Emeco Holdings Limited Slips After Booking Gains In Early Trade


Emeco Holdings Limited (ASX:EHL) is consistent with its growth plan for year ahead and is continuously working towards improving the systems and processes in order to maintain operational excellence as well as cost discipline. The Company is focused on enhancing centralized support to the regions which include centralized planning for the component change outs, standardizing processes across regions and usage of  technology to drive best practice asset management.

On October 16, 2018, the group has released its annual report for FY18. Group posted healthy operating revenues along with strong balance sheet figures. [optin-monster-shortcode id=”swikrbu1d9j9aq0o4cko”]

Group operating utilization at the end of FY18 was 62% as compared to 56% at the beginning of the reporting period. Significant increment in the fleet size over the period was reported. Continuous focus of the management is on increasing the operating utilization of the machines which are currently on rent and exploring opportunities on the redeployment of underutilized fleets to achieve greater returns.

The company has new projects in pipeline along with the expansion program for already existing projects that will lead to incremental growth for the group in FY19.

Group operating revenue from continuing operations grew by 63.51 % up to $381.0 million in FY18 from $233.0 million in FY17. 55.17% growth in rental revenues up to $324 million in FY18 from $208.8 million in FY17 was backed by the acquisition of Force equipment in November 2017, increased operating utilization of the rental fleet and improvements in rental rates on new and renewed contracts. Addition of the external maintenance capability on account of the acquisition of the Force equipment increased the maintenance by 150.9% to $55.2 million in FY18 from $22 million in FY17.Operating EBITDA margins recorded 40.2% rise in FY18 on account of increased rental rates across all regions, innovative contract structures with customers and further reduction in cost and operational efficiencies. Return on capital employed increased to 19.6% in FY18.

The working capital inefficiencies associated with the acquisition of the Andy’s and Orionstone businesses was rectified by the group. Adjusted net debt decreased to $400.8 million at 30 June 2018 from $457.1 million at 30 June 2017. Full year of earnings from Andy’s and Orionstone, increased cash reserves associated with greater conversion of earnings to cash flow from operations and the acquisition of the Force business in November 2017 improved the leverage ratio to 2.6x in FY18 from 5.5x in FY17. Finance lease liabilities decreased significantly to $1.2 million in FY18 from $9.8 million in FY 17 on account of closure of multiple leases acquired from the Andy’s and Orionstone businesses and assignment of various leases through the disposal of the Canadian business. Group cash balance reported $171.4 million at 30 June 2018 which includes $87.5 million in relation to the net cash received from the capital raising associated with the acquisition of Matilda Equipment. The cash was used to complete the acquisition of Matilda in July 2018.

Emeco Holdings rose 7.8% in early trade on October 26, 2018; and after touching the levels of $0.315, the scrip slipped and traded at the price levels of $0.285.


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