Royal Wolf Holdings delivers below expectations first half result
Shipping container group, Royal Wolf Holdings (ASX: RWH) has delivered a net profit of $4.2 million in the six months to December 31, 2016, approximately 11% lower than the previous corresponding period.
The result also fell short of Macquarie’s expectations. The broker was expecting a net profit of $4.8 million.
Royal Wolf Chief Executive, Neal Littlewood said conditions had been challenging, but the group’s strategy of delivering worksite stackable solutions to the building and construction and infrastructure industries as an alternative to the traditional modular building solutions continued to generate increased market share in that sector with lease revenue growing 16% in the first half.
However, it will be of significant concern that container sales revenues declined from $47.1 million to $31.3 million. Furthermore, management said it does not have any material confirmed orders in this area of its business this financial year, and as such is not expecting any new freight sales to be delivered.
Profitability is being impacted by higher depreciation related to the group’s unutilised mining camp accommodation assets. While redeployment of these portable buildings is being pursued, it is difficult to put a timeline on when this will occur.
Given the lower than anticipated profit and uncertainty regarding Royal Wolf’s outlook there is the potential for selling to occur, particularly given the company’s share price has increased nearly 50% in the last six months and is trading close to its 12 month high of $1.55.