Valmec serves up strong company metrics in full-year report

Valmec ASX VMX full year 2018 earnings revenue EBITDA energy infrastructure earnings
Valmec achieved strong revenue results for FY18, up 41% to A$103 million.

Energy industry and infrastructure services provider Valmec (ASX: VMX) has delighted shareholders this morning by announcing a pleasing earnings update that showed revenue growth was up 41% to A$103 million last year, with EBITDA exceeding A$7.5 million.

The news made an immediate impression on the company’s share price in early trade this morning with Valmec shares trading up 6.5% to $0.33 per share.

The earnings update serves as an early estimate of fully audited accounts, due to be published on 28 August, 2018.

According to Valmec, the company goes into the new financial year with over A$48 million of contracts and A$13 million in expected extensions on current long-term service contracts, “with the majority of these secured works expected to be completed within the next 12 months.”

Just last month, Valmec said it had secured new services and construction contracts in the gas and infrastructure sectors, with a combined value of over $14 million. At the time, the company said the contracts would be commencing “immediately” with the majority of the works expected to be completed by early 2019.

Riding a resurgence

As a company, Perth-based Valmec is an Australian energy and infrastructure services group providing specialised packaged equipment, construction, maintenance, commissioning and integrity maintenance services to the oil and gas, resources, energy and infrastructure sectors.

It employs around 280 project and support personnel with facilities across Australia in Dalby Queensland, Sydney and Port Hedland.

One of its key developments in recent months has been a “strengthening gas thematic” which has delivered Valmec a larger and more robust work pipeline compared with the same time last year.

As a consequence, Valmec says it is experiencing a significant increase in tender volumes, budget pricing and expressions of interest (EOI) registrations. The parallel improvement in mining industry conditions including higher commodities prices has also helped to raise the tide of many commodities including oil, gas and base metals in Australia.

As of the end of last month, Valmec said it was “well positioned” on over $120 million of gas infrastructure and services works currently in “tender submission phase”, which comprise part of a total construction and services tender pipeline currently valued at over $300 million.

“Underpinned by our significant growth in gas projects executed during the year, Valmec increased its revenue by more than 40% over the prior year, resulting in a doubling of total revenue over the last 24 months. Valmec’s prominence as a leader in the expanding gas infrastructure construction and service sector continues to underpin management’s expectations of a stronger project order book during FY19 and beyond,” said Steve Dropulich, managing director of Valmec.

Court action commenced

In other news, Valmec has commenced court proceeding in Western Australia’s Supreme Court against ‘John Holland Pty Ltd’, to recover payments associated with claims in relation to the NorthLink Southern Section in WA, otherwise known as the Guildford Road to Reid Highway Project.

The deal was first struck under a subcontract entered into between Valmec and John Holland in July 2016, but which has since turned sour due to contractual disagreements and now leading to legal action which Valmec sees as entirely justified.

Valmec said the value of its summons is approximately A$11.6 million, plus interest and costs.

In a carefully-worded statement, Valmec said “these proceedings follow a breakdown in protracted commercial discussions since Valmec’s successful completion of the project earlier this year. Valmec’s claim was prepared and reviewed by its external construction lawyers and by its independent project engineering experts, to ensure there was a proper basis for the claim to be made against John Holland.”

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