ferrets stock to watch: sedgman limited

Ferret's Stock to Watch: SEDGMAN LIMITED
09:08, Monday, February 19, 2007

QLD ENGINEERING GROUP BOOSTS ITS COAL INDUSTRY SERVICES

Sydney - Monday - February 19: (RWE Aust Business News)
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OVERVIEW
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Sedgman Ltd (ASX:SDM), an engineering and operations services
provider to the Australian and international coal industry, has
significantly expanded its global operations.

The company on Friday announced the signing of the Project
Alliance Agreement to undertake design, construction and commissioning
work on the $346.4 million Lake Lindsay coal handling and processing
facility with joint venture partner Thiess Pty Ltd.

Sedgman managing director Peter Hay said Lake Lindsay was the
second project undertaken by the company for leading coal producer Anglo
Coal Australia, which in April 2006 awarded the Thiess Sedgman Joint
Venture (TSJV) a contract for the $442 million Dawson mine project.

"We have built a strong relationship with Anglo Coal and this
contract proves our hard work is paying off," Mr Hay said.

"We have been working with Anglo Coal since 2005 in planning for
this project and commenced work under an interim agreement in March
2006.

"The signing of this contract provides further evidence that
Sedgman is continuing to deliver on its prospectus forecasts.

"We have now landed two of the largest coal handling and
preparation plant (CHPP) contracts ever awarded in the Australian coal
industry," Mr Hay said.

Mr Hay said the company was moving to exploit growth
opportunities in the global coal industry, after having already secured
a dominant position in Australia with more than 50 percent of the
market.

He said the Lake Lindsay project which was outlined in the
company's prospectus as a high-probably contract for Sedgman this
financial year, would lock in prospectus revenues.

Lake Lindsay involves the delivery of a new processing plant,
coal handling facilities and overland conveyor as part of an expansion
of Anglo Coal's German Creek mine located 290 kilometres southwest of
Mackay.

The mine will have its coal handling and processing capability
upgraded to 16 million tonnes per annum from the current 11 million
tonnes.

The project work will include an 800 tonne per hour coal
preparation plant and a 21 kilometre long single flight belt conveyor,
the second longest of its type in the southern hemisphere.

Work on the project is due for completion by December, with the
construction workforce peaking at 500 employees.

"The future growth and profitability of the company will be
underpinned by Sedgman delivering new contracts in coal together with
further expansion into the metalliferous sector through our recent
Pac-Rim acquisition," Mr Hay said.

"We have delivered three new coal contracts so far this
financial year, including the Acland and Sonoma CHPP contracts.

"We are also in negotiations for further expansion work and long
term CHPP operations at Sonoma."

Having locked up Australia's top design and construct deals,
Sedgman is set to utilise its expertise on the global stage.

"We're confident of replicating our success internationally,
with double-digit coal production growth forecast in all of Sedgman's
key geographical markets of Australia, South Africa, India and Indonesia
through to 2010," Mr Hay said.

"On top of this are the opportunities available in the domestic
and global metalliferous sector, particularly in nickel and iron ore
operations."

SHARE PRICE MOVEMENTS
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Shares of Sedgman closed 20c higher at an all-time high of $2.40
on Friday. Low for the year is $1.26. In the prospectus the company
forecast a total dividend for the 2007 financial year of 5.6c per share,
fully franked, and expects to deliver this. Sedgman says it will
endeavour to provide shareholders with fully franked dividends in
future years and currently intends to maintain a dividend payout ratio
of between 40 to 60 per cent of net profit. The company has 170 million
shares on issue with a market cap of $408.9 million.

Chairman Russell Kempnick, at his first annual meeting, held last
November outlined results in 2006.

"We announced a record pro forma profit after tax of $15 million,
more than double the previous corresponding period and exceeding
prospectus forecasts," he told shareholders.

"The record result was a reflection of the growth in Sedgman's
Engineering Services and Operations businesses, and we maintained our
position as the market leader in the design, construction and operation
of coal-handling and preparation plants.

"Revenue from our operations business grew 33 per cent to $27.9
million, boosted by full-year contribution from our Blair Athol
preparation plant which moved to 24 hour, seven-day operations during the
period," Mr Kempnick said.

On a pro forma basis, basic earnings per share was 10.6c which
exceeded the prospectus forecast of 10.2c based on a weighted average
number of ordinary shares on issue.

Sedgman's financial position is strong, with a net cash balance
as at June 30 of $39.5 million.

The company has also expanded its workforce, with a doubling in
personnel since June 2005.

There are now more than 300 people contributing to the business.

Sedgman's revenue and earnings before interest and tax have grown
considerably over the past three years, and directors expect
continued growth in 2007.

Forecast EBIT for 2007 is $25.3 million.

However this does not account for the company's Pac-Rim
acquisition, which will have a positive impact on its 2007 projections.

Mr Hay told shareholders that he continues to see growth in the
2007 financial year.

Sedgman's business units are performing well and are set to
deliver on the prospectus forecasts.

In addition to planned international expansion, Sedgman is
continuing to develop its services and will continue to seek further
complementary business opportunities such as Pac-Rim.

Sedgman is set to deliver increasing shareholder value, through
its platform of current services to the coal industry and our new growth
path in the metalliferous sector via Pac-Rim.

"We have already created a powerful and successful company in
coal; the opportunity now for us is to do the same in the metalliferous
sector through Pac-Rim.

"This is set to be a big challenge for us in the year ahead but
one that I look forward to immensely," Mr Hay concluded.

BACKGROUND
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Sedgman Ltd is a relative newcomer to the Australia Stock
Exchange, joining the list on June 8, 2006.

The company was established in 1979 and has become a leading
provider of multi-disciplinary engineering, project delivery and
operations services to the Australian coal industry.

Specialising in the design, construction and operation of coal
handling and preparation plants (CHPP), Sedgman is recognised
internationally for its coal processing and materials handling
technologies.

After listing, Sedgman expanded into the metalliferous sector in
December with the acquisition of ore crushing and screening services
provider Pac-Rim.

The Thiess Sedgman Joint Venture was formed in 2001. Thiess is
one of the largest construction, mining and services providers in the
Asia-Pacific region.

Both companies have an equal stake in the TSJV, while Thiess
holds a 38.1 per cent equity stake in Sedgman.

Sedgman has built a solid platform for growth in the Australian
coal industry.

The recent move into the metalliferous sector with the
acquisition of Pac-Rim gives Sedgman the opportunity to achieve
substantial earnings and revenue growth as we diversify across the range
of commodities.

With a dominant market position, quality client base and robust
industry fundamentals, Sedgman is confident about the future and has the
right team in place to capitalise on the opportunities available.

ENDS

Copyright © 2007 RWE Australian Business News. All rights reserved.