4th Sep 2007 07:00
Ashtead Group plc Unaudited results for the first quarter ended 31 July 2007 Financial summary ----------------- Growth ------ First quarter ------------- At actual At constant 2007 2006 rates rates[1] ---- ---- ----- -------- ‚£m ‚£m % % Revenue 252.5 175.7 +44% +52%Underlying operating profit [1] 49.7 35.0 +42%
+52%
Underlying profit before taxation [1] 30.7 24.3 +26% +35%Underlying earnings per share1 - basic 3.6p 3.8p -6% nil% - cash tax 4.9p 4.3p +12% +19%Profit before taxation 30.1 8.6 n/a n/aBasic earnings per share 3.2p 0.2p n/a n/a
[1] See explanatory notes below
Highlights
* Continued strong profit growth in all three divisions with underlying
operating profit up 52% at constant exchange rates.
* Underlying profit before tax grew 35% whilst underlying basic earnings per
share (reflecting the additional equity issued to fund last year's NationsRent acquisition) matched last year, measured in each case at constant exchange rates.
* Sunbelt's Q1 underlying operating profit grew by 25% on a pro forma basis1
to $84.8m with pro forma operating margins up from 16.7% to 21.8%.
* A-Plant continues to deliver good growth with pro forma operating profits
up 45% to ‚£7.0m (2006 - ‚£4.8m).
Ashtead's chief executive, Geoff Drabble, commented:
"We are pleased to report a strong performance in the first quarter as wecontinue to benefit from good market conditions in all three divisions. InSunbelt we again delivered significant growth in pro forma margins and profitsreflecting the integration cost savings and the progress made in driving growthin dollar utilisation1 at the acquired NationsRent stores.
A-Plant continues to progress based upon good revenue growth and the initial benefits from the profit centre rationalisation undertaken in the fourth quarter of last year.
We were also pleased to have delivered sufficient earnings improvement in thecombined business to bring underlying earnings per share, calculated on a muchlarger equity base, to last year's level in only the third full quarterfollowing the acquisition.
Despite the recent uncertainty in global equity and debt markets, the key economic indicators for our primary markets, US and UK non-residential construction, continue to indicate a favourable growth outlook. Current physical utilisation is also strong in both markets.
Looking forward, given the ongoing integration benefits at Sunbelt and thecontinuing improvement in pro forma dollar utilisation as well as the strongperformance in A-Plant and Ashtead Technology, we expect to report further goodprogress."Contacts:---------Geoff Drabble Chief executive ) 020 7726 9700 Ian Robson Finance director ) Brian Hudspith Maitland 020 7379 5151 Explanatory notes-----------------
a. Underlying profit and earnings per share are stated before exceptional
items, amortisation of acquired intangibles and non-cash fair value
remeasurements of embedded derivatives in long-term debt. The definition of
exceptional items is set out in note 4. The reconciliation of underlying
earnings per share and underlying cash tax earnings per share to basic
earnings per share is shown in note 7 to the attached financial
information.
b. Pro forma basis includes the NationsRent and Lux Traffic acquisitions
throughout both periods. For this purpose the pre-acquisition results of
NationsRent have been derived from its reported financial performance under
US GAAP adjusted to exclude the large profits on disposal of rental
equipment it reported following the application of US "fresh start"
accounting principles and to include an estimated depreciation charge under
Ashtead's depreciation policies and methods.
c. Constant rates assumes that US dollar amounts for both periods were
consolidated and translated at the average exchange rate applied in the
period ended 31 July 2007.
d. Dollar utilisation is defined as last twelve months rental and rental
related revenues divided by average original or "first" cost of rental
equipment. Overview--------
The quarter saw continuing emphasis on driving the operational performance of all three divisions.
The 25% improvement in Sunbelt's pro forma first quarter profits is very encouraging. Sunbelt's fleet has now been significantly reconfigured and was on average 3% smaller than the combined fleet in the corresponding period last year. We were therefore pleased to have maintained Sunbelt's rental revenue whilst focussing principally on margin improvement and raising the physical utilisation of its fleet.
At 29 August 2007, Sunbelt's physical utilisation was 71% compared to 72% forthe Sunbelt fleet alone at the same date last year. With this current strongphysical utilisation, we are now again investing to grow Sunbelt's fleet whichwe expect to allow us to drive rental revenue growth and continued marginimprovement in future periods.
