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Business Description: Sedgman Limited (SDM) is a provider of multi-disciplinary engineering, project delivery and operations services to resources industry. SDM delivers services in Australia, China, Mongolia, Africa and South America.
Strategy Analysis: SDM will look to cement its reputation as one of the leading designers and suppliers of coal handling equipment and their operation. A joint venture with Leighton subsidiary Thiess (TSJV) gives clients a high level of project delivery confidence by combining Thiess´ construction and project management skills and balance sheet with SDM´s design capabilities and process technology. SDM has established a Beijing office to secure coal projects that support China's industrialisation. It aims to target emerging coking coal mines particularly in Mongolia. The Johannesburg office is a service delivery hub targeting the thermal coal opportunities in South Africa and the coking coal projects in the Moatize basin in Mozambique. It also provides the foundation for delivering Metals projects in Africa. An office in Santiago will grow the business in South America and source skilled labour that is increasingly in short supply in Australia. The company will seek to improve the consistency of earnings by growing its Operation Services division, which provides coal handling services to customers. Expansion via acquisition into the mineral ore processing segment provides a degree of commodity diversification although at lower margins. Barriers to entry are not obviously high. An early mover in its industry, SDM retains a leadership position and the scale to spread the costs of design and development. These provide a degree of competitive advantage.
Sedgman reported NPAT down 36.5% to $12.29m for the half-year ended 31 December 2012. Revenues from ordinary activities were $239.02m, down 13.6% from last year. Diluted EPS was 5.6 cents compared to 8.9 cents last year. Net operating cash flow was $4.6m compared to $28.48m last year. The interim dividend declared was 3.0 cents, compared with 4.5 cents last year.
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