01.03.2005

Finning achieve record revenues but profits fall

Finning International, the parent company pf Hewden Stuart PLC, the UKs largest rental company, achieved record revenues in 2004 of C$4.1 (£1.7) billion an increase of 15 percent compared to 2003.

Net income however dropped by 13 percent to C$115(£49) million, due to increased Sales and administration costs, refinancing charges and restructuring.

At the gross margin line, the business performed well with an increase of over 20 percent to C$1.25(£0.5) billion representing almost 30 percent of revenues compared to less than 29 percent last year.

Earnings Before Interest and Tax, were marginally up to C$266 (£112) million representing 6.4 percent of revenues compared to 7.1 percent in 2003.

The company claimed that much of the revenue increase came from the UK and South America.

In the UK the strength of sterling added and extra bloom to the results but the inclusion of Lex Harvey numbers for 12 months compared to only seven in 2003 also made a significant impact.

Finning UK turned in revenues of C$1.04 billion (£441 million). And increae of 12 percent in dollars and 6.8 percent in sterling.

Hewden saw an increase in sterling revenues of 2.2 percent to £290 million (C$686), which equated to a seven percent increase in Canadian dollars. Finning stated that the UK market rental continued to see downward pressure on rates but that it had more than compensated with increased volume and higher utilization.

Hewden operating costs rose at a slightly higher pace than revenues to £204 million (C483), depreciation charges were though roughly the same as last year at £61 million (C$149), giving an improved EBIT of £24.7 million (C$58.5) 8.5 percent of revenues, compared to just over eight percent in 2003.

Other UK costs that hit Finning profitability in 2004 included higher pension costs, a C$13.4(£5.70) cost for IT set up and running expense. There was also a C$7.9 (£3.3) million hit, part of the Hewden Tower crane settlement with Yarm Road that had not previously accrued for.

"Finning finished 2004 on a strong note with record fourth-quarter revenue and a record order book of $835 million," said Doug Whitehead, president and CEO of Finning International Inc.

"Our fourth quarter net income however was negatively impacted by a $14.5 million after-tax expense related to the redemption of the non-controlling partnership interests. The strengthening Canadian dollar relative to the United States dollar, higher pension costs, and higher long-term incentive plan costs also affected our results. Nevertheless, the outlook for our business is very strong in most markets with continued strength in resource-based industries driving our growth."