Coates - whose national network includes service centres at the key Karratha and Burrup Peninsula locations - reported today that the profit rebound was achieved on Group sales that advanced to a record $291.6 million. This was up 18.6% from $245.8 million in the previous year and included sales from Wreckair since 7 February this year.
However, the $15.2 million earnings increase did not include any profit benefit from the Wreckair operations, acquired by Coates earlier this year for $64 million from Brambles Australia.
Profit prior to the one-off charges associated with the Wreckair acquisition was $21.4 million, representing a 98% improvement on last year's $10.8 million net profit before one-off charges relating mostly to the UK write-down.
Following widespread global concern through the investment community over corporate governance issues Coates has dropped its executive options scheme in favour of performance based incentives.
The company said after a review over recent months of the company's executive options plan, the board was in the process of cancelling all options issued under the plan. Directors said they proposed the introduction of a performance-based deferred share scheme.
Managing Director of the Coates Group, Mr Jim Brown, said today that the company had started the new financial year on a good note with encouraging results in line with expectations.
"Our national leadership in the general equipment hire market has been bolstered by the Wreckair acquisition, which has been successfully bedded down as part of the Coates Group in a very short period of time," he said.
"Group earnings will be enhanced in the current 2002-03 financial year by the benefits of the Wreckair purchase flowing through to our net profit line.
"While the sales results we expected have been achieved in the short period since the Wreckair acquisition was effected in February 2002, the profit benefits will come through during the first full year of the expanded Group in 2002-03 and beyond."
The Coates Hire business produced an impressive earnings turnaround in the latest financial year, with sales surging ahead by 32.7% and EBIT rising an impressive 358%.
Leading the way for the Coates Hire business unit was its Southern Region (VIC, SA and TAS) which produced a striking 251% EBIT increase over the previous year, on sales that rose 51.5%.
Mr Brown said the Southern Region's sales and profit upsurge had commenced in the December half and was buoyed in the second half by the amalgamation of the Wreckair business in that area - by far the most successful of the Wreckair businesses - to produce the outstanding result.
"Following a stronger opening half performance, the Western (WA), Northern (QLD and NT), and Eastern (NSW and ACT) regions also benefited from the inclusion of Wreckair sales from 7 February 2002," he said.
"This in turn contributed to the much improved Coates Hire results, as did our Coates Shorco Sykes and Coates Conrent specialist businesses."
A much-improved profit has resulted from the Coates Group's continuing efforts to generate a higher earnings contribution from the UK operations.
Despite subdued trading conditions encountered in the second half and a 2% dip in sales, UK EBIT was up by a healthy 39%, albeit from a very low base in the previous financial year.
Mr Brown said the Indonesian business performed below the previous year due to the continued uncertain economic and political situation holding back new development.
"Sales eased 2.4% on the previous year, and EBIT was down 45% - due largely to costs associated with some restructuring and one-off re-hiring," he said.
"Our keen, dedicated and experienced team in Indonesia remains confident about the future and the business remains profitable and cash flow positive."
Coates posted a final 4¢ dividend, making the total dividend for the year 8¢.
Mr Brown said the Coates Group remained at the forefront of the equipment hire business in Australia and was now better placed than ever to take advantage of improved conditions in the markets in which it operates.
"All indicators tell us that we are heading into very strong trading periods over the next few years," he said.
"For instance, a recently published Australian Bureau of Agriculture and Resource Economics outline of substantial minerals and energy projects planned for development over the next five years, contains a list of 154 large development projects with a total capital cost of almost $90 billion.
"Compared to the past few years, this represents a very healthy increase in the number of committed and uncommitted projects in Australia and we are targeting a major slice of that action."
