Ann: Full Year Results - Investor Presentation, page-14

This is a supremely cyclical business, with no pricing power whatsoever, except for during the absolute peaks of its business cycle.

And these guys committed the cardinal sin of taking on too much debt at the peak of the cycle (given the feast-to-famine nature of this industry, this kind of business should not be funded with any borrowings at all).

But, to their credit (that is, if they are due any credit) they have not gone down the path of least resistance, by conducting a capital raising [*] when the share price was bombed out; instead they have certainly earned their keep in keeping creditors at bay during the past few really tough years when demand for their services had fallen off the cliff.

At 31 December 2012, BOL's Net Debt was around $130m.  By the end of this year, i.e., 5 years later, it will be around $40m.  So they have paid down $90m in debt during the past 5 years. Admittedly, the bulk of this reduction came from the semi-distressed sale of assets, but they have had to work hard to reduce expenses and to restructure the business to keep it open for business without the need for an injection of external capital (which would have been very expensive money).

(Don't get me wrong; I'm no apologist for this company's board and management... the financial pickle that the company got itself into was of its own doing. But at least they have sweated to get the company out of the hole into which they drove it.)

My sense is that the finances of the business have been stabilised and the banks have finally taken their collective foot off the throat of the company.

So I think the worst is over for them and, as someone else has mentioned, the operating leverage in this business is pronounced, meaning that small increases in utilisation rates will be amplified significantly at the profit line.

They generated ~$10m of EBITDA last year.
That figure could in the blink of an eye. (Heck, JH2017 EBITDA was almost 30% up on JH2016, without any real fireworks in terms of improved business conditions - Revenue in JH2017 was up just 6% on JH2016.

And it is that dynamic - I think - that has got the market's attention in recent weeks.

Just one point to note: even if earnings increase due to a cyclical rebound, there will be a lag in cash flows because the company will need to invest quite heavily in order to take on any newly-won work. So don't expect major balance sheet changes for the next 12 months, even if a rebound in demand takes hold.


[*] They last raised capital in FY2010, at a price of 30cps.