• Revenue: $435 million, steady compared to both the first and second half of the previous year.
• EBITDA: $137 million, up 21% from the first half of 2023.
• EBIT: $60.7 million, up 49% from the prior corresponding period.
• Return on Capital: Improved to 15% from 13%.
• Operating Free Cash Flow: $40 million for the half.
• Net Leverage: Slightly above 1x EBITDA target.
• Rental Revenue: Just under $260 million, an increase of 11% from the first half of 2023.
• Rental Operating EBITDA: Just under $140 million, a 13% increase from the prior corresponding period.
• Force Operating EBITDA: $8.6 million for the first half of 2024.
• Pit N Portal Operating EBITDA: $12.1 million with an EBIT of $3.7 million.
• Net Debt: $290 million, up from $276 million.
• Liquidity: Just under $140 million, including $64.5 million in cash.

• Warning! GuruFocus has detected 8 Warning Signs with ASX:EHL.

Release Date: February 19, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Emeco Holdings Ltd (ASX:EHL) reported a solid financial performance with a steady revenue of $435 million for the first half of 2024.
• EBITDA increased by 21% compared to the first half of 2023, reaching $137 million.
• The company improved its return on capital to 15%, up from 13% in the previous period.
• The rental and Force businesses delivered strong operational and financial performance, with stable margins due to improved contract pricing.
• The company maintained a strong balance sheet with net leverage slightly above its 1x EBITDA target, supported by positive cash generation and recent credit rating upgrades.

Negative Points

• The Pit N Portal business contributed slightly lower to EBIT due to higher depreciation charges and a $2 million lower contribution.
• The announced scale back of Wyloo projects is expected to marginally lower Emeco Underground earnings in the second half of 2024.
• The company's capital management program has been suspended, with a focus on reducing financing requirements.
• Operating NPAT saw a reduction compared to the last half due to a previous tax loss write-back.
• Growth CapEx is expected to moderate in FY25, potentially impacting future expansion opportunities.

Q & A Highlights

Q: Can you confirm if you're comfortable with the consensus EBITDA of about $280 million for the full financial year? A: Yes, we're comfortable with the consensus. - Ian Testrow, CEO

Q: Could you discuss the demand environment for parts and rebuilds in the Force group, which had another record period? A: Our Force business has performed exceptionally well, showing significant revenue growth over the past two halves. It provides quality service to our customers and a competitive advantage to our Rental business. Demand remains high. - Ian Testrow, CEO

Q: With the divestment of Pit N Portal, should the consensus EBITDA of $280 million be adjusted? A: No adjustment is needed; the $280 million consensus remains correct, even with the divestment of Pit N Portal. - Ian Testrow, CEO

Q: Can you provide an update on the rental markets on the east and west coasts and overall business conditions? A: The rental business is performing well with strong demand. The East Coast is doing well, particularly with coal, and the Western region remains steady. Overall, the business is managing well. - Ian Testrow, CEO

Q: How are you approaching free cash flow generation and capital management, especially with growth CapEx expected to moderate into FY25? A: Our focus is on generating strong returns, improving margins, and generating strong cash flow to prepare for refinancing in a couple of years. This is the last tranche of growth CapEx for about 12 months, and we aim to improve earnings quality organically. - Ian Testrow, CEO and Theresa Mlikota, CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.