Opus guardedly optimistic new strategy beginning to bear fruit

Former chief executive says he's concerned about the company performance.

Opus International Consultants is already seeing benefits from its new business strategy and that momentum has continued into 2017, shareholders were told today.

At today's annual meeting in Wellington, chairman Kerry McDonald, who also announced his retirement in the next few months, said while the 2016 result was disappointing there were key elements that were "positive and encouraging," including in Australia and Canada which have been the two areas of "greatest difficulty".

The Wellington-based company reported a loss of $29.9 million, or 20 cents per share, in calendar 2016, compared to a profit of $16.7 million, or 11 cents, a year earlier.

Opus's Australian and Canadian units were hit hard by the collapse in oil prices, helping spur a restructure of its business last year along sector lines of buildings, water and transportation instead of country-based divisions.

McDonald said the changes were essential to ensure a viable future for the business and included a complete revamp of things like the company's project management system. The new strategy isn't a simple tweak, but is a "completely different way of doing business," he said. Among other things, it takes into account fast moving technology and innovation and is beginning to bear fruit.

Opus Stewart Weir, its Canadian geomatics business, moved from a trading loss of about $5.1 million in the first half to a profitable second half of $2 million. However, "with continued activity in OSW at record low levels, we continue to monitor the situation closely," chief executive David Prentice told the meeting. He also noted opportunities in Australia remain patchy and highly competitive. Against that backdrop, the company reassessed the value of its operations and impaired the carrying value of its Canadian asset by $33.2 million and its Australian asset by $4.4 million, he said.

However, as the "strategy starts to bed in, and the benefits of the improvement initiatives take hold, early trends are positive and encouraging." said Prentice. Gross Margin improved in the first quarter of 2017 and is ahead of the same comparable period over the last four years, he said.

"We are also seeing improvement in net revenue per FTE (full-time equivalent) especially marked in the first quarter of 2017 driven by both consolidation of FTEs and relative net revenue increases," Prentice said.

Still, not everyone was satisfied. Former chief executive Kevin Thompson told the meeting: "I am no longer disappointed in Opus' performance, I am concerned."

He noted the market value of the company has fallen by half over the past five years and "as a consequence I have offered myself as a candidate for the board." Thompson retired in 2010 as chief executive. McDonald agreed that while everyone is right to be disappointed in the company's performance and while the environment is difficult "I would say we are performing, almost certainly, well ahead of our peers."

McDonald acknowledged Thompson's bid to be elected to the board and said if elected he would qualify as an independent but while the board has "great respect" for him, it didn't support his election as it requires a different skill set. For his part, Thompson said his aim is to hold the board members accountable.

Shareholders also voted on the re-election of two directors, Keith Watson and Azmir Merican and the election of two directors who were appointed Sam Knowles and Shahazwan Harris. The election results will be published later this afternoon.

McDonald said that while there is no specific date for his own retirement, "I will be retiring in the not too distant future, within the next few months probably."

The shares rose 1 percent to 97 cents and have gained 7.9 percent so far this year.


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