Linde's UK premises

By Bill Redmond

Britain's biggest forklift maker, Linde Material Handling UK, part of the Kion group, is struggling in a difficult market. In 2007, it made a pre-tax loss of GBP47,000 (USD72,000) on annual sales up by GBP5 million (USD7.74 million) to GBP329.3 million (USD509.5 million).

At the operating profit level, however, efficiency drives to cut distribution and administration costs led to a profit rise from GBP630,000 (USD973,00) to GBP7.4 million (USD11.4 million), but the improving picture was hit by an actuarial loss on the pension scheme of GBP20 million (USD30.9 million) compared with a gain of GBP8.8 million (USD13.6 million) in 2006. As in 2006, there is no dividend.

Negative working capital has dramatically improved since 2006 but still remains negative at GBP10.3 million (USD15.9 million). During 2007, an infusion of fresh capital saved the company from plunging even deeper into negative shareholder equity, which in 2006 stood at GBP6 million (USD9.2 million). Last year, the company converted ordinary redeemable shares of GBP42.8 million (USD66.1 million) into ordinary shares and issued GBP30.7 million (USD47.3 million) of new ordinary shares at par. At the end of the year, this left net shareholders' funds of GBP56.7 million (USD87.4 million).

Linde has found the going tough in the UK market for the past seven years, racking up accumulated pre-tax losses of over GBP20 million (USD30.9 million) for that period and the directors continue to report that "the company suffers from cost pressures and competitor activity in its major markets which are expected to intensify in the coming year." During 2007, it shed jobs, and then, in November this year, it announced further redundancies amounting to more than 10% of its labour force at its main Basingstoke factory, where it claims that orders received are now what drives forklift production.

Ultimately owned by private equity groups Goldman Sachs and Kohlberg Kravis Roberts & Co, Kion's top management will be under rising pressure to turn the UK operation around after years of dismal performance, especially as its strong market areas in the East will weaken during next year.

Globally, Kion's performance in the first half of 2008 seems encouraging, as it notched up rising sales of 9.3% to EUR2.26 billion (USD2.95 billion) in the first half of 2008 compared with the same half in 2007, but it reports that its market share in the first half for small and low-tech trucks fell slightly. Net income in the first half of 2008 was only EUR29 million (USD37.8 million), hardly the heady stuff investors expect from a heavily geared company posting significant first half sales. It is hardly surprising, perhaps, that Kion does not expect a stock market launch in 2009.