18 Jun 2014

Hirepool boss happy with forecast

8:23 am on 18 June 2014

Hirepool's chief executive Brian Stephen is comfortable the forecasts in his company's prospectus are achieveable - despite doubts being raised by some fund managers.

On Monday, the owner of equipment hire company Next Capital said it planned to raise up to $262 million from selling shares priced between $1.10 and $1.50.

Fund managers have questioned the projected profit margins of between 37 and 45 percent of sales from an industry which has struggled to realise 30 percent margins.

They say that, even at the bottom of the price range, the float is being priced for perfection and at higher multiples of earnings than such companies are worth internationally.

But Mr Stephen, who has 27 years in the industry, said he was happy with the forecast.

The business had consolidated considerably since buying HireQuip in May 2013; HireQuip went into receivership in July 2012 after its bankers refused to continue to provide funding.

"Orginally when we did the merger we had 90 facilities, or branches. Through the consolidation, there were significant synergy savings associated with that consolidation, so we looked around the country and identified key locations where we believed we needed a branch network to take advantage of growth opportunities," Mr Stephen said.

"So that, in conjunction with the balance of the synergies that flowed out of the integration, in conjunction with the additional revenue through the top, will get us to the 39 percent."

The business was aligned to gross domestic product, and typically at around 1.5 percent GDP growth, the company was flatlining. Anything above that was growth, he said.

"But over and above that we get good revenues from project work and the New Zealand pipeline over the next 10 years looks very strong, especially with the Canterbury rebuild and central and local government forecast spending."