11.12.2009

GAM sees stability returning

Spanish rental group GAM, has reported an improvement in revenues and profitability during its third quarter. Revenues were €70.5 million up three percent on the second quarter although well down on the same period of 2008. Net profits were €286,000 compared to substantial losses in the first two quarters.

Nine month year to date revenues are €213.5 million, down almost 25 percent on the same period last year. The company reported a net loss of €6.1 million compared to a profit this time last year of €19.6 million. Included in the revenues and profits is the sale of €11.1 million of used equipment which generated a gross profit of €4.4 million. Gam says that sales are in line with the company’s internal budget and that it is seeing a return to stability and predictability.

The company generated €103 million of cash before debt repayments and investments and reduced its net debt to €561.6 million, €72.2 million below the level at the end of 2008. The company’s debtor days remain high at 144 days leaving it with a debtor book of €146 million. It has cut annualised expenses by €34.4 million in the first nine months putting it well on the way to achieving its target of reducing annual costs by €50 million. A key part of GAM’s strategy is to expand overseas and its operations in Peru and Panama are now fully up and running.

Vertikal Comment

GAM’s public financial reporting is far less clear than most of the companies we track, however it does seem that the business – drastically affected by the collapse in the Spanish construction market – is beginning to improve but also that it has a long way to go. The company expanded rapidly in 2007 and 2008 and has accumulated a massive debt pile for its size. It certainly has some tough times ahead and its future will depend on the flexibility of its lenders to pull it through the recession intact.

It has some good operating divisions and is making some progress with its international expansion. However its short term future depends very much on the state of the market in Spain.