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Done with huge impairments, Enra targets to return to black in FY20

TheEdge Mon, Jun 24, 2019 08:48pm - 2 months ago


KUALA LUMPUR (June 24): Enra Group Bhd president and group chief executive officer Datuk Mazlin Junid is expecting the oil and gas company to return to black in the financial year ending March 31, 2020 (FY20). 

The oil and gas services group intends to achieve this by focusing on downstream specialty chemicals, as well as the floating storage and offloading solution business that it ventured into last year — both of which helped Enra record FY18 profit at the earnings before interest, taxes, depreciation, and amortization (Ebitda) level.

FY20 will also be without the huge impairments it incurred in FY19 — which Mazlin largely blamed for Enra’s underperformance that year.

The group's kitchen sinking exercise in FY19 resulted in an impairment of RM24.54 million in the fourt quarter, comprising RM9.28 million on a property development project in London, and RM15.26 million on outstanding receivables for a completed project in Kuantan. 

This resulted in Enra booking a net loss of RM24.61 million in FY19 against a net profit of RM543,000 in FY18, despite annual revenue more than doubling to RM164.71 million, from RM75.29 million.

“We are really going to focus on oil and gas… I am quite confident [that the group will be profitable in FY20],” Mazlin told reporters at the sidelines of the Asia Oil and Gas Conference (AOGC) 2019 here today. 

The challenge remains in securing good profit margins, while staying competitive against other service providers in the sub-segment it intends to focus in.

"Depending on the service [offered], we have hurdle rates that we want to meet. For example, we [try to avoid] businesses with [gross profit] margin of less than 10%,” Mazlin said, adding that the group is actively looking outside Malaysia for opportunities.

It remains to be seen if Enra’s renewed focus will pay off. 

Meanwhile, the group had cash of RM22.84 million at end-FY19 against current borrowings of 16.17 million.

The group provided its maiden floating storage offloading (FSO) solution in Myanmar — a four-year job worth US$48 million — in FY18, and expanded its Australian specialty chemicals ventures that same year with the acquisition of International Chemicals Engineering Pty Ltd. However on average, margins have not recovered as speedily as intended. 

"Obviously in some areas of business, we [have to] become very competitive, so you have to suffer a bit of margins… But so far so good, [despite us being] a newcomer in these [segments],” Mazlin said, adding that the group has an order book of around RM200 million at present. 

Additionally, Enra will keep in mind the lessons it learnt on cost-optimisation, and to be more cautious in terms of diversification, considering the hiccup it experienced in its London property venture, following the decline in property prices there. 

“Now we have cleaned up [our books]… Going forward, we make sure we have gated processes in every investment that we do — that is tightly controlled by the board, and oil and gas-centric — providing guidance in terms of how we spend our money,” Mazlin said.

Enra’s shares were not traded today. The counter last closed at RM1.45, giving the group a market capitalisation of RM197.5 million.








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