Perth-based contractors Georgiou Group and Ertech Holdings have reported strong growth in annual profits, helped by their national expansion strategies.
Perth-based contractors Georgiou Group and Ertech Holdings have reported strong growth in annual profits, helped by their national expansion strategies.
Family-owned Georgiou has doubled its underlying profit (before interest, tax and depreciation) to $20.4 million for the year to June 2020.
This followed a 25 per cent jump in annual revenue to $608 million.
The company said recent project awards in WA and Queensland had lifted its work in hand to about $800 million, meaning 85 per cent of its FY21 budget was already secured.
Chief executive Rob Monaci said the FY20 result was an improvement on the prior year’s disappointing result and he was aiming for further gains.
“These are average numbers but we are looking to go better again next year,” he said.
“At the moment we have a real drive to increase the return to shareholders.
“We are happy to have growth but only if its profitable growth.”
Mr Monaci said the improved FY20 profit reflected both higher revenue and improved project delivery, leading to better margins.
The outlook for future growth was positive, especially in government road and rail projects.
“Our tendering pipeline remains healthy across our entire business with the exception of non-government building construction due to reduced commercial development.”
Mr Monaci added that a number of government infrastructure projects were being fast-tracked and utilising partnering style contracts to accelerate delivery.
“Georgiou’s improved work-in-hand along with a healthy pipeline of opportunities for future work provides the opportunity for the company to select projects which better suit our resources and capabilities.”
Wangara-based Ertech is also looking to benefit from increased government spending on infrastructure projects.
The employee-owned company has announced a big lift in annual earnings, with net profit after tax up 154 per cent to $22.2 million.
This followed a three per cent increase in group revenue to $447 million.
The Ertech numbers include the results of its specialist remediation subsidiary Duratec, which is in the midst of completing a public share offer and listing on the ASX.
Duratec contributed $12.2 million in profit and $247 million in revenue.
Its results will not be consolidated in future, as Ertech’s shareholding will be diluted form 50.7 per cent to 19.9 per cent as part of the IPO.
The IPO will further strengthen Ertech’s balance sheet. Its cash holdings increased to $66.1 million at 30 June and borrowings remained at historical low levels.
Executive chairman Gavin Miller described the FY20 results as an excellent outcome despite challenging market conditions.
“A strategic priority was to bid, win and deliver financially sustainable work and we are proud to have achieved this in the current climate,” he said.
Chief executive James Giumelli said Ertech was very well positioned to leverage its core capability and strong balance sheet to deliver projects in the public infrastructure and resource sectors.
Both Ertech and Georgiou said just more than 50 per cent of their FY20 revenue was earned on the east coast.
A big project for both companies was the $120 million Northern Road upgrade in Sydney, which they won in 2018 through a 50-50 joint venture.
Shortages of skilled labour are looming as a concern for bother companies.
“That’s a real big problem across the country,” Mr Monaci said.
“Its not just in Western Australia but certainly NSW and Queensland.
“That’s one reason we do joint ventures, to make sure we secure enough labour to do job adequately.”
Mr Monaci said joint ventures also allowed the group to bid for larger projects, which provided sustainable longer-term work.
A notable example was the $400 million Tonkin Gap project, which Georgiou won in joint venture with BMD Constructions, WA Limestone, BG&E and GHD.
