14.05.2007

Hewden continues to slip

Finning UK which now includes Hewden rental saw flat revenues for the first quarter 2007, although they translated into a rise of 12.3% in Canadian dollars, thanks to a stronger pound.

At the end of 2006 Finning consolidated its UK businesses into a single unit and no longer reports Hewden as a separate business. We can though still see a rental revenue number, although this could include any rental that Cat dealer Finning might do as well as those of Hewden.

Internally the business is organised into four divisions, Heavy Construction, General Construction, Power Systems, and Hewden.

Revenues in Canadian dollars were C$388.2 million ($349/£176 million), up 12.3 percent on the same period last year, largely due to a 13.1 percent shift in the exchange rate between the Canadian dollar and pound sterling. Revenues in sterling were flat.

Rental revenues in local currency fell due to lower utilisation and “Hewden's inability to achieve pricing targets due to a competitive market in the U.K”. They were C$153 million ($138/£69 million)

Revenues from sales of new equipment increased by six percent thanks to increased deliveries of machines to the construction sector.

Overall margins held up as a percentage of revenue although they fell in absolute terms, however Hewden saw margins fell while margins on new product sales improved providing an offset.

SG&A costs fell as cost savings came on line, however additional costs at Hewden related to “various initiatives underway to assess products, distribution network, and structure as well as efficiencies to ensure Hewden continues to meet its customers' needs”.

“Progress continues on the implementation of Hewden's new information technology system, which is expected to simplify and standardise business processes and provide improved management and customer information to improve performance”.

“Management continues to examine and assess our business model in the U.K. as we pursue our goal to build market share, grow the customer service business, improve returns on invested capital, and improve financial results”.

In spite of the above Finning’s UK business contributed 12.3 percent more revenue at C$388.2 million and EBIT of C$17.3 million ($15.5/£7.8 million) a 10.2 percent increase on 2006.