Emeco Holdings Limited posted solid results for 1H17, driven by increased operating utilisation and ongoing cost reductions
1H17 results summary:
Figure 1
Source: Emeco
Key points:
- EBITDA for 1H17 rose by 44.8% to $33.6m per corresponding period (pcp), and EBITDA margin increased by 17 points to 38.3% pcp. Emeco also reported positive operating EBIT of $3.5m, its first profit since 2H13. The strong performance was driven by improvements in operational efficiencies and sustainable cost reductions (increase of 34.4% in 1H17 pcp), as well as improvements in the operating performances in Chile and Canada via strategic partnerships. This is not withstanding a drop in revenue by 19.5% pcp to $87.8m in 1H17, due to the restructuring of the Canadian business and lower than expected operating utilisation in Chile
- Figure 2 shows increased operating utilisation of the group which, together with ongoing sustainable cost reductions, have resulted in the group’s improved financial performance
Figure 2
Source: Emeco
- Emeco recorded $9m of net operating cashflow 1H17, a reversal from its negative cashflow position of $3.3m pcp. The positive position was achieved despite a drop of 23% in cash from underlying operations, primarily offset by a reduction of 30% in net finance expenses to $17.1m, realisation of $15.2m of cash from closing out remaining hedging instruments and a reduction of 45% in capital expenditure to $12m
- Total debt reduced marginally to $362.9m at 31 December 2016, from $365.4m at 30 June 2016. Net debt also reduced slightly to $329.1m from $340.6m, due to a 36.3% increase in cash to $33.8m
- The group’s recapitalisation and merger transaction should result in a more sustainable capital structure, resulting in the extension of Emeco’s debt (144A notes and asset backed loan) maturity, net debt/FY16 proforma EBITDA lowered to 4.4x and FY16 proforma interest coverage ratio improved to 2.5x
Outlook
Emeco will continue to focus on managing cash and further delivering positive results for the group, and expects the following:
- Market recovery with increased levels of customer activity
- Increase operating utilisation of the group
- Execute and integrate merger with Orionstone and Andy’s
A link to the results is available here.