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Opus International flags $5.5 million bill after missing out on project

Tuesday 28th October 2014

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Opus International Consultants, the listed engineering firm, flagged the loss of an undisclosed project will weigh on profit margins and cost it $5.5 million in the year.

The loss of the large project, which was in "a non-traditional discipline with unique and unusual complexities", would weigh on its New Zealand earnings, the Wellington-based company said in a statement. First-half margins were squeezed by the loss on a project and bidding costs of $1.9 million, and those costs were expected to rise to $5.5 million in the full financial year.

"Despite strong work in hand and five successful wins with our contracting partners on long-term NZ Transport Agency network outcomes contracts, the New Zealand result has been further impacted by the substantial one-off project loss," chief executive David Prentice said. "A full review is underway to identify possible areas to reduce the expected loss."

In August, the company reported New Zealand revenue rose about 5 percent to $147.9 million while Earnings before interest and tax declined 5 percent to $11.2 million in what the company described as "variable market conditions."  Overall it reported a 6 percent gain in first-half profit to $9.9 million, reflecting the contribution from the Stewart Weir business acquired in 2013, which drove a jump in earnings in Canada. Group revenue jumped 25 percent to $265 million.

Shares of Opus fell 3.9 percent to $1.49 and have declined 25 percent since the start of the year. The stock is rated an average 'hold' based on the recommendation of four analysts compiled by Reuters, with a median price target of $1.87.

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