Monadelphous Group Limited (MND)
BUY

Recovery yet to come

 21 Feb 2023
Sector: Industrials

1H23 RESULT

Need To Know

  • EBITDA +6% ahead of market expectations
  • Guidance downgraded due to labour shortages and delays on timing of new awards
  • Re-affirm BUY rating

Result Highlights

Revenue A$953m vs A$935m market. 

EBITDA A$58.2m vs A$55.4m. 

NPAT A$29.1m vs A$25.7m. 

DPS of 24c in-line. 

Operating cash flow A$39.9m vs A$31m consensus. 

Net cash position of A$176m with an EBITDA cash conversion of 95%. 

Revenue guidance downgraded to a 5% to 10% decline. 

Investment Thesis

Solid result for the period with a 6% beat to EBITDA albeit clouded by expectations for a slower FY23. 

Guidance was updated to be a 5 to 10% decline in revenue due to labour shortages and weather-related issues. Management have indicated that this is simply a pushing out of the captured revenue and not a loss of work. Revision to revenue guidance implies a 5% - 15% downgrade to market expectations. 

Maintenance and Industrial services demonstrated better than expected performance with a record 6-month revenue of A$677m which is promising given this work is re-occurring. Engineering Construction was lower with A$278m in revenue in the half (down from A$472m 1H FY22).

Labour shortages remained the key area of worry and were attributed for the 3–6month delays that management expect for projects in the Calendar year. Management suggested that the thematic may remain for the next 12 months but expect the re-introduction of the international labour program to ease the impact.

The key take away is that things may get worse before they get better. The longer-term growth outlook still remains positive, and we expect that the margin will improve as disruptions from weather, labour and COVID completely unwind. 

Re-iterate our Buy Rating. 

Specific Disclosure: Sandstone Insights analyst holds a position in the subject company.

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Stock Overview

Share Price

Company Overview

MND is an Australian engineering firm that provides fabrication, pre-assembly, construction, electrical services and maintenance to the resources and infrastructure industries.

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