Fulton Hogan more than doubles 1H pretax profit, eyes growth after Shell exit
By Paul McBeth
March 10 (BusinessDesk) - Fulton Hogan, the privately held construction firm, more than doubled first-half pretax earnings with its five business units all running ahead of budget, and plans to ramp up growth once the Shell Group share buyback is completed.
Pretax profit climbed 144 percent to $92.8 million in the six months ended Dec. 31, for a net profit of $64 million, the Christchurch-based company said. Revenue was $1.64 billion in the half. The forward order book was $2.8 billion, down from the $3.4 billion level it gave in October.
The New Zealand business was underpinned by a pick-up in the economy that’s driven regional and infrastructure business, while the Australian sector was helped by increased airport work and the completion of six of seven distressed projects that had needed impairment charges in the past.
Managing director Nick Miller told BusinessDesk the slowing of Australian capital investment from the resources sector will flow through into Fulton Hogan’s business, and the strong New Zealand dollar was also weighing on trans-Tasman earnings.
Still, a pipeline of large public-private partnerships has opened opportunities for Fulton Hogan across the Tasman.
“For us, the challenge and the opportunity, is one of scale” and the company would participate as part of a consortia for the projects, Miller said. “We’re positioning Fulton Hogan to play to its strength as a key enabler to access that work.”
Fulton Hogan will complete the last two tranches of $117 million in a share buyback to allow Shell cash up out of the company. Once that’s completed, Fulton Hogan plans to accelerate a new phase of growth with its New Zealand unit diversifying into new sectors, such as irrigation, and the Australian segment knuckling down on its core businesses.
“At the completion of that (the Shell share buyback), Fulton Hogan is going to have a lot of available capital for the growth of the business,” Miller said.
Fulton Hogan retired $138.9 million of debt in the half, and refinanced some $155 million of banking facilities using its operational cash flow and the sale of some non-core assets, it said.
Miller said the company aims to bring its balance sheet to the equivalent of a BBB credit rating in 2015, and once the Shell buyback is completed, it will be on target to do so. He said it has no plans to raise capital.
Fulton Hogan shareholders were offered a 1-for-40 share issue last year to give them greater exposure to the company, of which 21.9 million shares were taken up. Miller said since the offer, the shares were valued at $8.60, up from $7.60.