RNS Number:5332P
Brandon Hire PLC
09 September 2003
9 September 2003
Brandon Hire plc Interim Results
for the six months ended 30 june 2003
Turnover surges as market conditions take positive turn
Highlights:
* Current trading strong:
* Organic year-on-year growth over the three months to the end of August
of c.10 per cent
* July and August - record months in terms of turnover and profitability
* First half performance in line with budget:
* Turnover up 20% to #18.72 m (2002: #15.51m)
* Operating profit of #1.53m (2002: #1.57m)
* Earnings per share of 2.7p (2002: 2.9p)
* Dividend growth maintained - dividend per share up 4% to 1.4p (2002:
1.35p)
* Significant progress in attracting more business from large high-volume
customers
* Brandon Loadtite successfully integrated - set to produce an attractive
profit stream going forward
John Laycock, Chairman, said: "The market for our services appears to have been
getting increasingly stronger. July and August were our best ever months both
in terms of turnover and profitability and were well ahead of budget. The trend
suggests that we are breaking out of the comparatively sluggish trading patterns
we have experienced over the last two years. We have further tightened the
control of our cost base and expect to see the full benefits of this flowing
through in the second half. We therefore have an excellent opportunity over the
second half of the year to achieve improved operating margins and are confident
in our ability to deliver an improved performance for the full year."
Enquiries:
Brandon Hire
Charles Skinner, Chief Executive 020 7404 5959 on 9 September
Chris Sims, Finance Director Thereafter: 07966 234075/ 07715 760884
Brunswick
Roderick Cameron 020 7404 5959
Kate Miller
Chairman's Statement
Results
Our turnover for the 6 months to June 2003 was up 20% at #18,725,000 (2002:
#15,511,000). Operating profit was #1,428,000 (2002: #1,484,000) after goodwill
amortisation of #99,000 (2002: #87,000). Profit before tax was #1,009,000
(2002: #1,153,000) after interest charges of #419,000 (2002: #331,000). This
performance was in line with budget.
The increased turnover reflected three factors: an additional turnover of #1.8m
generated by Brandon Loadtite which we acquired in November last year; the
maturing of branches opened over the last two years; and organic growth in
excess of 5% in our core operations. The fall in operating margin was
attributable to two major causes: first, Brandon Loadtite did not make a
significant contribution to profit during the period; second, we have yet to
realise the full benefit of our cost reduction initiatives.
The second half of the year has historically been a far stronger trading period
for the company.
Dividends
Your board has declared an interim dividend of 1.4p (2002: 1.35p) per existing
ordinary share. The dividend is payable on 17 October 2003 to shareholders on
the register at 19 September 2003.
Operations
Market conditions were generally steady during the period. April and May were
slower than we had anticipated with many major projects starting later than had
been expected. We have noticed a switch in the balance of the work of many of
our customers: increased spending on public sector refurbishment and
construction has replaced the slower private sector expenditure. We will benefit
from the many large-scale public sector refurbishment programmes currently being
undertaken, and those scheduled, as these projects typically involve a lot of
tool hire.
During the period we made significant progress in our goal of attracting more
business from the large high-volume customers whom we have been steadily
targeting for the last two to three years. In March we signed a preferred
supplier agreement with Dean & Dyball and in July we signed a sole supplier
agreement with Rok Property Solutions. Early signs are that the level of
turnover transacted with both customers has increased substantially. One of the
major attractions for larger customers is the quality of our back office systems
that are uniquely positioned to aid our customers' efficiency.
The quality of our customer data and our capacity to analyse it effectively has
enabled us to assess the profitability of individual customers more accurately.
Combined with the strengths of our Customer Relationship Management systems, we
believe we are better positioned than our competitors to attract new customers
and to retain existing customers.
Development
During the first six months of the year, most of our business development
focussed on integrating Brandon Loadtite, the lifting equipment business which
we acquired in November last year. This has involved re-locating three of the
branches, two of which now share premises with Brandon Tool Hire branches. We
also opened new branches of Brandon Loadtite in Plymouth and Birmingham, again
alongside Brandon Tool Hire branches. Together with the implementation of our
systems into the business, this process has had an adverse effect on the
short-term profitability of Brandon Loadtite. We remain confident that
prospects for this division are bright and that it will produce an attractive
profit stream in the future. There are very encouraging early signs of improved
margins from the branches where we have tool hire and lifting equipment
businesses running alongside each other as we achieve a better return from the
fixed property costs.
We continue to look for opportunities to increase the geographical coverage of
Brandon Tool Hire and to strengthen our branch network in the areas where we
currently operate.
Strategy
We continue to focus on the hire of tools and related products. We expect to
develop further strong relationships with selected high-volume customers while
retaining a balanced portfolio of customers.
Return on invested capital remains our key financial focus. Our fleet continues
to generate income nearly one-and-a-half times its original cost - way ahead of
that typical in our industry; this is the key to generating excellent returns
for our shareholders. This focus enables us to generate cash to expand our
operations while maintaining a progressive dividend policy.
Outlook
The market for the services of both Brandon Tool Hire and Brandon Loadtite
appears to have been getting stronger in recent months. I believe this trend is
likely to continue, unless there is significant deterioration in the economic
climate. There are clear signs that the aggressive pricing structures which have
been a feature of the tool hire industry over the past few years have become
increasingly unappealing to both suppliers and customers. This shift is creating
good opportunities for us to increase our market share and improve operating
margins.
Current trading is strong, with organic year-on-year growth over the last three
months of c.10%. We have further tightened the control of our cost base and
expect to see the full benefits of this flowing through in the second half.
