7th Sep 2010 07:00
Ashtead Group plc Unaudited results for the first quarter ended 31 July 2010 Change 2010 2009 Actual At constant rates £m £m % %Underlying results¹ Revenue 239.1 221.6 +8% +2%EBITDA 78.4 71.6 +10% +3%Operating profit 30.2 23.9 +26% +17%Profit before taxation 11.9 8.8 +35% +18%Earnings per share 1.6p 1.2p +34% +19%Statutory results Profit before taxation 14.0 8.2 +70% +56%Earnings per share 1.8p 1.1p +70% +72%Highlights
* Encouraging improvement in year on year Group profit * Return to profit growth in both divisions * Capital expenditure of £51m (2009: £15m) in line with previous guidance * Balance sheet remains strong and our debt well structured with long
maturities, lower net debt of £806m (2009: £873m) and conservative leverage
of 3.1 times EBITDA
1 Before exceptionals, intangible amortisation and fair value remeasurements
Ashtead's chief executive, Geoff Drabble, commented:
"We are pleased to announce good Group profit growth for the first quarter,reflecting an improvement in both divisions. Whilst end markets remain fragile,our strong performance in fleet on rent reflects the impact of the responsiblecorrection in fleet sizes throughout the rental industry and increasedoutsourcing by customers, a trend we expect to continue.Gross capital expenditure totalled £51m (2009: £15m) as we began the fleetreinvestment programme announced in June. Our investment remains flexible anddirected towards replacement not growth as we focus on maintaining the momentumwe have established in yield improvement in recent months.We continue to believe in the fundamental strength of the underlying demand andopportunities in our end markets. The business is delivering strong margins andgaining market share which, together with its financial strength, means thatthe Board believes that Ashtead is particularly well placed to benefit asmarkets recover."Contacts:Geoff Drabble Chief executive +44 (0)20 7726 9700 Ian Robson Finance director Brian Hudspith Maitland +44 (0)20 7379 5151 Trading results Revenue EBITDA Operating profit 2010 2009 2010 2009 2010 2009Sunbelt in $m 297.3 287.7 100.8 98.9 44.2 38.9 ===== ===== ===== ==== ==== ====Sunbelt in £m 199.4 179.0 67.6 61.6 29.7 24.3A-Plant 39.7 42.6 12.3 11.4 2.0 1.1Group central costs - - (1.5) (1.4) (1.5) (1.5) --- --- --- --- --- --- 239.1 221.6 78.4 71.6 30.2 23.9 ===== ===== ==== ==== Net financing costs (18.3) (15.1) ---- ----Profit before tax, remeasurements and amortisation 11.9 8.8Fair value remeasurements 2.5 -Amortisation (0.4) (0.6) --- ---Profit before taxation 14.0 8.2Taxation (4.9) (2.8) --- ---
Profit attributable to equity holders of the Company 9.1 5.4
=== === Margins Sunbelt 33.9% 34.4% 14.9% 13.5%A-Plant 31.0% 26.7% 5.1% 2.6%Group 32.8% 32.3% 12.6% 10.8%
First quarter results reflect gradually improving conditions in the US with Sunbelt's rental revenues growing 1% to $271m (2009: $268m). Sunbelt's total revenue grew faster at 3% supported by higher used equipment sales as we stepped up fleet replacement.
Average US fleet on rent in the quarter grew 1% over Q1 last year. Yield wasbroadly flat year on year although sequentially the series of small monthlyincrements in both fleet on rent and yield since January 2010 we reported inJune continued throughout the quarter.In the UK, A-Plant's rental revenues declined 6% to £38m (2009: £40m). Thisreflected good growth of 3% in average fleet on rent with demand for A-Plant'squality service continuing to result in market share gains. UK yield declined7% year on year principally due to the full year effect of price renegotiationslast Autumn with its key accounts (which in aggregate constitute approximately50% of its revenues).
Lower costs, reflecting the full year impact of measures we took in earlier quarters and a reduced depreciation charge on our smaller but well utilised fleet, helped deliver good operating profit growth despite the still weak end construction markets.
Underlying pre-tax profit for the quarter grew by 35% to £11.9m (2009: £8.8m) reflecting the operating profit growth and higher net financing costs which increased due to the full year impact of last November's senior debt refinancing.
After a credit of £2.5m relating to the remeasurement to fair value of theearly prepayment option in our long-term debt and £0.4m of intangibleamortisation, the statutory profit before tax was £14.0m (2009: £8.2m). Theeffective tax rate on the underlying pre-tax profit was again stable at 35%(2009: 35%). Underlying earnings per share grew 34% to 1.6p (2009: 1.2p) whilstbasic earnings per share were 1.8p (2009: 1.1p).
