Why AusGroup's operational woes are not yet over

Expect more loss quarters, says analyst.

OSK has flagged out AUSG’s operational issues since May 2013. Briefly, they are i) persistent losses in contracts on hand; ii) delays in winning new contracts; iii) low order book today; iv) high operational leverage and v) the ugly macro picture in Australia. OSK does not think that the loss scenario has fully played out with all of thes factors still relevant.

Here's more from OSK:

Expect more loss quarters. In 4Q13, AUSG had already suffered an operational loss, after stripping out the one-off scaffolding sale income.

High fixed costs will keep profitability low and vulnerable to additional cost overruns from projects on hand, unmitigated by new contracts’ commencement.

Management change, again. With the MD/CEO’s resignation, cofounder Mr. Stuart Kenny has stepped into the leadership position. We believe that AUSG is again looking for a new chief executive.

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