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Hirequip New Zealand Ltd Annual result

Hirequip New Zealand Limited: Annual result for the year ended 30 June 2004.

The Directors of Hirequip announced today a record net profit for 2004, after tax and minorities, of $16.6 million, which is an increase of 188% compared with the prior year.

A dividend of 2 cents will be paid on 24th September 2004 to shareholders recorded on the register on 17th September 2004.

Hirequip’s Executive Chairman, Graeme Wong, said it was the first full year since shareholders had approved the transformation into an equipment hire company in May 2003.

“The original two-year business plan transforming the business is progressing ahead of schedule. Substantial progress has been made in realising property and investment assets and the funds released have been successfully reinvested within the hire business.”

In the financial year under review, Hirequip invested a net $43.5 million in working capital, plant, equipment and property associated directly with equipment hire. Of this $32.9 million was invested in the purchase of Ready Hire and Power Hire. Net $14.2 million was spent on other additions to plant and equipment and a net $3.6 million was released from property transactions.

During the year $1.8 million was invested in branch developments including replacement branches in central Auckland and central Wellington and an upgrade of the Lower Hutt branch. Expenditure on a new branch in Manukau (Auckland), a new workshop facility in Grenada (Wellington) and upgrades of several other branches, which are underway, will be brought to account in the 2005 financial year. Several sites are under evaluation for new branches.

During the year the properties at Stoke, Wanaka and New Plymouth were sold for $5.4 million which released a capital profit of $1.7 million.

The integration of Ready Hire into Hirequip is operationally complete. On behalf of Directors, Mr Stuart McKinlay recorded his thanks for the considerable assistance in achieving a smooth integration to former Ready Hire CEO, Richard Grainger. Thanks were also recorded to Power Hire vendor, Michael Jacomb, for his ongoing assistance with that business. Mr McKinlay acknowledged the contribution from all Management and staff in a year of significant growth.

Cash operating earnings (EBITDA) from the Company’s equipment hire activities were $19.3 million. Earnings for the 2004 year include five month’s contribution from Ready Hire and one month’s contribution from Power Hire. The Board is confident that had these businesses been owned for an entire year, cash operating earnings (EBITDA) would have been at least $24.2 million. This compares with 2003 operating EBITDA from equipment hire activities of $13.6 million.

Assets sold by Hirequip New Zealand during the year were: Northwood Supa Centa (30%) for $3.5 million; Waimakariri Employment Park land (100%) for $1.5 million; Goldsworthy Bay land (50%) for $0.96 million. The last two sections in this development were contracted in 2004 for settlement in the 2005 financial year. Hirequip’s share of this income was recognised in the 2004 accounts. The Omaha Beach development company paid fully imputed dividends of $12.7 million during the 2004 year.

Since balance date, the sale of Pegasus Town has been announced at an effective price of $23 million, of which $10 million will be received in the 2005 financial year. The company expects to receive the amount of $20 million (including $7 million implied interest) over the next 5-6 years, in full settlement of the purchase.

Economic activity in 2004 was strong. Whilst recent rises in interest rates may dampen residential building activity beyond current orders, continued strong spending on infrastructure by central and local government is expected into the foreseeable future, thereby underpinning business activity and growth.

“We will, as we did in 2004, continue to actively seek out value-adding initiatives. A number are currently being considered but, as always, we will only do deals that clearly add value,” Mr Wong said.

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