25.02.2010

Finning may sell Hewden

Finning International, owner of UK based crane, access and telehandler rental company Hewden has issued its full year results and says that it is deciding whether to hold or to sell Hewden.

Hewden is a part of Finning’s UK operations which posted full year revenues of C$861 million (£521 million), a fall of 32 percent on the year. The UK company also posted a loss of $20 million (£12.3 million) compared to a profit of $53.6 million (£32.9 million) in 2008.

However the fourth quarter showed a positive improvement with a reduced loss compared to 2008 and significantly improved order intake for new equipment – Finning is the CAT dealer in the UK.

Hewden reported full year revenues of $238.1 million (£146 million) a drop of 34 percent on 2008, although in local currency the fall was just over 26 percent. At the same time the company posted an operating loss of $39.7 million (£24.3 million) compared to a profit of $4.9 million in 2008.The company has made substantial changes this year and says that utilisation has picked up in the fourth quarter.

Finning is currently conducting a strategic review of Hewden which it says, is progressing according to plan. “One option is to continue with the implementation of a recovery plan to drive operational improvement at Hewden which is progressing well. The second option is to dispose of the Hewden operation and, as a result of exploring alternatives, the company has received expressions of interest from a number of parties.”

It says that it will continue to explore both options and anticipates a decision by the end of the June, which “will be driven by the need to optimise shareholder value”.

Finning as a whole saw its revenues fall over 20 percent to C$4.7 billion ($4.5 billion), while pre-tax profits slipped just nine percent to c$139 million ($132 million) thanks to lower financing costs.

Vertikal Comment

There are no great surprises here, although it is encouraging that Finning is finally getting serious about Hewden and one hopes will make a decision to either sell it off or let it be run without constant policy and management changes, giving the managers a chance to stabilise and build the business.

It is hard to say which will be the best option for Hewden, if it could be sure of a good owner, rather than one that wanted to ‘take it out’ or some private equity owner that loaded it with expensive debt and charges - this would be the best as would a management buy-out with sensible payment terms.

We may hear more when Finning release their first quarter results in April or May.