Engineering group, Monadelphous Group (MND) says it is looking at an 80 per cent rise in revenue for the 2007 financial year and a doubling in profit; news which sent the company's shares jumping 84c to $13.44.
But while that was impressive, the company's update had a sting in the tail with directors warning of a softening outlook in the "shorter term".
The company said that the sharp rise is "due to much stronger than expected construction activity in the second half of the current financial year to date".
The company said it expects to report sales revenue of approximately $950 million for the 2006/07 financial year
It said that was "approximately 80% up on the previous year."
"Continued strong margin performance is also expected to deliver around 100% year on year increase in profit after tax"
"Buoyant conditions in the resources sector continue to drive high levels of activity and the company has experienced faster than expected progress as well as unexpected scope growth on a number of engineering construction contracts.
"Whilst the project pipeline remains robust, project timing and capacity constraints will continue to be the major factors impacting construction revenues in the short to medium term," directors warned.
But the market absorbed that warning and seemingly shrugged it off, or did it. The shares peaked at a high of $13.90 for the day in the wake of the upgrade, and then retreated to the $13.44 close.
At this level it is valued at around $1.1 billion.
Like Campbell Bros on Tuesday, which has also ridden the resources boom. MND's shares have risen strongly in the past year. Campbell's shares are up around $10 to more than $26 yesterday after a positive reaction to a profit surge.
MND's shares have risen from between $6 and $7 to yesterday's close of $13.44 and an all time high of $15.00 recently.
The warning on the outlook for 2007-08 might prompt some readjustment in the MND price:
"With a number of existing projects ramping down in the first half of 2007/08 and potential delays on near term project opportunities the company is expecting a softening of construction revenue in the shorter term," the company warned cautiously.
MND is a competitor to a host of companies: the likes of Leighton, Downer EDI, United Group, are just some of the giants and it is rapidly moving that way. But it doesn't seem to have the strong diversification of Leighton which has rapidly growing business in Asia, the Middle East and now India, to balance its dominant local position here.
"We are looking at a bumper 2006/07 with a doubling of profit over the previous year which, in turn, was also 76% up on the year before", said MND's Managing Director Rob Velletri in a statement to the ASX yesterday.
"Our tremendous growth has been driven by some significantly large construction contracts won in the resources sector over the past couple of years and maintaining this level of construction revenue in the short term will be a challenge.
"We are seeing plenty of project opportunities, however, keeping up this rate of quality work does rely on us winning the right work at the right time and at this stage it looks likely that we are going to see some drop off in construction revenue in the early part of 2007/08.
"Longer term growth prospects remain positive with the company continuing to capitalise on its strong market position in a booming mining and minerals sector which is expected to stay strong for some time.
"The company will also maintain a focus on diversifying its revenue base for sustainable growth and expanding its participation in the oil and gas, power and water sectors.
