GRD full year profit slumps to $62m loss

Engineering and infrastructure firm GRD has recorded a 236 per cent jump in full year net profit for its ongoing business, before the shine was taken off after a $58 million hit from the sale of a Sydney asset and other losses.

The company today reported a full year net profit after tax for its ongoing business of $13.1 million, up from the previous corresponding period's $3.9 million.

However after taking into account the one-off $58 million write down after tax on the sale of its Global Renewables' Eastern Creek facility and other losses, GRD's net profit after tax for the 2008 calendar year slumped to a net loss of $62.3 million.

This compared with a net profit from the previous corresponding period of $3.9 million.

Last month, GRD finalised its sale of the loss making Eastern Creek facility to Emergent Capital and had flagged the significant one-off charge.

Chief executive Cliff Lawrenson said the sale of Eastern Creek was a key part of the restructure of GRD to remove its lossmaking business and legacy financial obligations.

"The sale of the Eastern Creek facility eliminates project debt of $40 million and stops the cash burn that has been associated with that business. This will have an immediate positive impact on GRD's operating profit for 2009," he said.

Revenue for the reporting period was up 13 per cent from $224.6 million to $254 million, driven in large part by a strong performance by GRD's engineering arm, GRD Minproc, where revenue climbed 19 per cent to $247 million.

The division recorded a full year profit before tax of $32.8 million.

Mr Lawrenson said while the short term outlook for the resources industry remained unclear, the company is well positioned to generate opportunities, particularly repeat business with key clients, and will continue to aggressively cut costs to maintain profit.

Cash at the end of December 2008 was $20.9 million, down from the previous year's $37 million.

The company will not pay a final dividend for 2008.

The announcement is below:

GRD Limited (ASX: GRD) today released its full year 2008 results and announced its core engineering business had achieved a strong 12 month performance in the face of the global downturn in the resources sector.

GRD Minproc recorded strong earnings growth with revenue of $247 million and a full year profit before tax of $32.8 million.

GRD Limited Chief Executive Cliff Lawrenson said while the short term outlook for the resources industry remained unclear, the company is well positioned to generate opportunities, particularly repeat business with key clients, and will continue to aggressively cut costs to maintain profit.

Mr Lawrenson said the underlying strength of the GRD Group was demonstrated by a net profit after tax of $13.1 million for the ongoing business.

However, the overall GRD Group result was impacted by the write-downs and losses associated with the discontinued business of Global Renewables' Eastern Creek Facility.

As a result of these losses, including a $50.1 million before tax write-down on the sale of Eastern Creek, GRD recorded a statutory net loss after tax of $62.3 million.

Mr Lawrenson said the sale of Eastern Creek was a key part of the restructure of GRD to remove its lossmaking business and legacy financial obligations.

"The sale of the Eastern Creek facility eliminates project debt of $40 million and stops the cash burn that has been associated with that business. This will have an immediate positive impact on GRD's operating profit for 2009, said Mr Lawrenson.

"The restructure of GRD will allow us to focus fully on our core business - providing quality engineering and project management services to the mineral processing and waste services industries. This business is highly successful and well placed to continue to drive value for our shareholders.

"We have also acted swiftly to implement a cost reduction program, without the loss of core competencies, across all elements of the GRD business in response to the changed market conditions. In 2008 we also ceased Global Renewables' business development activities in the United Kingdom, in line with the downturn in the UK economy."

Mr Lawrenson said the Global Renewables Lancashire Waste Project, currently under construction and more than 50% complete, was fully funded and commercially robust.

"The Global Renewables data room established last year remains open and we continue to receive approaches to sell down our interest in the Lancashire Project," he said.

Mr Lawrenson said the flagship GRD Minproc engineering business continued to trade strongly despite difficult external market conditions and posted a 22% increase in pre-tax earnings.

He said GRD Minproc's strategy of using its recognised process engineering expertise as a differentiator in the current market would also continue to create opportunities in the coming year.

"The market shakeout has meant we face reduced competition on projects with complex flowsheets and we are having success leveraging our long standing client relationships with some of the world's major mining houses," he said.

"For example, the technical prowess of our engineers is still in demand as evidenced by our increasing workload at BHP Billiton's Olympic Dam Expansion Project where we have been awarded a second contract, this time to provide engineering services for various ore processing technology studies."Mr Lawrenson said

GRD Minproc also had a demonstrated capability and ongoing work in gold, uranium and iron ore - commodities that retained a level of strength in the current market.

"We have also benefitted from earlier decisions to diversify and increase our profile in sustaining capital works, a growing service sector as our major long term customers seek to get more out of existing operations," he said.

Mr Lawrenson said that while the continued solid performance of GRD Minproc and the recent sale of Global Renewables' Eastern Creek Facility enhanced the strength of the GRD Group, the Board believed that, faced with the current uncertainties in both the financial and resources markets, it was prudent capital management to reduce debt and review the provision of a final dividend to shareholders.

"An interim payment of 3 cents per share was paid for the 2008 half year, but the Board has decided not to proceed with a final dividend for 2008 on this occasion because of the need to maintain financial flexibility in the prevailing conditions. Our priority is to cut costs in response to the market and repay debt from cashflow and continued asset sales."

Mr Lawrenson said that despite tougher market conditions, he was confident 2009 would see sustained Group profitability achieved by focussing on core business.