The group boasts a simple company structure, with well-defined business groups, and has one of the market’s cleanest and appealing balance sheets.
MND’s stock fell hard over the second half of 2008 as the mining sector in general was punished. However, the mining services industry is seeing the pressure lifting, and MND boasts a strong order book.
MND reported excellent FY10 results, including a record profit after tax of $83.2 million and record sales revenue of $1.28 billion.
Blue chip clients
MND works with core markets in the resource industry, specifically iron ore, coal and mineral processing. However the company has also smartly diversified into oil and gas, water and power, where it continues to build a strong reputation for engineering excellence.
The iron ore sector has been booming of late on the commodities recovery and Australia boasts a sizeable chunk of the global ore market.
MND has delivered some of the iron ore industry’s largest engineering construction projects for BHP Billiton Iron Ore and Rio Tinto Iron Ore, resulting in repeat business.
MND’s structural, mechanical and piping contract for BHP Billiton’s Rapid Growth Project 4 at Newman Hub, valued at approximately $290 million, represents the group’s largest single contract awarded to date.
The company’s excellent track record has resulted in recurring business and preferred supplier status with blue chip customers in the coal sector including Rio Tinto Coal and Allied, Anglo Coal and BHP Billiton.
The company is also a major force in Australian projects in the oil and gas sector, with recent or current projects including the BP Kwinana Refinery Turnarounds and Capital Projects (Western Australia), the Darwin LNG Maintenance Services Contract and Oil Search’s (OSH) Field Facilities Construction Services Contract in PNG.
Another year of growth
In August, MND reported its FY10 results – including a record profit after tax of $83.2 million, up 12.1% on the prior year.
Strong revenue growth was achieved across the company’s operations and in all key markets − resources, energy and infrastructure − with total sales revenue for the year increasing by 13.6% to a record $1.28 billion.
Underlying earnings for the year were $129.4 million, up 11.5% on FY09. Earnings per share (EPS) rose 10.7% to 96.9 cents.
A final dividend of 48 cents per share was declared. This takes the total full year dividend payout to 83 cents per share, up 12.2% on year.
Whilst lower than the previous period, solid operating cash flow performance continued to be a feature of MND’s business in FY10, and the company reported a net cash position of $116.6 million at year-end.
At its recent AGM, MND confirmed that, since June this year, tendering activity has continued to be healthy.
Late last month, MND announced to the ASX three new construction contracts and additional work with a combined value of approximately $130 million.
These agreements take new construction and services contracts so far this financial year to about $400 million.
Following the achievement of record sales and earnings in FY10, MND has entered FY11 with a healthy forward workload.
The company has continued to experience a high level of demand and growth from existing contracts and expects revenues in 1H11 to at least match those of the 1H10.
Given this potential, MND will be one of the stocks to watch in the coming year.
Monadelphous Group is a heavily diversified resources company which stands to benefit from commodities growth across the board, in line with a global economic recovery.
The company’s FY10 results were strong and FY11 is looking healthy already, with new construction and services contracts so far totalling $400 million.
We also expect expansion opportunities in the water and solid waste management markets, along with the newly acquired transmission pipeline business, to provide MND with ongoing growth opportunities.