Capital expenditure
For the year as a whole we continue to anticipate investing around £225m grossand £175m net of disposal proceeds, principally on fleet replacement andthereby holding fleet age broadly flat over the course of the fiscal year. Forthe quarter, capital expenditure was in line with this guidance at £51m (2009:£15m) gross and £41m (2009: £9m) net of disposal proceeds of £10m. As a resultthe average age of the Group's rental fleet at 31 July 2010 was 44 months,unchanged from year end.
Cash flow and net debt
Reflecting the £32m increase in net capital expenditure and a £20m increase inthe value of receivables since April as quarterly revenues regained more usualseasonal patterns, £6m (2009: £57m) of net cash was generated in the quarterand applied to reduce outstanding debt. Reflecting this and currencyfluctuations, net debt at 31 July 2010 was £806m (30 April 2010: £829m) whilstthe ratio of net debt to EBITDA was 3.1 times at 31 July 2010, unchanged fromyear end.
Availability on the ABL senior debt facility at 31 July 2010 was $584m (30 April 2010: $537m) substantially above the $150m level at which the Group's entire debt package is covenant free.
Current trading and outlook
August saw both Sunbelt and A-Plant perform in line with expectations and continue the pattern established in the first quarter.
We continue to believe in the fundamental strength of our markets. The businessis delivering strong margins and gaining market share which, together with itsfinancial strength, means that the Board believes that Ashtead is well placedto benefit as markets recover.Geoff Drabble and Ian Robson will hold a conference call for equity analysts at9.30am on Tuesday 7 September. Dial in details for this call have already beendistributed but any analyst not having received them should contact theCompany's PR advisers, Maitland (Emma Stevens), on +44 (0)20 7379 5151. Thecall will be webcast live via the Company's website at www.ashtead-group.comand there will also be a replay available via the website from shortly afterthe call concludes. There will, as usual, also be a separate call forbondholders at 3.30pm UK time (10.30am EST).
CONSOLIDATED INCOME STATEMENT FOR THE THREE MONTHS ENDED 31 JULY 2010
2010 2009 Before Before exceptionals, Exceptionals, exceptional Exceptional amortisation amortisation items items and and and and remeasurements remeasurements Total amortisation
amortisation Total £m £m £m £m £m £mRevenue Rental revenue 219.6 - 219.6 206.8 - 206.8Sale of new equipment,
merchandise and consumables 11.0 - 11.0 11.1
- 11.1Sale of used rental 8.5 - 8.5 3.7 1.2 4.9equipment --- -- --- --- --- --- 239.1 - 239.1 221.6 1.2 222.8 ----- -- --- --- --- --- Operating costs Staff costs (70.6) - (70.6) (70.0) - (70.0)
Used rental equipment sold (8.3) - (8.3) (4.4)
(1.2) (5.6)Other operating costs (81.8) - (81.8) (75.6) - (75.6) ---- -- ---- ---- ---- ---- (160.7) - (160.7) (150.0) (1.2) (151.2) ----- -- ----- ----- ---- ----EBITDA* 78.4 - 78.4 71.6 - 71.6Depreciation (48.2) - (48.2) (47.7) - (47.7)
Amortisation of intangibles - (0.4) (0.4) -
(0.6) (0.6) -- --- ---- -- ---- ----Operating profit 30.2 (0.4) 29.8 23.9 (0.6) 23.3Net financing costs (18.3) 2.5 (15.8) (15.1) - (15.1) ----- --- ---- ---- ---- ----
Profit on ordinary activities
before taxation 11.9 2.1 14.0 8.8 (0.6) 8.2Taxation: - current (2.1) - (2.1) (0.9) - (0.9)- deferred (2.1) (0.7) (2.8) (2.1) 0.2 (1.9) ---- -- ---- ---- --- ---- (4.2) (0.7) (4.9) (3.0) 0.2 (2.8) ---- -- ---- ---- --- ----
Profit attributable to equity
holders of the Company 7.7 1.4 9.1 5.8 (0.4) 5.4 === === === === ==== ===Basic earnings per share 1.6p 0.2p 1.8p 1.2p (0.1p) 1.1p === === === === ==== ===Diluted earnings per share 1.5p 0.3p 1.8p 1.2p (0.1p) 1.1p === === === === ==== ===
* EBITDA is presented here as an additional performance measure as it is commonly used by investors and lenders.
All revenue and profit is generated from continuing activities.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED 31 JULY 2010 2010 2009 £m £m
Profit attributable to equity holders of the Company for 9.1 5.4 the period
Foreign currency translation differences (5.0)
(24.4)
Tax on share-based payments 0.3
-
---
--
Total comprehensive income for the period 4.4
(19.0)
===
======
Details of principal risks and uncertainties are given in the Review of the Balance Sheet and Cashflow accompanying these interim financial statements.
