Earlier today, crane provider Boom Logistics Limited (ASX: BOL) announced a statutory loss after tax of $36.9 million in the year to 30 June 2015. This is an improvement on last year's loss of $79.5 million.
Both this and last year's result were affected by various impairments and other "one-off" charges. Excluding these, the current year loss would have been $6.3 million.
The half on half earnings trend excluding the impact of "one-offs" isn't a pretty sight for shareholders either. The first half of the year delivered revenue of $115.6 million and earnings before interest and tax of $1.5 million. Things got worse in the second half and revenue was $91.0 million and earnings before interest and tax were -$7.8 million.
The reason provided by management for the deterioration during the year is a combination of weaker commodity prices, project delays and the completion of a major wind farm project in the first half. In response, the company cut the workforce by 147, or 19% during the period which is expected to deliver $11.6 million in operational savings and $4.1 million in overhead savings each year.
Like many companies exposed to the mining sector, Boom Logistics has seen demand for its products dry up in recent years. Consequently the company is focused on selling surplus assets and deleveraging its balance sheet.
On this score, things have gone quite well. Net debt has fallen to $71 million from $89.5 million last year and during the year the company sold $20.3 million of equipment that is no longer needed.
Net tangible assets are 41 cents per share compared to a share price of just 11.5 cents which suggests there is value in the stock. This assumes that Boom can convert the assets on its balance sheet into cash and not lose too much money in the meantime.
Given the heavy write downs to assets over the last couple of years and that asset sales last year delivered a profit of $3.2 million, it should be possible for Boom to realise most of the $253.3 million of plant and equipment stated on the balance sheet.
Also despite the heavy losses, the company is actually cash flow positive because it does not need to spend much on new plant and equipment given the shortage of work. Therefore, whilst the company recognised a non-cash depreciation charge of $24.2 million related to existing fixed assets, it spent just $8.3 million on new equipment last year.
Also, given the stock trades at just 28% of its net tangible asset value there is plenty of room for further write downs and worsening conditions before shareholders need to worry. Boom is not a good business, but as an investment in it offers a large margin of safety.
