Tuesday 27 February 2018 by FIIG Research Company updates

Company updates – Ausdrill, Bluestone, CML Group, IMF Bentham, Lucas TCS, McPherson’s, QBE, Qantas, PMP, Sydney Airport, Teachers Mutual Bank

This week, IMF Bentham sells its US investment portfolio, Bluestone in acquisition talks, Qantas set to pay tax again, new DirectBond from Teachers Mutual Bank, and full year results from QBE and Sydney Airport. Half year results from Ausdrill, CML Group, Lucas TCS, McPherson’s and PMP

Ausdrill half year results

On 23 February 2018, Ausdrill Limited (Ausdrill) released its 2018 half year results.

Key points:

  • Sales revenue up 17.9% to AUD439.7m
  • Profit from continuing operations up 163.5% to AUD35.3m
  • EBITDA up 40.6% to AUD92.2m
  • EBIT up 709% to AUD57.9m
  • More than AUD400m in contract extensions with new work won since 30 June 2017
  • Cash reserves of AUD218.6m and improved gearing of 17.5% provides strong balance sheet and flexibility to fund growth
  • On target to achieve earnings guidance of 40% uplift for FY18
  • Operating cash flow impacted by increase in working capital for three new project start ups

Read our Ausdrill research compendium outlook*

Bluestone to be acquired by Cerberus

Bluestone Group (Bluestone), issuer of the Sapphire residential backed mortgage securities, is to be acquired by New York based Cerberus Capital Management (Cerberus), according to this Australian Financial Review (AFR) article.

Cerberus has agreed to acquire Bluestone’s businesses in Australia, New Zealand and the Philippines for an undisclosed price. The AFR understands the transaction value of the purchase is in the order of AUD103m, reflecting a ratio of two to three times Bluestone’s local net assets of AUD41.2m. The deal is subject to regulatory approvals, including that of the Foreign Investment Review Board.

Founded in 2000, Bluestone has a circa AUD6bn loan book and typically lends to those that fall outside the remit of the major banks. It also has a loan servicing and origination unit and buys and manages loan books.

CML Group half year results

On 22 February 2018, CML Group (CML) released its half year investor presentation.

Key points:

  • Invoices funded up 16% to AUD581m
  • EBITDA up 31% to AUD7.8m
  • NPATA up 86% to AUD2.6m
  • FY18 EBITDA guidance of in excess of AUD15.5m reaffirmed (before acquisition)
  • Initial FY19 guidance is for AUD1.5bn invoices purchased and AUD19.5m EBITDA

CML made the following comments on funding: Over the next 6-18 months CML will transition current funding arrangements to majority institutional bank funding. This will result in lower cost of funds, relative to the current blended rate of 8.9%, reducing its funding cost by circa 3-4% and reducing exposure to unutilised funds, which should impact earnings by ~AUD3m before tax

Read our CML research compendium outlook*

IMF Bentham sells its US investment portfolio

On 6 February 2018, IMF Bentham (IMF) provided a summary of its US portfolio sale.  IMF’s wholly owned subsidiary, Bentham Capital LLC has agreed to transfer all its rights in relation to the majority of its investments in its US portfolio (Sale Investments) to IMF Bentham Fund 1 (Fund 1). IMF will receive gross consideration of US57.4m and will be entitled to 85 per cent of any profits on the Sale Investments realised by Fund 1.

Read our IMF Bentham research compendium outlook*

Lucas Total Contract Solutions half year results

We have provided a half year results report for Lucas Total Contract Solutions (Lucas TCS) available on our research page*. Read our Lucas TCS research compendium outlook*

McPherson’s half year results

On 21 February 2018, McPherson’s (MCP) released its 2018 half year result presentation.

Key points:

  • Underlying profit before tax maintained at AUD11m
  • Underlying profit before tax from continuing operations up 2.4% to AUD9.5m
  • Underlying cashflow conversion of 94%
  • 26% reduction in net debt over last 12 months to AUD30.4m
  • Divestment of Home Appliances to generate proceeds of net AUD28m, i.e. 7x EBIT
  • Net debt projected to be AUD5m by 30 June 2018

MCP reiterated that the sale of its home appliance business is on track to be completed next week, with proceeds to repay all outstanding Notes. The call date is 31 March 2018 whereby MCP needs to give 30 days’ notice.

Read our McPherson’s research compendium report

PMP half year results

On 27 February 2018, PMP Limited (PMP) announced its 2018 half year results.

Key points:

  • Sales revenue at AUD398.5m (higher at 52%, up AUD136.3m)
  • EBITDA at AUD20.2m (up AUD9.1m or 82.3% year on year)
  • EBIT at AUD4.9m
  • Net debt at AUD32.8m (interest cover 5.6x)
  • Loss before income tax expense at AUD13.8m
  • Net loss after significant items at AUD19.5m
  • Free cash flow at AUD0.7m, down AUD5m pcp as higher EBITDA was offset by higher working capital movements, higher capital expenditure and interest paid

Read our PMP research compendium outlook*

Qantas set to pay tax again after strong results

On 22 February 2018, this Australian Financial Review article said that Qantas Airways (Qantas) “is expected to begin paying corporate tax again from next year after reporting a record first half result despite soaring fuel costs.”

The company hasn’t paid corporate tax since 2009 because it carried forward previous losses.

QBE full year results

On 26 February 2018, QBE Insurance Group (QBE) announced its full year results for the year ended 31 December 2017.

Key points:

  • After tax loss on a cash basis of AUD258m (FY16 cash profit AUD898m)
  • Positive prior accident year claims development of AUD37m
  • Cash remittances from operating divisions broadly stable at AUD1,022m (FY16 AUD1,106m)
  • Net earned premium up 7%, assisted by reinsurance cost savings
  • Improved expense ratio of 15.7% (FY16 16.5%)
  • Net investment return for the year of 3.2% (FY16 2.9%)
  • Debt to equity of 40.8% above our 25% to 35% benchmark range (FY16 33.8%), impacted by non cash write down of North American Operations’ goodwill and deferred tax asset
  • Probability of adequacy of outstanding claims strengthened to 90.0% (FY16 89.5%)

See the QBE FY17 results presentation.

Sydney Airport full year results

On 21 February 2018, Sydney Airport announced its full year results for the year ended 31 December 2017. Here’s a quick glance at its financial results:

The full results presentation and other materials are available here on the Sydney Airport website.

Read our Sydney Airport research compendium outlook*

*Please note the content requires a wholesale client login.

New DirectBond from Teachers Mutual Bank

The Teachers Mutual Bank floating rate subordinated notes at BBSW+2.80% maturing in 7 September 2027 has been added to the DirectBonds list. The bond is available to wholesale clients only in minimum parcels of AUD10,000 at an indicative yield to worst of 4.37%. Please note this rate is accurate as of 27 February 2018. 

The bank provides key financial services to Australian educators and is one of Australia’s largest mutual banks, comprising three brands: the original Teachers Mutual Bank, UniBank, and Firefighters Mutual Bank.

Please note there is currently no Factsheet available for this bond. 

*Note the content requires a wholesale client login.