McAleese stabilises debt with revised banking arrangement

Losses rise as group focuses on financial position and sees Cootes transforming

McAleese stabilises debt with revised banking arrangement
McAleese says it has enough cash in had to fund improvements.


Red ink has gushed faster from McAleese Group as the company looks to other arms improving like Cootes has and with lenders giving it room to move under its debt.

Though the group insists the cost of the deal is "commercial-in-confidence", it says flexibility in its debt covenants was gained after scrutiny of financial year's budget details.

"These were used to determine the revised bank covenants, which the Company believes provides adequate headroom to pursue business improvement and strategic initiatives," it says, adding that is "satisfied that consent fees payable to the syndicate and revised interest margins are materially in line with market comparisons".

The new deal focuses on minimum gross earnings (EBITDA) and cash flow available for debt servicing, maximum capital expenditure requirements and reduced debt facility limits.

The group’s net debt fell $58.2 million to $170.5 million for the last financial year.

Meanwhile, the company is expecting is expecting a "modest" reduction in property, plant and equipment (PP&E) depreciation this financial year.

"This reflects the impairments to PP&E disclosed in the financial statements, offset by reduced residual values in the Heavy Haulage & Lifting [HH&L] division," McAleese says.

"These residual values have been reviewed in accordance with the accounting standards and in the context of prevailing market conditions for cranes and heavy haulage fleet assets."

PP&E sales were up from $7.7 million to $27.2 million, while purchases were down from $69.3 million to $54.1 million.

Most of the group’s capital expenditure was completed during the first half.

The results bottom line is that its $90.9 million loss last financial year is up 44 per cent on the $63.3 million loss for the previous financial year, with revenues down from $762 million to $637 million.

This was despite the group gaining $96 million from non-core asset sales including divestment of Liquip International, for $51.3 million, and Beta Fluid Systems for $2.5 million, and the sale of surplus equipment in its ‘oil & gas’ (O&G) division for $12.6 million and HH&L  for $13.6 million.

Against that were a series of impairments of which the biggest was in the ‘bulk haulage’ division, where $67 million went to a combination of goodwill and intangibles, of $49 million, and property, plant and equipment of $18 million.

The same total was lost from HH&L "reflecting the continued decline of activity and maintenance levels in the resources infrastructure sector, market over-capacity and a weak pipeline of new projects".

That division was also hit by the entrance into voluntary administration of significant customer Trans Global Projects.

The ‘specialised transport’ (ST) division saw further reductions in freight volumes particularly on the east-west corridor due to softening economic activity and a slowdown in the mining and resources sectors, with  goodwill was impaired by $4.1 million.

And despite $16.1 million thrown in to try to keep it afloat after its $3 million purchase of half of Heavy Haulage Australia (HHA), that effort went belly up, with only $200,000 salvaged.

McAleese put the failure down to the deterioration of market conditions in the second half, particularly in the upstream oil and gas and infrastructure sectors, and "HHA Group’s inability to support the high fixed costs of its lease arrangements".

Amongst the divisions, O&G, comprising Cootes Transport and fuel handling manufacturer Refuel International, provided a sliver of a silver lining

Its earnings before interest and tax (EBIT) of $4.8 million, a 214 per cent rise from last year’s loss of $4.2 million, come despite revenues falling from $295.4 million to $146 million.

The transformation of Cootes, which drove 30 million fewer kilometres for the year, is nearly complete.

"The Cootes Transport business continues to focus on expanding its customer base outside its traditional metro and regional fuel/LPG supply chains," its parent says.

"This includes the transport of other dangerous goods, including anhydrous ammonia, and working with the Bulk Haulage division in pursuing fuel and LPG transport opportunities to supply isolated locations within key resource producing regions."

A reverse picture was seen at ST, where a 3.1 per cent lift in revenues to $82.4 million resulted in a 131 per cent fall in EBIT to a $1.1 million loss.

Its aim this year is "reducing direct labour costs and improving sub-contractor management".

Earning at the ‘bulk haulage’ division, with which the revised Atlas contract is underway along with new deals withMillennium Minerals and Process Minerals International, were pretty level at $264.4 million but EBIT dropped from $21.6 million to $13.7 million

HH&A’s revenues fell from $186.5 million to $143.9 million and EBIT fall from $227.8 million to $4.4 million despite gaining $13.6 million in fleet sales.



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