12.08.2009

Hewden down 30%

UK based crane, telehandler and access rental company Hewden, part of the Canadian group Finning International, has reported first half revenues of C$118.2 million (£62 million) a fall of 38 percent in Canadian dollars, which strengthened by nine percent during the period. In local currency – sterling - the fall is therefore around 30 percent.

Hewden is blamed for the loss of C$14.7 million (£7.7 million) at Finning UK through which it reports, compared to a profit for the first half of 2008 of C$46 million (£24 million).

The second quarter was, if anything worse with revenues of just C$58.2 million (£30.4 million) a drop of almost 40 percent. The Finning UK loss during the period, again blamed on Hewden was C$9.3 million (£4.7 million) compared to a profit of C$17 million last year.

As a result of this poor performance, Fining says that will conduct a strategic review in order to decide what to do with Hewden.

Finning’s statement said: “Market conditions in the UK have taken a further downturn which has significantly impacted business levels at the Hewden rental operation and to a lesser extent at the UK dealership. The availability of inexpensive rental equipment in the marketplace is reducing demand for new equipment for projects.”

General construction continues to be weak and is not expected to recover soon. While business levels are lower, the dealership continues to generate modest profits. Regarding Hewden, rental utilisation rates and pricing are negatively affected resulting in lower rental revenues and higher operating losses than previously anticipated.”

A significant reorganization of the UK Group’s rental market unit occurred in the first half of 2009 and is expected to reduce this unit’s overall cost structure, increase the utilisation of its
assets, and improve its long term profitability.”

“The weak market conditions are expected to continue well into 2010. As a result of the further downturn and weaker outlook for the UK rental segment, management is undertaking a strategic review at Hewden with a view of assessing alternatives commensurate with our overall goal of maximizing shareholder value.”

Vertikal Comment

So another strategic review for Hewden before the current reorganisation and restructuring is complete. These results are clearly not good and worse than most of the company’s competitors but some of this surely has to be put down to the constant restructuring the business has gone through over the past few years?

The tone of the commentary in Finning’s financial reports has suggested for some time that Hewden is a thorn in its side, one wonders why it does not just sell the business to someone who possibly better understand the type of rental market that Hewden operates in?

The group as a whole turned in a very credible performance with pre tax profits down 41 percent and net profit just 33 percent lighter on revenues just 15 percent below those for 2008. Given the current state of the markets this is a very decent result.

It just seems that the company would be a lot happier if it was not in the UK day to day rental market.

There are buyers out there … maybe a longer term strategic plan will work wonders?