29.08.2017

A better year for Coates

Australia’s Coates Hire has reported higher revenues and a sharp jump in profits for the year to the end of June.

Full year revenues were up five percent to A$918 million ($732 million) boosted by 15 percent increases in both New South Wales and Victoria where infrastructure and construction activity has been buoyant. Overall utilisation improved to 59.5 percent, thanks in part to fleet rationalisation and relocation, while rental rates also improved, due -according to the company – to “the rationalisation of price books and the introduction of a pricing tool to ensure we optimise our price for the market.”

Last year’s operating loss of A$17.8 million ($14.2 million) was converted to a profit of A$31.7 million ($2.3 million) this year. The transformation, according to Coates, “has been achieved through the change in management, but more work is required on delivering the strategy. Coates is aiming for greater operational efficiency, and will deliver this through better turnaround times, a centralised customer contact centre and a new transport management system.”
The company also paid down its debt by $86 million during the year.

The company said: “The Coates Hire business is well positioned for growth in coming years, which will be driven predominately by the East coast infrastructure and construction projects. Market conditions in Western Australia remain challenging.”

“The leadership team will maintain its focus on business agility to respond to market demand and customer needs, disciplined cost and cash management and process improvements to deliver sustainable growth.”

The results were published in the annual report of Seven Group Holdings which owns a 46.5 percent stake in the company, which it acquired in 2008, when it partnered with US based Carlyle Group to take publicly quoted Coates private. It put the business up for sale in late 2012, but then decided to refinance it instead and at the same time acquired the assets of Force Rental.

The two partners are said to be looking again at selling the business which should fetch over A$2 billion. We understand that several trade buyers could be interested, along with a private equity firm.

Vertikal Comment

This is an encouraging result from Coates, which has struggled in recent years under its debt burden. Whether the two owners will now go ahead with selling the business is anyone’s guess. As its results improve, so the hole it would leave in Sevens results increases. If it does go ahead, the key point of interest would be whether it might attract an international rental company buyer, such as Ashtead or United Rentals etc...
The acquisition would be a brave move for either, the Australian rental market is not one for the faint hearted and it is hard to see what they might bring apart from an owner that fully understands the business.

Watch this space.