coates sells onshore uk business for loss

Coates Hire Limited (COA) announced today it has sold its onshore business in the UK to Speedy Hire plc for approximately A$17.1 million. The equipment hire company said it would retain its offshore operations, which provide specialist air compressors and steam generators, as well as related services to the worldwide oil and gas market based out of Aberdeen, Scotland.

Coates advised that proceeds from the sale would be used for a combination of debt retirement and possible further investment in Coates' offshore fleet. The company stated that the offshore business would operate under the Coates Rentair name.

The group said it expected that the sale would result in a loss, inclusive of exit costs, of approximately A$5.1 million before tax and A$3.7 million after tax.


Coates noted that about half its UK revenues were generated out of the North Sea Oilfields with the remainder coming from around the globe.

"The sale of the onshore business will see Coates transfer the assets and operations that provide rental equipment in air compressors, generators, lighting towers and welders to the general UK market as well as the single source contract business," the company said.

"The assets and operations will be consolidated within Speedy Power," Coates added.

While the sale agreement was effective on 13 August 2004, Coates advised that the loss on sale would be reflected as an asset write down as at 20 June 2004.

"In this regard, a total of $5 million before tax (being $3.5 million after tax) will be taken up in the 2003/04 financial year," the group said.

In addition, Coates stated that it would write down the carrying value of the Rentair trade name, which will be written down to $1.1 million from $2.9 million as at 30 June 2004.

"Together the combined impact at June 30 will be a write down of $6.7 million before tax and $5.2 million after tax,” the company noted.

Coates said it expected that revenues out of the UK in FY05 would be reduced by approximately 60% over the prior year. However it advised that profit was expected to rise as the retained Coates Rentair business would be able to deliver top-tier gross and EBIT margins to the group thanks to its streamlined business model.

"The Coates board is currently reviewing a proposal for further investment in the Coates Rentair fleet," the company said.

"This would allow for significant global expansion, with a particular focus on the Asia-Pacific region, where strong ongoing oil and gas exploration and production activity provides considerable growth opportunities," Coates stated.