Yet more bad news from crane company Boom Logistics Ltd.
It yesterday downgraded its full year profit guidance by up to $8 million following underperforming operations in Western Australia.
Boom is now forecasting a profit of $22 million for the 2008 fiscal year, down from the previous guidance of $29 million to $30 million provided in February.
That February guidance and other problems resulted in the CEO being changed with a new one appointed in April.
The company said excessive equipment cross hire from third parties in WA was causing "concern", while the systems integration and management turnover has interfered with the merger of Moorland Hire into the Sherrin business.
Boom shares dropped 18.5c or 20% to a low of 71c in early trading after the downgrade, but the shares then made their way back to 80c where they closed for a loss of 10.6% on the day.
The company’s shares have dropped 67% from the high of $3.63 hit a year ago (It actually was around 80c higher in the early months of 2007). For sometime the company was strongly supported by several leading brokers as a way of getting it into the resources boom from the services side (alongside companies like Orica, Macmahon, United and Campbell Bros).
But it has underachieved, replaced senior management in an attempt to fix the problems and struggled to live up to expectations and previous financial performance. It earned more than $36 million in the 2007 year, so the $22 million this year will be down by 39%.
Being hit by the floods in central Queensland was bad luck, and it’s to be hoped that the company’s recovering WA crane business isn’t hurt by the gas supply crisis now hitting the state and hurting the mining sector to varying degrees.
In the statement to the ASX Boom said:
"Major contributors to the underperformance in FY2008, which have been magnified in the second half of the year, have been personnel issues and systems integration issues.
These issues have been most evident in:
- Western Australia, where operations have underperformed despite favourable business conditions, with excessive equipment cross hire from third parties a particular concern;
- Systems integration and management turnover interfering with the effective merging of Moorland Hire into the Sherrin business.
"This resulted in the over accrual of revenue during the March quarter, which has since been identified and corrected.
"The Bowen Basin flooding and its impact on equipment movement and general crane operations continued to impact into the June quarter, but has since recovered.
"In pursuing a turnaround of the business the Board has appointed, during the past three months, a new Chief Executive and Chief Operating Officer.
In addition, a new General Manager of the Sherrin business was appointed in February, a new General Manager of Western Australian operations has been identified and a new Finance Manager for Western Australia has been appointed."
Chief Executive Officer Brenden Mitchell said:
“Boom Logistics operates in the growing and vibrant resource and infrastructure sector has a strong asset base and its cash flows are robust. Our rapid growth however, has masked some underlying problems especially to do with access to real time information. We know what we have to do to fix the situation.”
"The new Senior Management team has implemented a business review including balance sheet carrying values. This review has to date highlighted that the carrying value of the crane fleet is fully supportable by valuation work and recent third party sales indicate continuing improvement in crane values.
"The review will, however, result in some non-cash adjustments related to assets that will predominantly impact prior periods. These adjustments will be reflected in the audited accounts.
"The Company continues to be a strong cash generator with business cash flows more than sufficient to continue debt servicing and meet forward fleet plan requirements."
The company said the June quarter is expected to deliver a NPAT result higher than the previous two quarters despite the reduced full year forecast. In looking forward to the new financial year it is expected that this quarterly progress will continue, through a disciplined approach to market opportunities and a rigorous focus on costs.
"To achieve greater transparency and demonstrate the progress of the business, the Company will report the first quarter results of FY2009 at the Annual General Meeting in October," the company said in the statement to the ASX.
