The share price of Emeco Holdings Limited (ASX: EHL) has dropped 10% in response to the FY19 result.
Operating revenue increased by a pleasing 22% to $464.5 million and the heavy earthmoving equipment business reported that operating earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 40% to $214 million. The EBITDA profit margin increased by 590 basis points (or 5.9%) to 46.1%.
Operating earnings before interest and tax (EBIT) increased by 51% to $125.4 million with a good increase of the EBIT profit margin, which rose by 520 basis points (or 5.2%) to 27%.
Emeco’s operating net profit after tax (NPAT) rose by 214% to $63.1 million and statutory NPAT jumped by 536% to $33.7 million. According to Bloomberg, the market was expecting a net profit result of $54.18 million.
The growth of profit was driven by a continued increase in average operating utilisation to 64% (up from 58% in the prior year), improvement in the rental rates, continued tight cost control and a full year contribution from Force and Matilda Equipment.
Emeco generated $90.1 million of operating free cash flow before growth capital expenditure, which enabled it to repay US$33.8 million of its 9.25% senior notes and invest in strategic growth assets to future earnings. Emeco deleveraged to 2x by the end of FY19, down from 2.6x in FY18. This is calculated as net debt / operating EBITDA. Clearly deleveraging is a good thing for the strength of the business.
For FY20 the objective set by management is to continue deleveraging by growing earnings and using cashflow to reduce debt. This will allow the company to refinance its debts on materially better terms at the optimal time.
Management also referenced strong demand in iron ore and gold projects in the west as a reason to be excited by significant opportunities to enhance commodity diversification.
Whilst Emeco is theoretically a bit less volatile the commodity businesses, and it reported an impressive result today, I don’t like the idea of owning its shares because of how dependent it is on the large cyclical resource clients.
Instead, I want consistently good businesses in my portfolio, such as these top-quality ASX shares that are all long-term winners.
With interest rates likely to stay at rock bottom for months (or YEARS) to come, income-minded investors have nowhere to turn... except dividend shares. That’s why The Motley Fool’s top analysts have just prepared a brand-new report, laying out their top 3 dividend bets for 2019.
Hint: These are 3 shares you’ve probably never come across before.
They’re not the banks. Not Woolies or Wesfarmers or any of the “usual suspects.”
We think these 3 shares offer solid growth prospects over the next 12 months. Each of these three companies boasts fully franked yields and could be a great fit for your diversified portfolio. You’ll discover all three names and codes in "The Motley Fool’s Top 3 Dividend Shares for 2019."
Even better, your copy is free when you click the link below. Fair warning: This report is brand new and may not be available forever. Click the link below to be among the first investors to get access to this timely, important new research!
The names of these top 3 dividend bets are all included. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies move – we may be forced to remove this report.
Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.