MDM Engineering (LON:MDM) saw its share slide by 20% to 90p in early trading after the Africa-focused engineering and project management group, reported a 7.7% dip in full year revenues to US$33.2m (£21.8m) and a 56% drop in net profits to US$3.5m. The fall adds insult to injury for investors, who saw the price of shares fall from 171p to 112p at the start of July triggered by an earnings warning by the company for the 2011 financial year. Reacting to today’s results, MDM, which provides a range of services to the mining industry, including project evaluation, process engineering, design and project management, blamed the figures on reduced activity in the project market over the last 12 months. On a brighter note, it said it had seen an increase in requests for study proposals and tenders received and submitted since the beginning of the calendar year.

Investors were hit by news of a decrease in earnings per share of 56% to US9.25 cents per share, with the full year dividend cut to US4.60 cents per share from US11.25 cents last year. MDM said the decrease was primarily driven by a settlement with First Uranium Corporation Ltd on the close out of the Ezulwini project, as well as the suspension of both Mine Waste Solution's Phase 1b and Phase 2 projects in early February 2010.

MDM insisted that its performance needed to be viewed in the context of the global economic crisis that commenced in late 2008. It said the recovery had taken longer than anticipated and many of its clients had deferred execution of projects which in turn has moved MDM's anticipated project pipeline towards the latter part of the 2011 financial year. Further to this, MDM is experiencing fierce competition amongst the engineering companies, reducing margins during tendering to increase the probability of securing work.

MDM’s chief executive, Martin Smith, said: “MDM demonstrated resilience during the 12 month period ending 31 March 2010 by conserving cash reserves and maintaining a steady workload through what has been a continued stressed market. In spite of the global economic crisis and reduced activity in the project market over the last 12 months, MDM has used the time to strengthen its execution capability by recruiting key management and technical resources, cutting costs but also enhancing internal processes which will ensure more effective project delivery…

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