08.09.2020

Revenues up profit down at Boom

Australian crane and access rental group Boom Logistics has published its full year results for the 12 months to the end of June.

Total revenues for the year increased almost two percent to $185.5 million, thanks to solid revenue growth from wind farm construction, maintenance projects and power related contacts. Meanwhile telecommunications work held steady with 5G rollout and network upgrades, however infrastructure and construction revenue was lower, as was industrial maintenance revenue in the fourth quarter. Looking at the two main elements of the business, crane hire revenues were flat at $94 million, while truck mounted lift rental improved eight percent to $27 million. The balance was made up of labour provision and 'Projects'. The company’s pre-tax losses increased from $5.3 million last year to a loss of $12.5 million this year. Some of this was due to a $7.5 million loss on the Cattle Hill wind farm project due to major delays, and extreme weather conditions, while Covid-19 also made an impact.

Boom did however manage to substantially reduce its net debt from $33.6 million last year to $19.6 million as of the end of June. This after also buying back $1.7 million worth of shares. Capital expenditure however was negligible at $1.6 million, while sales of used equipment totaled $1.2 million. Crane utilisation overall was 76 percent, up from 73 percent last year, with cranes up to 25 tonnes touching 84 percent and those of 200 tonnes and above coming in at 77 percent. Truck mounted platforms averaged 57 percent with platforms over 38 metres coming in at 79 percent, compared to 44 and 45 percent for platforms up to 18 metres and 20 to 38 metres respectively, as a result the company is looking to dispose of 35 smaller platforms.

Managing director, Tony Spassopoulos, said: “While this result was disappointing, we made progress towards a number of strategic goals. With a strong balance sheet and cash flow and increasing diversification into growth sectors and regions, Boom is positioned to grow profitably in the future. process. The business has solid bookings for wind farm projects in the first half of the current year, based on an equipment hire and labour rate model for service performed. The business is targeting large infrastructure work in capital cities, such as rail works and level crossing removals in Melbourne, as well as major bridge and tunnel boring projects. The fleet’s larger cranes also assist with wind farm maintenance work which is increasing across the sector. Work on the Snowy 2.0 project, which commenced in August, and will benefit the business this year."

“While uncertainties remain regarding the impact of the pandemic on our operations, we have laid the foundations for Boom’s future growth, underpinned by low debt and strong cash flow. We are well placed to take advantage of new revenue opportunities, such as expanding services in mining maintenance and entering new growth regions including Western Australia’s north-west. There is considerable potential for our Travel Towers business to assist with power infrastructure and telecommunications work and to secure recurring revenue from the wind farm sector.”

“We are confident our focus on diversification, recurring revenue streams and targeted growth markets, together with our prudent capital management strategy, will lead to improved returns for our shareholders.”

Covid-19 response

“Boom responded rapidly to the emerging pandemic in line with advice from the Government and World Health Organisation. This included working closely with customers to ensure all health requirements were met, while developing an action plan to keep people safe and manage impacts on the business. The company was early to implement travel restrictions in March and introduce stricter cleaning processes. This required sourcing cleaning and sanitation products, establishing social distancing protocols and introducing thermal scanning devices to conduct temperature checks at depots.”

“A number of decisions were made to preserve cash, introducing additional cost controls to minimise expenditure. Major suppliers were approached to extend credit terms and employees were directed to take leave during the fourth quarter”

Vertikal Comment

Given that the results included at least three pandemic months this is not a bad result at all. Clearly the large loss on the wind farm project dented what otherwise would have been a slightly better bottom line that last year, in spite of the pandemic - and that is quite an achievement.

The lack of investment in the fleet is a concern of course, as is the company’s policy of using suppliers payment terms to fund its debt reduction programme and dividend. Both policies, while saving cash, do have a habit of coming back and biting the business at a later date.

It will be interesting to see how the current year pans out.