CONSOLIDATED BALANCE SHEET AT 31 JULY 2010
Unaudited Audited 31 July 30 April 2010 2009 2010 £m £m £mCurrent assets Inventories 10.2 9.5 9.9Trade and other receivables 152.2 137.6 134.7Current tax asset 1.1 1.0 1.1Cash and cash equivalents 54.6 2.4 54.8 ---- ---- ---- 218.1 150.5 200.5Assets held for sale - 0.3 - -- --- -- 218.1 150.8 200.5 ----- ----- ----- Non-current assets
Property, plant and equipment
- rental equipment 948.9 1,011.8 969.7- other assets 128.8 137.2 131.9 ----- ----- ----- 1,077.7 1,149.0 1,101.6Intangible assets - brand names and other acquired 2.9 5.0 3.3intangibles Goodwill 365.4 346.0 373.6Deferred tax asset 7.8 10.6 7.8
Other financial assets - derivatives 8.0 -
5.7
Defined benefit pension fund surplus - 0.4
- -- --- -- 1,461.8 1,511.0 1,492.0 ------- ------- -------Total assets 1,679.9 1,661.8 1,692.5 ======= ======= =======Current liabilities Trade and other payables 137.9 108.5 130.6Current tax liability 2.8 - 2.1Debt due within one year 2.3 5.9 3.1Provisions 11.9 14.3 12.0 ---- ---- ---- 154.9 128.7 147.8 ----- ----- -----Non-current liabilities Debt due after more than one year 857.8 869.0 880.7Provisions 28.4 34.3 29.4Deferred tax liabilities 126.2 122.6 126.6
Defined benefit pension fund deficit 7.6 -
7.7 --- -- --- 1,020.0 1,025.9 1,044.4 ------- ------- -------Total liabilities 1,174.9 1,154.6 1,192.2 ------- ------- -------Equity Share capital 55.3 55.3 55.3Share premium account 3.6 3.6 3.6Capital redemption reserve 0.9 0.9 0.9Non-distributable reserve 90.7 90.7 90.7Own shares held by the Company (33.1) (33.1)
(33.1)
Own shares held through the ESOT (6.3) (6.3)
(6.3)
Cumulative foreign exchange translation 15.1 4.7
20.1differences Retained reserves 378.8 391.4 369.1 ----- ----- -----Equity attributable to equity holders of the 505.0 507.2
500.3
Company ----- -----
-----
Total liabilities and equity 1,679.9 1,661.8
1,692.5
======= =======
=======
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE THREE MONTHS ENDED 31 JULY 2010
Cumulative Own foreign Share Capital Non- shares exchange Share premium redemption distributable Treasury held
by translation Retained
capital account reserve reserve stock
ESOT differences reserves Total
£m £m £m £m £m £m £m £m £mAt 1 May 2009 55.3 3.6 0.9 90.7 (33.1) (6.3) 29.1 385.8 526.0Total comprehensive income for the period - - - - - - (24.4) 5.4 (19.0)Share-based payments - - - - -
- - 0.2 0.2 --- --- --- --- --- --- --- --- ---
At 31 July 2009 55.3 3.6 0.9 90.7 (33.1) (6.3) 4.7 391.4 507.2 Total comprehensive
income for the period - - - - - - 15.4 (9.8) 5.6Dividends paid - - - - - - - (12.8) (12.8)Share-based payments - - - - -
- - 0.3 0.3 --- --- --- --- --- --- --- --- ---
At 30 April 2010 55.3 3.6 0.9 90.7 (33.1) (6.3) 20.1 369.1 500.3 Total comprehensive
income for the period - - - - - - (5.0) 9.4 4.4Share-based payments - - - - -
- - 0.3 0.3 --- --- --- --- --- --- --- --- --- At 31 July 2010 55.3 3.6 0.9 90.7 (33.1) (6.3) 15.1 378.8 505.0 ==== === === ==== ==== === ==== ===== =====
CONSOLIDATED CASH FLOW STATEMENT FOR THE THREE MONTHS ENDED 31 JULY 2010
2010
2009
£m
£m
Cash flows from operating activities Cash generated from operations before exceptional items and changes in rental fleet 57.3
74.7
Exceptional costs paid (1.3)
(2.7)
Payments for rental property, plant and equipment (45.7)
(16.4)
Proceeds from disposal of rental property, plant and equipment before exceptional disposals 7.9
4.7
Exceptional proceeds from disposal of rental property, plant and equipment
-
1.2
--- --- Cash generated from operations 18.2
61.5Financing costs paid (net) (7.5) (2.6)Tax paid (net) (1.3) (0.5) --- ----
Net cash from operating activities 9.4
58.4
--- ---- Cash flows from investing activities Payments for non-rental property, plant and equipment (5.4)
(2.7)
Proceeds on disposal of non-rental property, plant and equipment 2.0
0.8
--- --- Net cash used in investing activities (3.4)
(1.9)
---
---
Cash flows from financing activities
Drawdown of loans 11.8 9.3Redemption of loans (16.8) (63.6)
Capital element of finance lease payments (1.2)
(1.4)
---
----
Net cash used in financing activities (6.2)
(55.7)
---
----
(Decrease)/increase in cash and cash equivalents (0.2)
0.8
Opening cash and cash equivalents 54.8
1.7
Effect of exchange rate differences -
(0.1)
--
----
Closing cash and cash equivalents 54.6
2.4
====
===
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
The condensed financial statements for the three months ended 31 July 2010 wereapproved by the directors on 6 September 2010. They have been prepared inaccordance with relevant International Financial Reporting Standards (`IFRS')(including International Accounting Standard - `IAS 34 Interim FinancialReporting') and the accounting policies set out in the Group's Annual Reportand Accounts for the year ended 30 April 2010 except for the adoption, witheffect from 1 May 2010, of new or revised accounting standards as set outbelow.
