Investment Matters

Company News

Your companies this week (please see below for news from last week): 

Emeco Holdings (positive impact) held its annual general meeting on Thursday. Pleasingly, the company is continuing to see an improvement in rates and utilisation. As a result, Emeco is anticipating that it will make an operating profit of between $118 and $120 m in the first half of FY-20 (1H-20), in comparison to $102.8m in the previous year (1H-19). In addition, the company is anticipating further earnings growth in the second half.

In terms of its operations, equipment relocated to the Western region of Australia has secured new work (primarily servicing iron ore and gold miners) while utilisation remains high in the Eastern region, particularly in metallurgical coal.

The company also reiterated that its recently purchased growth assets (which had been a cause of concern for the market) are delivering additional earnings for the company, with the $85.1m in capital expenditure in FY-19 anticipated to deliver $25m in operating profit in FY-20. 

Furthermore, the company continues to focus on its financial leverage, reaffirming a commitment to reduce both gross debt and leverage (targeting a Net Debt to EBITDA ratio of 1.5x by the end of FY-20 and 1.0x by the end of FY-21).

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CML Group (positive impact) announced it has entered a scheme of implementation arrangement with Consolidated Operations Group (COG) as part of a merger of equals.

Consolidated Operations Group (COG) is Australia’s largest equipment financing broker and aggregator. In addition to being aligned with an extensive network of brokers, the company provides its own equipment financing solution.

The combination of the two companies is expected to provide significant cross-selling opportunities, allowing COG’s network to offer businesses an invoice financing product. This is in addition to operational synergies (reduction of corporate overheads, listing and compliance costs).

Under the scheme of implementation, shareholders of CML will be offered either: 5.4 COG shares for each 1 CML Group share held or 2.7 COG shares plus a cash consideration of A$0.24 for each 1 CML Group share held.

Furthermore, under the scheme of implementation and prior to the merger, each respective company will raise capital through a rights issue. This capital will be used for working capital purposes, debt reduction and the costs associated with the scheme.

 

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Pact Group (positive impact) held its annual general meeting on Wednesday. Trading conditions in FY-20 have remained in line with expectations, with the company reaffirming its earnings guidance. Furthermore, Pact reiterated its commitment to innovation, integrating and optimising its existing packaging network and sustainability. Its strategic review remains in progress, the results of which are anticipated to be announced in December, which will bring further clarity around its future strategic direction.  

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BHP Group Limited (neutral impact) announced it will be appointing a new CEO on the 1st of January 2020. Current CEO Andrew Mackenzie will be stepping down from the role and retiring from the group on the 30th of June 2020. Mr Mike Henry, a member of BHP’s executive team and currently the President of Operations for Minerals Australia will be appointed in his place. Mr Henry joined BHP in 2003 and has held various roles in business development, marketing and senior management. He possesses deep operational and commercial experience, with a global career that has spanned several geographies.

 

Last week:

Cardno (positive impact) announced on Monday the resignation of CEO and Managing Director Mr Ian Ball, who has decided to pursue other opportunities. Mr Ball will be succeeded by Ms Susan Reisbord.

Ms Reisbord, who joined Cardno in 2015, has led the significant turnaround seen of the company’s Americas Region as President of the Science and Environment Division and CEO of the Americas Region.

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Boral (neutral impact) released an update for trading over 1Q FY-2020. In line with expectations, a softer housing market and delay in infrastructure projects has seen volumes remain weak for Boral Australia. Volumes for its North America segment are showing signs of improvement, in line with a recovery of the US housing market, while 1Q earnings for USG Boral (its plasterboard division) have also been impacted by a slowdown in residential construction.

The company reiterated its earnings guidance for FY-20, with weakness in the first half expected to be offset by a strong second half due to seasonal uplift, the ramp up of several major infrastructure projects and completion of cost out initiatives.

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MMA Offshore (neutral impact) completed its acquisition of Neptune Marine services this week. As part of the transaction, 67.6 million MMA shares were issued to Neptune Marine Services Limited – at a price of A$0.20 per share.

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Worley (positive impact) announced the signing of a new contract with chemical maker Nouryon. Under the agreement, Worley will provide engineering, procurement and construction management (EPCM) services to twenty of Nouryon’s chemical sites across Europe for a period of five and a half years. As part of the contract, 50 of Nournyon’s employees have been transferred to Worley’s Europe business - establishing a strong relationship between the companies.

Furthermore, the company announced that its contract with BP Exploration (Alaska) has been extended by an additional two years. Under the existing contract signed in 2012, Worley provided well support services and fluids hauling.