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@Warrigals,

If you could synthesize a ratio for a stock that measures the quality of the debate from various contributors, to the quality and size of the company, then BOL would have one of highest metric in the market, I am sure.

An investment in BOL is akin to the high board diving event at the Olympic Games, where the wannabe gold medalist has nominated as his dive a backwards triple somersault with a double twist, tuck, pike and tuck again, into a barrel of water.... i.e., maximum degree of difficulty.


This time last year, I thought that a successful investment BOL, would require getting the following two things right:

1. Bringing the cost base into line with the new post-commodity boom Revenue "paradigm" (my most hated bit of corporate lexicon, but it feels appropriate here)

2. Monetising the asset base in order to repair the balance sheet while 1.) is being undertaken


In essence, the real restoration of shareholder value it is really what Point 1 is about, and Point 2 is really about eliminating the financial risks that burden the business.

However, somewhere along the way most of the discussion ended up being about Point 2, and the veracity of the asset base in standing up to being monetised. But I think this missed the point, to an extent.

Whether or not the full NTA would ultimately be realised – of which some doubt was expressed – was always somewhat moot, I feel.

All that needed to happen was for enough of the NTA to be liberated in order to “buy time” to allow for Point 1 to be effected.

Whether eighty, seventy or even fifty cents in the dollar might ultimately be realised from liquidating all the PP&E is academic, for comprehensive monetisation is not the end game.

All that needed to happen was that enough of the idled gear needed to be able to be sold which, combined with whatever surplus capital the business generated (which, it turns out, has been reasonably meaningful), would get the Net Debt from the precarious $130m-odd just three years ago, to something more manageable (or, preferably, to zero).

This, clearly, is in train.

In the 6 months ending 31 December 2015, Net Debt fell by over $19m, from $71m, to $51.8m, $8m of the reduction being derived from surplus capital generation (all of it due to working capital release), and $11m from asset sale proceeds.

By the end of this financial year, Net Debt will have fallen over the last 3.5 years by some $90m, to circa $40m.

And if the foot of the banking syndicate remains firmly place on the throat of the company, which I hope and expect it will, by this time next year, the company will be fast approaching a point whereby Net Debt will be below $20m, and the magical parity level with EBITDA will be in view.

This process has run on perfectly cue (no surprises here… the stakes were high, because the alternative was a possible corporate death spiral).

But what has taken far longer than I had expected/hoped was the right-sizing of the business (which, as I said, was the thing that matters most to investors, but it is the thing that enjoys the least attention, I feel).

The company today operates with a cost base that is 35% higher that it was the last time Revenues were at similar levels as today.

So there is a very rich layer of fat that can be sucked out before the obese patient at the clinic will being to feel any pain (not a aesthetically-pleasing analogy, I apologise.)

At any rate, this latest result was the first time in the past 7 half-years that Operating Expenses sequentially fell faster the fall in Revenue, so the Cost base alignment with the Revenue base has commenced. Finally.

The largest improvement in costs came from the item labelled “Equipment Service and Supplies” (represents 27% of total operating costs), which fell sequentially by 25%.
The most significant cost item, Salaries and Employee Benefits (~60% of total Operating Costs), fell by 13.3% sequentially (and 25% on pcp).

Against that, Revenue in the half fell by 11%.

All that needs happen is for those relative movements between Revenue and Costs s to be replicated in coming halves and the small base effect will lift EBITDA nicely.

And, hey, maybe Revenues may at some stage of my life stabilise a tad, in which case the Revenue-Cost jaws would widen quite smartly.


All-in-all, the judges sitting next to the pool, having watched the dive (aka financial result) on slow-motion replay, are holding up scores of:

6.5, 6.0, 7.5, 6.5, and 7.0,

…. for an average score of 6.8


Quite far off a medal finish, but better than the non-qualifying dives of previous competitions.