Chairmans Statement

Overview and financial highlights

Despite the worldwide economic downturn, I report that the group achieved a normalised operating profit* of £12.9 million for 2009 which is £5 million lower than 2008. It should be remembered that last year was a record for our group and the current year’s performance is broadly comparable with the results achieved in 2007 during positive yearly economic growth.

Although trading conditions have been difficult, we have reduced net debt significantly from £16.9 million at the end of last year to £2.8 million at 31 December 2009.

Ongoing cost control, cash and working capital management have been priorities for this year. Group stock levels have been reduced by £3.1 million, capital expenditure has been carefully controlled; hire fleet asset utilisation, the fleets’ condition and availability have all been maximised.

Cost control has been achieved mainly though efficiency savings without any adverse impact on the operational structure of the business. Although some redundancies were necessary no depots have been closed and our customer service level has been maintained. The group remains in a strong position ready to take advantage of any business opportunities whenever they arise.

Operating Performance

The performance of our main hire and sales business in the UK and Northern Europe was adversely affected by the economic recession. The effect was mitigated by the development of niche markets together with continuing investment in our traditional businesses, this strategy will continue to be followed.

Our Middle East hire and sales business had another recordoperating profit following on from the previous record made in 2008 despite the economic downturn in the second half of 2009. At the moment the economic conditions remain difficult in the Middle East and consequently it is unlikely that we will be able to maintain the 2009 level of profitability in 2010. During the year credit control was strengthened by the appointment of an additional employee and customer repayment agreements have been entered into to facilitate the repayment of old debt.

The UK based air conditioning installation business had a better year turning an operating loss of £0.1 million into a profit of a similar amount. Management have reduced costs, streamlined the business and are looking forward to further improvements in 2010.

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 and Earnings Per Share

Despite the above decline in normalised operating profit, the net profit after tax for the financial period has increased by £0.5 million to £11.6 million, a new record for our group. This is due to the following factors:

	£m
Profit for the 2008 financial period	11.1
Less:
Decrease in normalised operating profit	-5
Decrease in profit on sale of property	-0.3
Add:
Dividends received from other participating interests	1
Reduction in net finance costs	2.2
Reduction in charge for taxation	2.6
Profit for the 2009 financial period	11.6

Dividends received from other participating interests represents the receipt of three years of dividends from Oasis Sykes, our operation based in the Middle East.

The reduction in the net finance costs reflects both a significant reduction in net debt and a decrease in the average effective interest rate charge in the year.

The significant reduction in the tax charge is mainly due to the enactment of the 2009 Finance Act on 8 July 2009 following which the group no longer has to pay corporation tax on most dividends received from its overseas operating subsidiaries. This has resulted in both the release of a deferred tax reserve brought forward and no tax being payable on the current year’s profits.

The basic earnings per share has increased by 5.8% from 24.85 pence to 26.30 pence this year.

A more detailed review of the above factors is given in the Operations and Finance Review within the Directors’ Report.

Net Debt

Net debt has been reduced from£16.9 million at 1 January 2009 to £2.8 million by the period end. The movement can be reconciled as follows:

	£m
Opening net debt	16.9
Less:
Cash inflow from operating activities	-14.3
Sale of property	-0.4
Dividends received from other participating interests	-1
Add:
Capital expenditure net of plant and equipment
disposal proceeds	0.8
Other factors	0.8
Net debt as at 31 December 2009	2.8

This reflects the strong cash generating ability of the group.

Share Buyback Programme

The board continues to believe that shareholder value will be optimised by the purchase, where appropriate, of our own shares. Although no shares were purchased during the year under review, in previous periods shares were purchased for cancellation and these purchases enhanced earnings per share. At the forthcoming Annual General Meeting, the board will request that shareholders vote in favour of a resolution to renew the authority to purchase up to 12.5% of the ordinary shares 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 proved to be beneficial in 2009 and will therefore be continued into 2010.

The group continues to face a difficult operating environment in all of its geographical markets, particularly the Middle East, and therefore 2010 will be challenging. Nevertheless the business is strong, the infrastructure remains fully in place with a hire fleet that has been well maintained and is in excellent condition. The board is therefore optimistic for further success in 2010.

JG Murray
Chairman
5 May 2010