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City News: Hewden’s flat first half Catherine Stratton assesses the latest financial results from Hewden and GAP. The
first
half
of
2006
has
produced
disappointing
results
for
the
UK’s
largest
plant
hirer,
Hewden.
Its
revenues
in
sterling
terms
were
virtually
unchanged
from
a
year
ago
at
£145m,
but
the
strengthening
of
the
Canadian
dollar
means
that
Hewden’s
contribution
to
parent
company
Finning’s
results
shows
a
12.8%
decline.
Hewden
saw
its
revenues
fall
by
4.7%
in
sterling
terms
in
the
second
quarter.
The high operational gearing of hire companies means that a fall in revenues is inevitably accompanied by a steeper decline in profitability. Hewden’s earnings before interest and tax fell 18% to C$17.3m (approximately £8.7m). The second quarter saw an overall 48% drop in EBIT in sterling terms; the decline was 28% when adjusted for project and re-structuring costs. The company said that project costs have accelerated as the development of its new information system (a £14m investment) advances; in the second quarter, C$3.8m was expended on the development. Finning’s statement describes the UK market as “extremely competitive, especially in the plant and tool hire businesses” and goes on to indicate that utilisation rates have declined. By early this year, Hewden had completed the integration of its wide range of hire activities. In July, however, it announced a further restructuring of its cranes business, moving away from a widespread depot approach to focusing on a management structure based on three regions. The company warns that this project may have a short term adverse impact on revenues. On the UK market outlook, Finning comments that “construction activity continues at reasonable levels and modest expansion is occurring”. However, it emphasises the competitive nature of the UK construction equipment market, saying: “Equipment sale and rental margins are comparatively tight and rental equipment utilisation rates are lower compared to other rental markets. The company’s UK operations are competitive in this marketplace and they continue to focus on high quality customer service and increasing operational efficiencies to improve results.’ GAP BUILDS NATIONAL PRESENCE The family-owned GAP Group continues to build up its presence as a national player in non-operated plant and tool hire. The company’s recent acquisition of J&S Plant in Lincoln gives it its 56th depot and it has two more openings in Swansea and south London planned in its current financial year. Joint Managing Director Douglas Anderson says that the acquisition does not signify any change in policy at GAP, where expansion has been by ‘greenfield’ openings in recent years. GAP’s recently issued 2006 accounts show the company continues to grow strongly with turnover up 18%. Finance Director Andrew Stewart calculates ‘like for like’ growth at between 10% and 12%, and that turnover from tool hire rose 11.5% to £29m. The past year saw GAP adding a further five depots to its network, a record for the company. As a result, capital expenditure rose 22% to £39m, 56% of turnover. Inevitably this level of expenditure has dampened down profits growth as interest payments rose by over 40% to just over £2m, still comfortably five times covered by operating profit. The GAP fleet currently has an average age of less than three years and Douglas Anderson anticipates that capital expenditure will fall by around 15% this year. He states that the market is currently “a bit flat” and that conditions have tightened a little. • Executive Hire News › Archives › September 2006 › City News › Hewden's flat first half
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