17th Jul 2015 06:59
LONDON (Alliance News) - Atlas Development and Support Services Ltd Friday said it expects to make a loss in the first half of 2015, and warned that the second half will be even tougher due to the faltering oil and gas industry.
The African-focused support services and logistics company said it expected revenue in the first half of 2015 to total USD11.0 million and for its pre-tax loss to be around USD2.5 million, and warned revenues in the second half of 2015 will be "significantly below expectations" which will lead to an overall loss for the full year.
The company has forecast a difficult second half in 2015 due to "pressures on revenues and margins from oil and has industry customers", which are suffering from oil prices falling from around USD115 per barrel a year ago to around USD57 per barrel on Friday, forcing oil companies to tighten capital expenditure and delay projects.
"Our management focus has always been to build a cross-sector support services business in East Africa, to capitalise on the huge corporate and government investment initiatives across the region. The impact of the decline in oil prices has increased the urgency of that task," said Carl Esprey, chief executive of the company.
However, the company has made "significant progress" refocussing the business towards non-oil & gas related services after winning contracts in the geothermal and civil engineering sectors during the first half, including a USD1 million contract in Ethiopia.
Overall, the company said it has a solid potential project pipeline across multiple sectors in excess of USD500 million for work in 2016 and 2017.
"Ambitious businesses of this nature are not built overnight. We are making substantial progress and are hopeful that 2016 will be a year of growth in new areas for the company," added Esprey.
Atlas Development said it had cash totalling USD6.1 million at the end of June and said it is continuing with its "substantial cost rationalisation programme".
"In particular, the employee headcount has been reduced significantly and savings have been identified in areas of discretionary spending," said the company.
Atlas Development will book a USD1.0 million non-recurring restructuring cost in the first half and a further USD2.8 million in the second.
Overall the second half looks bleak. On top of the restructuring costs and anticipated fall in revenue, the company said it will also be hit by foreign exchange losses in 2015 due to the depreciation of the Kenyan shilling against the dollar.
Over 65% of the company's revenue comes from the oil and gas industry, and the company said it will make an overall loss in 2015, and further warned cash will fall from its current GBP6.1 million to around the GBP2.0 million to GBP2.5 million mark.
Atlas Development also said it is seeking to appoint a Kenyan as a non-executive director to the board in order to improve its local interest and reputation.
By Joshua Warner; [email protected]; @JoshAlliance
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