Hirequip 'on track' to improve profit

Hirequip New Zealand said today it was on track for a stronger pre-tax profit, despite reporting its December half year net profit falling sharply to $1.1 million from $3.7m a year earlier.

Joint chief executive George Paterson forecast full year ebitda (earnings before interest, tax, depreciation and amortisation) in the range of $27m to $29m after one-off costs. That compares to $27m for the 2005 year.

Earnings in the current period were affected by a one-off cost of $1.2m from an efficiency initiative.

Started in November and December, the initiative had realised measurable cost savings on an annualised basis of $1m to $1.2m.

An unchanged fully imputed interim dividend of 1.25cps will be paid on March 28.

Revenue from core hire and related operations rose to $42.5m from $41.1m.

Mr Paterson said that despite some sectors of the economy, including residential construction, showing signs of weakening,

Hirequip's outlook remained positive.

He said a significant number of non-residential construction and roading projects, either underway or in the planning stages, were underpinning sales.

"We are encouraged by the positive trend in revenue for the beginning of the second half of the year after a somewhat flat first six months."

Ebitda from the core business before one-offs fell marginally from $12.3m to $12.1m in the completed period.

Bank debt increased with the further expansion and upgrade of the hire fleet, branch upgrades and land purchased for future branch development.

Brian Stephen, the other joint chief executive, said revenue for January and February was significantly higher than the modest increase reported in the first half of the year.

He said a number of supply orders for large projects would be delivered in the second half of the year.

"Accordingly the second six months is being approached with confidence."

The amount of branch development being undertaken had resulted in the company carrying a greater than normal amount of property on its books. That had contributed to higher interest costs.

The company was in the process of selling a number of properties with settlements due before year end.

Mr Stephen said the carrying value of remaining legacy assets was conservatively valued in the books and "considerable future profits can expect to be realised".

Hirequip shares were up 1c at 83c today. They have traded between 78c and $1.27 in the past year.

- NZPA