Essex posts Q1 double digit rises
By Alex Dahm14 August 2008
The increase in revenues was driven primarily by a 29.3% increase in equipment rental revenue to $13.9 million for the quarter ended 31 March 2008 from $10.8 million in the same quarter 2007.
Increases in utilisation and rental rate generated the revenue rise. Essex invested $21.7 million over the last 12 months in new heavier lift cranes to replace older smaller cranes.
Average monthly rental revenue rate increased 27.2% to $19,163 for the three months ended March 2008 from $15,068 for the three months ended March 2007. Total cost of revenues (excluding net book value of rental equipment sold) remained constant at $7.6 million for the quarter ended 31 March 2008 compared to the same quarter of 2007, despite the 18.5% growth in total revenue. Selling, general and administrative expenses increased by 1.2% from $2.46 million to $2.49 million. Total cost of revenues (excluding net book value of rental equipment sold) and SG&A expenses as a percentage of total revenues (excluding used rental equipment sales) declined to 44.1% and 14.5%, respectively, from 52.5% and 17.0% in the first quarter of 2007.
The decrease in expenses as a percentage of total revenue (excluding used rental equipment sales) was attributed to improved overhead management and expense controls as well as improvements in the mix of cranes in the Essex fleet through investment in new heavier lift cranes which drive higher average monthly rental rates.
Equipment rental revenue backlog increased by 28.7% to $43.1 million at 31 March 2008 from $33.5 million at 31 December 2007.
Essex was acquired by Hyde Park Acquisition Corp. in March for $210 million. Laurence Levy, Hyde Park chairman and CEO, commented, "Hyde Park is pursuing the acquisition of Essex on the basis of the long-term benefits associated with Essex's market-leading position serving growing infrastructure-related end markets, as well as the attractive asset value and long useful lives of Essex's crane fleet. As evidenced by these strong first quarter results, Essex continues to benefit from robust demand conditions prevailing in its end markets, as investments in bridge and road construction, power, water treatment, refineries, alternative energy and similar projects remain strong. In addition to the strong demand conditions, Essex's management has maintained strict cost control which has contributed to strong profitability for the quarter. Essex also continued to optimise its crane rental fleet by selling under-utilised, older equipment with lighter lifting capacity. As a complement to these sales, during the first quarter of 2008 Essex purchased approximately $9 million of new heavy lift equipment for which demand remains strong and rental rates are attractive relative to lighter lift equipment. These investments are expected to benefit operations and profitability beginning in the second half of 2008 and continuing into 2009 and beyond. Based on Essex's backlog at March 31, 2008, the pace of new contract-related activity, the addition of new equipment to the fleet and the strength of its end markets, we remain confident in Essex's ability to achieve or potentially exceed its 2008 projected financial results."