A-Plant's programme to enhance its profits and return on investment has continued and it has once again delivered strong revenue and profit growth. Its focus on growing revenue by providing a range of plant and tools to our contractor customer base together with the restructured profit centre infrastructure continues to improve margins.
We have also continued to invest in Ashtead Technology to support positive market conditions contributing to its good revenue and profit growth.
A strong first quarter----------------------
Good progress continued in the quarter to July 2007, sustaining the momentum established in the second half of last year.
* Revenue for the quarter was ‚£252.5m up 43.7% on last year.
* Underlying operating profit for the quarter grew 42.0% on the prior year at
actual exchange rates to ‚£49.7m whilst underlying profit before tax grew
26.3% to ‚£30.7m (2006 - ‚£24.3m).
* Profit before tax, which is stated after amortisation of acquired
intangibles was ‚£30.1m. There were no exceptional items in the quarter in
comparison with the prior year position where the pre-tax profit of ‚£8.6m
was stated after ‚£15.7m of exceptional items.
* Basic earnings per share for the quarter were 3.2p (2006 - 0.2p) whilst
underlying earnings per share were 3.6p (2006 - 3.8p). On a cash tax basis
underlying earnings per share were 4.9p (2006 - 4.3p).
* Capital expenditure in the first quarter was ‚£124.2m (2006 - ‚£110.5m).
* At 31 July 2007, net debt was ‚£894.4m (30 April 2007 - ‚£915.9m) whilst the
ratio of net debt to pro forma LTM EBITDA was 2.6 times (30 April 2007 -
2.7 times). Availability under the $1.75bn asset based loan facility was
$671m ($589m at 30 April 2007).
* For the twelve months ended 31 July 2007, Group pro forma revenues were ‚£
1,005.3m, pro forma underlying EBITDA was ‚£348.7m and pro forma underlying
operating profit was ‚£169.7m. Approximately $37m of the $48m estimated
annual NationsRent integration savings are included in the pro forma LTM
results. The remaining $11m will be realised in Q2 (principally) and Q3 of
the current year. The pro forma LTM EBITDA and operating profit margins are
34.7% and 16.9% respectively.
Sunbelt------- 2007 2006 Growth ---- ---- ------ $m $m Revenue ------- As reported 388.5 234.0 +66%NationsRent - 171.3 ----- -----Pro forma combined 388.5 405.3 -4% ===== ===== Underlying operating profit -------------------------- As reported 84.8 57.1 +49%NationsRent - 10.7 ----- ----- Pro forma combined 84.8 67.8 +25% ===== ===== Pro forma operating profit margin 21.8% 16.7% ===== =====
Sunbelt's first quarter performance was in line with our expectations as we continued to realise the benefits of the NationsRent acquisition with the actions taken to lower costs and increase dollar utilisation driving improved profitability.
As planned, Sunbelt's revenue growth in the quarter was limited by both ourcurtailment of low margin sales of new equipment previously undertaken byNationsRent and by the reconfiguration of the acquired fleet towards higherreturning product areas which tend to be less seasonal and cyclical. Excludingsales revenues, first quarter rental and rental related revenues grew 0.2% to$362.0m.Pro forma dollar utilisation, which is measured on a rolling twelve monthsbasis to eliminate seasonal effects, was 63% at 31 July compared to 62% at 30April 2007. Pro forma fleet size was on average 3% smaller in the first quarterthan in the equivalent period last year as we focused on raising the timeutilisation of the acquired fleet. First quarter time utilisation averaged 69%close to the 71% achieved by Sunbelt alone a year ago.A-Plant------- 2007 2006 Growth ---- ---- ------ ‚£m ‚£m Revenue ------- As reported 52.1 43.9 +19%Lux Traffic - 5.4 ----- ---- Pro forma combined 52.1 49.3 +6% ===== ==== Underlying operating profit --------------------------- As reported 7.0 4.5 +56%Lux Traffic - 0.3 ----- ---- Pro forma combined 7.0 4.8 +45% ===== ==== Pro forma operating profit margin 13.5% 9.8% ===== ==== A-Plant's pro forma revenue growth of 6% was again amongst the highest in itspeer group. This growth reflected a 4% increase in average fleet size, a 2%increase in utilisation to a record 72% for the quarter (2006 - 71%) andbroadly unchanged rental rates. That this revenue growth was achieved in theperiod immediately following the store rationalisation programme at the end oflast year is a testament to the way A-Plant managed that programme and thestrength of the market.
