What: After restructuring the company, divesting assets and paying down debt, management of Transpacific Industries Group Ltd. (ASX: TPI) have reported full year results to investors.
Unfortunately despite Herculean efforts to reform the company, full year 2014 did not quite result in the success expected by management and investors after a promising 1H 2014.
Highlights:
- EBITDA down 7% on 2013, to $383.2 million
- Profit after tax attributable to shareholders up 35.5% to $92 million
- Underlying earnings per share of 5.8 cents, up 34.8% (statutory: 0.7 cents/share)
- Additional $189 million after-tax charge to cover increased landfill remediation costs
- Extra charges of $125-175 million over the next five years to cover increased remediation costs
- Debt down from $978m to $137m
- Huge asset sales in order to reduce debt and remove underperforming branches
- 33% reduction in total recordable injury frequency rate
- Dividend of 1.5 cents per share, the first since 2008
So What?
Ordinarily I am a big fan of focussing on underlying profit figures rather than statutory figures; however this only works in an investor's favour when a company does incur truly 'one-off' charges.
Often the statutory loss reported to the market can be enough to scare off investors and allow you to purchase shares at a discount.
I don't believe this is the case with Transpacific, with a seemingly endless string of increased remediation provisions and more expected over the coming five years.
Although the company has done great work to stop its balance sheet haemorrhaging red ink with cost reductions and debt repayment/refinancing, I don't believe this is cause for an immediate turnaround in the company's near-term prospects.
Now What?
Transpacific has had a shocking week, with huge remediation increases announced at the same time as the annual report. There has also been a fatal accident reported last Monday night, which has resulted in the grounding of its fleet.
I would not be a comfortable purchaser of shares in the company as it stands at the moment.
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