Mining service provider, Ausenco Ltd, says it will take a $6.8 million after-tax, non-cash impairment charge in its half year accounts, following a review of its energy business.
The news saw the company’s shares pushed down 9% to $1.77 yesterday, a fall of 18c, before a small bounce to be down 15c (or 7.7%) at $1.80 at the close.
It came nearly five weeks after the company revealed that a slowdown in some parts of its business would see a first half loss.
Taken with the estimated loss then of between $9 and $13 million, total first half loss for Ausenco could be as high as $18 million to $19 million.
Ausenco said yesterday that the charge represented 5% of the value of goodwill of assets acquired in 2008.
The charge will be presented as an individually significant item in the June 30 half year accounts.
Ausenco says the charge will have no impact on its cashflow or compliance with financial covenants.
Ausenco chief executive, Zimi Meka, said in a statement that the company’s board remained committed to a strategic diversification and expansion into the energy sector following a thorough review of the five year strategic plan.
Mr Meka said the impairment charge resulted from costs incurred in advance of earnings from new projects and delays in government environmental and greenhouse initiatives.
This had made it difficult to achieve short term financial targets for the energy business.
Mr Meka said "The impairment charge arose as a result of the costs of current strategic initiatives being incurred in advance of earnings from new projects, in combination with delays in government environmental and greenhouse initiatives, particularly in North America. This had made achieving short term financial targets for the Energy business difficult.
“Despite these delays, we have confidence in our business model and the medium term growth plans for this area of our business. Our strategic and operational goals remain unchanged,” said Mr Meka.
On May 27 the company revealed in a trading update that it would be looking at a first half loss.
"Ausenco anticipates 2010 first half revenues of between $200 and $230 million and a reported net loss after tax of between $9 and $13 million.
"This projected result includes an office closure and surplus lease provision of up to $7.5 million, pre-tax, but does not include any intangible impairment losses that might be assessed following the current review.
"Reported net profit after tax for the 2010 full year is projected to be between $13 and $18 million.
"Compared with the second half of 2009, Ausenco has experienced lower first half EBITDA and cash flows as a result of later than anticipated project commencements, relatively higher comparable foreign exchange rates and lower than historic resource utilisation rates. In addition, higher tender related costs and resource capacity holding costs increased the Group’s comparable cost base.
"This has resulted in a significantly lower 2010 first half earnings result.
"The Group expects 15% to 20% revenue growth in the second half of 2010, largely the result of utilising existing resource capacity to deliver secured projects and optimising the performance of underperforming offices.
"The realisation of benefits from the various initiatives taken and anticipated growth in revenues is expected to deliver second half EBITDA of between $38 and $45 million, providing a solid platform for growth into 2011," Mr Meka said.