The financial statements have been prepared on the going concern basis as described in the corporate governance report included in the 2010 Annual Report and Accounts. They are unaudited and do not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006.
The statutory accounts for the year ended 30 April 2010 were prepared inaccordance with relevant IFRS and have been mailed to shareholders and filedwith the Registrar of Companies. The auditors' report on those accounts wasunqualified and did not include a reference to any matter by way of emphasiswithout qualifying the report and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
The following new standards, amendments to standards or interpretations are effective for the Group's accounting period beginning on 1 May 2010 and, where relevant, have been adopted. They have not had a material impact on the consolidated results or financial position of the Group:
* Amendments to IFRS 1 Additional exemptions for first-time adopters; * Amendment to IFRS 1 Limited exemption from comparative IFRS 7 disclosures
for first-time adopters;* IAS 24 (revised) Related party disclosures;* Amendment to IFRIC 14 Prepayments of minimum funding requirement;* IFRIC 19 Extinguishing financial liabilities with equity instruments.
The exchange rates used in respect of the US dollar are:
2010
2009
Average for the quarter ended 31 July 1.49 1.61At 31 July 1.57 1.662. Segmental analysis Operating Revenue profit before before Operating exceptionals amortisation Amortisation profitThree months to 31 July £m £m £m £m2010 Sunbelt 199.4 29.7 (0.3) 29.4A-Plant 39.7 2.0 (0.1) 1.9Corporate costs - (1.5) - (1.5) --- --- --- --- 239.1 30.2 (0.4) 29.8 ===== ==== === ==== 2009 Sunbelt 179.0 24.3 (0.5) 23.8A-Plant 42.6 1.1 (0.1) 1.0Corporate costs - (1.5) - (1.5) --- --- --- --- 221.6 23.9 (0.6) 23.3 ===== ==== === ==== Other financial Segment Taxation assets - Total assets Cash assets derivatives assetsAt 31 July 2010 Sunbelt 1,321.7 - - - 1,321.7A-Plant 286.4 - - - 286.4Central items 0.3 54.6 8.9 8.0 71.8 --- ---- --- --- ---- 1,608.4 54.6 8.9 8.0 1,679.9 ======= ==== === === ======= At 30 April 2010 Sunbelt 1,332.0 - - - 1,332.0A-Plant 290.9 - - - 290.9Central items 0.2 54.8 8.9 5.7 69.6 --- ---- --- --- ---- 1,623.1 54.8 8.9 5.7 1,692.5 ======= ==== === === =======3. Operating costs 2010 2009 Before exceptional Exceptional Before items and items and amortisation Amortisation Total
amortisation amortisation Total
£m £m £m £m £m £mThree months to 31 July Staff costs: Salaries 65.2 - 65.2 64.4 - 64.4Social security costs 4.9 - 4.9 5.1 - 5.1Other pension costs 0.5 - 0.5 0.5 - 0.5 --- --- --- --- --- --- 70.6 - 70.6 70.0 - 70.0 ---- --- ---- ---- --- ----Used rental equipment sold 8.3 - 8.3
4.4 1.2 5.6 --- --- --- --- --- ---Other operating costs: Vehicle costs 19.2 - 19.2 16.2 - 16.2
Spares, consumables & external repairs 14.6 - 14.6 13.4 - 13.4Facility costs 12.4 - 12.4 11.4 - 11.4 Other external charges 35.6 - 35.6
34.6 - 34.6 ---- --- ---- ---- --- ---- 81.8 - 81.8 75.6 - 75.6 ---- --- ---- ---- --- ----
Depreciation and amortisation: Depreciation 48.2 - 48.2 47.7 - 47.7Amortisation of acquired intangibles - 0.4 0.4
- 0.6 0.6 -- --- --- -- --- --- 48.2 0.4 48.6 47.7 0.6 48.3 ---- --- ---- ---- --- --- 208.9 0.4 209.3 197.7 1.8 199.5 ===== === ===== ===== === =====
4. Exceptional items, amortisation and fair value remeasurements
