Australian industrial services group Boom Logistics (ASX: BOL) has delivered a substantial improvement in its financial results for the year ending 30 June 2018, signalling a “turning point” for the business after a period of volatile market prices and challenging operating environments.
Revenue for the company increased in 2018 by 22% to A$183.1 million compared to A$150.1m in the previous corresponding period, while gross margins increased to 28.7% (compared to the previous 27.1%).
Boom attributed part of the increase to strong growth in the mining and energy sectors, with higher revenues from mining maintenance contracts in line with increased customer activity, and the completion of three Australian wind farm construction projects during the year requiring ongoing maintenance by way of specialised assets and expertise.
It also cited a major shutdown completed during the reporting period at BHP Billiton’s (ASX: BHP) Olympic Dam facility in South Australia, which accounted for approximately A$10m revenue.
Strong cash position
Statutory earnings before interest, tax, depreciation and amortisation (EBITDA) improved markedly with a profit of A$20.6m compared to the previous year’s loss of A$1.3m, while statutory earnings before interest and tax (EBIT) recorded a profit of $2.4m (compared to the previous A$19.5m loss).
Boom’s cash position strengthened in the second half of the year and delivered a solid operating flow of A$11.5m, compared to A$6.3m in the previous year. This reduced the company’s debt to a net position of A$37.3m at year end (compared to the previous A$45.1m).
Strong recovery was reflected in statutory net loss after tax (NPAT) figures, which were reported as a loss of just A$1.55m for the year, compared to a A$22.6m net loss in the previous period.
A flexible operating model
Boom chief executive officer Brenden Mitchell, who will retire next month after 10 years at the helm, said the current financial results were an “important turning point” for the company which was hit hard by a commodities price crash in 2013.
At that time, 68% of Boom’s revenue came from the mining sector however after the crash, the level of demand, as well as the prices paid, for the company’s services in the sector dropped by as much as 30%.
“We have worked hard to transform this business [in light of continued market price pressures] and transition it to a more flexible operating model,” Mr Mitchell said.
“We have demonstrated operational leverage in the business and with further growth, [we believe we] can deliver positive earnings and real value to our shareholders.”
Following Mr Mitchell’s decision this month to retire as CEO, managing director and board member, Boom’s board of directors has appointed current chief operating officer and director of sales and marketing Tony Spassopoulos to the role.
Mr Spassopoulos has over 30 years’ experience in the equipment hire and services, and pallet and container industries.
He has held various executive positions within Boom since joining the company in 2008.
Mr Mitchell will remain in the business for six months until February 2019 during which time he will support Mr Spassopoulos in his new role, manage specific projects and ensure a smooth transition.
“Tony is the right leader for [Boom] and I have every confidence that his vision and strategy will continue to strengthen the business and build its respected reputation in the market,” Mr Mitchell said.
Boom’s pipeline of multiple work opportunities is slated to deliver further revenue growth of around 15% in the 2019 financial year.
The company is targeting a greater involvement in Australia’s wind farm maintenance market and hopes to win around $30m per year in wind farm revenue during financial years 2019 and 2020.
It will also investigate tenders for specific infrastructure and civil construction projects where experience in complex lifts and engineering are required.
Boom acknowledged a major opportunity to supply technical and specialised labour for minesite shutdowns through its labour hire business readi.