Baldwins Industrial Services, the rental company listed on the London stock exchange, is reviewing its operations – having recorded a pre-tax loss of £14.4m ($22m) for the year to 31 March 2002.
Although group turnover increased 8% to £83.0m, an operating loss of £100,000 was posted for the year (excluding exceptional items, profits on sale of fixed assets and interest). This compares to an operating profit of £11.4m and a pre-tax profit of £5.8m in the previous year.
The company is now reviewing its continuing presence in the US market after racking up much of the losses at its subsidiary there, Texas-based Phillips Crane & Rigging.
Turnover sourced by Baldwins outside of the UK amounted to £22.1m (2001: £17.1m) and the operating loss was £5.9m (2001: £900,000 profit).
‘The US business was affected by very difficult trading conditions during the year, where the market, whilst relatively buoyant in certain sectors, remained highly price competitive. This coupled with technical problems on some of the new cranes contributed towards a very poor result for the year. Much effort has been made during the last six months to downsize the US operation and to focus on its core activities as well as to bring the cost base under tighter control. We reduced our depot network to two main terminals – Houston and Dallas, and closed four ancillary locations. The performance of the US business remains unacceptable, and the long-term future of the business is under review.’
Baldwins finished the year with borrowings of £83.2m -down marginally from £84.7m at the end of the previous year – representing a gearing of 333%.
The company confirmed that it had breached its borrowing covenants and is negotiating a restructuring proposal with its UK funders. ‘Various terms and conditions are currently being discussed with a view to finalising a position that ensures the group remains viable in the long-term. The accounts have been prepared on a going concern basis, on the assumption that negotiations will be successful,’ said chairman and chief executive Richard Baldwin.
Exceptional items for the year were £8.5m, of which £6.4m relates to an impairment of crane asset values, £600,000 relates to goodwill created on the acquisition of Phillips and £1.5m relates to a charge for potential claims from equipment suppliers, said Baldwins.
The UK end of the business made an operating profit of £5.8m (2001: £10.5m) on a turnover of £60.9m (2001: £59.4m). Baldwin commented: ‘The UK general crane market had a difficult year with the expected benefits from market rationalisation not becoming evident in margins. Price pressure continued and increasing costs of fuel, operator wages and administration costs put further pressures on margins. The small crane division benefited from the continued strong activity in the southeast. Heavy cranes saw fluctuating levels of utilisation through the year although with the heavy crane fleet now rationalised, improving trends are evident.
‘The year was one of mixed fortunes for heavy lift contracts, with aggressive overseas competition, particularly in relation to contracts bid for in Europe and South America. This resulted in market rates for heavy capacity cranes both in the UK and on international markets being under severe pressure. The year saw both of the heaviest cranes in the fleet, the AK912 and LR1800, return to the UK having completed contracts in Venezuela.’
The company is reigning back its spending on cranes. Capital expenditure during the year amounted to £19.5m, a significant reduction on the previous year’s £55.7m. Said Baldwin: ‘The group operates a relatively young fleet and expects to enter a period of limited capital investment in order to reduce gearing levels and improve net operating cash flow. The fleet is in the process of being rationalised for the future through targeted disposals.’
The group’s total crane fleet comprised 502 units as at 31 March 2002. Since then, the fleet has been reduced by 36 units and a further 10 to 15 units will be got rid of in the next few months.
There was some good news, however. ‘Enquiry levels for heavy cranes are now encouragingly high and show increasing levels of activity, particularly in the UK as the construction sector remains buoyant, and petrochemical investment takes advantages of government tax incentives for clean fuels projects,’ Baldwin said.
The Mechanical & Electrical division delivered ‘strong growth’, Loadtite, the lifting equipment hire and sales business, returned to profit, and Delta, the tower crane division, increased both revenue and profitability, Baldwin said.
He also said: ‘During the year we received an award of a Certificate of Recognition for Safety performance in Venezuela for 16 million man-hours worked, without a lost time accident. Additionally, we successfully completed heavy lift projects at Tilbury Container Services and Southampton Container Terminal and we secured a nine-month contract for lifting operations involving the LR 1800 on the rebuilding of Blast Furnace No.5 for Corus at Port Talbot [in Wales].’