July and August were our best ever months both in terms of turnover and
profitability and ahead of budget. While the hot, dry weather conditions were
undoubtedly helpful, the trend in recent months suggests that we are breaking
out of the comparatively sluggish trading patterns we have experienced over the
last two years. We therefore have an excellent opportunity over the second half
of the year to achieve improved operating margins.
John Laycock
9 September 2003
Profit and Loss Account
Six months to Six months to Twelve months to
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
NOTE #000 #000 #000
Turnover
Continuing operations 18,725 15,511 32,937
Operating profit
Continuing operations before goodwill 1,527 1,571 3,568
Goodwill amortisation (99) (87) (210)
Continuing operations 1,428 1,484 3,358
Profit on sale of properties - - 323
Profit on ordinary activities before interest
and taxation 1,428 1,484 3,681
Interest payable (419) (331) (729)
Profit on ordinary activities before taxation 1,009 1,153 2,952
Tax on profit on ordinary activities 1 (283) (345) (744)
Profit on ordinary activities after taxation 726 808 2,208
Dividends 2 (377) (363) (996)
Retained profit 349 445 1,212
Earnings per share 3
Basic earnings per share 2.7 3.0 8.2
Fully diluted earnings per share 2.7 2.9 8.1
There are no recognised gains or losses other than the retained profit for the period
Balance Sheet
As at As at As at
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
#000 #000 #000
Fixed assets
Intangible assets 3,218 2,746 3,316
Tangible assets 18,604 17,717 18,620
Investment 200 200 200
22,022 20,663 22,136
Current assets
Stocks 2,370 1,702 2,253
Debtors 9,725 8,399 9,223
Cash at bank and in hand 55 69 56
12,150 10,170 11,532
Creditors
Amounts falling due within one year 11,252 7,776 10,068
Net current assets 898 2,394 1,464
Total assets less current liabilities 22,920 23,057 23,600
Creditors
Amounts falling due after more than one year 9,412 10,898 10,476
Provisions for liabilities and charges 1,197 969 1,161
Net assets 12,311 11,190 11,963
Capital and reserves
Called up share capital 2,691 2,691 2,692
Share premium reserve 5,951 5,946 5,951
Revaluation reserve 313 313 313
Other capital reserve 10 10 10
Profit and loss account 3,346 2,230 2,997
Equity shareholders' funds 12,311 11,190 11,963
Cash Flow Statement
Six months Six months Twelve
to to months to
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
#000 #000 #000 #000 #000 #000
Net cash inflow from operating activities 2,735 2,734 6,194
Returns on investments and servicing
of finance
Bank and loan interest paid (351) (292) (626)
Interest element of finance lease rentals (68) (39) (103)
(419) (331) (729)
Taxation (paid)/received (186) 53 (864)
Capital expenditure
Payments to acquire tangible fixed assets (2,645) (2,159) (3,867)
Receipts from sales of tangible fixed assets 893 1,041 2,026
Net cash outflow from capital expenditure (1,752) (1,118) (1,841)
Acquisitions and disposals
Purchase of businesses - (1,002) (2,667)
Equity dividends paid (633) (618) (980)
Financing
Issue of ordinary share capital - 53 58
New loans received - 1,000 2,067
Repayments of amounts borrowed (1,000) - -
Capital element of finance lease rentals (438) (555) (710)
Net cash (outflow)/inflow from financing (1,438) 498 1,415
(Decrease)/increase in cash in the period (1,693) 216 528
Net cash inflow from operating activities
Six months to Six months to Twelve months to
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
#000 #000 #000
Operating profit 1,428 1,484 3,358
Depreciation charges and goodwill amortisation 1,779 1,593 3,426
Profit on sale of tangible fixed assets (79) (141) (193)
(Increase)/decrease in stocks (117) 21 (257)
(Increase) in debtors (502) (471) (964)
Increase in creditors 240 256 818
(Decrease)/increase in provisions (14) (8) 6
Net cash inflow from operating activities 2,735 2,734 6,194
Reconciliation of net cashflow to movement in net debt
Six months to Six months to Twelve months to
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
#000 #000 #000
(Decrease)/increase in cash in the period (1,693) 216 528
Decrease/(increase) in debt and lease finance 1,438 555 (1,357)
Change in net debt from cashflows (255) 771 (829)
New lease financing - (2,410) (2,329)
Movement in net debt in the period (255) (1,639) (3,158)
Net debt at start of period (14,668) (11,510) (11,510)
Net debt at end of period (14,923) (13,149) (14,668)
NOTES
1 The tax charge is based on the estimated effective tax rate for the full year.
2 An interim dividend of 1.4p (2002: 1.35p) will be paid on 17 October 2003 to those members on the
register at the close of business on 19 September 2003.
3 Basic earnings per share and fully diluted earnings per share are based on the profit after taxation
using weighted average numbers of shares in issue during the period of 26,919,000 and 27,150,000
respectively (2002: 26,859,000 and 27,399,000 respectively).
4 The Interim Report was approved by the Board on 9 September 2003.
5 The Interim Report has been prepared on the basis of the accounting policies as set out in the Report and
Accounts for the year ended 31 December 2002 as filed with the Registrar of Companies. The results for
the year ended 31 December 2002 and the balance sheet ending on that date are extracts from the Report
and Accounts, which contained an unqualified audit report and did not contain a statement under section
237(2) or (3) of the Companies Act 1985.
6 Copies of this statement will be circulated to shareholders and will be available at the Registered
Office of the company at 72-75 Feeder Road, St Philips, Bristol BS2 0TQ on 9 September 2003. On or
shortly after that date the company's website - www.brandonhire.co.uk - will contain a pdf version that
may be downloaded.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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