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Fulton Hogan FY profit rises 9.7% on Christchurch, Auckland

Fulton Hogan FY profit rises 9.7% as Christchurch, Auckland activity makes up for slower Australia

By Paul McBeth

Sept. 15 (BusinessDesk) - Fulton Hogan, the closely held construction company, lifted annual profit by 9.7 percent, with activity in Auckland and Christchurch underpinning the company's performance, offsetting slower Australian activity.

Net profit rose to $151.6 million in the six months ended June 30, from $138.2 million a year earlier, the Christchurch-based company said in a statement. Revenue fell 11 percent to $2.9 billion, with a slowing resources sector across the Tasman, particularly in Western Australia and Queensland, weighing on sales. Fulton Hogan now gets 53 percent of annual revenue from Australia.

"Our New Zealand regional businesses were really solid this year, particularly in Christchurch and Auckland - Auckland on the back of strong population growth and Christchurch still on the back of the earthquake rebuild," managing director Nick Miller told BusinessDesk. Miller said Western Australia and Queensland faced "considerable economic uncertainty" as the mining sector slows down, and the divide between the resources and non-resources reliant states was becoming more evident.

By contrast, New South Wales "has been very strong on the back of a very strong pipeline of infrastructure procurement by the state government there, and our land unit here performed well and responded well to Auckland property demand and the Christchurch east to west shift," he said.

Last year, Fulton Hogan signalled tighter Australian government budgets at state and federal levels would probably eat into sales in the 2015 year, and Miller said today that the decline in revenue "was in line with budget expectations."

The company anticipates a "steady year" in 2016 as residential building work in Auckland stays strong, though "beyond the backend of 2016 we see softening in the NZ infrastructure market and may see that accelerate in regional sectors on back of economic downturn in dairy pricing."

In Australia, Fulton Hogan has won contracts on the National Broadband Network, which Miller said could deliver $140 million a year for the next five years, while roading work in NSW and the prospect of Queensland winning the Commonwealth Games provided more opportunities.

Fulton Hogan completed its buy-back of former cornerstone investor Shell, ending a 33-year relationship with the oil company as a shareholder. The company generated an operational cash flow of $215 million in the year and continued to repay debt, which Miller said left the books in good shape with net bank debt at a ratio of 35.3 percent to net bank debt plus total equity.

"Completion of the Shell transaction is a major milestone for the organisation and positions us well to look at growth opportunities for the future," Miller said. "We do have headroom for the right opportunities - Fulton Hogan has been a business that's grown by both organic growth and acquisition over its 82 years of trading, and we have focused on a fair amount of organic growth in markets such as regional Australia."

Fulton Hogan continued to improve its work safety record, with total recordable injury frequency rate (TRIFR) falling to 6.7 from 7.6 a year earlier.


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