Earthmoving equipment supplier Emeco Holdings Ltd has reported a strong increase in sales and profit for the half-year to December 2006 and predicted that it would achieve its full-year prospectus forecasts despite some difficulties in the business.
Earthmoving equipment supplier Emeco Holdings Ltd has reported a strong increase in sales and profit for the half-year to December 2006 and predicted that it would achieve its full-year prospectus forecasts despite some difficulties in the business.
Emeco reported a net profit after tax of $16.1 million, an increase of 66 per cent.
It noted that on a pro-forma basis, after adjusting for the effects of financing transactions associated with its initial public offering, net profit was $34.8 million.
Sales revenue increased by 45 per cent to $251.6 million, with increases from all three business segments: equipment hire, equipment sales, and maintenance.
Managing director Lauirie Freedman said the group was exploring a range of organic growth and acquisition opportunities which would potentially require significant capital spending, that would flow through to the results in 2008.
Mr Freedmand said the overall outlook for the business was positive, with strong growth in resources and infrasstructure projects generating demand for its services.
"Despite supply side constraints and some challenges in Indonesia, we remain committed to our prospectus earnings forecasts for the 2007 year," Mr Freedman said.
An edited company announcement is pasted below:
Emeco achieves 54% growth in EBITA half on half
Emeco today reported results for the half year to 31 December 2006 delivering 54.0%
growth in EBITA half on half based on a 45.0% increase in consolidated revenue and a
6.6% increase in EBITA margins.
Emeco's managing director, Laurie Freedman said, "Our revenue and earnings have
continued their strong growth trajectories during the first half. These strong results have
been achieved in the face of some challenging supply side conditions and have been
driven by increasing demand for the Company's services from both existing and new
customers."
The significant increase in growth capital expenditure in the half year ended
31 December 2006 as compared to the previous corresponding period was driven by
organic growth in the Australian rental fleet, the acquisition of Bevans, the acquisition of
a large package of equipment from TSM North America Inc and the continued expansion
of our Canadian business.
EBITDA ROFE of 28.4% and EBITA ROFE of 17.4% in the half year ended
31 December 2006 are in line with prospectus forecasts.
Mr Freedman said, "We are exploring a range of organic growth and acquisition
opportunities which would potentially require additional capital expenditure
commitments in the second half of FY07. Earnings from capital invested in the second
half of FY07 would begin to flow through in the first half of FY08 consistent with the
inherent deployment lags that occur in our business model".
Interim Dividend
A fully franked interim dividend of 1 cent per ordinary share has been declared by the
Board, representing a 39% payout ratio based on statutory net profit after tax. The interim
dividend will be paid on 21 March 2007 on shares registered at 5.00pm on Monday 5
March 2007.
Outlook
Mr Freedman said, "The overall outlook for the Company remains positive and the
business remains on track to achieve its prospectus forecasts. The volume of earth moved
in our existing markets is the primary driver of demand for the group's services. With
global demand for commodities remaining strong, the development of major new
resources projects by existing and new customers, and the commencement of new
infrastructure projects in North America, Europe and Australia, we think there will continue to be significant growth in the volume of earth moved in the markets we service. This growth will underpin our performance over the medium term."
Geographic Highlights
Australia
All our business units continue to experience robust market conditions in Australia driven
by ongoing development activity in Western Australia, New South Wales and
Queensland. The outlook remains positive with the continued emergence of new
investment and deployment opportunities domestically.
Indonesia
While the broader earth moving market in Indonesia also remains robust, we have
experienced some challenges in Indonesia recently with a decline in utilisation rates. We
are taking advantage of our geographical reach and pursuing opportunities to redeploy
under utilised equipment to Australia and North America.
Rest of the World
Opportunities continue to emerge for us in our Canadian and European markets driven by
further expansion of our River Valley operations and the acquisition of Euro Machinery
which occurred in January, 2007. In relation to the USA operations Mr Freedman said,
"While we are optimistic about our USA prospects in the medium term, we are facing
challenges in our efforts to take our rental business from the start up phase to consistently
contributing positive earnings to our overall Group."
Guidance
Emeco's revenue of $251.6 million for the 1st half of FY07 has increased by 45.0% over
revenue for the 1st half of FY06, while EBITA of $61.3 million for the 1st half of FY07
has increased by 54% over EBITA for the 1st half of FY06.
"We have forecast in our prospectus to increase revenue to $524 million in FY07, up
37.0% on FY06 and to increase EBITA to $121.8 million, up 36.2% on FY06.
These increases are significant. Despite supply side constraints and some challenges in
Indonesia, we remain committed to our prospectus earnings forecasts for the 2007 year,"
Mr Freedman said.