Exceptional items are those items of financial performance that are materialand non-recurring in nature. Amortisation relates to the periodic write off ofacquired intangible assets. Fair value remeasurements relate to embedded calloptions in the Group's senior secured note issues. The Group believes theseitems should be disclosed separately within the consolidated income statementto assist in the understanding of the financial performance of the Group.Underlying revenue, profit and earnings per share are stated before exceptionalitems, amortisation of acquired intangibles and fair value remeasurements. Exceptional items, amortisation and fair value remeasurements are set outbelow. Three months to 31 July 2010 2009 £m £mFair value remeasurements 2.5 -
Taxation on fair value remeasurements (0.8)
- --- ---Net fair value remeasurements 1.7 -Amortisation of acquired intangibles (net of tax credit) (0.3) (0.4) --- --- 1.4 (0.4) === ===The items detailed in the table above are presented in the income statement asfollows: Three months to 31 July 2010 2009 £m £mSale of used rental equipment - 1.2Used rental equipment sold - (1.2)Amortisation of acquired intangibles (0.4)
(0.6)
Charged in arriving at operating profit (0.4) (0.6) --- ---Net financing costs 2.5 - --- ---Charged in arriving at profit before tax 2.1 (0.6)Taxation (0.7) 0.2 --- --- 1.4 (0.4) ==== ==== 5. Financing costs Three months to 31 July 2010 2009 £m £mInvestment income: Expected return on assets of defined benefit pension plan (0.9) (0.8) --- --- Interest expense: Bank interest payable 4.5 2.9
Interest payable on second priority senior secured notes 11.9 11.1 Interest payable on finance leases
0.1
0.1
Non-cash unwind of discount on defined benefit 0.9
0.8
pension plan liabilities
Non-cash unwind of discount on self-insurance provisions 0.4 0.3 Amortisation of deferred costs of debt raising
1.4 0.7 --- --- Total interest expense 19.2 15.9 ---- ----Net financing costs before exceptional items 18.3 15.1Fair value remeasurements (2.5) - ---- ---- Net financing costs 15.8 15.1 ==== ==== 6. Taxation The tax charge for the period has been computed using an estimated effectiverate for the quarter of 37% in the US (2009: 36%) and 30% in the UK (2009: 29%)applied to the profit before tax, exceptional items, amortisation of acquiredintangibles and fair value remeasurements. The blended effective rate for theGroup as a whole is 35%.
The tax charge of £4.2m (2009: £3.0m) on the underlying pre-tax profit of £ 11.9m (2009: £8.8m) can be explained as follows:
Three months to 31 July 2010 2009 £m £mCurrent tax 2.1 0.9Deferred tax 2.1 2.1 --- --- Tax on underlying activities 4.2 3.0 === === Comprising: - UK tax 3.2 2.6- US tax 1.0 0.4 --- --- 4.2 3.0 === ===In addition, the tax charge of £0.7m (2009: credit of £0.2m) on exceptionalcosts (including amortisation and fair value remeasurements) of £2.1m (2009: £0.6m) consists of a deferred tax charge of £0.4m relating to the UK (2009: £nil) and a deferred tax charge of £0.3m (2009: credit of £0.2m) relating
to theUS. 7. Earnings per share Basic and diluted earnings per share for the three months ended 31 July 2010have been calculated based on the profit for the relevant period and on theweighted average number of ordinary shares in issue during that period(excluding shares held in treasury and by the ESOT over which dividends havebeen waived). Diluted earnings per share is computed using the result for therelevant period and the diluted number of shares (ignoring any potential issueof ordinary shares which would be anti-dilutive). These are calculated asfollows: Three months to 31 July 2010 2009
Profit for the financial period (£m) 9.1
5.4
===
===
Weighted average number of shares (m) - basic 497.7 497.6 ===== ===== - diluted 504.4 497.7 ===== =====Basic earnings per share 1.8p 1.1p ==== ====Diluted earnings per share 1.8p 1.1p ==== ====
