Investors took the long handle to a couple of stocks yesterday – vitamins group Blackmore’s was one (see separate story) on a weak China outlook; heavy equipment hirer, Emeco Holdings was another despite producing a $12 million profit for the six months to December.
Blackmores shares were knocked down more than 30% at one stage and ended off more than 24%. Shares in Emeco Holdings fell nearly 30% and ended more than 24% at $2.13.
Emeco reported a net profit of $12 million for the first half compared with a $293,000 loss a year earlier.
Revenue was up 31% to $224 million.
Investors sold off the stock because they reckoned it fell far short of what they thought it would be – upwards of $70 million for the half.
An $11.4 million foreign exchange loss and long-term incentive payments of $4 million cut what would was a reasonable underlying profit of $31.7 million for the half.
But that wasn’t good enough with overly optimistic brokers having forecast net profit for the full 2019 fiscal year in the vicinity of $70 million which was way ahead of the latest results.
The company’s results were solid – $102.8 million of operating earnings before interest, tax, depreciation, and amortisation which were up 53.4%; an operating EBITDA margin of 45.8% vs 39.2% in the first half of 2017-18 and operating utilisation 64% vs 57%.
Managing director Ian Testrow said the company had focused on improving margins and increasing equipment utilisation, and reducing leverage over the last six months.
“The outlook for the remainder of FY19 is positive,” Mr. Testrow said strong market conditions were expected to continue, particularly in eastern Australia.
Investors also noticed that the company had spent $20 million in a deposit on a fleet of new machines, mainly 240-tonne trucks (used in open cut mines) and D10/D11 dozers.
“In order to meet strong ongoing demand and drive continued growth, Emeco has committed to investing in a significant package of core assets. We currently have very high utilisation in these asset classes and already have rental agreements in place for a majority of these assets.
“This disciplined asset purchase is expected to achieve high-teens returns through its life. Delivery and preparation will occur throughout 2H19, with earnings contributions expected in FY20.”
