead cost base whilst continuing to invest in its growth. In recent months, Neptune's workforce has increased by some 10% reflecting management's confidence in the current market. Safety, risk management and skills development remain areas of investment.
The ongoing flow of small ticket IRM projects is also growing and while there is no long term visibility on the revenue derived from these projects, this market is well understood by Neptune's management, the company has excellent visibility and recognition with its customers and is well placed to grow its ongoing workflow in both divisions. A focus on securing longer term, multi-year projects that deliver more predictable and recurring revenues is also a focus for the current half and beyond. The $20 million project with Qatargas reflects the style of project that Neptune is pursuing and there are a number of near term prospects that the company is pursuing.
Across all divisions, cross-selling of services is now starting to accelerate as customers recognize the broader capabilities of the Neptune group. The company is aggressively marketing these capabilities to its customers with more multi-service project opportunities now emerging. "Our focus for the remainder of this financial year is returning Neptune to profitability and this is now occurring. We remain confident about the company's prospects and we are witnessing growing demand for our services and increased opportunity in all our markets," Mr. Lange added.
"We are also working hard to stabilize the earnings profile to significantly reduce the impact of one-off issues and, as we grow our revenue base both in Australia and internationally, these fluctuations will become less apparent. Our management team is now much stronger and we have the additional skills to better manage our growth." Neptune will continue to update the market on its progress during the current half.
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