CEO says it was insulated from pandemic-led problems elsewhere and clinched several fresh jobs, too.

 

AUSTRALIAN engineering firm Civmec, one of the Singapore Exchange' s " OSV (offshore supply vessel) plays" , was not merely insulated from the pandemic-led operational strain that whipped the sector last year but also clinched several fresh jobs, all of which have added a spring to its step in 2021.

 

" We' ve been quite, quite lucky in Western Australia. It (the outbreak) hasn' t had a huge overall impact on the business. The projects we' re working on still carried on. The only area where we had some slight impact was in the maintenance segment. And that was deferral of work rather than cancellation," chief executive Patrick Tallon told The Business Times in an interview.

 

Sweetening the proposition further for the firm - that derives the bulk of its revenue from full turnkey services for the metals and mining sector - is a bigger and better waterfront facility in Henderson, south of Perth, where Civmec is headquartered.

 

The assembly and sustainment hall that was completed a year ago is 18 storeys or 70 metres high, has a sizeable undercover workshop serviced by overhead travelling cranes, and is the largest heavy engineering facility of its kind in Australia. Its internal space is equivalent to an area that can house 12,000 passenger buses.

 

" One of the most optimistic things is that we have finished the development at Henderson. It is a very extensive facility. Now, all the big modular assemblies that were previously done outside can be done inside, undercover, protected from the elements. So, we' re capable of doing what we have done in the past better," said Mr Tallon.

 

Civmec' s executive chairman Jim Fitzgerald said: " We have doubled up our capacity and essentially, we can double our revenue" . (Mr Fitzgerald and Mr Tallon, the company' s co-founders, each own around 19.5 per cent of Civmec.)

 

That may not be the best part of Civmec' s mega-facility. Henderson is one of two manufacturing centres in Australia earmarked for the government' s massive investment of reportedly well over A$100 billion (S$102.4 billion) in naval shipbuilding to ramp up its defence capabilities.

 

" The facility is very well-located for opportunities as Henderson is one of the precincts that the Australian government has earmarked for sovereign shipbuilding. A large portion of the Royal Australian Navy' s fleet is kept on these waters. That' s a huge opportunity," said Mr Tallon.

 

Civmec, also listed on the Australian Stock Exchange, is currently undertaking a multi-billion-dollar 10-year " job bonanza" together with Luerssen Australia to deliver 12 offshore patrol vessels (OPVs) to the Australian navy. While the first two vessels were built in South Australia using steel plates prepared and cut at Henderson, the remaining 10 vessels will all be built at the Henderson shipyard. Civmec' s other facilities are located in Newcastle, New South Wales, and at Gladstone, Queensland.

 

Civmec is also building a rescue facility in Henderson to help submarines in emergency situations.

 

Gentle manoeuvre

 

Civmec' s relatively new move into shipbuilding can be deemed a " gentle" manoeuvre.

 

Metals and minerals still form the biggest activity and accounted for over 85 per cent of 2020' s total revenue of A$392 million. Last year, Civmec reported a 150 per cent jump in net profit to A$17.5 million despite a 20 per cent fall in revenue.

 

Given the commodity rush from gold to ore, Civmec expects activities to stay buoyant in the sector as producers seek to raise their output. " We see that as quite a solid sector. Minerals and metals has always been our biggest area of revenue return and will remain that way for the next couple of years at least."

 

" It (shipping) is a little bit of a shift...not a quick shift. The focus was to get into a bit more recurring revenue streams along with the cyclical nature of major projects. And we are seeing the reward of that focus," said Mr Tallon.

 

By recurring income, he means shipbuilding and long-term maintenance projects, all of which are mostly big jobs.

 

" These are pretty major projects. The trick with major projects is finding the next major project to go on to when one is finishing up. That can be quite difficult to do."

 

Other than metals and minings and defence activities, the firm also does fabrication of subsea structures for the oil and gas sector.

 

It is further hoping to tap more infrastructure jobs from the Australian government from building roads and bridges to steel structures.

 

It appears to be a deliberate strategy for job sustenance. Mr Tallon said: " Generally when the public sector - for example infrastructure - is busy, the private sector is not so busy and vice versa. So the fact that we are across that many sectors gives a much better opportunity for sustainability across the business."

 

Civmec' s order book stood at A$1.1 billion as at December 2020 - the first time it crossed the billion-dollar mark, owing to some new contract wins including the fabrication of wharf girders and structures at a loading port in Queensland, and heavy engineering contracts to be delivered from its facilities in Henderson and Newcastle.

 

" FY21 order book (is) already greater than FY20 revenue," said the company in an investor presentation dated August last year. At that point, the contracted order book stood at some A$940 million.

 

Not much of that exuberance is reflected in its stock showing unfortunately. On the SGX, the stock is currently trading at 39 Singapore cents, just one cent shy of the level it stood at a year ago and off its 52-week peak of 46.5 Singapore cents in August when it unveiled a robust full-year report card.

 

Australian brokerage Euroz Hartleys, the sole research firm that has paid attention to Civmec so far, cites liquidity issues for the lacklustre performance of the stock.

 

" We recognise of course that Civmec are not orphans in an undervalued sector. However we can see scope for momentum back in the sector with growth money returning to value and this on its own could drive the re-rate we are looking for," said the house in a report issued last November, following several new job wins by the company.

 

Paring debts

 

Over the last year, Civmec has managed to pare its debts. Total borrowings fell by more than a third to A$62 million in FY2020 from A$98 million a year ago. Net cash from operations rose to A$95 million from A$79 million over the same period.

 

Mr Tallon said: " We feel quite solid where we are at the moment. We' re not looking to double our numbers overnight. But we' re very focused on having that steady growth over the next couple of years."

 

If anything, the pandemic has led the company to dig in its heels on its Australian-focussed strategy.

 

He added: " One big lesson from 2020 was the importance of sustaining ourselves in Australia. From the restrictions, you can see how difficult it would be to operate if we were more global. It doesn' t mean we' re afraid in the future to look beyond, but right now, our focus is very much Australia" .

CONSTRUCTION and engineering group Civmec Limited said on Monday that it has secured multiple contracts worth A$140 million (S$141.11 million) in total.

 

These include a major contract for onsite structural, mechanical, piping and electrical works for the Iron Bridge Magnetite Project in Australia, said Civmec, which is listed in Singapore and Australia. The Iron Bridge project is a joint venture between a Fortescue Metals Group subsidiary and Formosa Steel IB.

 

Civmec will be mobilised for the Iron Bridge project in " early 2021" and at the peak, the project will employ approximately 400 people on site. Currently, the group is already contracted to deliver site civil concrete works and the supply of 4,700 tonnes of steel structures and modules for the same project.

AUSTRALIAN engineering firm Civmec on Thursday posted a net profit of A$4 million (S$3.69 million) for the third quarter ended March 31, a 2,756.7 per cent year-on-year jump from A$141,000 previously.

 

This comes on the back of a 19.2 per cent rise in revenue to A$95.5 million, from A$80.1 million the year before.