Concrete contracts worth $24.6m awarded to Global Construction Services

Global Construction Services ASX GCS concrete Watpac Construction Victoria
GCS has secured two contracts totalling around $24.6m with Watpac Construction for the concrete structure works at the Deakin University Law Building and a Data Centre Project, both in Victoria.

Perth-based Global Construction Services (ASX: GCS) has secured $24.6 million worth of concrete structure works with Watpac Construction on two major building projects in Victoria.

The contracts were awarded to GCS through its wholly-owned subsidiary GCS Summit Contracting and will include the installation of all precast panels, post tensioning, reinforcement, and related concrete structure works on the construction of Deakin University’s new Law Building and the four-storey Melbourne Data Centre.

Both contracts will commence in early 2019 and are expected to take nine months to complete.

Post tensioning for both projects has been subcontracted to engineering, construction and maintenance group SRG Global, created in June between GCS and SRG Limited.

Managing director Enzo Gullotti said the Watpac contracts highlight the progress GCS has made since entering Australia’s east coast construction market in mid-2017.

Since then, the company has secured over $63m of contract works and has over $600m in the contract tender pipeline.

GCS / SRG merger

In June, GCS announced a merger of equals with SRG Limited (ASX: SRG), to create SRG Global as a specialist service offering to clients worldwide.

Under the terms of the merger, effected by way of an all-scrip scheme of arrangement, SRG shareholders will receive 2.479 GCS shares for each SRG share held, with GCS acquiring all SRG shares on issue.

On completion of the merger in September, GCS and SRG shareholders will own approximately 51% and 49% of SRG Global respectively, on a fully-diluted basis.

GCS and SRG currently work together on a number of Victorian construction projects, and have key customers in common including Multiplex, BGC Contracting and Lendlease.

“This merger makes complete sense when you look at the separate businesses side by side,” Mr Gullotti said at the time of the announcement.

“We are confident it will create a strong group that will benefit our clients and provide superior return to shareholders.”

Full-year financials

Earlier in the week, GCS reported mostly positive financial results for 2018 including a 33% increase in group revenue to $247.5m (compared to $186.6 in the 2017 period), and a net profit after tax for GCS shareholders up 30% to $14.1m.

The company’s Commercial segment led the way with revenue increasing 64% to $200.2m and growth in business along Australia’s east coast making up 59% of that total.

Revenue for the Resource, Industrial, Oil & Gas segment declined by 30% during the year, impacted by the completion of construction on Inpex’s Ichthys LNG project in Western Australia’s Browse Basin, and reduced activity levels at CITIC Pacific Mining’s Sino iron ore project near Karratha.

At mid-afternoon trade, shares in Global Construction Services were trading at 1.50% higher at $0.675.

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