Energy services group Hunting PLC (LON:HTG) earned some goodwill on Monday morning with an upbeat trading statement that included good news on its banking covenants.
Underlying earnings (EBITDA) for 2017 are likely to be nearer the upper end of market expectations, thanks to a strong performance by the perforating systems division in the second half of the year.
READ: Hunting promotes chief operating officer, Jim Johnson to chief executive role from September 1
Given the improved trading results and continued strengthening of the balance sheet, the group has started the process of cancelling the "suspension period" of bank covenants over its core borrowing facilities and re-installing the facility's original net debt to EBITDA and interest cover covenants; the covenants were suspended when it became clear towards the middle of last year that it would breach them.
Ultimately, the restoration of its original covenants could pave the way for the resumption of the payment of dividends; the divi was suspended as a condition of the bank giving the group some extra breathing space, and Hunting indicated there are no plans to reinstate the dividend in respect of the current year.
Revenue for the full year is expected to be around the US$700mln level, with results strongly weighted to the second half of the year.
Management continues to anticipate a modest pre-tax profit for the full year before charges for intangible asset amortisation and any exceptional items, though having said that, there are currently no exceptional items recorded in the year to date financials.
Performance exceeds management expectations
Cash generation remains strong and a positive net cash position continues to be forecast for the year-end. Capital investment remains tightly controlled with spend in the full year expected to be around US$12mln, Hunting said.
"Hunting Ti tan's performance in the year continued to exceed management expectations, and has underpinned the group's results in 2017,” said Jim Johnson, the chief executive of Hunting.
“The group's other businesses now operate at close to break-even at the EBITDA level given the cost-cutting initiatives and working capital management implemented in the year. As we close 2017, Hunting has retained its operational capabilities and remains well positioned to capitalise on any improvement in global market conditions," he added.
Shares in Hunting were up 5% at 579p following the trading update.