- Saunders International has been awarded a multi-disciplined defence contract by Laing O’Rourke Australia Contracting Pty Ltd worth ~ $26 million.
- The contract is Defence Fuel Infrastructure- Marine (Tanks, SMP & E&I) for the Larrakeyah Defence Precinct Redevelopment Program (LDPRP) in Darwin.
- “The contract is a significant win for our Defence sector strategy and demonstrates Saunders’ ability to deliver value-creating multidisciplined services through our renewed operating model”, says CEO, Mark Benson.
- Shares of Saunders International on ASX recorded a fresh 52-week high of $ 0.7 after this update was released to the market.
Multi-disciplined engineering and construction company, Saunders International Limited (ASX:SND) made a successful entry into the defence sector during FY20. Completion of one project was followed by the grant of a further two contracts whilst bidding on further opportunities.
Continuing its contract winning spree, Saunders has been recently awarded a multi-disciplined contract pertaining to defence by Laing O’Rourke Australia Contracting Pty Ltd. The contract is Defence Fuel Infrastructure- Marine (Tanks, SMP & E&I) for the Larrakeyah Defence Precinct Redevelopment Program (LDPRP) in Darwin.
The new contract update, which was released to the market on 15 September 2020, saw investors taking ample interest in Saunders’ shares on the ASX. Consequently, SND recorded a fresh 52-week high of $ 0.7 during the day on 15 September.
SND traded at $ 0.630 on 21 September 2020 (AEST 02:48 PM), up 5% from its last close. The stock has delivered YTD returns of 84.62%.
Saunders’ Defence Contract with Laing O’Rourke
Reportedly, the contract value is around $ 26 million. Laing O’Rourke will be the Managing Contractor for the same. The Company will begin design work immediately, while construction works are scheduled to commence in Q2 2021. These works are due for completion by the end of 2022. Saunders believes that the contract will contribute revenue through FY21 to FY23.
Contract Significance and Management View
Defence, besides water and energy, is an emerging sector for services that Saunders’ offers. The Company forecasts strong spend in the infrastructure, industrial, minerals and defence sectors in FY21. In its Annual Report for FY20, Saunders intimated that in Australia, the Government spend is forecast at 2% of GDP by 2022 for defence.
Interestingly, one of the Company’s strategic objectives is to position Saunders for major national fuels program for the defence sector. The sector also forms a key growth focus area where the Company seeks expansion.
The contract with Laing O’Rourke, therefore, marks a significant win for the Company’s Defence sector strategy. It is an illustration of Saunders’ ability to deliver value-creating multidisciplined services via its renewed operating model.
Overview of LDPRP Project
The LDPRP project is worth circa $ 470 million and lies in Darwin. It is likely to enhance the Australian Defence Force’s capability to carry out operations and exercises in the north of Australia. Besides, the Project may provide fuel storage and refuelling capabilities to meet existing and expected demand.
The base supports several Army, Navy and Joint units, together with Headquarters Northern Command, North West Mobile Force and HMAS Coonawarra.
Saunders’ Recent Wins in Defence Sector
The Company recently entered this emerging market with the delivery of a contract and two further contract awards in FY20. Clients include Lend Lease and Nova NACAP JV.
- For NAVFAC, the contract value stood at circa $ 7 million. Scope of works includes the construction of two cut and cover fuel storage tanks. Mobilisation to the site is due to commence in Q3 FY21 with works to be completed by 2022.
- The contract with Lend Lease Building Pty Limited valued at circa $ 5 million marks the second defence contract awarded to Saunders International by Lendlease. Scope of works includes design, supply and installation of two new tanks. Besides, the contract covers coordination of the interfacing trades involving electrical subcontractors and fire systems. Mobilisation to the site will begin in Q2 FY21 Works are likely to be completed by H1-FY21.