Valmec shares surge on strong growth

Investors have welcomed Valmec’s announcement that it expects to record a 64 per cent rise in net earnings for the 2019 fiscal year.

The Kewdale-based contractor told the ASX it has forecast earnings before interest, tax, depreciation and amortisation of $8 million from revenue of around $110 million.

Shares in Valmec peaked at 34 cents each at 10.35am AEST, an increase of 25.9 per cent from its previous closing price.

The company said it had moved into this financial year in a strong position with an order book of around $80 million on the back of large fluctuation in tender activity in the second half of the 2019 financial year across its service and energy segments.

It said this was underpinned by a growing pipeline of energy, water and resource infrastructure opportunities throughout Australia.

“The majority of our secured works are expected to be completed with the next 12 months,” Valmec said.

The company also said it had written-off the value of its contract at the Guildford Road to Reid Highway project, at which John Holland is the primary contractor.

Valmec is currently embroiled in a legal battle with John Holland in the Supreme Court of Western Australia, and said any commercial settlement of the matter is expected to result in a one-off lift in the company’s earnings and free cash flow.