The Investment Column: Hire is healthy for Goode Durrant

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The Independent Online
Van-hire specialist Goode Durrant is motoring along in the fast lane thanks to a buoyant economy and strong growth from acquisitions and new depot openings. After disposing of several peripheral businesses it has returned to profit and has achieved strong earnings growth over the last few years.

In the six months to October profit rose 14 per cent to pounds 17.4m thanks to a rise in its fleet, which grew from 16,000 to 20,000 in the last eight months of 1997.

Half of that rise came from opening new depots at Milton Keynes and Cardiff and the rest from the acquisition of TDG, its smaller rival. The deal has slowed earnings growth in the first half and dampened margins but should bring longer-term benefits.

One worry is that acquisitions pushed interest charges up 70 per cent to pounds 4.8m in the first half. but interest cover is still a healthy 4.6 times. Hire charges are holding steady and the cost of new vehicles has been edging down, which is good news for Goode Durrant. Ravenstock Tam, the equipment hire division, is also doing well, with profits up a fifth to pounds 1.6m.

This is a competitive industry in which the Americans are becoming big players, but Goode Durrant's 9 per cent market share makes it one of the major operators. The growing trend for companies to outsource transport needs should help maintain demand even if the economy as a whole begins to slow this year.

Analysts are expecting full year profits to reach pounds 30m, rising to pounds 35.4m and 41.4p a share in 1998-99. The shares edged up 5p to 500p yesterday which rates them on an undemanding 13.6 times this year's earnings and just 12 times next year's earnings. Even after a great run they still look attractive.