Hirequip exceeds expected Profit Performance

News Release 29 August 2003

Hirequip exceeds expected Profit Performance and Announces maiden dividend

Listed hire company Hirequip has posted a net profit after tax of $5.76 million, 8 percent ahead of the company’s 2003 forecast.

Hirequip’s Executive Chairman Graeme Wong said the Board was pleased the company had delivered a result that was in line with its forecast for the 2003 financial year, and has announced a maiden dividend of 1.5 cents per share. This will be paid on 10 October 2003 to shareholders recorded on the register as at 26 September 2003. The Board decided it would be prudent to adopt a modest level of dividend at this transitional stage, but expects to review the payout policy once non-core assets are sold. At that time the capital requirements to fund growth opportunities will be clearer and banking arrangements well established.

“We have produced the 2003 result we said we would and are now implementing our 2004 business plan. The company is the largest equipment hire business in New Zealand, and our business is on track to take advantage of opportunities for further growth.”

Previously known as Southern Capital, the investment company acquired the remaining 50 percent of Hirequip in May (it bought 50 percent last year) and changed its name to Hirequip to better reflect its changed focus.

Hirequip’s result was achieved on earnings before interest and tax (EBIT) of $9.455 million against a forecast of $9.461 million. Underpinning the good result were lower interest and financing costs of $1.958 compared with a forecast of $2.232, and the company provided for $1.123 million in tax, slightly below what was forecast. Earnings per share of 5.5c on a weighted average basis, exceeding the forecast of 5.1c per share.

Mr Wong said there were significant opportunities in the hire equipment sector. The last 12 months have seen the company invest $15.9m in plant and equipment including $1.6m spent bringing off balance sheet funded assets onto the balance sheet. Equipment sales amounted to $2.6m and depreciation financed a further $6.7m. This level of investment shows that Hirequip has significantly upgraded and added to its hire fleet during the past 12 months.

The branch network has also been upgraded with the refurbishment or new facilities in Stoke, Wanaka, New Plymouth, Mt Manganui and Mt Wellington. Further branch refurbishment and expansion is planned for the coming year.

The company intends further growing the business through the acquisition of other general and specialist hire companies, and the acquisition or development of related businesses such as equipment leasing and financing.

The equipment business is Hirequip’s main focus. The residual assets of the company, from when it was operating as Southern Capital, include property developments and biotechnology, all of which are being reviewed.

Southern Capital’s land development assets include the 117 hectare Omaha Beach subdivision north of Auckland, the 338 hectare new town site at Pegasus Bay north of Christchurch, a 41 hectare property development at Goldsworthy Bay, and the 7.7 hectare Northwood Supa Centa at Belfast in Christchurch.

“These investments are performing to expectation with $74.65m of sales to date of Omaha sections, new tenants in place at the Supa Centa, and seven of the ten sections sold at Goldsworthy Bay.”

Mr Wong said there was no need to sell any of its investments immediately. “Each investment is under review and will only be sold when they reach maturity or when the right opportunity is forthcoming.”

Further investment by the company will be funded in the short-term by the company’s unutilised debt capacity and over the longer term by the sale of the company’s non-core assets.

Looking ahead, Hirequip is well placed to take advantage of the proposed major project and infrastructure spend within New Zealand.

Hirequip, New Zealand’s oldest and only nationwide hire company, supplies equipment for “DIY” home users, events, and to the manufacturing and construction industries.
ENDS

Issued by Sorensen Group on behalf of Hirequip New Zealand Limited

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