Emeco Holdings Limited (ASX: EHL) held its Annual General Meeting on 15 November 2018 following which the share price of the company uplifted by 3.333 percent. While providing a recap of FY 2018, the Managing Director of the company Mr. Ian Testrow informed that the operating utilization of the company increased from 56 percent to 62 percent throughout FY18 and returned the business to positive operating NPAT for the first time since FY13. The operating EBITDA of FY 2018 was $153 million which was an increase of 83% compared to last year while operating EBIT was up nearly 600% on FY17 at $83 million. The company has expanded the operating EBITDA margins from 35.8 percent in FY17 to 40.2 percent in FY18. In FY 2018 the company reduced its leverage to 2.6x which was down from 3.9x in the previous year, in line with Emeco’s aggressive deleveraging strategy. In November 2017 the company acquired Force Equipment which has provided low capital-intensive earnings and the capability to rebuild components.
In July 2018, the company acquired Matilda Equipment, which is a high margin rental business specializing in late model ancillary equipment. In September 2018, the company further strengthened and de-risked its balance sheet by replacing its $35 million cash advance and $5 million bank guarantee facility expiring March 2020 with a new three-year $65 million credit facility expiring in September 2021. Due to the larger facility and expanded hedging program, S&P Global Ratings upgraded the company credit rating to “B” which is going to support the company’s objective of refinancing the notes on more attractive terms. The operating performance in the Q1 FY19 has been solid with operating utilization at 64%, up from 62% at the start of the quarter.
While discussing the outlook of the company Mr. Ian Testrow informed that the management of the company is seeing high levels of activity and demand for the fleet from its customers and the company is expecting its fleet’s operating utilization to further increase throughout FY19, particularly in the second half. He further informed about the strong eastern region mining markets and told that the company has actually transferred a few assets from the west to the east in response to the strong immediate demand.
Mr. Ian further informed that the company would continue building its asset management and maintenance capabilities. It is going to push to extend component lives without jeopardizing machine availability or reliability. The company is in the process of expanding Force’s workshop capacity to grow its retail maintenance workshops business. Further, the company is continuing to assess its options to refinance its notes on more attractive terms and optimize its capital structure.
In the last six months, the share price of the company decreased by 3.23 percent as on 14 November 2018, traded at a PE ratio of 69.770x. EHL shares traded at $0.310 with a market capitalization of circa $953.66 million as on 15 November 2018 (AEST 4:00 PM).
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