DEMAND for trucks and trailers has been severely hit during the
recession, with the market nationally down 30% in volume terms in both
1990 and 1991, but there are signs that the market may be on the point
of turning up.
Dawsongroup, the truck and trailor contract hire and rental company,
believes it will be among the major beneficiaries given the company's
healthy state both financially and in terms of its rental fleet which
has been steadily updated and is expected to number 880 by the year end
after further capital investment. A further two business sites are to be
opened taking the total to around 30.
Despite the fact that the company began to feel the effects of
recession as long ago as the end of 1988 it has prospered. Results for
the six months to end June showed an impressive 80% jump in profit
before tax to #3.55m. Earnings per share advanced by 71% to 7.7p and the
interim dividend was doubled to 1.5p.
Chairman and chief executive Peter Dawson, who owns a 75% stake in the
company, said the result were ''very pleasing'' and reflected the
company's commitment to quality and a clearly focused strategy aimed at
serving niche markets.
On a divisional basis, the rental business benefited from good demand
with turnover up 5% despite an 8% smaller fleet compared with the
corresponding period last year. Average time rates and utilisation rates
both improved on last year. Within contract hire, the customer base has
broadened in recent years to cover a variety of sectors.
Customers include Bernard Matthews, London Rubber and the Royal Navy.
Turnover within this part of the business was maintained and margins
were slightly better.
The commercial vehicle market has been the worst hit by the recession
but it is showing small signs of recovery, albeit from a very low base,
which is expected to continue.
The costs associated with making new vehicles comply with new
regulations governing noise and smoke emission will inevitably be passed
onto the consumer. However at the current time prices and margins are
still subject to downward pressure with what buyers there are seeking to
drive a hard bargain. The dearth of new vehicles in recent years has led
to a weak aftermarket. Dawsongroup is the UK's largest Volvo truck
distributor.
Problems facing rival Tiphook concerning its accounting practices have
turned the spotlight onto the sector. But Dawsongroup's finance director
Clive Gear, was keen to stress that the company's balance sheet was
''clean and tidy'' with no off-balance sheet borrowings or operating
leases.
The balance sheet remains strong with gearing almost unchanged at
119%, which is low by the industry's standards. A strong positive
cashflow enabled the company to repay early, loans on its freehold
properties. Capital expenditure was #13.5m in the first half and is
expected to reach #30m by the year-end.
Dawsongroup has no wish to become a large player in terms of fleet
size just for the sake of it but is more interested in growing a small
and profitable business.
Given the problems facing Tiphook and the skeletons thought to exist
elsewhere in the industry it is probably no bad thing. In a tight market
Dawsongroup's shares jumped 60p to 303p.
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