Boart Longyear halves loss but revenue is slashed 20pc
Boart Longyear has halved its loss for the first half but warned about its ability to operate as a going concern.
Troubled mining services group Boart Longyear has halved its loss for the first half, as it delivered a dire financial report that showed turbulence in the resources sector slashing its revenues by 20 per cent.
The group (BLY) most significantly warned about its ability to operate as a going concern, given a sharp rise in its liabilities, which has forced Boart to request assistance from a restructuring entity.
For the six months to June 30, the company reported a loss of $US73.2 million, an improvement on last year’s corresponding red figure of $US152.3m.
The group’s underlying loss improved 24 per cent to $US52m, from $US69m in FY2015.
Boart said revenues slid 20 per cent to $US310m, while it was able to deliver a pre-tax profit of $US3m.
“The first half of 2016 was another challenging period for the resources sector,” Boart chief executive Jeff Olsen said.
“Exploration levels were low, which is evident in our revenue dropping.
“On the positive side, our focus on productivity and cost control means that costs have dropped substantially faster than revenue.”
Mr Olsen said the recovery off lows for several commodities had spurred confidence the group could enjoy a rebound in its fortunes in the near-term.
“We are … seeing positive signs in the market,” he said.
“Gold continues to climb, and the second quarter of 2016 was the strongest quarter for equity raisings by junior miners since the fourth quarter of 2012.
“Gold represents over half our revenues, and this improved price environment has already resulted in increased tenders for drilling.”
The company is expecting to be cash positive from 2017 as the market improves and costs continue to be trimmed.
In the meantime, a 16 per cent jump in net debt has forced it to request assistance to evaluate its weakening financial position.
“This is also a good time to evaluate capital structure options, and this work has already begun with the appointment of a team of advisers including restructuring specialist, Houlihan Lokey,” Mr Olsen said.
In its official report, the group raised the alarm over “material uncertainty” about its ability to meet its debt obligations.
“The directors believe at the date of signing the financial statements, there is material uncertainty about the ability of the company to continue as a going concern in the future and, therefore, whether it will realise its assets and settle its liabilities and commitments in the normal course of business and in the amounts stated in the financial statements,” Boart noted in its HY report.
“Subject to these uncertainties, the directors reaffirm that current and expected operating cash flow, cash on hand and available drawings under the company’s asset-based loan facility provide sufficient liquidity to meet debts as and when they fall due.”