1. Can you elaborate on Civmec’s business segments and focus areas.
Civmec is a construction and heavy engineering company based in Australia. Established in 2009, Civmec is one of Australia’s leading providers of turnkey solutions across a range of core capabilities. The group operates four facilities across Australia with a combined land area of some 43ha.
We provide a suite of turnkey solutions to the resources, energy, infrastructure as well as marine and defence sectors.
Our capabilities are diverse but they fall broadly within the areas of construction, manufacturing and maintenance. The services we offer include, but not limited to, fabrication of structures, industrial insulation, shipbuilding, offshore logistics, civil works, and surface treatment.
The group can take on projects of all sizes and complexities. Our clients include major energy and resources companies such as Chevron, Rio Tinto, BHP, Fortescue Metals Group, Alcoa as well as government bodies in Australia.
2. How has Covid-19 affected your operating conditions, especially since Civmec’s business requires heavy manpower at manufacturing and onsite facilities? What measures have you put in place to mitigate the impact?
Covid-19 has not made any significant impact on our operations. Our in-house manufacturing capabilities proved beneficial in ensuring that many of our clients’ onsite supply-chain requirements continued to be met. We also sought to ensure that our manufacturing operations remained as close as possible to normal so we could service our sites and clients without any disruptions.
In terms of maintenance work for our clients, certain projects were rescheduled but none was cancelled. For some maintenance projects that were delayed last year, we expect to recognise their financial contributions in FY2021 ending June.
3. Who are some of your competitors? What differentiates Civmec from them?
Several companies are providing some of the services we offer. However, there are no companies we know of with the same extensive range of capabilities in fabrication, modular construction and maintenance that we have.
Such a full suite of capabilities enable us to be involved in a significant portion of a project without us having to sub-contract certain functions to third parties. This makes us a one-stop shop for the vast majority of our customers.
4. How has the group’s order book grown over the years? How do you plan to sustain this growth?
Our order book has grown quite significantly over the last few years. As at Jan 31, it stood at A$1.15 billion ($1.17 billion), a record high and the first time it has gone above A$1 billion.
Companies in the sectors we operate in are projected to spend about A$500 billion on various projects over the next five years. This presents significant growth opportunities for a service provider like Civmec.
5. Does the company have a dividend policy?
Due to our ability to generate profits consistently, we have been paying final dividends every year since our listing in 2012. We declared our very first interim dividend of 1 Australian cent per share when we reported our results for the half year ended Dec 31, 2020, on Feb 10. This interim dividend was possible because of our strong profits and operating cash flows as well as reduced capital requirements.
6. What are the key focus areas for Civmec in the next 2–3 years?
We aim to develop recurring revenue streams even as we continue to tender for more construction and manufacturing projects. This will involve scaling up our maintenance business.
One major enhancement to our flagship Henderson facility in Western Australia is the addition of an assembly and sustainment hall. This is the largest undercover modularisation and maintenance facility in Australia and has enough space to house the equivalent of 12,000 passenger buses. With this facility, we can build and maintain large vessels as well as complex modules for projects in the resources and energy sectors.
We intend to spend about A$10 million over the next 18 months to set up a permanent facility in Port Hedland in Western Australia to better support our clients in the resources and energy sectors. This facility will have fabrication and maintenance capabilities and provide our clients access to local manpower for their short- and long-term needs regularly.
For the defence sector, we are building 10 offshore patrol vessels in Henderson for the Royal Australian Navy. This project will provide longterm revenue until 2029. The Australian federal government has also designated Henderson as a strategic site for the building and maintenance of various naval ships.
We also see more opportunities in the infrastructure space. Australia’s federal government recently announced an additional commitment of A$15.2 billion over 10 years for road, rail and community infrastructure projects as part of the stimulus measures to support employment in the aftermath of Covid-19.
We are also keen on renewable energy projects. Initiatives involving clean energy such as hydrogen and wind are increasingly taking off in Australia.
7. Do you have any plans to expand your geographical reach?
We remain focused on Australia for the moment as we believe that opportunities here are still plentiful. Just based solely on the defence business, the group has income visibility till 2029. This is just based on our existing orders and does not include prospects for more contracts that the Australian military is expected to award. As for the resources, energy and infrastructure sectors, we expect more projects to be tendered in the foreseeable future.
8. How have pandemic-induced changes in global supply chains altered Civmec’s market outlook and operating landscape?
Fortunately for us, the impact so far has been minor as all our major supply chains are based in Australia. None of our projects has been cancelled although some maintenance work for certain clients has been pushed back. Our extensive network of suppliers across Australia gives us access to most of the materials, products and services we need to carry out our projects. This also enables us to still meet our contractual obligations without any compromise on quality.
9. The group maintains several policies with regards to diversity, environmental, health & safety and local industry participation. Can you elaborate on some of the group’s key focus areas?
Our key focus areas are described in our annual sustainability report and are broadly grouped under People, Safety and Environment. People: The percentage of women employed in our head office and in the business increased in FY2020, as did the percentage of apprentices and trainees employed in the business. Safety: Our all-injury frequency rate (rate of injuries requiring first aid or greater medical attention for every million hours worked) improved to 30.13 for FY2020. Our target for FY2021 is to bring this rate to below 30. Environment: Targets for energy intensity and emissions intensity, measured against revenue earned, improved in FY2020. Our recycling participation rate also increased in FY2020. Both these measures are expected to improve further in FY2021.
10. Why should investors take a closer look at Civmec?
The group has been profitable every year since its inception in 2009 and we are still actively seeking opportunities for further growth.
We believe that the sheer scale of what we have put in place is now unparalleled in Australia and matches the best facilities globally. Our substantial manufacturing and construction capabilities as well as resilient inhouse supply chain management put us in a good position to seize more growth opportunities and secure significant projects across all the sectors we operate in.
Our investments are bearing fruit, as seen from the substantial increase in our revenue and earnings over the last few years as well as our current record order book of A$1.15 billion.
