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Summary

  • Containment measures have reduced COVID-19 infection rates in Australia, though few restrictions remain
  • Saunders witnessed reduced productivity and travel restriction impacts on its business
  • Revenue guidance for FY20 revised, with some project revenue pushed into FY21
  • Dividend reinstatement is a high priority, with plans to resume fully franked dividend payments in FY21 remaining unchanged

Global economy is undergoing a severe downturn, as economies seek to contain the novel coronavirus. To avoid a Global Virus Crisis (GVC, as experts are calling it), financial markets are working more efficiently than they were about one month ago, though conditions have not entirely normalised. However, containment measures have reduced infection rates in a number of countries, including Australia, where a vigilant easing of COVID-19 restrictions has given businesses a much-awaited restart.

Saunders International Limited (ASX:SND), a multi-disciplined engineering and construction company that actively contributes to the development of Australian industries, on 26 May 2020 provided its second business update in relation to COVID-19. The Company outlined outcomes of operational impacts of the ongoing pandemic and measures that SND implemented to ensure safe operational continuity.

Impact of COVID-19 on Projects and Work Sites

Over the past one month, SND has been vigilantly monitoring the outcomes of COVID-19 impacts on its projects and work sites.

Firstly, the Company has witnessed reduced productivity across some sites, including its precast facility, primarily driven by increased requirements to ensure that relevant social distancing guidelines are being adhered to. Secondly, there has been a delay in receiving materials due to challenges experienced by freight channels for international supply chain and other logistic constraints. Thirdly, specialist project personnel have been unable to attend to certain sites, owing to interstate travel restrictions.

To know about SND’s First COVID-19 Business update, READ HERE- Saunders International Strengthens Orderbook With Major Construction Contract Amid COVID 19

Revenue Guidance Revised for FY20

The virus has prevailed for over three months now, challenging productivity and causing supply chain delays while reducing some margins and pushing project revenue into FY21 for the Company. SND has started to consider the potential impacts of COVID-19 on its projects and supply chain, consequently, revising its revenue guidance that was earlier released in February this year.

Key changes in the guidance are outlined below-

  • Revenue guidance for FY20 has been amended to circa $66 million - $70 million
  • EBIT margin forecast for FY20 to be between 1.8% and 2.3%
  • A target budget for FY21 of $100 million
  • EBIT margin in FY21 is forecast to be circa 3.75% - 4.75%

Impressively, SND has reported $77 million in project wins in the second half of FY20. Moreover, the combination of its record order book (exceeding $107 million) along with re-phasing of revenue of existing projects has led to the FY21 target budget.

The Board objective to resume fully franked dividend payments in FY21 remains unchanged.

Comparing Guidance Statements for FY20

SND had previously announced its FY20 guidance on 26 February 2020, when the impacts of COVID-19 were not known as capably as they are now. Let us cast an eye upon the changes (where relevant) between the February and May guidance update for FY20.

SND’s Focus Area

Saunders International has continued to focus on the preservation of cash through reduced discretionary operating and capital expenditure. The Company is also focused on the health and wellbeing of its team members, customers, and their families during these, what SND calls it, evolving times.

While it continues to monitor the operational impacts of COVID-19, SND also reported that there have been no confirmed cases of COVID-19 to date.

Quoting Chief Executive Officer Mark Benson-

SND was trading at $0.415 a share on 15 June 2020 (AEST 12:34 PM) and has delivered returns of 38.33% in the last six months.

Disclaimer: All the currencies mentioned are in AUD unless specified

 

 


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