RCR is a study in Success
- May 4, 2024
- 4 min read
by Andrew Burrel THE AUSTRALIAN, 12AM January 18,2012
PAUL Dalgleish doesn't hesitate for a second when asked about the topic of his PhD
RCR is a study in Success Thanks to the Boss.
PAUL Dalgleish doesn't hesitate for a second when asked about the topic of his PhD Thesis at Melbourne University in the 1980’s.
With remarkable speed, the science whiz turned engineering firm boss declares: "It was called Aerodynamic Transport and Impaction Efficiency of Droplets on Foliar Targets." (It involved computer modelling of how chemical spraying of crops can be done more efficiently).
The restless Dalgleish, who is now turning around the fortunes of listed integrated engineering contractor RCR Tomlinson, says that while running a company and devising corporate strategy can be mentally stimulating, it doesn't always provide him with an intellectual challenge.
"This company needed a lot of cultural change," he says.
"It was a whole pile of things pushed together. It was very blue-collar at the time, which is fine, but the companies we were trying to tender to also wanted to see a professional bit up the top of project management."
Dalgleish, 50, has built a new senior management team, removing those he says were imbued with the "old culture", and increasing the number of employees from 200 to 2500.
About 60 per cent of RCR's work is in Western Australia, with the rest on the east coast, including the Queensland coal industry.
Last financial year, as the resources sector began to boom again, RCR posted a record net profit after tax of $19.5 million on record revenues of $607m.
Underlying profit margins rose from 3.2 per cent to 4.6 per cent, while net debt was slashed from $23.1m to $6.5m. The results are reflected in RCR's share price, which was 35c when Dalgleish arrived and is now trading at $1.60, although this is down on its record price of $1.87 last April.
Dalgleish's biggest triumph was in November when RCR won a $600m contract with Fortescue Metals Group for engineering, procurement and construction work at the miner's Solomon iron ore project in the Pilbara. It is RCR's biggest contract, eclipsing the previous record of $57m.
The work is due to be completed in December, but Dalgleish believes it may be just the start of a lucrative relationship with Fortescue, which is rapidly expanding its iron ore operations.
"We'll do this job and do it well," he says.
"It's an opportunity-based contract, so if we do well, we will enhance our margins because of the incentives."
Last May RCR also bought the failed power business owned by AE&E for about $2.5m, including the intellectual property. The acquisition allowed RCR to move up to tier-one status in the power-generation services sector and reduce its dependence on mining.
RCR announced yesterday it had been awarded a $30m contract to provide power generation works for BHP Billiton's Yarnima power station in the Pilbara - the first major deal it has secured using the AE&E technology.
Brokers have reacted to the flow of positive news from RCR with a string of glowing reports and price upgrades.
Bell Potter analyst Jonathan Snape has a 12-month price target on the stock of $2.12 and says the company has been transformed into a serious player in the resources and energy sectors.
"RCR looks to have successfully transitioned from a sub-contractor to tier-one supplier," he said in a note to clients. "The balance sheet is positioned for revenue growth and rising mining investment should support a step-change in revenues over the next two to three years."
Despite the fragility of the global economy and the threat of falling commodity prices, Dalgleish remains confident that mining will continue to grow strongly this year.
"I don't believe the mining sector will slow appreciably, but you can get hiccups," he says.
"When the RSPT was announced (Mineral Resources Rent Tax in 2010), spending just pulled up for six to eight months. Confidence was high and spending was starting to get going - and then everyone just went 'uurrgh'.
"But I don't think commodity prices will come off that far. Commodities will always be sought after unless people are going to accept a reduction in standard of living.
"And it's very rare that people accept a lower standard of living, so you'd have to say it's a great future for mining services companies in Australia for the next five or 10 years."
While clearly relishing the corporate challenge at RCR, Dalgleish still hasn't got the academic bug out of his system and, perhaps jokingly, says he may have to return to university again to sate his intellectual curiosity.
"I started school at four so that means I haven't been at school for only nine or 10 years of my life," he says in an email. "Now I am writing this, I now realise I need to start studying something!"
