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Due to the coronavirus (COVID-19) pandemic, construction companies face unprecedented and completely unpredictable operating challenges. Social distancing measures and government-ordered business closures, create a maze of decisions for management teams to navigate daily.
Meanwhile, Leading construction group Access Engineering PLC (AEL) in a disclosure to the CSE stated that as a result of the island wide curfew imposed by the Government in March - May 2020, several of the Company’s ongoing projects' work was temporarily disrupted.
Nevertheless, the company said that work on certain projects continued from end of April while complying with public health related regulations imposed by the relevant authorities, and added that by early May 2020 most of the remaining projects and production plants resumed work within confined worksites with necessary approval from the authorities.
However, due to the temporary disruption of operations caused, the Company expects the 1st quarter results of 2020/2021 to be negatively impacted. Nevertheless, the company believes that the measures initiated by them to reduce the cost will help minimize this negative impact.
The impact of COVID-19 pandemic on the business/operations of the Company;
Funding and Liquidity
As funding for Company's major ongoing projects are well secured through local banks, bi - lateral and multi - lateral funding, the company do not anticipate a major cash flow strain on the operations or their ability to meet supplier/debt obligations. “These projects specific secured funding could not be utilized by the implementing agencies for any other purpose or activity. Hence our access to working capital and credit facilities are less likely to be affected as a result of secured funding,” it said.
Impact on Assets
At the year end, the fair value of assets has been determined with no significant decrease in the assets value. Since the company's operations are undertaken after the relaxation of the island wide curfew the assets are being utilized adequately. Hence the Company does not anticipate any major impact on its assets or impairment provisioning.
Impairment Provisioning
The Company has not identified any material impairment in good will, intangible assets and right of use assets- A provision for investment securities has already been made over the period and credit losses have been determined as per Expected Credit Loss (ECL) requirements which are similar to last year. Hence no material impact due to this is anticipated.
lmpact on Internal Operations and Business Continuity
At the very early stages of the pandemic's outbreak in Sri Lanka, the Company’s management consciously decided to implement adequate business continuity plans for each major business unit and project. This helped the Company to fast track its process of resuming work on projects without much delay or disruption. The financial reporting process too was intact and the annual external audit is currently ongoing without any delay. The Company expects to release its interim financial statements and the Annual Report within the time period stipulated by the CSE.
lmpact on Supply Chain Management
Main raw materials required for the Company's operations which include sand, steel and cement are primarily sourced from major local suppliers with whom we have built long standing mutual relationships. Asphalt concrete, ready-mix concrete, quarry and crusher products are produced internally and operations of production plants have already commenced to cater the internal and external market demand. However, imported raw materials required for specialized work could be delayed due to anticipated delays in shipments and limited port operations.
Impact on Human Capital
The Company employs approximately 1800 staff members and 900 laborers whose job security has been confirmed by the Management. A limited staff working during the curfew period had a significant impact on the productivity of Company's operations. The Management has decided temporary restructuring of salaries at all levels as a forward looking measure to manage the current crisis and ensure job security of all employees.
However, though the company anticipates a short - term downturn in its immediate financial results it is confident of returning back to normalcy without much delay.
The company further noted that its strong order book which comprised of confirmed and signed projects spanning next 2-3 years with secured funding, prudent and sound financial management practices in place and the best corporate governance practices will undoubtedly help the company in this cause.
While the current external macro-economic conditions are extremely volatile, the Board and the Management of Access Engineering PLC is firmly committed to create sustainable value to all stakeholders concerned.
