Monadelphous hit by COVID-19

Australian engineering group Monadelphous Ltd is unable to make forecasts on the likely outcome of its financial year ending with the June quarter as the COVID-19 pandemic is hampering its operations.
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Monadelphous water engineering project in New Zealand

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Measures taken by governments and industry across the world to tackle the virus have resulted in the delay, suspension, deferral or reduction of services across a range of the company's projects and worksites, as well as materially disrupting productivity levels, it said.

The engineering construction division has experienced supply chain issues causing delays on large resources construction projects currently in progress, as well as a number of temporary deferrals to potential new construction contract award dates.

Activity levels for the maintenance division have seen significant reductions, particularly in fly-in-fly-out operations with customers reducing non-essential work, delaying discretionary maintenance expenditure and deferring shutdowns.

While Monadelphous is not able to quantify the fallout with confidence, it said should current activity levels continue until the end of the financial year, revenue would be flat year-on-year. Margins in the second half of the financial year are expected to be "significantly challenged".

Following a strategic and operational review of its water infrastructure business in Australia and New Zealand, the company decided to pull out of New Zealand and consolidate its east coast engineering construction operations into a single Eastern Australian business unit.

It started a review after several water projects approaching completion recently experienced an escalation in contract disputes and disappointing levels of profitability.

The restructuring will cut costs and allow Monadelphous to focus on improving the quality of its earnings from the water sector.

It will make a pre-tax provision of A$14 million in the current financial year for project underperformance and restructuring costs.

The chairman, the managing director and the non-executive directors are taking a 30% paycut for the next six months, while salaries for the executive and general management teams will be cut by between 10 and 20%.