Friday 01 May 2015 by William Arnold Company updates

Silver Chef – 1H15 Trading update

Strong result with revenue increasing 23% to $82.9m


half year results to Dec15

Source: FIIG Securities, Company presentation

SIV reported strong 1H15 results with revenue increasing 23% to $82.9m, underlying EBITDA increasing 20% to $52.7m and NPAT increasing 9% to $7.1m driven by a faster than expected turnaround in the GoGetta business. Interest cover continues to grow at around 14x (up from around 13x 1H14) and net debt/EBITDA is 2.7x (up from 2.4x 1H14). FY15 guidance has been revised upward to a range of $15.2 to $15.7m (from $13.75 to $14.25m). Overall, good results and importantly for bondholder’s credit metrics continue to strengthen.

Hospitality: Revenue was up 23% to $83.0m. The hospitality division performed in line with expectations during the first half with acquisitions of $50.0m. The hospitality rental asset base including lease receivables are now $221.1m, up 9.0% from 2H14.

GoGetta: Revenue was up 27% to $27.4m. With prior periods of poor performance, the GoGetta division reviewed its strategy and began focus toward better performing sectors namely business critical assets in the light commercial vehicle and construction areas. This has paid off driving record growth in asset acquisition up 72% up on the previous corresponding period and up 51% on the second half of FY14.

Canada: During the period the Canadian operations passed the cash profit break even position and recorded an accounting loss of $0.4m. The business is now well established and it is expected to record an accounting profit early in calendar year 2016.

Siv-2 will comp updates
Source: FIIG Securities, Company presentation

Funding: SIV continues to receive good support from its primary bank with its debt facility increased from $120m to $140 m and renewed to December 2016. It is likely the company will consider calling the FIIG originated bond at first call opportunity in September 2015. The bond is expensive compared to where rates are now and there are restrictions in the terms which the company would prefer to eliminate.

Credit and residual asset risk:
credit residual asset risk chart

Source: FIIG Securities, Company presentation

The appointment of new senior financial management during the period has led to the discovery of some lapses in the business’ debt collection process. In a number of cases, arrears were allowed to accumulate beyond the equivalent of the client’s 13 week deposit before appropriate action was taken, thereby exposing the business to loss. SIV highlight that the failure in systems and processes has been addressed however a one off impairment expense of $4.1m was recorded this period. Impairment loss to rental assets has therefore risen to 2.3% (from 0.9%), however this is still within longer term averages (2-3%), and these losses should probably have been recorded against the prior periods of historic lows. Regardless these bad debt figures are still considered low for this type of business.