Troubled transport group McAleese (MCS) saw its shares all but unwanted for most of yesterday after it has warned that its 2015 earnings could be hit by the slow payment of outstanding debts and impairments.
In fact yesterday’s trading update contained a litany of bad news for any still loyal shareholders.
The company didn’t win over any new converts either by revealing that it has now started talks with its banks over a potential restructure of its debt facilities.
In other words management and the board see the need for a revamped debt repayment schedule given the host of financial pressures confronting the group.
It’s those fears and news of the slow repayment of debts that led to the shares being unwanted for most yesterday until a late series of sales saw the shares slide to 9 cents – down 14% on the day, on volume of 2.1 million shares.
MCS 1Y – More problems for beleaguered McAleese
McAleese revealed in yesterday’s statement that a significant debtor to McAleese’s heavy, haulage and lifting division has not been able to pay the transport company due to slow payments by one of its key customers.
That’s the division that has taken the brunt of the financial impact from the troubles at the Atlas Iron’s iron ore mines in WA, forcing a big write down.
"This may have a negative impact on the company’s fiscal 2015 earnings," McAleese said. "The company continues to seek information to determine what, if any, provision against the debt should be reflected in the fiscal 2015 results."
And if that happens, any material provision could impact the financial undertakings in McAleese’s syndicated facility agreement, hence the talks with its banks.
“McAleese Group has commenced discussions with its financiers regarding its debt facilities with the aim of providing a stable base to improve the company’s balance sheet, operations and long term growth prospects,” directors said yesterday.
Directors also warned the carrying value of its bulk haulage division had been revised lower after restructuring its agreements with Atlas Iron. McAleese will take an impairment of between $50 million and $70 million on the division reflecting write-downs on goodwill, intangibles and property, plant and equipment.
The company invested tens of millions of dollars in transport equipment and infrastructure to haul iron ore from Atlas’s three Pilbara iron-ore mines to Port Hedland, initially providing about 100 trucks and 400 employees. But Atlas’ near collapse and restructuring has seen the value of those assets reduced.
McAleese now holds a 10.5% of Atlas Iron following the troubled miner’s capital raising and holds an additional 280 million option with a strike price of 7.5 cents each and expire on June 30 2017. They are well underwater with Atlas shares trading at 3 cents yesterday.
And there’s more bad news there so far as McAleese shareholders are concerned.
"The Company’s revised arrangements with Atlas make assessment of the carrying value of the Bulk Haulage division sensitive to the Australian dollar iron ore price. At recent iron ore prices and exchange rates, an impairment of approximately $50-70 million to a combination of goodwill, intangibles (together ~$49 million) and property, plant and equipment is expected,” the company said yesterday.
On top of this it will also take a $4 million goodwill impairment in its specialised transport division due to lower freight volumes.
But there was one tiny bit of good news – McAleese said its trading EBITDA for fiscal 2015 and June 2015 net debt were in line with previous guidance.
McAleese has not yet announced on what date it will report 2015 earnings, but they are likely to be in late August, given the problems outlined yesterday.