Consequently the good revenue increase drove first quarter pro forma operating margins to 13.5% (2006 - 9.8%) and produced growth of 45% in pro forma operating profits to ‚£7.0m (2006 - ‚£4.8m).
Ashtead Technology------------------ 2007 2006 Growth ---- ---- ------ ‚£m ‚£m Revenue 6.3 5.5 +15% ===== ===== Operating profit 2.3 1.3 +79% ===== ===== Operating profit margin 37.1% 23.7% ===== ===== Both Ashtead Technology's offshore and onshore markets remain good and we havecontinued to invest in order to support these markets. Whilst prior yearcomparatives now also reflect good markets and quarterly are becoming morechallenging, Ashtead Technology continues to deliver good revenue and profitgrowth.Returns-------Return on investment (underlying operating profit divided by net assetsemployed before debt, deferred tax and certain other non cash items), which ismeasured on a rolling twelve month basis to eliminate seasonal effects was12.9% for the year ended 31 July 2007. RoI for Sunbelt was 13.7% whilstA-Plant's RoI was 9.6% and continues to improve. After tax return on equity forthe twelve months to 31 July was 14.9%.Current trading and outlook---------------------------
The first quarter of the fiscal year developed in line with our expectations with good profits growth in all three divisions.
Despite the recent uncertainty in global equity and debt markets, the key economic indicators for our primary markets, US and UK non-residential construction, continue to indicate a favourable growth outlook. Current physical utilisation is also strong in both markets.
Looking forward, given the ongoing integration benefits at Sunbelt and thecontinuing improvement in pro forma dollar utilisation as well as the strongperformance in A-Plant and Ashtead Technology, we expect to report further goodprogress. - o0o - Geoff Drabble and Ian Robson will host a conference call for equity analysts at9.30am on Tuesday 4 September and a further conference call for bondholders at3pm (10am EST) on the same day. The analysts' call will be webcast live via theCompany's website at www.ashtead-group.com and there will also be a replayavailable from shortly after the call concludes. A copy of the slidepresentation used for the call will also be available on the Company's website.Analysts and bondholders have already been invited to participate in the callsbut anyone not having received dial-in details should contact the Company's PRadvisers, Maitland (Jane Franklin) at 020 7379 5151.
CONSOLIDATED INCOME STATEMENT FOR THE THREE MONTHS ENDED 31 JULY 2007
2007 2006 ---- ---- Before Before exceptionals Exceptionals exceptionals Exceptionals & & amortisation & amortisation & fair
value fair value
of intangibles of intangibles Total
remeasurements+ remeasurements+ Total
-------------- -------------- -----
--------------- --------------- -----
‚£m ‚£m ‚£m ‚£m ‚£m ‚£m Revenue 252.5 - 252.5 175.7 - 175.7Staff costs (78.0) - (78.0) (53.3) - (53.3)Other operating costs (84.7) - (84.7) (59.6) (0.3) (59.9)Other income 4.2 - 4.2 2.2 - 2.2
-----------------------------------------------------------------------------------
EBITDA* 94.0 - 94.0 65.0 (0.3) 64.7Depreciation (44.3) - (44.3) (30.0) - (30.0)Amortisation of intangibles - (0.6) (0.6) - - -
-----------------------------------------------------------------------------------
Operating profit 49.7 (0.6) 49.1 35.0 (0.3) 34.7Investment income 1.1 - 1.1 1.0 - 1.0Interest expense (20.1) - (20.1) (11.7) (15.4) (27.1)
-----------------------------------------------------------------------------------
Net financing costs (19.0) - (19.0) (10.7) (15.4) (26.1)
-----------------------------------------------------------------------------------
Profit on ordinary activities before taxation 30.7 (0.6) 30.1 24.3 (15.7) 8.6Taxation: - current (3.8) - (3.8) (5.4) - (5.4)- deferred (7.1) (1.6) (8.7) (2.3) 0.1 (2.2)
-----------------------------------------------------------------------------------
(10.9) (1.6) (12.5) (7.7) 0.1 (7.6) Profit attributable to equity shareholders 19.8 (2.2) 17.6 16.6 (15.6) 1.0
===================================================================================
Basic earnings per share 3.6p (0.4p) 3.2p 3.8p (3.6p) 0.2p
===================================================================================
Diluted earnings per share 3.6p (0.4p) 3.2p 3.7p (3.5p) 0.2p
===================================================================================
* EBITDA is presented here as an additional performance measure as it is commonly used by investors and lenders.
