Earthmoving equipment provider Emeco Holdings Limited (ASX: EHL) announced the cash offer outcome to purchase excess US$3.8 million face value of its senior secured notes which takes its total purchase of the notes to US$33.8 million.
Pursuant to the offer, Emeco has accepted all the notes tendered underpinned by the company’s robust balance sheet. As a result, company’s annual interest expenses will be reduced by US$3.1 million per annum.
Emeco stated that the outcome of the excess cash offer to purchase US$3.8 million notes is in accordance with the terms of the note indenture. Further, on the completion of the purchase, the outstanding senior secured notes of the company will reach US$322.1 million.
Recently, the company completed the acquisition of Queensland-based national equipment rental company Matilda Equipment for an enterprise value of A$80 million. The takeover was funded by a fully underwritten A$90 million entitlement offer. The company specialises in individual high margin rentals of high demand, late model and low-hour ancillary equipment.
Matilda takeover came in line with previous acquisitions undertaken by Emeco, including Force Equipment Pty Ltd acquired in November last year. During Fiscal 2018 the newly acquired Force Equipment raised Emeco’s scale by providing it with 179 high quality low-hour machines. Further, the retail maintenance business unit of Force has enabled Emeco to widen its customer offering and provide a new source of low capital intensity earnings supported by four workshops located around Australia.
Coming to Fiscal 2018 financial performance, Emeco has reported significant improvement in its rental business with rental revenue increasing to $324.0 million compared to $208.8 million in FY17. The strong growth in rental revenue is underpinned by additional contribution derived from the acquisition of Force, improvement in operating utilization of the rental fleet and rise in rental rates. Subsequently, group’s FY18 operating revenue from continuing operations increased from $233.0 million in FY17 to $381.0 million, thereby delivering increased operating EBITDA of 40.2%, up from 35.8% last year.
Statutory Earnings before interest and tax (EBIT) increased to A$49.7 million from negative A$85.8 million in FY17. EBIT recovery improved statutory return on capital (ROC) to 11.7% in FY18, from -22.6% in previous financial year. Statutory Net Profit After Tax (NPAT) increased to A$5.3 million from the loss of A$157.2 million reported in FY17. Further, the group has reported FY18’s strong operating utilization at 62% compared to 56% at the end of previous FY17.
In the outlook for full year Fiscal 2019, Emeco expects further growth in revenue and earnings, driven by continuous increases in utilization and rates, additional retail maintenance services, a full year contribution from Force and Matilda. Moreover, in order to draw its complete focus on the expansion of Australian operations, Emeco has disposed of its Canadian business in April 2018.
The Annual General Meeting of Emeco Holdings Limited is scheduled to be held on 15 November 2018. With this update, Emeco Holdings share price has plunged 2.632% to close at $0.370 on 18 October 2018. But, in the last one year the stock has seen a performance change of attractive +63.04%.
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