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DRA Global swings to A$14m interim loss over legacy contracts

31st August 2022

By: Marleny Arnoldi

Deputy Editor Online

     

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ASX- and JSE-listed consultancy DRA Global has posted an underlying loss before interest, taxes, depreciation and amortisation of A$14-million for the half-year ended June 30.  

This compares with underlying earnings before interest, taxes, depreciation and amortisation of A$32.5-million in the first half of 2021.

DRA reported an adjusted basic loss a share of A$0.72c in the period under review, compared with adjusted basic earnings a share of A$0.21 reported in the prior comparable six months.

Interim CEO James Smith explains that the first half of the current financial year was plagued by legacy fixed-price construction contracts that were entered into by the G&S Engineering Services and G&S Support Services businesses operating in the Asia-Pacific (Apac) region, in prior years.

The contracts have been terminated and associated contract claims are being commercially resolved, with estimated financial effects accounted for as at June 30.

Smith adds that the company’s businesses in the Europe, the Middle East and Africa (Emea), and North, Central and South America (Amer) regions are performing steadily.

Smith expects the company’s Apac operations to become profitable during the second half of the financial year, following the divestment of the noncore G&S businesses in September.

The G&S businesses will be sold to technical industrial solutions provider Kaefer, following which DRA will restructure its Apac operations.

The company is also in the process of updating its operating model, following a review and having completed the first two phases of updates. The new operating model for the group will ensure clarity of accountabilities to support improved performance and collaboration; appropriately empower business units to responsibly operate within the group’s governance, risk and compliance frameworks; and provide a platform to optimise overhead cost structures.

While DRA has appointed a permanent CFO, Michael Sucher, it is still recruiting a permanent CEO.

Meanwhile, DRA has also managed to successfully resolve two major disputes that arose prior to the group’s initial public offering in mid-2021.

“Together with progress towards resolving the residual fixed-price construction contracts and planned divestment of G&S, the group has a platform to deliver a profitable second half,” Smith affirms.

The group has decided to not declare an interim dividend.

Moreover, DRA Global achieved significant milestones with its Emea-focused businesses in the half-year under review, including winning more mining, processing and infrastructure work as part of Phase 3 of the Kamoa-Kakula copper plant, in the Democratic Republic of Congo.

The group also welcomed new clients steelmaker ArcelorMittal and Saudi State-owned miner Maaden, and won large-scale projects in new countries within the Emea region.

The Emea region is expected to continue delivering strong performance in all business units, while the Amer region will continue growing.

DRA’s pipeline includes about A$5.8-billion worth of opportunities, with A$3.9-billion related to projects and the balance to operations.

The group expects underlying earnings before interest and taxes in the range of A$0 to A$10-million for the full-year and a profitable second half of the financial year with a strong focus on quality of earnings.

However, profitability may be impacted by certain macroeconomic events, including potential further interest rate increases by central banks as the effect flows through financing of future major projects and the pipeline for DRA, and inflationary pressures that impact on the group’s cost base in all major regions.

 

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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