+ Fair value remeasurements relate to embedded derivatives in long-term debt.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
2007 2006 ---- ---- ‚£m ‚£m Net profit for the period 17.6 1.0Foreign currency translation differences (2.1)
(4.1)
------------- Total recognised income and expense for the period 15.5
(3.1)
=============
CONSOLIDATED MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
2007 2006 ---- ---- ‚£m ‚£m Total recognised income and expense for the period 15.5
(3.1)
Issue of ordinary shares, net of expenses -
0.6
Credit in respect of share based payments -
0.3
Own shares vested/(acquired) by ESOT 0.2
(2.5)
-------------- Net increase in equity shareholders' funds 15.7
4.7
Opening equity shareholders' funds 396.7
258.3
--------------
Closing equity shareholders' funds 412.4
253.6
==============
CONSOLIDATED BALANCE SHEET AT 31 JULY 2007
As at 31 July As at 30 April 2007 2006 2007 ---- ---- ---- ‚£m ‚£m ‚£mCurrent assets Inventories 23.7 14.0 24.2Trade and other receivables 169.3 116.6 163.7Current tax asset - - 2.0Assets held for sale 5.5 - 10.3Cash and cash equivalents 1.3 1.1 1.1
---------------------------------
199.8 131.7
201.3
---------------------------------
Non-current assets Property, plant and equipment - rental equipment 966.4 615.2 920.6- other assets 129.5 90.7 127.4
---------------------------------
1,095.9 705.9
1,048.0
Intangible assets - brand names and other acquired intangibles 8.8 - 9.7 - goodwill 285.2 145.1 289.6Deferred tax asset 34.9 3.3 41.7Defined benefit pension fund surplus 5.4 1.9
5.2
---------------------------------
1,430.2 856.2
1,394.2
---------------------------------
Total assets 1,630.0 987.9
1,595.5
=================================
Current liabilities Trade and other payables 205.5 143.1 166.8Current tax liabilities 2.2 4.8 0.7Debt due in less than one year 8.4 10.1
9.0
Provisions 13.7 6.7
12.7
---------------------------------
229.8 164.7
189.2
---------------------------------
Non-current liabilities Debt due in more than one year 887.3 490.3 908.0Provisions 17.8 12.2 19.6Deferred tax liabilities 82.7 67.1 82.0
---------------------------------
987.8 569.6
1,009.6
---------------------------------
Total liabilities 1,217.6 734.3
1,198.8
---------------------------------
Equity shareholders' funds Share capital 56.0 40.6 56.0Share premium account 3.3 3.6 3.3Non-distributable reserve 90.7 90.7 90.7
Own shares held in treasury through the ESOT (8.5) (6.7)
(8.7)
Cumulative foreign exchange translation differences (32.3) (21.3)
(30.2)
Distributable reserves 303.2 146.7
285.6
---------------------------------
Total equity shareholders' funds 412.4 253.6
396.7
---------------------------------
Total liabilities and equity shareholders' funds 1,630.0 987.9
1,595.5
=================================
CONSOLIDATED CASH FLOW STATEMENT FOR THE THREE MONTHS ENDED 31 JULY 2007
2007 2006 ---- ---- ‚£m ‚£mCash flows from operating activities
Cash generated from operations before exceptional items 85.3 57.7 Exceptional items paid
(5.4)
(0.3)
Cash generated from operations 79.9 57.4Financing costs paid (13.0) (9.4)Tax paid (0.3) (3.7) ------------------ Net cash from operating activities 66.6
44.3
------------------
Cash flows from investing activities Payments for property, plant and equipment (88.6)
(70.3)
Proceeds on sale of property, plant and equipment 30.4
13.7
------------------
Net cash used in investing activities (58.2)
(56.6)
------------------
Cash flows from financing activities Drawdown of loans 14.3 31.7Redemption of loans (20.1) (15.0)Capital element of finance lease payments (1.9)
(2.4)
Purchase of own shares by the ESOT (0.5)
(2.5)
Proceeds from issue of ordinary shares -
0.6
------------------
Net cash (used in)/generated from financing activities (8.2) 12.4
------------------
Increase in cash and cash equivalents 0.2
0.1
Opening cash and cash equivalents 1.1
1.0
------------------
Closing cash and cash equivalents 1.3
1.1
------------------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
The financial statements for the three months ended 31 July 2007 were approvedby the directors on 3 September 2007. They have been prepared in accordancewith relevant International Financial Reporting Standards (`IFRS') and theaccounting policies set out in the Group's Annual Report and Accounts for theyear ended 30 April 2007. They are unaudited and do not constitute statutoryaccounts within the meaning of Section 240 of the Companies Act 1985.The statutory accounts for the year ended 30 April 2007 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 contain a statement under section 237 of the CompaniesAct 1985.