7. Earnings per share (continued)
Underlying earnings per share (defined in any period as the earnings beforeexceptional items and amortisation of acquired intangibles for that perioddivided by the weighted average number of shares in issue in that period) andcash tax earnings per share (defined in any period as underlying earningsbefore other deferred taxes divided by the weighted average number of shares inissue in that period) may be reconciled to the basic earnings per share as
follows: Three months to 31 July 2010 2009Basic earnings per share 1.8p 1.1pExceptional items and amortisation of acquired (0.4p)
0.1p
intangibles Tax on exceptional items and amortisation 0.2p
- ---- ---- Underlying earnings per share 1.6p 1.2pOther deferred tax 0.4p 0.4p ---- ----Cash tax earnings per share 2.0p 1.6p ==== ====
8. Property, plant and equipment
2010 2009 Rental Rental equipment Total equipment TotalNet book value £m £m £m £mAt 1 May 969.7 1,101.6 1,140.5 1,294.0Exchange difference (15.8) (17.7) (95.5) (107.1)Reclassifications (0.2) - 0.3 -Additions 45.2 51.3 12.2 15.2Disposals (7.8) (9.3) (4.3) (5.4)Depreciation (42.2) (48.2) (41.4) (47.7) ---- ---- ---- ----At 31 July 948.9 1,077.7 1,011.8 1,149.0 ===== ======= ======= ======= 9. Share capitalOrdinary shares of 10p each: 2010 2009 2010 2009 Number Number £m £mAuthorised 900,000,000 900,000,000 90.0 90.0 =========== =========== ==== ====Allotted, called up and fully 553,325,554 553,325,554 55.3 55.3paid =========== =========== ==== ====
There were no movements in shares authorised or allotted during the period. At31 July 2010, 50m shares were held by the Company and a further 6m shares wereheld by the Company's Employee Share Ownership Trust.
10. Notes to the cash flow statement
Three months to 31 July 2010 2009 £m £ma. Cash flow from operating activities Operating profit before exceptional items and amortisation: 30.2 23.9 Depreciation 48.2 47.7 ---- ---- EBITDA before exceptional items 78.4 71.6 Profit)/loss on disposal of rental equipment (0.3) 0.7
Profit on disposal of other property,plant and equipment (0.6) (0.1) Increase in inventories
(0.5) (0.1)Increase in trade and other receivables (20.2) (2.2) Increase in trade and other payables 0.3 4.4Exchange differences (0.1) 0.2Other non-cash movements 0.3 0.2 --- ---Cash generated from operations before exceptional items and 57.3 74.7changes in rental equipment ==== ==== Three months to 31 July 2010 2009 £m £m
b. Reconciliation to net debt Decrease/(increase) in cash in the period 0.2
(0.8)
Decrease in debt through cash flow (6.2)
(55.7)
--- ---- Change in net debt from cash flows (6.0) (56.5)Exchange differences (19.8) (107.6) Non-cash movements:
- deferred costs of debt raising 1.4
0.7
- capital element of new finance leases 0.9
-
---
---
Reduction in net debt in the period (23.5) (163.4)Opening net debt 829.0 1,035.9 ----- ------- Closing net debt 805.5 872.5 ===== ===== c. Analysis of net debt 1 May Exchange Cash Non-cash 31 July 2010 movement flow movements 2010 £m £m £m £m £mCash (54.8) - 0.2 - (54.6)Debt due within 1year 3.1 (0.1) (1.4) 0.7 2.3Debt due after 1 year 880.7 (19.7) (4.8) 1.6 857.8 ----- ---- --- --- -----Total net debt 829.0 (19.8) (6.0) 2.3 805.5 ===== ==== === === =====
Details of the Group's debt are given in the Review of Balance Sheet and Cashflow accompanying these interim financial statements.
11. Contingent liabilities and contingent assets
There have been no significant changes in contingent liabilities from those reported at 30 April 2010.
