Adelaide-based engineering and mining services group E & A Limited says it expects full year profit for 2014 to come in under previous expectations.
The company said increased competition and pressure for contractors to do “more for less” had contributed to the adjustment of forecasts that it could again produce a record breaking profit.
“On the basis of unaudited management estimates, the company’s current expectations are that net profit after tax will be comparable with the record annual profit of $7.7 million after tax recorded in the previous year,” it told shareholders today.
Executive chairman Stephen Young said that “while the forecast results are lower than anticipated earlier in the year, we are expecting to deliver our previous record earnings in what has increasingly become a very tough and competitive market”.
“Our recent success in winning new work such as we have announced today, in extending our safety record further and in securing approval for self-insurance, show EAL has started the new financial year with a solid order book and good momentum.”
E&A Limited operates eight wholly-owned subsidiaries across the mining, resources, defence, water, energy and financial services industries.
Young said the record revenue and lower earnings expectations reflected lower margins as a result of a difficult construction contract completed in south-east Queensland and lower utilisation in its Whyalla facilities as a consequence of the Federal Government bringing forward the Renewable Energy Target (RET) review.
The company has also secured approval from WorkCoverSA to register as a self-insured employer.
While still on the lookout for acquisitions, the company has had to make some adjustments.
“EAL has previously advised of its intention to complete acquisitions in complementary sectors and regions as part of its growth strategy,” the statement said.
“This intention remains and the company is continuing to review opportunities with the objective of completing at least one value-adding transaction each year.
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“An acquisition targeted for completion in the last 12 months was not completed.
“This unexpected development was most disappointing particularly in view of the commitment of resources and effort made by EAL towards the transaction.
“Litigation has commenced to recover the losses incurred by EAL as a result of the vendor’s decision to withdraw the business from sale.”
The statement said EAL subsidiaries have recently secured contracts for new work of approximately $75 million and as a consequence the order books were well-positioned for the coming year.
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