Executive Hire News › Archives › July 2009 › City News : Some sound results
City News : Some sound results
Catherine Stratton compiles a detailed analysis of the latest financial results from Hire Station, Ashtead and Andrews Sykes.
The past month has seen annual results from several leading hire companies, but, it is probably fair to say that the City will be more concerned about the prospects for Speedy’s £100m rights issue and whether its success or failure will have implications for them. For a detailed discussion, please see Forum on page 3. The Speedy share price has been under continuing pressure since it announced its deeply discounted rights issue in late May.
Of course, Speedy will receive the £100m to be raised by the rights issue, as it has already been underwritten. However, there will be much interest in seeing what percentage of the shares issued will be taken up by existing shareholders.
Sound set of results
Vp has produced a sound set of results for the year to 31 March 2009 with Group pre-tax profits up by 5%. The Vp business model of a group of niche hire businesses means that the company has a wide customer base in a variety of markets and this gives it defensive qualities.
| Vp: Year ended 31 March 2009 |
| |
31.03.09 £’000 |
31.03.08 £’000 |
% change |
| Revenue |
150,945 |
149,269 |
+1.1 |
| Operating profit |
24,522 |
22,976 |
+6.7 |
| Profit before taxation |
20,835 |
19,857 |
+4.9 |
| Hire Station (reporting as part of the above Vp results) |
| Revenue |
55,650 |
57,055 |
-2.5 |
| Operating profit before amortisation |
6,385 |
5,914 |
+8.0 |
Hire Station, Vp’s tool hire business, continues to make good progress. It contributes just over one third of the Group’s total revenues and a quarter of operating profits. Its 8% advance in profits reflects an improvement in operating margins from 10.3% to 11.5%. This is a noteworthy achievement in the difficult trading conditions prevailing over the past year. Hire Station MD John Singleton says that the company has reduced its cost base by over £2m in recent months and it is currently trading “ahead of plan.” Vp has also recently been appointed a Key Strategic Supplier to Enterprise and this will generate more revenue for Hire Station.
Within Hire Station, the safety equipment specialist ESS Safeforce achieved a doubling of profits last year. This January the Survey Technology business, previously part of Vp’s Groundforce division, was absorbed into Safeforce. John Singleton says that its customer base mirrors that of Safeforce with the combined offering enhancing ESS’ market leadership position. Like its competitors, the air conditioning and heating business, Climate Hire, had a mixed year with little demand for air conditioning in the summer, but better revenues from heating in the winter. It now operates from a central call centre in Alfreton, via 12 tool hire outlets across the UK.
Vp Chief Executive Neil Stothard says that the Group is focussed on conserving cash by “significantly reducing rental fleet expenditure
(for example, Hire Station’s capital expenditure last year was down 26% to £8.8m), tightening working capital management and by negotiating better supply chain arrangements.”
Ashtead’s cost cutting measures
Ashtead’s results showed that, like Speedy, it has had to introduce significant cost cutting measures to downsize its operations to a level more suited to current market conditions in both the UK and the US. It reports that the cost reduction programme initiated in December has now been fully implemented and it will deliver savings of at least £100m. The relative strength of the US dollar to sterling means the decline in revenues at the US subsidiary, Sunbelt, is not apparent from the overall Group figures. In dollar terms, Sunbelt’s revenues declined 8% over the year and underlying operating profit by 27%. The final quarter (i.e. February to April 2009) saw a 24% drop in revenues over the same period of 2008.
ANNUAL RESULTS
| Ashtead: Year ended 20 April 2009 |
| |
30.04.09 £m |
30.04.08 £m |
% Change |
| Underlying revenue* |
1,073.5 |
1,047.8 |
+2.5 |
| Underlying operating profit* |
155.0 |
187.1 |
-17.2 |
| Pre-tax Profit |
0.8 |
109.7 |
-99.3 |
| *Underlying revenue and profit are stated before exceptional items and amortisation of acquired intangibles; these amounted to £86.6m in 2009 (2008: ££2.6m). |
Segmental Analysis
| Revenue |
| |
30.04.09 £m |
30.04.08 £m |
% change |
| Sunbelt |
865.5 |
810.0 |
+6.9 |
| A-Plant |
208.0 |
237.8 |
-12.5 |
| |
1,073.5 |
1,047.8 |
+2.5 |
| Operating profit before exceptionals and amortisation |
| Sunbelt |
144.4 |
164.9 |
-12.4 |
| A-Plant |
16.1 |
30.2 |
-46.7 |
| Corporate costs |
(5.5) |
(8.0) |
-31.3 |
| |
155.0 |
187.1 |
-17.2 |
| Operating profit |
| Sunbelt |
89.6 |
162.8 |
-45.0 |
| A-Plant |
(15.7) |
29.7 |
-152.9 |
| Corporate costs |
(5.5) |
(8.0) |
-31.3 |
| |
68.4 |
184.5 |
-62.9 |
In the UK, A-Plant suffered a 22% decline in revenues in the fourth quarter. The company states that this reflects a fleet size 5% smaller than 12 months earlier, with physical utilisation down at 68%, compared with 74% in 2008, and a yield reduction of 11%. The cost reduction measures undertaken at A-Plant lowered its underlying operating costs by 12% to £145m for the whole year and by 23% to £31m in the final quarter. A-Plant’s depot network has been reduced by 70 to 122 and its headcount has fallen by 14% from 2,422 to 2,077. Its rental fleet now has an original cost of £321m (2008: £360m) and its average age is 27 months (2008: 23 months).
Impressive rise
The specialist business of Andrews Sykes, focused on pumps and heating and air-conditioning equipment, posted an impressive 24% rise in pre-tax profit to a record £15m. The company states that it is “less weather dependent than ever before.” In the UK, Andrews Sykes Hire had “a very successful year” despite a difficult summer period. The pumping division achieved strong growth and secured new contracts with major national contractors and non-construction related end users. Overseas, the company’s Dutch and UAE subsidiaries achieved record performances.
| Andrews Sykes: Year ended 31 December 2008 |
| |
31.12.08 £’000 |
31.12.07 £’000 |
% change |
| Revenue |
67,394 |
57,846 |
+16.5 |
| Normalised operating profit* |
17,924 |
14,599 |
+22.8 |
| Profit before taxation |
15,377 |
12,378 |
+24.2 |
| *normalised operating profit is operating profit before non-recurring items |
Andrews Sykes Chairman JG Murray concludes, “the board believes that 2009 will be a difficult year as the worldwide economic downturn continues to depress the markets within which we operate. However, the group is financially strong; it is continuing to generate both good levels of profits and positive cash flows and, therefore, it will be well placed to take advantage of any upturns in the market, whenever that might be.” •
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