Release Date: August 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue growth of 28% year-over-year, reaching nearly $42 million.
- EBITDA increased by 118% from the previous year.
- Achieved a maiden net profit of $0.5 million.
- Improved operating cash flow, allowing for reinvestment and debt reduction.
- Successful introduction of hybrid power units, combining solar and battery power with diesel.
Negative Points
- Challenges in gaining client uptake for hybrid generators.
- Commodity price declines, particularly in iron ore, could impact demand.
- High working capital requirements for the maintenance segment.
- Reduced CapEx spend in FY24, potentially limiting growth opportunities.
- Ongoing need to manage high utilization rates to avoid asset shortages.
Q & A Highlights
Q: Do you expect a strong uptake for the hybrid generators by existing clients in FY25?
A: Michael Shelby, Managing Director: It's been harder than expected, but we've learned from the process. We now have case history and actual results to show clients, which should increase uptake. The product offerings are also improving, giving us more options to present to clients. While diesel generators will remain, we see a growing opportunity for hybrid units.
Q: Has the decline in commodity prices, specifically iron ore, affected demand in the rental segment?
A: Michael Shelby, Managing Director: Power generation and dewatering are critical, so there's always demand. Clients may defer CapEx and opt for rentals, which benefits us. On the maintenance side, clients are sweating assets more, leading to increased rebuilds instead of new purchases.
Q: How are utilization levels tracking across the rental asset book?
A: Michael Shelby, Managing Director: Utilization fluctuates but trends upward. We aim to keep it above 70%. Currently, we're just over 70% utilization, which includes a mix of power generation and pumping assets. We continue to add assets to maintain high utilization and grow our capabilities.
Q: Which rental assets are showing the most demand from clients?
A: Michael Shelby, Managing Director: All our hybrid units are currently on hire, indicating strong demand. Specialty pumping, particularly high horsepower pumps, is also in high demand. These are big-ticket items that clients prefer to rent rather than purchase due to long lead times and high costs.
Q: Is there scope to expand into other commodities beyond gold and iron ore?
A: Michael Shelby, Managing Director: Yes, we've had some work in lithium and nickel markets and continue to see opportunities there. However, our primary focus remains on gold and iron ore, especially with mid-tier players who are in need of our services.
Q: Are you seeing increased demand from mid-tier gold players on the maintenance side as well?
A: Michael Shelby, Managing Director: The demand on the maintenance side has primarily been from larger clients. As we've matured and proven our capabilities, larger clients have shown more confidence in us, leading to increased and repeat business.
Q: What characteristics are you looking for in potential acquisitions?
A: Michael Shelby, Managing Director: We're looking for asset-heavy businesses in water management and power generation. We prefer companies with unique offerings and strong management teams. Acquisitions should align with our focus on specialty rentals and potentially have an ESG component.
Q: How do you plan to fund potential acquisitions?
A: Michael Shelby, Managing Director: It depends on the case. For smaller acquisitions, we prefer a mix of bank debt and deferred consideration to avoid shareholder dilution. Larger opportunities will be considered based on their fit and potential for growth.
Q: Do you foresee any existing businesses becoming non-core and potentially being sold?
A: Michael Shelby, Managing Director: As a listed company, everything is always for sale. However, we're currently happy with our growth plans and the performance of both our rental and maintenance segments. Any decision to sell would depend on what's best for long-term growth and shareholder value.
Q: Where do you see the business in two years?
A: Michael Shelby, Managing Director: We aim for higher turnover and earnings, achieving critical mass. We want to remain essential to our clients in the resource sector, providing valuable and innovative services. Our goal is to grow our scale and financial returns while being recognized for our contributions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
