Boom CEO leaves as profits fall 22%

12 May 2008

Boom Logistics chief executive officer Mark Lawrence resigned in February, the same month that trading of the company’s shares was halted ahead of its half-year results announcement. Boom is Australia’s biggest crane and access rental company.

The results included a 22% fall in pre-tax profits, an AU$2.9 million (US$2.6 million) accounting charge relating to the 2005 acquisition of Sherrin Hire, and news that severe flooding in the Queensland Bowen Basin would impact on the company’s second half performance.

Boom Logistics said its net operating profit after tax was AU$15.3 million ($14 million) for the first half of its financial year to 31 December, falling to AU$12.4 million ($11.3 million) after the one-off charge. This was lower than the AU$17 to 18 million ($15.5 to $16.4 million) figure it had indicated earlier.

Revenues rose 19% in the six months, however, profits were down 22% because of a “pronounced slowdown• over the pre-Christmas, early January period. In addition, the company said there had been pressure on its margins caused by higher labour, fuel and consumable costs as well as price erosion in some areas, particularly the aerial platforms rented by the Boom Sherrin division. Boom Logistics said it was taking steps to reduce fixed costs and optimise fleet utilisation.

John Robinson, Boom Logistics chairman, said, “The underlying Boom business model remains robust, despite the issues that have affected margins during the first half.”

The accounting charge arose because assets acquired from Sherrin Hire in 2005 had been ascribed incorrect “useful lives• when they were acquired. Boom said the assets, which account for around 4% of the group’s total AU$400 million ($365 million) fixed assets, had been valued correctly but depreciation charges had been too low.

Flood disruption in the Queensland Bowen Basin will, meanwhile, have an impact on the second half results, said the company. It said that disruptions would apply for the whole of the first three months of 2008 and that 9% of company revenues would be affected.

At the time of writing in early February a search was underway for Lawrence’s replacement. In the interim, Jack Hebiton, one of the company’s founding directors, will take direct responsibility for operations.

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