Transcription of Presentation Given by Watpac Limited (ASX:WTP) Managing Director & CEO, Martin Monro Watpac Limited
(ASX:WTP) is a national building and construction organisation. We operate in all States and Territories around the country. We also have a mining operation, primarily in Western Australia, but also operate in Queensland and to a certain extent in Victoria as well.
I suppose the most prominent thing that came out of the first-half in FY16, is the return to a reasonable level of health in the contracting sector. Building and constructing activity in Australia has been somewhat depressed, for a period of time. And we’re really starting to see the volume of work pick up and a reasonable level of health, returning to the organisation - returning rather to the industry. I think you get the best demonstration of that when you look at the migration of profit levels, in our contracting part of the business. We’re up about 30 per cent on the previous corresponding period.
Contracting across the board is in reasonable health, there’s certainly more volumes appearing than we’ve seen over the last few years, in Australia. Each of the States has a slightly different story to tell. Some States have a higher proportion of public funded work, others private funded work etc. and there are different segments of the market that are performing differently in each of the States. But as a general comment, the Australian contracting space is in reasonable health at the moment.
Mining civil is a tougher place to be, there’s no doubt about that and mining is very different from civil. We’re not a major contract area in the civil infrastructure space. We do work in that territory, but primarily our civil and mining business is more mining focused. And that’s a challenging place to be. We work in gold, iron ore and mineral sands. Iron ore is obviously, there’s a lot being said about that, and that’s a pretty challenging environment.
Gold is having resurgence at the moment and we’re in that space, and we’re pleased to be in that space. When you look at the work that we’ve won over the last 12 months or so in the mining business, it’s all been in the gold sector. There’s $20 million worth of debt in the entire business, and that is primarily structured around the plant and equipment that is deployed in the mining space.
The cash position is in rude health at the moment. We’re enjoying being in rude health. I think there’s a new normal in Australia in terms of what’s expected from contractors in terms of the health of their balance sheet. We’re pleased to be in the position that we’re in. Current cash position, or cash position at 31 December was $226 million.
We had impairments in the mining business. As I said before, it’s a challenging space to be. Those impairments were primarily across plant and inventory, attached to the mining business. And a difficult position that we have with an iron ore contractor, we took an impairment on an account.
I think being as best positioned as we possibly can be to enjoy what I think is now, a sustained period of returned health, to the contracting space. That’s clearly a priority for us. We’re not in denial about some of the challenges in mining. But it’s a much, much smaller part of our organisation, 10 per cent by revenue and obviously a little bit more, in terms of the balance sheet deployed. But to be focused on our core business in contracting, right around the country where all of the States are really starting to see some good forward opportunities, that’s absolutely where our focus will be.
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