Gerard Hutchison 30.10.2015Gerard Hutchinson was appointed MD and CEO in April 2015. Photo by Sim KihLEADERSHIP CHANGES are afoot at AusGroup as a significant new revenue stream takes off.

Even its MD is recently appointed. Gerard Hutchinson, 47, has just clocked six months on the job but he is not new to AusGroup, having served prior to this as its CFO for about three years.

Stuart Kenny, long the face of AusGroup as its MD, has now taken on a non-executive role but remains as chairman. 

And Chew Heng Ching, the lead independent director, has assumed an extra role as deputy chairman. 

Phillip Coetzer 30.10.2015Phillip Coetzer, now CFO after being acting CFO since April 2015.
Photo by Sim Kih
Among other changes, Phillip Lodewikus Coetzer has been confirmed as CFO.


At the recent 1QFY16 results briefing, Mr Hutchinson, the MD, spoke about "rebuilding the company" and "refreshing the company" -- a task made necessary in view of the significant decline in Australia's mining and oil & gas sectors that AusGroup previously derived most of its revenue from through supplying key services. 

In the transformation of AusGroup, among other things, a message to the staff is "because we have always done things that way -- I don't want to hear that as a reason for why we are still doing it that way. You have to go back to the fundamentals, and ask 'Is there a better way?' " said Mr Hutchison. 


The AusGroup story is now about port & marine services at Port Melville across from Port Darwin in north Australia -- while AusGroup also grows its engineering services, which is largely maintenance services for the oil & gas sector.

(Maintenance services has grown from A$15 million to A$150 million on an annualised basis in the past two years, as Mr Hutchinson noted).


About a year ago, AusGroup acquired for S$41 million in new AusGroup shares (at 44.49 cents apiece) a subsidiary of Singapore listco Ezion Holdings which was setting out to build a port and marine supply base in Port Melville.

In July 2015, AusGroup has completed the construction of a jetty and three storage tanks with an aggregate capacity of 30 million litres.

Regulatory approvals for full commercial operations were delayed until very recently.

And now, a new business segment is born -- port & marine services, in addition to the other existing segment (engineering services). Investors, no doubt, will hope the new business can deliver the earnings to justify the A$130 m total investment. 

The offshore oil & gas sector isn't exactly rosy, so that's a reason for reining in excessive optimism. By the way, AusGroup is confident of saving A$10 million a year from cost-cutting measures.

1QFY2016
results
Engineering services AU$’000 Port & marine services
AU$’000
Total
AU$’000
Revenue 120,748 11,999 132,747
Gross profit 14,049 1,124 15,173
Margin 11.6% 9.3% 11.4%
Net profit (loss) 1,869 (1,397) 472

Revenue from Port Melville -- the only gazetted natural deep water international port in Northern Australia -- comes from, among others:

1) Supplying bunker fuel to vessels. AusGroup will earn a spread of c.10 US cts/l from the sale, sharing half of that spread with the fuel supplier, a US oil major.

2) The jetty. AusGroup gets revenue when wood chips are exported through Port Melville. It provides services such as ship handling, and unloading and loading of cargoes.


Check out the following corporate video to get an idea of Port Melville and the business of AusGroup: 


A fund manager noted that AusGroup's fixed assets have been, understandably, low-yielding because of the development of Port Melville, and the company's debt has been eating away at its cashflow.

His question: "Are you past the level of maximum capex, and are you about to sweat the assets? Is the company now past an inflexion point?" 


Mr Hutchinson replied that no more capex is slated for Port Melville and the business there will henceforth generate free cash flow. The only key capex in AusGroup is the ongoing replacement of the various portions of its portfolio of scaffolding equipment when they reach five years of age. 


Share Prices

Counter NameLastChange
AEM Holdings4.6200.240
Avi-Tech Electronics0.3000.005
Broadway Ind0.150-0.003
China Sunsine0.470-0.005
DISA0.004-
Food Empire0.550-0.005
Fortress Minerals0.375-
Geo Energy Res0.395-0.015
Golden Energy0.495-0.045
GSS Energy0.053-0.003
InnoTek0.435-
ISDN Holdings0.480-0.025
ISOTeam0.101-0.004
IX Biopharma0.165-0.004
Jiutian Chemical0.091-0.003
KSH Holdings0.3550.005
Leader Env0.061-
Medtecs Intl0.181-0.005
Meta Health0.0300.001
Moya Asia0.060-0.002
Nordic Group0.425-
Oxley Holdings0.180-0.004
REX International0.240-0.005
Riverstone0.710-0.045
Sinostar PEC0.220-
Southern Alliance Mining0.670-
Straco Corp.0.390-
Sunpower Group0.385-
The Trendlines0.096-
Totm Technologies0.124-
UG Healthcare0.210-
Uni-Asia Group1.1200.040
Wilmar Intl4.120-0.060
Yangzijiang Shipbldg0.945-0.015

NextInsight RSS

rss_2 NextInsight - Latest News

Online Now

We have 1473 guests and no members online