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Hirepool sees profits from 2015 on debt repayment, merger benefits

UPDATEDHirepool is projecting profits from 2015, after years of losses, having squeezed out costs since buying major rival Hirequip out of receivership last year and using its initial public offering to pay down debt.

Hirepool is forecasting a net profit of $25 million for the year ending June 30, 2015, from a pro forma loss of $17.8 million in the current year, according to the company’s prospectus. After adding back finance costs, depreciation and amortisation of Hirepool and Hirequip, pro forma aggregated earnings before interest, tax, depreciation and amortisation are forecast at $34.5 million this year and $60.5 million in 2015.

Hirepool alone has posted net losses each year from 2009, according to the prospectus, mostly reflecting finance costs. Hirequip achieved a profit in 2012 and for the 10 months to May 6 2013, following three years of losses, the figures show.

“In financial years prior to FY2015F, the stand alone Hirepool and Hirequip businesses carried significant debt and, in a number of years, generated losses,” the company says in the prospectus.

It prefers to focus on Ebitda figures because last year’s acquisition of Hirequip “generated significant one-off merger and associated costs in FY2013 and FY2014” and the latest year’s results will also include the costs of the IPO. It forecasts an Ebitda margin rising to 33 percent this year from 29 percent in 2013, and widening again to 39 percent in 2015.

Following the merger, Hirepool is the nation’s only generalist hire equipment company, although it has only about 19.6 percent of the market based on last year’s application to the Commerce Commission to buy Hirequip. Those figures included an estimate that the building hire industry generated $780 million of equipment hire revenue in 2013, while Hirequip’s revenue was $153 million.

Revenue is forecast to decline to $140.6 million this year, before recovering to $155.6 million in 2015. The company attributes the revenue decline this year to Hirepool primarily attributes a drop in major project sales and disruption relating to the acquisition and merger of Hirequip, which included slashing the number of branches of the combined group to 56 from 90.

As a result of the capital raising, interest bearing debt will drop to $85 million on listing from $203.6 million at June 30.

Major companies, spending more than $100,000 a year, make up 44 percent of Hirepool’s sales, while revenue is evenly spread throughout its three regions in New Zealand and by industry sector, the prospectus says.

Hirepool plans to raise as much as $262 million in its IPO prior to listing on the Australian and New Zealand stock exchanges next month with a market capitalisation of as much as $340 million.

The Auckland-based company said it plans to sell as much as 120.1 million new shares, raising up to $136.5 million and 83.5 million existing shares, raising up to $125 million, in a range of $1.10 to $1.50 apiece. The final price will be set by a bookbuild to institutions and retail brokers on June 24, the company said.

Australian private equity firm Next Capital currently owns 64 percent of Hirepool and Macquarie Group holds 21 percent. Hunter Powell Investments holds 7 percent and the balance is owned by current and former managers. After the sale, Next, Macquarie and their co-investors will own between 20 percent to 35 percent of the company.

Hirepool says it expects to benefit from an expanding New Zealand economy with a large pipeline of infrastructure and construction projects ahead, as well as eyeing acquisitions and widening its product range.

Auckland businessman Tenby Powell, who founded Hunter Powell Investments with his partner Sharon Hunter, bought Hirepool with Goldman Sachs JB Were from Owens Group for $43 million in 2003 and retained a 20 percent stake in the expanded company when it was sold to Next Capital in 2006 for $174 million, according to his profile on the ICMI Speakers Bureau.

(BusinessDesk)


EARLIER: Hirepool plans to raise up to $262m in IPO, list on NZX, ASX July 11

Hirepool, New Zealand's largest general equipment hire company, plans to raise as much as $262 million in an initial public offering and list on the Australian and New Zealand stock exchanges next month with a market capitalisation of as much as $340 million.

The Auckland-based company said it plans to sell as much as 120.1 million new shares and 83.5 million existing shares at between $1.10 to $1.50 apiece. The final price will be set by a bookbuild to institutions and retail brokers on June 24, the company said.

Australian private equity firm Next Capital and its co-investors will raise as much as $125.2 million from selling their shares and will continue to own between 20 percent to 35 percent of the company. Hirepool bought rival Hirequip out of receivership in May last year and says the larger company with 58 branches expects to benefit from an expanding New Zealand economy with a large pipeline of infrastructure and construction projects ahead, as well as eyeing acquisitions and widening its product range.

"The merger of Hirepool and Hirequip last year has created a more efficient business with a better platform to invest in higher yielding product offerings, complementary acquisitions and achieve more efficient fleet management," said Hirepool chairman Emmet Hobbs.

The company expects earnings before interest and tax to rise 16 percent to $24.9 million in the current financial year in the 12 months to June 30, and increase to $40.7 million next year, according to its prospectus.

Auckland businessman Tenby Powell, who founded Hunter Powell Investments with his partner Sharon Hunter, bought Hirepool with Goldman Sachs JB Were from Owens Group for $43 million in 2003 and retained a 20 percent stake in the expanded company when it was sold to Next Capital in 2006 for $174 million, according to his profile on the ICMI Speakers Bureau.

Shareholders of Next Capital and Macquarie expect to raise $43.2 million to $125.2 million from selling their shares while a further $132.1 million to $136.5 million will be raised from the sale of new shares, according to the offer documents.

Funds raised from the share sale will be used to raise capital, repay debt and provide an opportunity for existing shareholders to realise all or part of their investment, according to the offer. The funds will also be used to pay for the remaining shares in subsidiary Bligh Finance.

Net debt is expect to total $85.2 million at July 11 when the company plans to list its stock.

(BusinessDesk)

Comments and questions
6

Another game of pass the parcel?

Unfortunately what will happen is the fund managers etc of Kiwisaver funds will purchase and it will just mean less of a return in the future
for the kiwi fund holders
Been going on for ages this rought over some IPO's
Amazing with a few figure adjustments how you can increase the value of a coy

How much one-off Christchurch re-build noise will be in these figures...

Good to see the selling shareholders retaining are significant shareholding post listing - A sign there is potential upside.

Do the numbers. They are only leaving the profit on sale in. If they retained 40 percent of their investment,, then that would be a different story.

How can a company, which hasnt reported a profit be worth $262 million?

The Prospectus says the will retain between 20-40% (30% midpoint).

Also the Company is profitable.