The Emeco Holdings Limited (ASX: EHL) share price is soaring higher in mid-morning trade. This follows the release of the company’s presentation at the Macquarie Group Ltd (ASX: MQG) conference along with an update from its board.
At the time of writing, the equipment rental company’s shares are fetching for 99 cents apiece, up 6.67%.
What did Emeco announce?
Investors are snapping up Emeco shares after the company reaffirmed its guidance for the H2 FY21 period.
In its announcement, Emeco highlighted that it is continuing to deliver strong revenue growth. This is primarily due to the successful execution of its strategy.
Operating earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to be in the upper guidance range of $115 million to $118 million. Pleasingly, this is despite the company facing COVID-19 disruptions and coal weakness in the sector.
In addition, Emeco noted that it is achieving positive Q4 FY21 rental earnings that are set to run into FY22. Approximately half of the equipment off-hired last year has been re-deployed across the business into new projects.
Further to the company’s share price rise, the Emeco board approved a capital management policy.
This will see between 25–40% of operating net profit after tax allocated to capital management initiatives each year. The policy will come into effect after the end of FY21, on a pro rata basis for the second half.
The board stated it will decide on the relative benefits of dividend payments to maximise shareholder value. In particular, the company aims to make use of its $85 million through franking credits and share buybacks. This of course is dependent on the share price and valuation at the time of the decision being made.
Comments from the CEO
Emeco CEO and managing director, Ian Testrow commented:
This capital management policy marks the next phase of Emeco’s evolution where our strong balance sheet and cash flow supports the recommencement of returning funds to shareholders. The company is in a sound position both financially and operationally, with a positive outlook ahead. Emeco has come a long way over recent years and we are excited to continue the journey as a business which makes regular payments to shareholders, as we maximise shareholder value through the cycle.
Our aim is to provide a sustainable distribution stream to shareholders, utilising our available capital as well as our franking balance, whilst also taking into consideration our share price and valuation and ensuring that we prudently deploy our capital to support growth in a disciplined way.
About the share price
It has been a rocky 12 months for investors as the Emeco share price has gone on a rollercoaster ride. While the company’s shares are almost 10% higher from this time last year, its year-to-date performance has slumped, down 10%.
Based on today’s prices, Emeco has a market capitalisation of about $554 million, and 544 million shares outstanding.