Leading mid-tier engineering firm Verbrec has started the year on a high note by closing out its final legacy project, enabling it to build upon record work in hand within key growth sectors of the economy.
Verbrec (ASX:VBC) is now focused on higher-margin projects in energy transition, digitalisation of the economy, and vocational training for infrastructure and resources projects.
Work in hand is now more than $81.5m, with historical highs in energy and digital industries.
This is expected to close the gap between Verbrec’s strong underlying margins and its statutory margins. In FY22 the underlying profit of $42.1m took a $6.7m hit from the poor-performing legacy projects, however VBC completed the work and is now pursuing recovery of these costs.
In the crucial energy sector, Verbrec has just won a front-end engineering and design (FEED) study from Denison Gas for its proposed infrastructure expansion. That project is part of Denison’s goal to facilitate early gas production from the Mahalo North project in Queensland and ease hard-felt supply constraints on Australia’s east coast.
The study is being jointly funded by gas plays Denison and Comet Ridge (ASX:COI).
Verbrec’s other clean energy transition projects have included decommissioning a gas field, developing control systems for the plant providing hydrogen for the world’s first shipment of liquid hydrogen and design of a hydrogen refuelling station.
Narrowing the gap
After a 32.1% increase in gross profit, a huge 900% lift in earnings and a 24.6% surge in revenue to $121.4m last year, the company’s now looking forward to a big 2023.
“In energy and digital industry (DI) we now have higher margins and strong work in hand, which sets us up very well for the future given these are crucial sectors attracting billions of dollars of investment,” CEO Linton Burns said on a visit to the company’s Perth facilities this month. “All this work will improve our margins going forward and narrow the gap between marginal and statutory profits.
“We’re also tapping into the demand for more skilled labour by providing training, particularly for other growth areas like mining and infrastructure.
“As some operators tickets expire every two to three years, this part of the business provides ongoing steady and recurring revenue from large industries.”
Verbrec’s offerings for the resources sector include training on the breakthrough ToolTek system which replaces the teeth on frontline loading machines at mine sites by a wireless adaptor. It replaces the dangerous task of mine workers replacing the teeth by heavy hammering with their at-risk hands.
The system won the WA Department of Mines, Industry Regulation and Safety’s Health and Safety Invention of the Year award last year and Verbrec is proud to have developed the training material for the technology that’s becoming more widely used.
DI projects include the control system upgrade projects for major Australian utility companies.
Verbrec has additionally developed and commercialised its own stockpile inventory management software solution StacksOnTM which is used by mining giant BHP (ASX:BHP) to drive greater efficiencies at its iron ore operations in Western Australia.
In recognition Verbrec is on the right track for more growth, it also got an increase in finance facilities to $23.8m and greater flexibility from Westpac.
This article was developed in collaboration with Verbrec (ASX:VBC), a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.