AusGroup anticipates Q1 net loss

Blame cost overruns and contract delays.

In a disclosure to the Singapore Exchange communicating its profit guidance for the first quarter ended 30 September 2013, AusGroup Limited and its subsidiaries (AusGroup or the Group) announced that after a preliminary assessment of its results for the first quarter ended 30 September 2013 (Q1), it anticipates that it will incur a net loss for Q1.

The anticipated loss is due to three reasons: Cost overruns from two contracts that are approaching completion; delays in the commencement of new contracts; and restructuring costs.

The board has investigated the causes of the Q1 anticipated loss and it is satisfied that all costs in respect of the contracts in question have been brought to account in Q1 and that the Group’s overhead costs have now been substantially reduced in order to protect the Group’s future profitability (Operational Restructure).

The board said it is optimistic on the future opportunities for the Group’s businesses with specific focus on long-term maintenance contracts that are in the final stages of negotiation. Further details of the Group’s performance will be discussed when the Group announces its Q1 results.

The Q1 anticipated results have caused the Group to breach certain technical covenants in its banking facility agreements.

"We are in discussions with the banks in relation to resolving the covenant issues and will update the market shortly. As a consequence of the Group’s Operational Restructure, there have been a number of changes to the leadership team. Laurie Barlow has stepped down from the position of Chief Executive Officer (CEO) and Managing Director (MD) of the Company and Stuart Kenny has been reappointed CEO and MD," said the company.

"The Group thanks Mr Barlow for his work and welcomes Stuart to the role. Stuart Kenny is one of the original founders of the Group’s business and has been part of the Group’s leadership for over 15 years," it added.