News: EHL Emeco Holdings appoints Justine Lea as acting chief financial officer, page-32

Until recently, Emeco has been priced for a default on their debt and, although there is still risk, they are now in the strongest position they have been in for several years.

The cost reduction efforts have resulted in a Q4 operating margin that is the highest since early 2014. If they can maintain those margins into 2017, and potentially improve further with the Canada business stabilised, they should start to generate more substantial operational cash flow surpluses going forward. In addition, any improvement from the currently very low 40% operational utilisation will translate into much stronger operating margins.

Interest payments are still very high but will reduce by $5m due to the bond repurchase. There may even be any opportunity to buy back more bonds over the next 6 months at a discount to fair value.

In summary, Emeco is still at risk from any further deterioration in market conditions and will need to find a solution to refinancing their debt when the bonds mature in 2019 (? from memory), but indications are looking much more positive.