Kentz – Pleased with progress during the first half of 2013

Irish-founded international engineering services group, Kentz has said that its cash position has remained strong into 2013 and provides “considerable financial flexibility” to support the group’s strategic growth plans.

The business, which has operations across the world, has plans to expand into western Africa and claims to be progressing well with its target of opening a regional office in Ghana.

Kentz Corporation Limited (LSE: KENZ), the holding company of the Kentz engineering and construction group, announced the following pre-close trading update.

Overview

• Trading in the first half of 2013 in line with our expectations
• Backlog increased 9% to US$2.8bn at the end of May (31 December 2012: US$2.57bn)
• Order intake of US$900m to the end of May
• Backlog contains approximately 80% reimbursable contracts
• 82% of 2013 target revenues under contract at the end of May, in line with our plans
• Pipeline of prospects increased 6% to US$14.0bn at May 2013 (31 December 2012: US$13.2bn)
• Increased bidding activity throughout our regions of operation
• Cash at end of H1 expected to be in line with the position at 31 December 2012 and is forecast to strengthen by the year-end

Christian Brown, Chief Executive Officer of Kentz commented:

“We are very pleased with the progress we have made during the first half of 2013. Our future growth plans are underpinned by the continued expansion of our global footprint, the strengthening of existing client relationships, and our success in winning work with new clients. Kentz’s diversified operations, which are spread strategically both in terms of services and geographical locations, have been a key enabler of this continued growth.

“Despite a cautious outlook from some of our peers in the services industry, our broad range of services has provided us with the opportunities to continue and grow our pipeline and backlog since December 2012. We remain confident of achieving our target of delivering double digit earnings growth in 2013”

Operational update

Overall Kentz’s operations worldwide have performed in line with our expectations during the first half of 2013 and as previously stated, we expect results to be weighted towards the second half of the year.

We are making good progress in the roll-out of our strategy;2013 and Beyond. The appointments have been made of three Regional Managing Directors (RMDs) to the Middle East, Africa and Australasia. These new roles provide regional points of co-ordination, collaboration and integration for all three business units and functional support.

We are progressing with our plans to expand our operations into West Africa and to open our regional office in Accra, Ghana to support projects identified locally and in the Economic Community of West African States (ECOWAS) region for the oil, power and mining sectors.

In addition to this planned expansion, we continue to win new awards for our core African business. All three business units have recently been successful in being awarded new contracts totalling approximately US$90m. Some new awards are expansion of existing contracts, again demonstrating our success in winning repeat business.

We won a second contract earlier this month at the Ichthys LNG project in Australia. This LNG project, which has achieved its final investment decision (FID), will be one of the most important developments to take place in Australia in the coming decade. This award to our Construction business unit, valued at approximately US$100m, builds on Kentz’s experience in LNG projects and adds to the telecoms contract awarded to its EPC business unit in 2012.

Kentz’s Middle East operations recently added four new reimbursable service contracts in Saudi Arabia and Abu Dhabi with a total value to Kentz of circa US$60m. Under these contracts, the Technical Support Services (TSS) business unit will provide services to existing clients over the next three years in completion and commissioning works for a refinery upgrade; a petrochemical and sulphur recovery plant; and project management services in overseeing the construction of a refinery. Such contracts demonstrate the increasing level of TSS projects which are longer term in nature and provide Kentz with recurring revenue and better visibility of future earnings.

The growth in the backlog and pipeline since December 2012 highlights the continued investment by our clients and their demand for our services. Our bidding pipeline contains many exciting opportunities in Australia at the Ichthys LNG project where we are bidding on approximately US$1.5bn of contracts due for award later this year. Kentz is bidding on a number of projects in the Middle East and Caspian region – in Qatar, Saudi Arabia and Kazakhstan. We are also bidding on further projects in the newer locations of our operations in Alaska and Colombia where we were recently awarded our first contracts.

Cash Position

The Group’s cash position remains strong and provides considerable financial flexibility to support our strategic plans. Net cash at the end of June 2013 is expected to be broadly in line with the position at 31 December 2012 and is forecast to strengthen by the year-end.