Ezra Holdings suffers seasonally weak 1QFY14 with $6.35m net profit

Revenues grew but in lower-margin segment.

Ezra Holdings delivered an adjusted net profit of US$6.35mn for 1Q FY14, -3% q/q and -6% y/y, with operating profit margin falling 2ppt y/y to 5%, reports Barclays.

The research firm said this is a seasonally weaker quarter for Ezra and will have negative implications for the company's share price.

Here's more from Barclays:

Subsea service continues to grow. Ezra delivered 1Q FY14 revenue of US$339.8mn (+22% y/y). This was mainly attributable to an increase in revenues from the subsea service segment (+US$59.5mn y/y). Inclusion of revenue from two subsea construction vessels, Lewek Express and Lewek Centurion, and an increase in the number of projects undertaken contributed to the subsea service segment’s revenue growth. Revenue from the marine service segment also increased by US$2.4mn, but revenue from the offshore support segment declined by US$0.8mn.

Gross margin lowered by 3ppt y/y to 15%: 1Q FY14 gross margin of 15% is 3ppt lower y/y, due to higher revenue contribution from subsea services which has a comparably lower gross margin. Ezra’s 1Q GPM averaged 25.6% over the past five years.

Operating profit down on absence of one-off gains: Ezra recorded operating profit of US$17.4mn in 1Q FY14, -15% y/y. This was mainly attributed to the absence of a US$3.8mn one-off gain on asset disposal in 1Q FY13.

Order backlog remains robust: The company’s order backlog remains strong at above US$2.0bn, with offshore support services segment utilization at c90%.

Cautiously optimistic outlook for FY14: Ezra’s management remains ‘cautiously optimistic outlook’ for FY14, with EMAS AMC (subsea construction services) continuing its strong top-line growth, with the company focusing on execution, operational profitability and strengthening EMAC AMC’s foothold in its growing subsea service business.