RE: MrTall29 Jun 2015 22:12
Hi Aurum, it's a capital intensive business. As well as ambitious growth plans the business deals in physical assets that age and need to be replaced.
The EBITDA margin is healthy at c25% and utilisation on both core and specialist streams are pretty good. Yes there is a lot of debt but it's not unmanageable and interest cover is OK IMO. If the business wasn't growing I'd be more concerned, but all debt appears to be used to grow the business in bricks and mortar so to speak and in this industry you need to be there when your customer needs you, if you are not then someone else will be.
The macro plant industry is growing, they state 4% in their annual report but I'd say that's a bearish view. Infrastructure and construction projects are on the up, and the service offering here is good enough to provide an attractive alternative to "in house" plant.
So I'm interested to see how the second half of the year goes and the Q3 update in particular to see if the initial June assessment carries through July and August. But for now I'm satisfied that the cashflow and margins being achieved are more than enough to support operations, service debt and fund growth.
The key for me will be how quickly dividends are started!