REVIEW OF BALANCE SHEET AND CASH FLOW
Balance sheet
Fixed assets
Capital expenditure in the quarter was £51.3m (2009: £15.2m) with £45.2minvested in the rental fleet (2009: £12.2m). Expenditure on rental equipmentwas again entirely for replacement and comprised 88% of total capitalexpenditure with the balance relating to the delivery vehicle fleet, propertyimprovements and to computer equipment. Capital expenditure by division was
asfollows: 2010 2009Sunbelt in $m 62.4 17.0 ==== ====Sunbelt in £m 39.8 10.3A-Plant 5.4 1.9 --- ---Total rental equipment 45.2 12.2
Delivery vehicles, property improvements & computers 6.1 3.0
---- --- Total additions 51.3 15.2 ==== ==== The average age of the Group's serialised rental equipment, which constitutesthe substantial majority of our fleet, at 31 July 2010 was 44 months (2009: 37months) on a net book value basis. Sunbelt's fleet had an average age of 46months (2009: 40 months) comprising 47 months for aerial work platforms whichhave a longer life and 44 months for the remainder of its fleet while A-Plant'sfleet had an average age of 38 months (2009: 29 months). Rental fleet at original cost LTM LTM 31 July 2010 30 April 2010 LTM LTM rental dollar physical average revenue utilisation utilisationSunbelt in $m 2,117 2,094 2,118 992 47% 65% ===== ===== ===== === === ===Sunbelt in £m 1,351 1,368 1,352 665 47% 65%A-Plant 327 321 321 150 47% 69% --- --- --- --- === === 1,678 1,689 1,673 815 ===== ===== ===== ===
Dollar utilisation is defined as rental revenue divided by average fleet atoriginal (or "first") cost and, measured over the last twelve months to 31 July2010, was 47% at both Sunbelt and A-Plant. Physical utilisation is time-basedutilisation, which is calculated as the daily average of the original cost ofequipment on rent as a percentage of the total value of equipment in the fleetat the measurement date. Measured over the last twelve months to 31 July 2010,average physical utilisation was 65% in Sunbelt (2009: 66%) and 69% at A-Plant(2009: 67%). At Sunbelt, physical utilisation is measured for equipment with anoriginal cost in excess of £7,500 which comprised approximately 90% of itsfleet at 31 July 2010.
Trade receivables
Receivable days at 31 July were 47 days (2009: 48 days). The bad debt chargefor the quarter ended 31 July 2010 as a percentage of total turnover was 1.2%(2009: 1.1%). Trade receivables at 31 July 2010 of £127.2m (2009: £117.1m) arestated net of allowances for bad debts and credit notes of £16.3m (2009: £16.6m) with the allowance representing 11.3% (2009: 12.4%) of gross receivables.
Trade and other payables
Group payable days were 54 days in 2010 (2009: 47 days) with capital expenditure-related payables, which have longer payment terms, totalling £28.6m(2009: £4.9m). Payment periods for purchases other than rental equipment varybetween 7 and 45 days and for rental equipment between 30 and 120 days.Cash flow and net debt Three months to LTM to Year to 31 July 31 July 30 April 2010 2009 2010 2010 £m £m £m £mEBITDA before exceptional items 78.4 71.6 261.9
255.1
==== ==== =====
=====
Cash inflow from operations before exceptional items and changes in rental equipment 57.3 74.7 248.2 265.6 Cash conversion ratio* 73.1% 104.4% 94.8%
104.1%
Maintenance rental capital paid (45.7) (16.4) (65.4)
(36.1)
Payments for non-rental capital (5.4) (2.7) (9.4)
(6.7)
expenditure Rental equipment disposal proceeds 7.9 5.9 28.8
26.8
Other property, plant and equipment 2.0 0.8 5.2
4.0disposal proceeds Tax (paid)/received (net) (1.3) (0.5) (0.5) 0.3Net financing costs paid (7.5) (2.6) (59.6) (54.7) ---- ---- ----- ---- Cash flow before payment of exceptional 7.3 59.2 147.3 199.2costs Exceptional costs paid (1.3) (2.7) (6.8) (8.2) ---- ---- ---- ---- Total cash generated from operations 6.0 56.5 140.5
191.0
Business disposals/(acquisitions) - - (0.7)
(0.7) --- ---- ----- ----- Total cash generated 6.0 56.5 139.8 190.3Dividends paid - - (12.8) (12.8) --- ---- ----- -----Decrease in net debt 6.0 56.5 127.0 177.5 === ==== ===== ===== * Cash inflow from operations before exceptional items and changes in rentalequipment as a percentage of EBITDA before exceptional items.Cash inflow from operations before exceptional items and changes in rentalequipment decreased 23.3% to £57.3m. The cash conversion ratio was 73.1% (2009:104.4%) reflecting a £20m increase in trade and other receivables since Aprilas quarterly revenues regained more usual seasonal patterns.Total payments for capital expenditure (rental equipment and other PPE) werebroadly in line with capital expenditure delivered into the fleet whilstdisposal proceeds received totalled £9.9m. Net cash capital expenditure wastherefore £41.2m in the quarter (2009: £12.4m).
Financing costs paid differ from the accounting charge in the income statement due to the timing of interest payments in the quarter and non-cash interest charges.
