Shares in AJ Lucas Group fell more than 10% after the company told shareholders to brace themselves for disappointing half-year results.
Despite saying it expected a second-half turnaround in yesterday’s earning update; the company’s shares hit a low of $2.67 during the day, before bouncing back a touch to close at $3.16, down just 2.5%.
The reason for the dramatic slide wasn’t hard to see: AJ Lucas warned that interim earnings before interest, tax, depreciation and amortisation for the six months to December 31 are expected to show an $18 million loss.
"As foreshadowed in the 2009 Annual Report and November’s annual general meeting, the Group has experienced a disappointing first half year," AJ Lucas said in a statement to the ASX.
"The legacy of management missteps from the previous financial year, delays in project timing and general business uncertainty have all affected the group’s financial performance," directors told the stock exchange.
The company said its EBITDA included non-recurring costs of $10.1 million, and no interim dividend for the half-year was anticipated.
Directors said that after a first half normalised EBITDA of a loss of around $18 million, second half EBITDA is forecast at $30-plus million.
The operational loss of $18 million "has been offset by the successful sale of ATP651, adjusted for other non-operating costs, to deliver an overall EBITDA profit of $42 million," directors said.
Drilling revenues had been strong during the first half of the financial year, but the general market uncertainty in 2009 led to irregular work, it said.
"Infrastructure works on the various CSG (coal seam gas) and LNG (liquefied natural gas) projects, the division’s principal domain, have been slow to start, affecting the financial results," it said.
But AJ Lucas said the second half should see much stronger results, with EBITDA of more than $30 million and its "growing pains" over.
"The Company’s growing pains, experienced in full in calendar 2009, are behind us and we are confident of our turnaround plan, now in full operation," director said confidently.
"Our future prospects are very encouraging.
"The drilling division now has a full order book for calendar 2010 and, barring unforeseen events, will deliver a substantially improved operating result in the second half," AJ Lucas said.
The construction and infrastructure divisions benefited from $20 million in work to government schools, with another $20 million of such work to come, it said.
The company said the proceeds from the sale of the Authority To Prospect (ATP651) "will return the Company to its usual trading conditions".
"Part of the proceeds will be used to repay debt, with the balance used for working capital.
"Given the improved operating outlook, the Group believes it has sufficient working capital to meet its obligations and conduct its business operations.
"Lucas proposes to release its results for the first half ended 31 December 2009 on February 26."
