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RNS Number:5332P Brandon Hire PLC 09 September 2003 9 September 2003 Brandon Hire plc Interim Results for the six months ended 30 june 2003 Turnover surges as market conditions take positive turn Highlights: * Current trading strong: * Organic year-on-year growth over the three months to the end of August of c.10 per cent * July and August - record months in terms of turnover and profitability * First half performance in line with budget: * Turnover up 20% to #18.72 m (2002: #15.51m) * Operating profit of #1.53m (2002: #1.57m) * Earnings per share of 2.7p (2002: 2.9p) * Dividend growth maintained - dividend per share up 4% to 1.4p (2002: 1.35p) * Significant progress in attracting more business from large high-volume customers * Brandon Loadtite successfully integrated - set to produce an attractive profit stream going forward John Laycock, Chairman, said: "The market for our services appears to have been getting increasingly stronger. July and August were our best ever months both in terms of turnover and profitability and were well ahead of budget. The trend suggests that we are breaking out of the comparatively sluggish trading patterns we have experienced over the last two years. We have further tightened the control of our cost base and expect to see the full benefits of this flowing through in the second half. We therefore have an excellent opportunity over the second half of the year to achieve improved operating margins and are confident in our ability to deliver an improved performance for the full year." Enquiries: Brandon Hire Charles Skinner, Chief Executive 020 7404 5959 on 9 September Chris Sims, Finance Director Thereafter: 07966 234075/ 07715 760884 Brunswick Roderick Cameron 020 7404 5959 Kate Miller Chairman's Statement Results Our turnover for the 6 months to June 2003 was up 20% at #18,725,000 (2002: #15,511,000). Operating profit was #1,428,000 (2002: #1,484,000) after goodwill amortisation of #99,000 (2002: #87,000). Profit before tax was #1,009,000 (2002: #1,153,000) after interest charges of #419,000 (2002: #331,000). This performance was in line with budget. The increased turnover reflected three factors: an additional turnover of #1.8m generated by Brandon Loadtite which we acquired in November last year; the maturing of branches opened over the last two years; and organic growth in excess of 5% in our core operations. The fall in operating margin was attributable to two major causes: first, Brandon Loadtite did not make a significant contribution to profit during the period; second, we have yet to realise the full benefit of our cost reduction initiatives. The second half of the year has historically been a far stronger trading period for the company. Dividends Your board has declared an interim dividend of 1.4p (2002: 1.35p) per existing ordinary share. The dividend is payable on 17 October 2003 to shareholders on the register at 19 September 2003. Operations Market conditions were generally steady during the period. April and May were slower than we had anticipated with many major projects starting later than had been expected. We have noticed a switch in the balance of the work of many of our customers: increased spending on public sector refurbishment and construction has replaced the slower private sector expenditure. We will benefit from the many large-scale public sector refurbishment programmes currently being undertaken, and those scheduled, as these projects typically involve a lot of tool hire. During the period we made significant progress in our goal of attracting more business from the large high-volume customers whom we have been steadily targeting for the last two to three years. In March we signed a preferred supplier agreement with Dean & Dyball and in July we signed a sole supplier agreement with Rok Property Solutions. Early signs are that the level of turnover transacted with both customers has increased substantially. One of the major attractions for larger customers is the quality of our back office systems that are uniquely positioned to aid our customers' efficiency. The quality of our customer data and our capacity to analyse it effectively has enabled us to assess the profitability of individual customers more accurately. Combined with the strengths of our Customer Relationship Management systems, we believe we are better positioned than our competitors to attract new customers and to retain existing customers. Development During the first six months of the year, most of our business development focussed on integrating Brandon Loadtite, the lifting equipment business which we acquired in November last year. This has involved re-locating three of the branches, two of which now share premises with Brandon Tool Hire branches. We also opened new branches of Brandon Loadtite in Plymouth and Birmingham, again alongside Brandon Tool Hire branches. Together with the implementation of our systems into the business, this process has had an adverse effect on the short-term profitability of Brandon Loadtite. We remain confident that prospects for this division are bright and that it will produce an attractive profit stream in the future. There are very encouraging early signs of improved margins from the branches where we have tool hire and lifting equipment businesses running alongside each other as we achieve a better return from the fixed property costs. We continue to look for opportunities to increase the geographical coverage of Brandon Tool Hire and to strengthen our branch network in the areas where we currently operate. Strategy We continue to focus on the hire of tools and related products. We expect to develop further strong relationships with selected high-volume customers while retaining a balanced portfolio of customers. Return on invested capital remains our key financial focus. Our fleet continues to generate income nearly one-and-a-half times its original cost - way ahead of that typical in our industry; this is the key to generating excellent returns for our shareholders. This focus enables us to generate cash to expand our operations while maintaining a progressive dividend policy. Outlook The market for the services of both Brandon Tool Hire and Brandon Loadtite appears to have been getting stronger in recent months. I believe this trend is likely to continue, unless there is significant deterioration in the economic climate. There are clear signs that the aggressive pricing structures which