Fulton Hogan pushes up profit 9.7pc

Nick Miller, managing director of Fulton Hogan.

Fulton Hogan annual result out for June 2015 year

Major Christchurch-headquartered civil engineering and resources business Fulton Hogan pushed up net after-tax profit 9.7 per cent for the June 2015 year, but "trying" Australian conditions forced revenue down.

Managing director Nick Miller announced that the business - operating here, in Australia and in the Pacific - made $151.6m net after-tax profit, up on last year's $138.2 million while revenue fell from $3.24 billion to $2.9 billion.

A company statement said: "The growth in profit comes amid trying market conditions in Australia where tightening infrastructure budgets have contributed to a 10.5 per cent dip in company revenue."

Australian infrastructure budgets had tightened, Miller emphasised.

Fulton Hogan employs 5600 people and has a $3.5 billion forward order book which Miller said was slightly down on last year's $3.6 billion, reflecting more difficult market conditions and increasing competition, particularly in Australia.

In the latest financial year, the business created a new role of chief executive officer for New Zealand, filled last September by long-term experienced professional Robert Jones, formerly of Leighton Contractors. Jones joined Fulton Hogan in January 2012 as chief operating officer of the infrastructure stream.

International business Shell has now fully sold out of Fulton Hogan as at December 31 last year, after a long-term selldown beginning in 2009. That followed a 33-year relationship with Fulton Hogan. Miller said Shell was an equity partner but during a much longer term of 81 years, Shell was a supplier to the company. Shell sold out due to its decision to leave New Zealand and the Fulton Hogan sale was in line with Shell's sales of petrol stations, although its has retained its offshore oil and gas activities out from New Plymouth.

Fulton Hogan's major projects include work won for the Huntly section of the $458 million Waikato Expressway, Australia's $140 million national broadband network projects in South Australia and Western Australia, the $122 million Western Belfast Bypass north of Christchurch, the $130 million King Georges Interchange in New South Wales, NZTA network outcome contracts for the West Coast ($115 million) and Northland ($141 million), VicRoads eastern and south west maintenance alliances in Victoria ($200 million for the first five years) and the $10 million Lorde Howe Island airport resurfacing.

No forecast for 2016 was released but Miller gave an indication of expected performance.
"We see next year's market as being relatively stable compared to this year's and that's reflective of the infrastructure spend coming off, particularly in the Australian market," Miller said.

However, New Zealand conditions appeared to be slightly more buoyant than Australia's.

"We see the infrastructure market in New Zealand a game of two halves: Auckland and Christchurch steady for the next 12 months then some softening. Regional NZ we see some softening occurring on the back of lower economic activity, driven by falling dairy prices."

FULTON HOGAN RESULT
YEARS TO JUNE 30
2015 2014
Revenue $2.9 $3.24b
EBITDA $318m $303.7m
EBIT $234.7m $225.4m
Profit before tax $210.8m $192.4m
Net profit after tax $151.6m $138.2m