Henlys destiny 'in hands of US economy'

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The bus and coach builder Henlys warned yesterday that its second-half performance would fall "significantly" due to the US economic slowdown, as it revealed a steep fall in first-half profits.

The company, which relies on the US for 70 per cent of its profits, said there had been declining demand for school buses, touring coaches and motor homes due to high energy costs, pressure on state budgets and the general economic slowdown.

Robert Wood, the chief executive, said: "Our destiny is in the hands of how the US economy performs and to a certain extent on the cost of energy. We were buying into economic theories around early in the year that there would be a short, sharp recession. Clearly that is not the case. We are now taking the view that there is not going to be any improvement in the US economy in the second half."

Shares in Henlys slumped 48 per cent to 124p after the company reported a pre-tax loss of £19.4m in the six months to 30 June, down from £21.1m a year earlier, on turnover of £333.6m, down from £346.8m.

Mr Wood said, however, that before a number of considerable one-off costs, the group made an underlying pre-tax profit of £17.5m, compared with £30.4m the previous year.

Henlys, whose North American businesses include the wholly owned Blue Bird and 49 per cent stakes in Prevost and Nova, incurred a £14m loss on disposal of the UK bus business into the company's joint venture TransBus International.

In addition there were exceptional costs of £11.8m related to the closure of Blue Bird's assembly plant in Mexico, downsizing costs for Nova's RTS operations in New Mexico and restructuring costs of the bodybuilding operations in TransBus.

Mr Wood said that despite the slowdown, operating-profit margins in Blue Bird and Prevost were still at 7-8 per cent and the priority was to ensure that the business was in good shape to respond when the economy recovered: "If and when demand comes back we should see the benefits. We believe we have some very good qualities."

Several initiatives are under way to reduce costs in the North American operations but the benefits will not be achieved until 2002 trading.

The house broker, ABN Amro, said forecasts for the full year were a pre-tax loss of £20.4m, compared with a profit of £46m last year. Underlying profit was expected to be £27.5m, compared with £65.3m a year ago.