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An active contributor to the development of Australian industries, Saunders International Limited (ASX:SND) is a multi-disciplined engineering and construction company with an experience of 69 years. The Company provides a range of reliable, innovative and cost-effective solutions to leading organisations across Australia and the Pacific Region with its design, fabrication, construction and maintenance services.
Sectors that leverage from Saunders’ considerable knowledge and experience include bulk liquid storage, industrial, energy, road and rail infrastructure and the resources sectors.
SND’s Clients
SND Secures ECI for NSW-based Terminal Expansion Project
The Company has been successful in commencing an Early Contractor Involvement (ECI) for a New South Wales Terminal Expansion project, pertaining to design and construction of three tanks. The Project value is over approximately $20 million.
The ECI, which will include design, procurement and fabrication of steel and early civil works, is set to begin in late February 2020. Construction works will begin in Q120 and continue through FY21 (pending full project approval).
SND is confident that if the project proceeds, it will contribute revenue from FY20-H2 through FY21.
SND recently declared its results for the half year to 31 December 2019, demonstrating its improved operational performance, renewed operating model, practical execution of the corporate strategy and continued focus on improving shareholder value.
Encouraging FY20 Interim Results
During 1H20, SND witnessed record orderbook and strengthening pipeline of new opportunities. Disciplined approach to working capital management, continued focus from projects to the corporate office and increasing opportunities across sectors were a few catalysts that propelled the encouraging results.
On the financial end-
- Revenue amounted to $29.64 million, 5.54% higher than 1H19.
- EBITDA was $1.45 million, representing an uptick of 461.1% relative to 31 December 2019.
- Record Orderbook of $97.1 million, up by 60.5% as compared to 30 June 2019.
- As at 31 December 2019, SND had cash on hand of $9.42 million and net assets worth $21.81 million.
- The Company successfully secured a new $5 million bonding facility, doubling its capacity to provide security up to a new $10 million limit.
On the operations end-
- After completion and commissioning of its first project in the Defence sector, SND bagged two further contracts valued at over $12 million. Interestingly, market trends project that there are increasing opportunities in the defence sector. With Government spend forecast to be 2% of GDP by 2020–22 and total spend of $175 billion to 2022-23, Saunders is focused on expanding its market share in this sector.
- The Company expanded into the industrial sector via completion of two shut down maintenance contracts and was awarded over $15 million in Civil Infrastructure works in the half year.
- It bagged a major contract for Sydney Water valued at circa $15 million and a contract worth over $30 million with Rio Tinto (ASX:RIO), to be delivered over the next two years.
Saunders’ Priorities Across Sectors
Over the years, SND’s client base has expanded to include a diverse combination of industries including mining companies and water utilities. Consequently, the Company has naturally transitioned to the delivery of larger and more complex solutions for its clients. Its priorities are spread across its strategic objectives pertaining to civil infrastructure, asset services, mechanical infrastructure and new sectors.
Below mentioned are its strategic objectives:
- Expansion of national civil infrastructure footprint and development of bridge maintenance business.
- Focused execution of Rio Tinto contract to deliver operational excellence and position itself well for long term maintenance contracts in NSW and VIC.
- Capitalise on major construction prospects, while securing further EPC projects with existing clients.
- SND will prioritise to continue its growth trajectory in water sector through successful delivery of Sydney Water contract.
- In the new sectors, the Company aims to evaluate options to diversify and get required scale, pursue international opportunities with key clients and evaluate acquisitions to expand maintenance activities and increase scale.
Promising Outlook
At the back of a strong pipeline of opportunities emerging across many markets that SND operates within, the Company’s outlook remains positive.
Having secured new contracts worth more than $70 million, SND expects to have $107 million worth preferred contractor status projects with the value of live tenders currently standing at approximately $344 million. The pipeline, which is yet to be tendered, is close to $265 million.
The Company is forecasting revenue growth in FY20-H2 to over $70 million for the financial year and remains confident of EBIDA growth into FY21 and beyond, at the back of strong orderbook and pipeline of opportunities. Given the increasing project size, the forecast revenue growth can be sustained with current fixed overheads, as per the company.
As the business returns to profitability, the reinstatement of dividends remains a high priority for the company.
The Company is expecting a strong multi-year growth outlook with new projects contributing to earnings through FY21 and FY22.
Share Price Information
Building on to the investors’ sentiment positively, SND settled at $0.52, up by 6.12% on the ASX after market close on 27 February 2020. The stock has generated impressive returns of 75% in the past three months.
With resources allocated to new growth projects, recent project wins with blue chip clients and the portfolio of project size increasing, SND is well-positioned to sustain and deliver well amid the dynamic and competitive business environment.
