The Kenyan headquartered, African focused support services and logistics company Atlas Development has said the H1 pre-tax losses anticipated is $2.5m from an expected turnover of US$11.0m in its latest six month period to 30 June 2015.
Atlas attributes the loss to a slowdown in oil exploration in the regions it operates an effect of the dip in international crude oil prices with the company relying on the oil and gas sector for 65 percent of its revenue.
To date the support services and logistics company says there has continued to be delays and cancellation of tenders and allocation of new contracts as the downturn in oil sector persist.
Atlas says it is reducing their expectations for trading in H2 2015 and anticipate to make a loss for the 12 month period to 31 December 2015 with cash at bank at the yearend expected to be in the region of US$2.0-2.5 million.
As a result the Company says it has initiated important cost rationalisation programmes to correctly position the business until such time as projects re-emerge in the established support services sectors, spending in the oil sector returns or projects in alternative sectors come on-stream.
To be affected include the employee headcount which has been reduced significantly especially in Kenya while savings have been identified in areas of discretionary spending. The company further expects to feel the pinch from foreign exchange losses resulting from the depreciation of the Kenyan shilling by about 7 percent since the start if 2015 against the US dollar.
Away from the oil and gas sector contract conversions have been achieved in the geothermal, civil engineering, oil & gas and mining spaces including a US$1m contract in Ethiopia.
Going forward Atlas has diversifed its business development offering targeting new sectors of operation so as to reduce the impact of the negative oil price environment and associated cut-backs.
One target is business from the crude oil pipeline from Uganda to the Kenyan coast which the company sees potential revenue of about $500 million for work to be carried out in 2016 and 2017. To prepare itself Atlas adds that the cost cutting programme has been tailored to retain sufficient capacity to meet the requirements of the pipeline of contracts.
Opportunities are also alive elsewhere in the region as the region is in the process of undergoing rapid development, with numerous large scale infrastructure, geothermal, power and other substantial development projects being executed.
“Our management focus has always been to build a cross-sector support services business in East Africa, to capitalise on the huge corporate and government investment initiatives across the region. The impact of the decline in oil prices has increased the urgency of that task. Ambitious businesses of this nature are not built overnight. We are making substantial progress and are hopeful that 2016 will be a year of growth in new areas for the Company,” Carl Esprey, Chief Executive Officer of Atlas Development, says.
Atlas further hopes that the listing on Nairobi Securities Exchange’s GEMS market will enable it acquire more business by the virtue of being a Kenyan company.
On the management part Atlas is currently reviewing a select group of Kenyan candidates for a non-executive role on its board to supplement and strengthen local presence and to support business development and growth.