NRW Holdings Limited (NRW) posted its results for the first half FY2017, noting strong operating results and significant improvement in its financing structure
The following table summarises 1H17 results:
| $m | 1H FY17 | 1H FY16 | Var $ | % |
| Revenue | 176.5 | 150.3 | 26.2 | 17.4% |
| EBITDA (underlying) | 29.3 | 24.0 | 5.3 | 22.1% |
| Net profit after tax | 11.6 | 6.1 | 5.5 | 90.1% |
| Net debt | 40.4 | 59.4 | -19.0 | -32.0% |
Source: FIIG Securities, NRW
Key points:
- 1H17 revenue rose 17.4% to $176.5m from $150m, per corresponding period (pcp), primarily driven by the Civil and Mining segments that secured new contracts with Rio Tinto. However, this increase was partially offset by lower revenue from the Action Drill & Blast segment due to a rescoping of the Middlemount contract
- At February 2017, the order book was $1bn, including $170m of secured work for delivery in 2H17 and $300m of work secured for delivery in FY18
- 1H17 underlying EBITDA – which excludes one off costs due to the corporate note issuance, debt rescheduling and Hughes acquisition costs – was $29m, up 22% pcp on the back of higher revenue. This resulted in a significant improvement in net profit after tax by 90% to $11.6m, compared to $6.1m
- Free operating cashflow decreased by around $26m to $1m in 1H17, primarily due to higher capex spending in the period as well as costs related to the acquisition of Hughes drilling business
- Net debt reduced to $40m at 31 December 2016 compared to $59m at 31 December 2015. During 1H17, NRW issued $19.7m of shares to institutional investors, refinanced its $75m two year bank debt with $70m of new four year corporate bonds and signed a new $35m multi option bank facility. This resulted in an improved financing structure – a diversified portfolio of funding sources and smoother debt maturity profile – as well as a better alignment of debt repayments and earnings
- Net debt/EBITDA reduced to 0.7x on an annualised basis at 31 December 2016, compared to 1.2x at 30 June 2015
- NRW will not be paying a dividend to its shareholders at the half year
- The company also completed the successful acquisition of the East Coast business of Hughes drilling, with its current order book in excess of $50m
Recent developments
NRW was awarded several contracts, including:
- Five year contract for Altura to perform mining, drilling and blasting services at Altura’s Pligangoora Lithium Project, worth $110m;
- A 66 month contract worth $40m for Macmahon at Newcrest’s Telfer gold mine; and
- A two year contract extension for Talison Lithium at Greenbushes worth $12m
We will provide a more in depth update report and model – incorporating the new contracts mentioned – in a separate note.
Outlook
NRW will remain focused on the execution of its projects, supporting the iron ore sector, growing its presence in Queensland and New South Wales on the back of the Hughes acquisition, assessing strategic partnerships and organic growth, and opportunistic consolidation targets.
NRW’s directors also stated that whilst dividends will not be paid to its shareholders at the half year, they will continue to reassess the appropriate timing to recommence dividend payouts.
Conclusion
Overall, NRW’s 1HFY17 result is broadly consistent with the estimates provided at the time of its new issue in December 2016, and continues to delever as expected.