25.08.2020

22% rise for Loxam

French international rental group Loxam has reported a 22 percent rise in first half revenues, while recording a substantial loss.

Total revenues for the six months to the end of June were €927.4 million, up 22 percent on the same period in 2019, thanks to the Ramirent acquisition last July. However last year’s pre-tax profit of €25.2 million was converted to a loss this year of €53.4 million. This due to higher depreciation, amortisation, and costs.

Looking at the second quarter revenues were 10.5 percent higher at €433.3 million with a pre-tax loss of €18.1 million compared to a profit last year of €14.6 million. Net debt at the end of June was €3.8 billion, down from just over €4 billion a year ago. Capital expenditure for the six months was down 61 percent on last year at €102.4 million.

The company said: “Prior to the emergence of the Covid-19 pandemic, the Group anticipated that its activity would slow down in certain key markets, such as France, in line with the municipal election cycle, or in Sweden, following several years of consecutive growth.”

“During the first two months of 2020, Loxam recorded a positive business performance in France in line with its expectations ahead of the municipal elections. From mid-March onwards, lockdown measures halted activity at construction sites and led to the shutdown of other sectors, such as events, and as a result, negatively impacted the revenue of the group.”

“In the second quarter of the year, all business operations of the group were affected by the Covid-19 pandemic. The decrease in the level of activity was the sharpest in Southern and Western Europe, where strict lockdown measures were imposed on businesses, such as in France, Italy, and the UK. However, after lockdown measures were lifted, the group’s business experienced a rapid recovery, although it has not yet returned to its pre-crisis levels. “

“We operated 1,068 branches as of June 30, 2020 compared to 1,072 as of December 31, 2019. Over the first six months of 2020, we opened seven branches, and closed 11 branches as part of our network optimisation. The group implemented a strict financial policy during the second quarter. Fixed costs were cut, and notably staff costs were reduced as the group reduced working hours and also put staff on furlough where possible. Capital expenditures were stopped, and orders cancelled to minimise undertakings. Finally, the group reduced cash payments and accepted offers to delay social, tax, property lease payments as well as to suspend payment of some of its finance leases.”

Vertikal Comment

The pandemic has hit Loxam hard given that it was/is still in the process of digesting the massive Ramirent takeover. In spite of that revenues have held up relatively well. However in spite of this the company boasts of having held up cash payments, cancelled orders, let staff go, taken advantage of handouts and stopped capital expenditure while making a significant dent in its debt.

Paying down debt at a time of uncertainty is absolutely the right strategy – no argument - especially when your debt pile is as big as Loxam’s . But to do so at the expense of your suppliers is not a good strategy in the medium to long term… One can only hope that in reality the policy was not as abusive as the words in the report suggests.

Loxam Powered Access has lost some good key people, most of whom have joined ambitious and well run small to medium sized competitors, they will be targeting the company in the months ahead. It will be interesting to see how the second half develops.