Sedgman FY15 results and outlook

Interviews

Transcription of Finance News Network Interview with Sedgman Limited (ASX:SDM) Managing Director and CEO, Peter Watson
 
Natalie Macdonald: Hello I’m Natalie Macdonald for the Finance News Network. Joining me now from leading resource sector services firm, Sedgman Limited (ASX:SDM) to discuss its annual report for FY2015 is Managing Director and CEO, Peter Watson. Peter, thank you for joining us at FNN today.
 
Peter Watson: Thank you very much Natalie, lovely to be here and really welcome the opportunity.
 
Natalie Macdonald: You’ve just announced your full year results for FY2015. What were the highlights?
 
Peter Watson: I think for me, the highlights were a great return to strong profitability. This represents the third half of that continuous momentum building in the organisation. And personally it’s gratifying that the whole of the organisation’s contributed very strongly to it. From our projects business, our operations business and our functional support, have all contributed very well to it.
 
Natalie Macdonald: Can you also tell us about the full year dividend, including the special dividend?
 
Peter Watson: Our strong profit result has allowed the Board to continue on with their policy of returning 100 per cent of NPAT, as dividend to our shareholders. And as well as that, as part of our capital management strategy the Board has declared and flagged to the market, an intention to continue a special dividend. Both of those fully franked for the period and for the special dividend, intended to continue for the foreseeable future.
 
Natalie Macdonald: Now to discuss the Sedgman business. Can you give investors a feel for the Sedgman business and also, how it has adapted to the slowdown in the resources sector?
 
Peter Watson: We’ve responded in a number of ways to the current commodity cycle. We’ve leaned down the organisation. We restructured it 14 months ago to make sure that we’re as efficient and effective, in delivering our services as possible. We’ve consolidated some of our locations to make sure that that efficiency improvement is sustainable, across the organisation and across in fact, the globe.

We’ve also responded with a strong focus culturally on performance and performance management. And through that and through our operational capabilities, as well as our engineering in projects, we’re providing a differentiated offering out into the market.
 
We specialise and have historically delivered lump sum, fixed price project work. And in the current environment, where capital is hard to find or tightly contested, capital efficiency and cost and time delivery assurance, is very important in new work being developed. Through that differentiation, we’re finding that the market is responding very well to our valued differentiation. And we’re in a position right nowwhere the company is actually, I believe, building market share in quite a difficult set of circumstances.
 
Natalie Macdonald: What then Peter are some of your largest projects, and how are they performing?

Peter Watson: We have three current signature projects on the books at the moment Natalie. The first I’ve mentioned is the Guyana goldfields project in the northern part of the Amazon, in Latin America. We’re just in the final stages of commissioning that, so it’s been a green fields gold project, a $US140 million lump sum. And that project has taken us 14 months from contract signing to first gold production. I think a very credible world-class benchmark project, in terms of cost and time and performed extremely well.
 
Closer to home in Groot Eylandt in the northern part of Australia, we’re building about halfway through, a manganese reprocessing facility for South32 Limited (ASX:S32), up at Groot Eylandt. And that project’s performing extremely well. Further west over in Western Australia at Kwinana, for Alcoa Inc. (ASX:AAI) we’re building a tailings retreatment and processing facility for them.
 
Natalie Macdonald: I just wanted to touch on safety for a moment. What is the company’s record for the last 12 months and also, the company’s approach to improving performance?
 
Peter Watson: Safety’s a very strong focus for me personally, for the Board and for the executive and in fact, across the whole company. We’ve moved the conversation in Sedgman around safety, from what was probably more a compliance focus conversation, now into a much more balanced and behavioural safety piece of work. We started out with some cultural development work last year. And we’re now in a focus of making sure that people are self-aware of the hazards that they do face in the workplace, be it on an operation site or a project site. And trying to take people on a journey of self-awareness and self-responsibility, for not only their own safety, but their peers.
 
We’re starting to see some great benefits of that program. We saw a 27 per cent reduction through financial year 2015, of our recordable injury frequency rate. And we’ve seen some fantastic examples of excellent results in safety performance. We’ve seen projects that are delivering over 1.5 million man-hours lost time injury free, in Guyana as an example. Our operation site at Red Mountain in Queensland has just surpassed 750 days of recordable injury free performance, as well as great production benchmarking. So it’s a very important aspect for us, it’s obviously a sustainability issue and we have to demonstrate leadership and accountability, in that safety journey.
 
Natalie Macdonald: Lastly then Peter, what’s your outlook for FY2016?
 
Peter Watson: FY16 remains in our view, to be a difficult market subdued because of the commodity cycle, albeit we do see good quality near term opportunities. We’re forecasting and I guess the outlook statements that we would take forward into the market are plateau revenue, but strong and sustained earnings. Continuing to improve our production performance, continue to focus on cost and looking to continue to return good results, for our shareholders.
 
Natalie Macdonald: Peter Watson, thank you for the update.
 
Peter Watson: Thanks for the opportunity.

 
Ends