have been a feature of the tool hire industry over the past few years have become increasingly unappealing to both suppliers and customers. This shift is creating good opportunities for us to increase our market share and improve operating margins. Current trading is strong, with organic year-on-year growth over the last three months of c.10%. We have further tightened the control of our cost base and expect to see the full benefits of this flowing through in the second half. July and August were our best ever months both in terms of turnover and profitability and ahead of budget. While the hot, dry weather conditions were undoubtedly helpful, the trend in recent months suggests that we are breaking out of the comparatively sluggish trading patterns we have experienced over the last two years. We therefore have an excellent opportunity over the second half of the year to achieve improved operating margins. John Laycock 9 September 2003 Profit and Loss Account Six months to Six months to Twelve months to 30 June 30 June 31 December 2003 2002 2002 (unaudited) (unaudited) (audited) NOTE #000 #000 #000 Turnover Continuing operations 18,725 15,511 32,937 Operating profit Continuing operations before goodwill 1,527 1,571 3,568 Goodwill amortisation (99) (87) (210) Continuing operations 1,428 1,484 3,358 Profit on sale of properties - - 323 Profit on ordinary activities before interest and taxation 1,428 1,484 3,681 Interest payable (419) (331) (729) Profit on ordinary activities before taxation 1,009 1,153 2,952 Tax on profit on ordinary activities 1 (283) (345) (744) Profit on ordinary activities after taxation 726 808 2,208 Dividends 2 (377) (363) (996) Retained profit 349 445 1,212 Earnings per share 3 Basic earnings per share 2.7 3.0 8.2 Fully diluted earnings per share 2.7 2.9 8.1 There are no recognised gains or losses other than the retained profit for the period Balance Sheet As at As at As at 30 June 30 June 31 December 2003 2002 2002 (unaudited) (unaudited) (audited) #000 #000 #000 Fixed assets Intangible assets 3,218 2,746 3,316 Tangible assets 18,604 17,717 18,620 Investment 200 200 200 22,022 20,663 22,136 Current assets Stocks 2,370 1,702 2,253 Debtors 9,725 8,399 9,223 Cash at bank and in hand 55 69 56 12,150 10,170 11,532 Creditors Amounts falling due within one year 11,252 7,776 10,068 Net current assets 898 2,394 1,464 Total assets less current liabilities 22,920 23,057 23,600 Creditors Amounts falling due after more than one year 9,412 10,898 10,476 Provisions for liabilities and charges 1,197 969 1,161 Net assets 12,311 11,190 11,963 Capital and reserves Called up share capital 2,691 2,691 2,692 Share premium reserve 5,951 5,946 5,951 Revaluation reserve 313 313 313 Other capital reserve 10 10 10 Profit and loss account 3,346 2,230 2,997 Equity shareholders' funds 12,311 11,190 11,963 Cash Flow Statement Six months Six months Twelve to to months to 30 June 30 June 31 December 2003 2002 2002 (unaudited) (unaudited) (audited) #000 #000 #000 #000 #000 #000 Net cash inflow from operating activities 2,735 2,734 6,194 Returns on investments and servicing of finance Bank and loan interest paid (351) (292) (626) Interest element of finance lease rentals (68) (39) (103) (419) (331) (729) Taxation (paid)/received (186) 53 (864) Capital expenditure Payments to acquire tangible fixed assets (2,645) (2,159) (3,867) Receipts from sales of tangible fixed assets 893 1,041 2,026 Net cash outflow from capital expenditure (1,752) (1,118) (1,841) Acquisitions and disposals Purchase of businesses - (1,002) (2,667) Equity dividends paid (633) (618) (980) Financing Issue of ordinary share capital - 53 58 New loans received - 1,000 2,067 Repayments of amounts borrowed (1,000) - - Capital element of finance lease rentals (438) (555) (710) Net cash (outflow)/inflow from financing (1,438) 498 1,415 (Decrease)/increase in cash in the period (1,693) 216 528 Net cash inflow from operating activities Six months to Six months to Twelve months to 30 June 30 June 31 December 2003 2002 2002 (unaudited) (unaudited) (audited) #000 #000 #000 Operating profit 1,428 1,484 3,358 Depreciation charges and goodwill amortisation 1,779 1,593 3,426 Profit on sale of tangible fixed assets (79) (141) (193) (Increase)/decrease in stocks (117) 21 (257) (Increase) in debtors (502) (471) (964) Increase in creditors 240 256 818 (Decrease)/increase in provisions (14) (8) 6 Net cash inflow from operating activities 2,735 2,734 6,194 Reconciliation of net cashflow to movement in net debt Six months to Six months to Twelve months to 30 June 30 June 31 December 2003 2002 2002 (unaudited) (unaudited) (audited) #000 #000 #000 (Decrease)/increase in cash in the period (1,693) 216 528 Decrease/(increase) in debt and lease finance 1,438 555 (1,357) Change in net debt from cashflows (255) 771 (829) New lease financing - (2,410) (2,329) Movement in net debt in the period (255) (1,639) (3,158) Net debt at start of period (14,668) (11,510) (11,510) Net debt at end of period (14,923) (13,149) (14,668) NOTES 1 The tax charge is based on the estimated effective tax rate for the full year. 2 An interim dividend of 1.4p (2002: 1.35p) will be paid on 17 October 2003 to those members on the register at the close of business on 19 September 2003. 3 Basic earnings per share and fully diluted earnings per share are based on the profit after taxation using weighted average numbers of shares in issue during the period of 26,919,000 and 27,150,000 respectively (2002: 26,859,000 and 27,399,000 respectively). 4 The Interim Report was approved by the Board on 9 September 2003. 5 The Interim Report has been prepared on the basis of the accounting policies as set out in the Report and Accounts for the year ended 31 December 2002 as filed with the Registrar of Companies. The results for the year ended 31 December 2002 and the balance sheet ending on that date are extracts from the Report and Accounts, which contained an unqualified audit report and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. 6 Copies of this statement will be circulated to shareholders and will be available at the Registered Office of the company at 72-75 Feeder Road, St Philips, Bristol BS2 0TQ on 9 September 2003. On or shortly after that date the company's website - www.brandonhire.co.uk - will contain a pdf version that may be downloaded. This information is provided by RNS The company news service from the London Stock Exchange END IR UWAKROSRKRAR
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