Shares in Monadelphous Group fell sharply today as the market looked past its strong FY21 profit and focused on the patchy outlook and “unprecedented” labour shortages.
Shares in Monadelphous Group fell sharply today as the market looked past its strong FY21 profit and focused on the patchy outlook and “unprecedented” labour shortages.
The engineering and construction contractor enjoyed strong growth in revenue and profit in the year to June 2021.
Revenue was up 18.3 per cent to $1.95 billion and net profit after tax was up 29 per cent to $47.1 million.
However, its capacity to meet the increased demand for its services was heavily constrained by international and interstate COVID travel restrictions.
“The resultant shortfall of available skilled resources was unprecedented and resulted in labour cost and productivity pressures across the industry,” the company said.
Its direct employee numbers peaked at over 7,600 during the period, its largest employee base since 2013.
The group ended the year with a total workforce, including subcontractors, of 7,791 representing an increase of 37 per cent over the year.
“The shortage of skilled labour will continue to be the major challenge for the company’s operations in Australia,” it stated.
The company said the impact was particularly acute for fly-in, fly-out construction work in the resources and energy sectors, where travel restrictions were impeding labour mobilisation and impacting operational productivity.
Monadelphous also noted that the volume of work was being affected by COVID.
It said there had been an “extraordinary surge in construction activity” in FY21 after the initial impact of COVID.
Its engineering construction division reported a 59 per cent jump in revenue of $979 million, but its maintenance division suffered a 6.9 per cent fall in revenue to $976 million.
Demand within the iron ore sector was particularly strong but this was offset by reduced levels of activity in the oil and gas sector.
Looking ahead, the company said total revenue was likely to fall in FY22 as several large construction projects completed in the next six months, before rising again in FY23.
“The performance of the business will be dependent on the unpredictable and uncertain nature of the COVID-19 pandemic and its impact on the company’s operations,” it said.
Managing director Rob Velletri said COVID-19 impacts and the skills labour shortage would continue to be a major challenge.
“Our attraction and retention initiatives, strategic approach to targeting new work and collaborative working relationships with our customers will become more important than ever,” he said.
Its planned response includes a review of its variable remuneration practices to support the retention of key talent.
That is code for paying higher bonuses to retain staff.
The company’s shares fell 14.7 per cent this morning to $10.055.
They hit a low of $9.87 during morning trade.