After exceptional costs paid of £1.3m, representing mostly vacant propertycosts all of which were provided for at 30 April 2010, the Group generated £6.0m of net cash inflow in the quarter which was applied to reduce outstandingdebt.Net debt 31 July 30 April 2010 2009 2010 £m £m £m
First priority senior secured bank debt 355.5 396.5
367.5
Finance lease obligations 3.1 6.1
3.5
8.625% second priority senior secured notes, due 2015 156.6 147.3 160.2 9% second priority senior secured notes, due 2016 344.9 325.0 352.6 ----- ----- ----- 860.1 874.9 883.8Cash and cash equivalents (54.6) (2.4) (54.8) ---- ---- ---- Total net debt 805.5 872.5 829.0 ===== ===== =====Net debt at 31 July 2010 was £805.5m with the reduction since April reflectingthe cash generation set out above and currency fluctuations. The Group'sunderlying EBITDA for the twelve months ended 31 July 2010 was £261.9m and theratio of net debt to underlying EBITDA was therefore 3.1 times at 31 July 2010(30 April 2010: 3.2 times).Under the terms of our extended asset-based senior bank facility, $1.3bn iscommitted until November 2013 whilst an additional $0.5bn continues to beavailable until August 2011. Our debt facilities remain committed for the longterm, with an average of 4.8 years remaining at 31 July 2010. The weightedaverage interest cost of these facilities (including non-cash amortisation ofdeferred debt raising costs) is approximately 7.5%. Financial performancecovenants under the two senior secured note issues are only measured at thetime new debt is raised. There are two financial performance covenants underthe asset-based first priority senior bank facility:
* funded debt to LTM EBITDA before exceptional items not to exceed 4.0 times; and * a fixed charge ratio (comprising LTM EBITDA before exceptional items less
LTM net capital expenditure paid in cash over the sum of scheduled debt
repayments plus cash interest, cash tax payments and dividends paid in the
last twelve months) which must be equal to or greater than 1.1 times.
These covenants do not, however, apply when excess availability (the differencebetween the borrowing base and net facility utilisation) exceeds $150m. At 31July 2010 excess availability under the bank facility was $584m ($537m at 30April 2010) making it unlikely that covenants will be measured. Additionally,although the senior debt covenants were not required to be measured at 31 July2010, the Group was in compliance with both of them at that date. Accordingly,the Board continues to believe that it is appropriate to prepare the accountson a going concern basis.
Principal risks and uncertainties
Risks and uncertainties in achieving the Group's objectives for the remainderof the financial year, together with assumptions, estimates, judgements andcritical accounting policies used in preparing financial information remainunchanged from those detailed in the 2010 Annual Report and Accounts on pages23 to 31. Our business is subject to significant fluctuations in performancefrom quarter to quarter as a result of seasonal effects. Commercialconstruction activity tends to increase in the summer and during extendedperiods of mild weather and to decrease in the winter and during extendedperiods of inclement weather. Furthermore, due to the incidence of publicholidays in the US and the UK, there are more billing days in the first half ofour financial year than the second half leading to our revenue normally beinghigher in the first half. On a quarterly basis, the second quarter is typicallyour strongest quarter, followed by the first and then the third and fourthquarters.Fluctuations in the value of the US dollar with respect to the pound sterlinghave had, and may continue to have, a significant impact on our financialcondition and results of operations as reported in pounds due to the majorityof our assets, liabilities, revenues and costs being denominated in US dollars.All our debt was denominated in US dollars at 31 July 2010 and representedapproximately 80% of the value of dollar-denominated net assets (other thandebt) providing a partial, but substantial, hedge against currencyfluctuations. The dollar interest payable on this debt also limits the impactof changes in the dollar exchange rate on our pre-tax profits and earnings.Based on the current currency mix of our profits and on dollar debt levels,interest and exchange rates at 31 July 2010, a 1% change in the US dollarexchange rate would impact pre-tax profit by £40,000. In addition, the currenttrading and outlook section of this interim statement provides a commentary onmarket and economic conditions for the remainder of the financial year.
OPERATING STATISTICS
Profit centre numbers Staff numbers 31 July 30 April 31 July 30 April 2010 2009 2010 2010 2009 2010Sunbelt Rentals 344 398 393 5,328 5,818 5,334A-Plant 103 115 105 1,849 1,933 1,872Corporate office - - - 10 12 12 --- --- --- -- -- --Group 447 513 498 7,187 7,763 7,218 === === === ===== ===== =====
Sunbelt's store numbers include 40 Sunbelt at Lowes stores at 31 July 2010 (90at 31 July 2009 and 89 at 30 April 2010). By agreement with Lowes 50underperforming Sunbelt at Lowes stores were closed in July 2010 and at thesame time Lowes agreed an extension to the lease for the remaining 40 storesuntil October 2012. The revenue and contribution from the closed stores in the12 months ended 31 July 2010 was not significant to Sunbelt's overallperformance.
vendorRelated Shares:
Ashtead Group