Tuesday 05 September 2017 by FIIG Research Company updates

Company updates – Capitol Health, Dicker Data, Emeco, Genworth, IMF Bentham, NEXTDC, PMP and Sunland

This week, NextDC battle for APDC heats up, 1H17 results for Dicker Data and Genworth, FY17 results for Emeco, IMF Bentham, PMP and Sunland and Capitol Health pre FY17 presentation 

Capitol Health – pre FY17 results presentation

On 25 August 2017, Capitol Health released its full year 2017 results presentation.

Key points:

  • Operating revenue of AUD162.5m, a 2.6% increase from FY16
  • Core radiology EBITDA of AUD22.2m before one off restructuring costs, ahead of guidance range of AUD19.5m to AUD21.5m
  • Post sale cash balance will be circa AUD95m against total debt of AUD55m with debt levels at less than 2x
  • AUD81.5m NSW asset sale is on track for completion ‘on or around 31 August 2017’
  • Balance of NAB senior facility paid down in August and AUD35m facility undrawn
  • FY18 EBITDA provides about AUD80m investment and dividend capacity. Guidance indicates revenue of AUD118m to AUD122m and EBITDA of AUD19m to AUD21m
  • Intention to redeem AUD50m note in May 2018
  • Return to net profitability in FY18 with Victorian revenues growing slightly better than Medicare receipts
  • High borrowing costs to be reduced with FY18 bond repayment

A link to Capitol Health’s report presentation is available here.External link - opens in a new window 

Dicker Data – 1H17 results

Dicker Data reported its half year results to 30 June 2017.

Key points:

  • Sales revenue for 1H17 rose 7.2% to AUD631.7m (1H16: AUD589.0m), driven by nine new vendors and contributed AUD17.2m to revenue, while revenue for existing vendors grew 9.4%
  • Total gross profit (excluding other revenue) rose 6.7% to AUD57.1m (1H16: AUD53.5m)
  • The gross profit margin fell slightly to 9.0% (FY16: 9.1%) due to market competition
  • Operating costs to income remained stable at 5.4%
  • Free cashflow reduced gross debt by AUD20m year on year to AUD100m and net debt to AUD72.6m (1H16: AUD98.7m)
  • Note the cashflow was impacted as the change in financial year delayed an ATO assessment meaning the majority of the FY16 tax was actually being paid in H117 (an additional circa AUD10m)
  • Dicker confirmed its previous guidance of AUD40.0m in pre tax operating profit for FY17

Loss of Cisco distribution in New Zealand

On 15 August 2017, Dicker Data announced the termination its distribution agreement with Cisco in New Zealand. The actual amount is not public, however the total NZ business represents about 10% of EBITDA (FY17) and Cisco NZ represents a portion of that. Dicker stated its distribution agreement with Cisco in Australia remains in place and is not impacted by this announcement. Cisco represents a significant portion (approximately 30%) of Dicker’s total business. 

For more information, see this link here.External link - opens in a new window 

Emeco – FY17 results

On 31 August 2017, Emeco released its full year 2017 financial results. Emeco successfully completed its recapitalisation exercise and mergers with Andy’s Earthmovers (Asia Pacific) Pty Ltd and Orionstone Holdings Pty Ltd on 31 March 2017, which resulted in an increased fleet sized (by around 80% to circa 800 machines in Australia) while reducing its average age, and stronger balance sheet with lower leverage.

Key points:

  • Revenue improved by 12% per corresponding period (pcp) to AUD233m
  • EBITDA increased by 54% to AUD83.5m, primarily driven by strong revenue in 4Q17, reflecting added scaled following the mergers of Andy’s and Orionstone in addition to improved market conditions.
  • EBITDA margin improved by 9.8pt to 35.8% as the business realised a full year benefit of initiatives implemented in FY16
  • Operating free cash flow was 44% lower pcp at AUD36.9m, impacted by the working capital deficiencies of Andy’s and Orionstone, as well as expenditure incurred in 4Q17 to bring the acquired fleet from Andy’s and Orionstone up to Emeco’s operating standards
  • Following the mergers, the enlarged Emeco group now enjoys the benefit of diversification from a geographical, commodity and customer perspective, and the integration process is proceeding well

For more information, see this link here.External link - opens in a new window

Genworth Australia – 1H17 results

On 2 August 2017, Genworth released its half year 2017 results.

