On 4 August 2016, Emeco provided a fourth quarter operational update
A link to the announcement is available here. The key points from the update include:
- Emeco expects to post a full-year operating EBITDA of $54.2m, driven by cost reductions and efficiency improvements. This is 25% higher than the previous year and within management’s previous guidance of $53-$57m
- Emeco generated $44.4m of group revenue in the fourth quarter, with $12.7m underlying operating EBITDA over the period. The underlying Q4 operating EBITDA margin improved to 28.6%, up from 24.2% in the prior quarter. Difficult operating conditions continued into the fourth quarter with a large fire devastating the Canada oil sands region
- Group utilisation (i.e: proportion of fleet rented) averaged 77% in the quarter, while operating utilisation (i.e: the proportion of actual hours equipment was utilised to total available hours) averaged only 40%.
- Liquidity and cash flow generation remain very weak. The year-end cash balance remains at a very low $24.8m, and is down $3m on the prior year. The business was able to generate positive cash flow for the quarter of $11.8m. However, after allowing for the third quarter result which included the large semi-annual bond coupon payment, the business generated small positive free cash flow of $0.8m over 2H16.
The improved operating and financial result was well received by the share market on the day. Emeco’s share price was up 3c to 7c (86%) on daily trading, however please note that this is only a $20m uplift in market capitalisation from $22m to $42m and share price movements can be highly volatile when priced at such low levels. The share price has since fallen 21% to 5.5c.
Please note Emeco’s bond continues to trade at a deep discount to par (USD50’s) with no price action seen following the announcement. Emeco still carries a very high risk of default despite the improved fourth quarter result. It has been previously reported in the media that the company has appointed an adviser to assess restructuring options in relation to the company’s debt.
Please contact your FIIG representative for further information on the Emeco US dollar bonds. Available to wholesale investors at a minimum face value of USD200,000.
Director – Infrastructure and Fixed Income Research.
Alen joined FIIG Securities in May 2014 and is responsible for covering the infrastructure/PPP, resources, airlines and property sectors.