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City News: Uncertain times Catherine Stratton suggests that hirers are remaining confident despite the recent turbulence in world financial markets. Harold Macmillan famously said that the most difficult thing a Prime Minister had to deal with was ‘events’; in mid-August, confronted by turbulent financial markets across the world, and trying to comment on a small part of the UK Stock Market, one recognises the problem. In these uncertain circumstances, the best approach is to relate the most recent ‘events’ as we go to press, and ask the understanding of our readers if developments overtake us by the time of publication. We are likely to be in a mindset for some time when investors react to bad news and ignore good. There are still positive developments, however; for example, the UK annual consumer price inflation rate in July fell to 1.9%, compared with 2.4% in June, raising doubts that the Bank of England will increase interest rates again this autumn. Indeed, at individual company level, we continue to see signs of confidence. In line with the new Disclosure and Transparency requirements of the UK Listing Authority, Vp has issued an Interim Management Statement for the quarter ended 30 June; the company says its performance is “comfortably ahead of management expectations and the prior year.” The recent acquisition, Cool Customers, has integrated well into Hire Station’s Climate Hire operation and is performing ahead of expectations. Early August saw a further expansion of Hire Station when it acquired the Scottish operations of ET Hire for £1.1m cash. ET Hire’s operations in Scotland were run by Kevin Thompson; he assumes responsibility for Hire Station’s sales business there. ET Hire continues to operate its depots south of the Border, in Bolton and Manchester. Hire Station Managing Director, John Singleton, comments that the new acquisition has strengthened the company’s position in central Scotland significantly, adding three depots in Edinburgh, Glasgow and Livingston to bring the network to five locations in the region. In addition, Hire Station opened new depots in Exeter and Hull. SPEEDY COMPLETES HEWDEN TOOLS ACQUISITION As was anticipated, the Office of Fair Trading declined to refer the Speedy acquisition of Hewden Tools to the Competition Commission. The OFT report concluded that, although both Speedy and Hewden Tools are national players, “their combined shares of supply are not such as to give rise to competition concerns. There are sufficient national and local players to provide competitive constraints on the merged entity both for national contracts and for local tool and equipment hire needs.” The OFT estimates the merged company will have a share of 10-20% of the tools and equipment hire market. The report states that a small number of local areas had been identified where there would be “a limited number of competitors present” but that, in each locality, there would remain at least three other tool and equipment hire companies. Significantly, the report also refers to submissions by third parties that “small players are able to provide genuine competition to individual outlets operated by national multiples.” So, on 1 August, Speedy was able to announce the completion of its biggest ever acquisition. Only two days earlier, it had undertaken its first acquisition in Ireland with the purchase of the highly regarded Waterford Hire Services for a maximum consideration of €6.5m (£4.40m). The initial payment is €5.2m (£3.52m) cash; the balance will be satisfied by the issue of 74,587 Speedy shares on 29 February 2008, depending upon Waterford’s performance in its financial year ending 31 December 2007. Waterford Hire operates from two depots, in Waterford City and south east Kilkenny. The deal signals that Speedy is ambitious to expand in Ireland, where it has been operating in Dublin and Belfast for over a year. LATEST HEWDEN RESULTS Hewden
Stuart’s
parent
company,
Finning,
has
announced
record
second
quarter
results;
revenues
in
the
three
months
ended
30
June
2007
were
ahead
25.7%
at
C$1,497.6m
(£701.7m)
and
net
income
from
continuing
operations
rose
34.5%
to
C$75.3m
(£36.0m).
For
the
half
year
period,
revenues
advanced
23.8%
to
C$2,873.6m
(£1,347.0m)
and
net
income
rose
31.2%
to
C$146.0m
(£68.4m).
Following
the
reorganisation
which
combined
Finning
(UK)
and
Hewden
late
last
year,
Hewden’s
results
are
included
within
those
for
Finning
(UK),
but
Finning
does
give
an
analysis
of
UK
revenues
by
‘line
of
business’.
This
shows
that
UK
equipment
hire
rose
5.6%
in
the
second
quarter
to
C$113.6m
(£53.3m);
in
the
six
month
period,
revenues
were
up
13.8%
at
C$227.1m
(£106.5m).
All
these
figures
relate
only
to
continuing
business,
so
they
exclude
Hewden
Tools.
Finning
commented:
“….the
UK
Group
continues
to
be
impacted
by
lower
rental
utilisation
rates
and
Hewden’s
inability
to
achieve
price
realisation
targets.
This
is
due
to
a
competitive
market
in
the
UK,
as
well
as
management
being
deployed
in
various
initiatives
to
generate
future
benefits.”
One
of
these
benefits
is
the
new
M3
IT
system
which
went
live
throughout
Hewden’s
102
depots
in
July.
M3
forms
the
software
core
of
the
£14m
Project
Horizon
change
programme
now
being
implemented. The results indicate that, in the first three months of 2007, revenues at Hewden Tool Hire were at a similar level to the first quarter of 2006; the second quarter decline is not surprising in view of the uncertainty surrounding the operation once its potential sale was the subject of speculation. • Executive Hire News › Archives › September 2007 › City News › Uncertain times
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