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Engenco turns $33m loss into $4m profit

ASX-listed industrial engineer Engenco has reported a profit in FY16 after recording significant losses in FY15.

Engenco on Monday announced a $4.1 million profit after tax in FY16, compared with a $32.7 million loss in FY15.

The company’s locomotive and rolling stock leasing business Greentrains, which contributed $26.7 million to the FY15 losses after a fleet review resulted in a $24.4 million devaluation of the business, was subsequently sold to Southern Shorthaul Railroad in May this year.

Greentrains made a profit of $1.6 million for Engenco in FY16, prior to its sale.

“We were able to achieve better revenue outcomes than in recent years notwithstanding the subdued market conditions,” managing director and CEO Kevin Pallas said.

“Profit after tax from continuing operations was $2.5 million compared to a loss of $6.0 million last year. Additionally, following the sale of the majority of the Greentrains locomotive fleet, a profit of $1.6 million was recorded for what is now a discontinued operation.”

Revenue from continuing operations was $132.8 million in FY16, up 4.6% year-on-year. EBITDA from continuing operations was $6.7 million, up from $129,000 in FT15.

Pallas said a net operating cash flow of $11.1 million, up from $4.6 million, was “a consequence of improved EBITDA margins, and a judicious capital expenditure programme coupled with close management of working capital”.

Engenco reduced its net debt from $15.9 million at the end of FY15 to $5.4 million at the end of FY16.

The company’s Drivetrain Power and Propulsion business reported an improvement in revenue, driven by the completion of gas compression projects.

“Drivetrain is well positioned to provide excellent customer service and flexible and responsive offerings delivered through its comprehensive branch network, deep technical know-how and large range of genuine spare parts and consumables inventory holdings,” Pallas explained.

Another Engenco subsidiary, Gemco Rail, which supplies rolling stock products and services, was a particular focus for restructuring works, with productivity improvements taking place as well as site consolidation in New South Wales as a result of the Greentrains disposal.

“The volume of general work including wheelset, bogie and bearing refurbishment services for national rail operators and northwest miners increased at our Forrestfield facility,” Pallas outlined.

“The product sales business began to win some significant supply contracts and the future looks very exciting in this regard as distribution agencies mature.”

Pallas said work had also increased at Gemco’s Dynon facility, in Melbourne’s west.

Gemco’s revenue was up from $39.0 million to $45.5 million. Pre-tax profit was $3.0 million in FY16, after the segment reported a pre-tax loss of $1.7 million in FY15.

Engenco said another subsidiary, rail recruitment, labour hire, maintenance, training and certification service firm Total Momentum, was also benefitting from a streamlining process, with profitability up despite lower revenue.

Total Momentum’s pre-tax profit was up from $1.1 million to $1.2 million, despite a revenue dropping to $9.7 million, after it was $17.4 million in FY15.

“The performance of Total Momentum in the year reflects a focus on the higher value-added end of  rail skills provisioning with the hiring out of well trained and carefully screened personnel, particularly in the locomotive driver and protection officer skill areas,” the company told the ASX.

Engenco’s wholly-owned Registered Training Organisation CERT (the Centre for Excellence in Rail Training) “encountered some revenue generation obstacles in the year as a government-funded training opportunities began to deplete”.

CERT’s revenue dropped from $8.9 million in FY15 to $8.4 million in FY16. Pre-tax profit was down from $2.7 million to $2.0 million.

Pallas said the CERT business performed well given the dry-up in government training, thanks to an expanded scope of training services. He also said the establishment of additional training facilities set to generate new revenue streams into the future.

“CERT is well regarded as a high quality, responsive and cost effective training organisation,” he said.

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