24.08.2018

Solid year for Coates

Australia’s largest rental company Coates Hire – now wholly owned by the Seven Group – has reported a solid set of numbers for the full year to the end of June.

Total revenues were up seven percent on the prior year to A$978.1 million $712 million) thanks mainly to strong improvements in Queensland which reported revenue growth of 16 percent, and to a lesser extent New South Wales, Victoria/South Australia which were both eight percent up on the year, partly offset by a 10 percent fall in Western Australia driven by aggressively competitive rental rates, among other things.

Operating profit for the business was 21 percent higher at just under A$172 million ($125 million) driven by Queensland where profits are said to have risen by 171 percent. Victoria/. South Australia was 20 percent higher and New South Wales 19 percent, while profits declined in Western Australia. Overall utilisation improved to 57.9 percent from 57.2 percent last year. The company spent A$148 million ($108 million) on new equipment net, after allowing for used equipment sales, the details of which have not been disclosed. The company currently has a further A$98 million ($71 million) in order and expects total capital expenditure for the current year to be in the region of A$180 million (131 million).

The Seven Group held a minority stake in Coates until it acquired the 53 percent of the equity it did not already own from Carlyle and a number or minority stockholders, in September at a total cost of A$517 million ($376 million). Seven as a whole achieved revenues of A$3.4 billion ($2.5 billion) an increase of almost 18 percent on the prior year, while pre-tax profits were 65 percent higher at A$483.8 million ($351 million). Net debt jumped 60 percent to just over A$2 billion ($1.5 billion), due to a number of acquisitions – including Coates - and greater investment in rental equipment.

The company said: “The move to full ownership has allowed the group to increase exposure to the industrial services sector and in particular the strong infrastructure activity on the East Coast of Australia. The optimisation of this ownership structure and the further focus on operational efficiencies between WesTrac and Coates Hire will assist in improved customer solution offerings.”

Vertikal Comment

Given the fact Seven acquired part the way through the year and it reports both the full year – which is what we have shown - and the numbers relevant to the nine months under its full ownership, not to mention the fact that it over complicates the reporting of its results, making it tough to report and comment on the detail of Coates performance this year. However it is clear that the company has recovered substantially and had a pretty good year, with strong improvements in most states, and looks set to do a good deal better in 2018/2019.