Key points:

  • Genworth Mortgage Insurance Australia Limited (GMA) reported 1H17 NPAT of AUD88.7m, down 34.7% from AUD135.8m reported in 1H16
  • Underlying NPAT was relatively unchanged at AUD113.5m compared to AUD112.9m reported in 1H16
  • GMA’s loss ratio ticked up 1.8% to 34.8% in 1H17
  • GMA’s loan book from 2008 is so far the worst performing with current 3 months plus delinquencies at 0.50% with delinquencies having peaked at 1.20% in 2012. GMA’s overall 3 months plus delinquency rate increased by 8bps to 0.51% in 1H17 as delinquencies for loans originated in 2012-2014 ticked up
  • The group reported a regulatory solvency ratio of 1.81 times the PCA

For more information, see this link here.External link - opens in a new window 

IMF Bentham – FY17 results

On 25 August 2017, IMF released its full year 2017 results.

Key points:

  • IMF reported the second highest net revenue in its history for twelve months ending June 2017 (FY17) of AUD57.1m, up from AUD56.4m
  • Net income for the year was AUD15.4m, down from AUD20.9m reported in the prior year mainly due to higher tax expense in FY17 relating primarily to the capitalisation of intercompany loans between the parent and its US subsidiary
  • Cash position remained strong at year end with cash on hand of AUD144.9m compared to total debt of AUD122.0m. According to the company, it is at its maximum appetite for debt. While there is no mandated requirement to hold a certain level of cash, IMF maintains a high liquidity buffer to satisfy litigants and courts that it has sufficient resources to meet funding of costs during trials and any adverse judgements
  • IMF sourced 39 matters with total capital commitments of AUD106m in FY17. As at year end it had 65 active matters in Australia, the US, Canada and Asia with total estimated portfolio value of AUD3.8bn. Business growth is expected to be strong in FY18 and IMF has invested in operational infrastructure as well as headcount ahead of the expected expansion

For more information, see this link here.External link - opens in a new window 

NextDC battle for APDC heats up with new proposal from 360 Capital

NextDC’s bid of AUD1.87 to APDC has been challenged by a new proposal from 360 Capital of an AUD1.95 per security offer. The offer from 360 Capital is structured as a scheme of arrangement, which would require the acceptances from owners of 75% of the target’s shares by value. Securing such a high majority could prove a challenge for 360 Capital, which owns 20.8% of the target and had previously lobbed an AUD1.80 bid.

The scheme may put NextDC under less pressure to rush out a higher counteroffer, however market shares went up 4% to close at AUD1.96 on Friday, which indicates that investors could be hoping for a higher counteroffer.

APDC, which has previously endorsed the NextDC offer, said its board would consider the revised proposal from 360 Capital.

PMP – FY17 results

On 28 August 2017, PMP released its full year 2017 results.

Key points:

  • FY17 results were in line with revised company guidance. Sales revenue increased 28.9% to AUD1.051bn as it included a four month contribution from IPMG Pty Ltd
  • Underlying EBITDA fell 37% to AUD32.2m as lower profits across the PMP Group more than offset four months profits from IPMG. On a normalised 12 months basis, the merged entity would have had a FY17 EBITDA before significant items of AUD49m
  • Statutory loss after tax was AUD126.4m (FY16: AUD0.2m profit) due to significant items of AUD142.6m and AUD19m lower EBITDA. Significant items comprised AUD61.6m of cash items and AUD61.0m of non cash items. Significant cash items included redundancies, press relocations, the initial phase of streamlining back office functions and costs relating to the IPMG merger
  • Net debt increased to AUD20.8m (FY16: AUD1.8m) with increased costs associated with the acquisition. Credit metrics remain strong with net debt/EBITDA of 0.6x (FY16: 0.0x) and EBITDA interest cover of 6.3x (FY16: 6.5x). The group expects to be net debt free by FY19
  • Liquidity is good with cash of AUD54.3m and headroom of AUD50m under PMP’s AUD65m working capital and receivables facilities (at 30 June 2017)

For more information, see this link here.External link - opens in a new window 

Sunland Group – FY17 results

On 23 August 2017, Sunland released its full year 2017 results. FY17 results were in line with guidance and expectations. The Abian project finance facility has been paid out and gearing is likely to have fallen from 60.3% to around 40%.

Key points:

  • NPAT increased 12% to AUD35.3m in FY17 meeting previous company guidance of AUD35m
  • The group reported 524 sales and 597 settlements (FY16: 426 sales and 443 settlements)
  • Debt to equity gearing increased from 42% at 31 December 2016 to 60.3% FYE17 (FYE16: 57.1%) as the Abian project completed
  • Cash received from Abian settlements, including those achieved post balance date has repaid the project finance facility of AUD132m. The group’s debt levels have reduced by AUD163m from peak utilisation during the financial year
  • Settlement receivables are significantly higher at AUD74.9m (FYE16: AUD14.9m)
  • Sunland’s share buyback program acquired shares totalling AUD13.3m during FY17
  • The group has a balance sheet capacity of AUD14.6m in cash and AUD109.8m in undrawn working capital lines

For more information, see this link here.External link - opens in a new window