Chairmans Statement

Overview and financial highlights

I am pleased to be able to report that the normalised operating profit* has increased by £1 million from £12.9 million in 2009 to £13.9 million in the current year.

The group continues to generate strong cash flows. Net cash inflow from operating activities was £13.9 million which, due to higher tax payments, was down a little compared with £14.3 million last year. As at 31 December 2010 the group had net funds of £4.9 million compared with net debt of £2.8 million last year despite shareholder related cash outflows of £6 million on dividends and the purchase of own shares. External bank borrowings have been reduced by £9 million from £29 million at the start of the year to £20 million by the year-end.

Ongoing cost control, cash and working capital management continue to be priorities for the group. In total working capital has been reduced by £0.2 million thereby consolidating the significant reductions of £2.2 million made last year. Capital expenditure is carefully controlled and directed to assets that will yield the best returns. Hire fleet utilisation, the fleet’s condition and availability have all been maximised.

*Operating profit before non-recurring items as reconciled on the Consolidated Income Statement.

Operating Performance

Our main hire and sales business in the UK and Northern Europe (the Netherlands and Belgium) returned a strong performance in the year. The operating profit from this business sector increased by £2.9 million from £11.1 million in 2009 to £14.0 million in the current year. The performance was in part attributable to the cold weather in December which assisted the performance of our heating division. In addition management continue to develop non-weather dependent niche markets which has benefited the performance of the specialist hire division. We will continue to invest in and develop this business as well as our traditional core products and services.

As predicted in my Interim Statement, our business in the Middle East continues to suffer from the economic downturn in the region, particularly in Dubai, and we anticipate that this will continue for some time. The business does continue to make a return on reduced levels of turnover and management are taking action to ensure that the cost base reflects the reduced activity levels. On a more positive note, our business in Abu Dhabi continues to grow year on year.

The UK fixed installation business improved its operating profit by £0.1 million to £0.2 million and we look forward to further improvements next year.

The ongoing strategy of cost control through efficiency savings has resulted in reduced overhead costs which have also contributed to the overall increase in normalised operating profit during the year.

A more detailed review of this year’s operating performance is given in the Operations Review within the Directors’ Report.

Profit for the Financial Year

Profit before tax increased by £1.1 million from £13.3 million in 2009 to £14.4 million in the current year. However, the profit after tax for the financial year was £10.6 million (2009: £11.6 million) due to a normal tax charge of £3.8 million this year compared with £1.7 million in 2009. This is mainly due to a deferred tax release of £1.2 million last year and a change in the group’s profit mix away from the Middle East towards the UK and Northern Europe.

A more detailed review of the profit for the financial year is given in the Operations and Financial Review within the Directors’ Report.

Net Funds/(Debt)

As at 31 December 2010 the group had net funds of £4.9 million compared with net debt of £2.8 million last year: a positive increase of £7.7 million despite a dividend of £4.8 million and cash outflows on share buybacks of £1.2 million.

Equity Dividends Paid

The company declared an interim dividend of £4.8 million on 9 November 2010 and this was paid on 10 December 2010. The Board continues the policy of returning value to shareholders whenever possible and accordingly the decision regarding an interim dividend for 2011 will be taken later in the year in the light of profitability and available cash resources.

Share Buyback Programme

During the current year the company purchased 1,152,561 ordinary shares for cancellation for a total consideration of £1,371,000 of which £187,000 remained unpaid at the year-end. So far during 2011 the company has purchased a further 402,716 ordinary shares for cancellation for a total consideration of £867,000. These purchases enhanced earnings per share and were for the benefit of all shareholders.

As previously reported, the directors intend to continue to actively pursue the buyback programme provided the necessary funds are available. Shares will only be bought back for cancellation provided they enhance earnings per share. Any shareholder who is considering taking advantage of the share buyback programme is invited, after taking the appropriate independent financial advice, to contact their stockbroker, bank manager, solicitor, accountant or other independent financial advisor authorised under the Financial Services and Markets Act 2000, in order to contact Brewin Dolphin Limited who are operating the buyback programme on behalf of the company. Accordingly at the next Annual General Meeting shareholders will be asked to vote in favour of a resolution to renew the general authority to make market purchases of up to 12.5% of the ordinary share capital in issue.

Outlook

The group’s continuing strategy of investing in its traditional core products and services, the increase in non-seasonal business and investment in new technically advanced and environmentally friendly products yet again proved to be beneficial in 2010 and will therefore be continued into 2011.

The group continues to face challenges in all of its geographical markets. Nevertheless our business is strong, cash generative and well developed with positive net funds. All these factors help us to be able to take advantage of opportunities wherever and whenever they arise and the Board is therefore optimistic for further success in 2011.

JG Murray
Chairman
3 May 2011