Rescue talks continue as McAleese sinks into the red


First half loss of $97 million as impairments bite, revenue falls and the situation becomes critical

Rescue talks continue as McAleese sinks into the red
McAleese is doomed without a deal.

 

McAleese Group is staring into the abyss, admitting there are "material uncertainties that give rise to significant doubt about the ability of the Group to continue".

McAleese and its financiers are battling for a compromise debt and refinancing deal with unnamed firms, the company says as it releases its first-half results.

With the firm struggling with difficult market conditions that saw non-cash property, plant and equipment impairments add $50 million to its $97.4 million first-half loss, the third parties are offering prices lower than the company is presently worth.  

"As further negotiation is required in relation to each of the proposals, the effect of the proposals on McAleese Group’s shareholders remains uncertain, however, the enterprise valuations attributed to the Company by each proposal are materially below that implied by its current market capitalisation," McAleese says.

At present, market conditions are such that without action the firm "will not operate within the level and terms of its financial undertakings" and will be unable to repay a $55.4 million tranche due in November.

"Given the forecast breach of covenants and debt repayment requirements under the existing syndicated facility, in the absence of the Strategic Process resulting in a recapitalisation of the Group, the Group will require the ongoing support of its existing financiers to continue as a going concern," it says in its half-year report.

Until the negotiations end, the company’s shares will stay suspended.

The net first half net result was down 285 per cent on the previous first half’s $52.5 million profit and came on the back of a 20 per cent fall in revenues to $285 million, compared with $357 million previously.

"The financial results for the half clearly reflect a difficult trading environment for the Company," McAleese MD and CEO Mark Rowsthorn says.

"Our recent focus has very much been on restructuring the business to align with lower activity levels, while actively seeking profitable revenue opportunities.

"We have made good progress with our business transformation program and are confident that there are significant gains yet to be realised."

Most exposed to market conditions is the Bulk Haulage division in the Pilbara.

It handled 1.2 million more tonnes than in the previous first half, for the likes of Atlas Iron, Millennium Minerals and Process Minerals International.

But margins were hit due to revised Atlas haulage contracts and the low iron ore price meant its profit share deal with that miner has so far failed to kick in.

McAleese reveals the division is part of the ‘super-quads’ initiative.

"During the half, the Bulk Haulage division also commenced trials for an alternative road train combination in collaboration with Main Roads Western Australia, which, subject to ongoing endorsement, provides the Group with an opportunity to roll out the alternative combination in its operations and generate cost savings through significantly enhanced payloads," it says.

Apart from the Elgas deal, the Oil & Gas division saw revenue down 37 per cent to $49.2 million compared with the last first half, with subsidiary Cootes Transport’s deal with Caltex winding up, Shell and BP wet-hire deals ending, and the loss of sold arms Liquip’s and Beta Fluid Systems’ earnings.

The firm was confident of the medium-term future of the Heavy Haulage & Lifting division (HHL), which suffered continued low capital expenditure in the resources industry and ongoing deterioration in market conditions, though the uncertain nature of a resources-sector rebound was a concern.

The Specialised Transport division continued to face weak east-west volumes and a highly competitive market on east-coast lanes. While volumes were as expected, margins contracted.

"A review of the division’s revenue base is ongoing, with corrective action commenced to improve yield and restore profitability," the company says.

Fuel, oil, electricity spend was $28.47 million compared with $38.73 million in the previous first half but direct transport and logistics costs were up at $85.9 million compared with $72.9 million.

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