The exchange rates used in respect of the US dollar are:
2007
2006
----
----
Average for the three months ended 31 July 2.00 1.85At 31 July 2.03 1.872. Segmental analysis Operating profit Exceptional before exceptionals items & Operating Revenue & amortisation amortisation profit ------- -------------- ------------ ------ ‚£m ‚£m ‚£m ‚£m2007 ---- Sunbelt 194.1 42.4 (0.5) 41.9A-Plant 52.1 7.0 (0.1) 6.9Ashtead Technology 6.3 2.3 - 2.3Corporate items - (2.0) - (2.0)
--------------------------------------------------------
252.5 49.7 (0.6)
49.1
========================================================
2006 ---- Sunbelt 126.3 30.8 (0.3) 30.5A-Plant 43.9 4.5 - 4.5Ashtead Technology 5.5 1.3 - 1.3Corporate items - (1.6) - (1.6)
--------------------------------------------------------
175.7 35.0 (0.3)
34.7
========================================================
3. Operating costs 2007 2006 ---- ---- Operating Operating profit before Exceptional profit before Exceptional exceptionals & items & Operating
exceptionals & items & Operating
amortisation amortisation profit
amortisation amortisation profit
------------ ------------ ------ ------------ ------------ ------ ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m Staff costs: Salaries 70.7 - 70.7 48.4 - 48.4Social security costs 5.9 - 5.9 3.9 - 3.9Other pension costs 1.4 - 1.4 1.0 - 1.0
-----------------------------------------------------------------------------
78.0 - 78.0 53.3 - 53.3
-----------------------------------------------------------------------------
Other operating costs: Vehicle costs 18.1 - 18.1 13.9 - 13.9Spares, consumables & external repairs 14.8 - 14.8 11.0 - 11.0Facility costs 12.5 - 12.5 7.9 - 7.9Other external charges 39.3 - 39.3 26.8 0.3 27.1
-----------------------------------------------------------------------------
84.7 - 84.7 59.6 0.3 59.9
-----------------------------------------------------------------------------
Other income: Profit on disposal of fixed assets (4.2) - (4.2) (2.2) - (2.2)
-----------------------------------------------------------------------------
Depreciation and amortisation: Depreciation 44.3 - 44.3 30.0 - 30.0Amortisation of acquired intangibles - 0.6 0.6 - - -
-----------------------------------------------------------------------------
44.3 0.6 44.9 30.0 - 30.0
-----------------------------------------------------------------------------
202.8 0.6 203.4 140.7 0.3 141.0
=============================================================================
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. Non-cash fair value remeasurements relate toembedded derivatives within long-term debt instruments. The Group believesthese items should be disclosed separately within the consolidated incomestatement to assist in the understanding of the financial performance of theGroup. Exceptional items, amortisation and fair value remeasurements areexcluded from underlying profit and earnings per share and are set out below: Three months to 31 July ----------------------- 2007 2006 ---- ---- ‚£m ‚£m Acquisition integration costs - 0.3Taxation 1.8 -Total exceptional items 1.8 0.3 -------------
Amortisation of acquired intangibles (net of ‚£0.2m tax credit) 0.4
-
Fair value remeasurements of embedded derivatives - 15.4 ------------- 2.2 15.7 =============
The exceptional tax charge relates to the reduction in the UK deferred tax asset as a result of the recently enacted reduction in the statutory rate of UK corporation tax from 30% to 28%.
These items are presented in the income statement as follows:
Three months to 31 July ----------------------- 2007 2006 ---- ---- ‚£m ‚£m Other operating costs - 0.3Amortisation of acquired intangibles 0.6
-
-------------
Charged in arriving at operating profit 0.6 0.3Net financing costs - 15.4 -------------Charged in arriving at profit before tax 0.6 15.7Taxation 1.6 - ------------- 2.2 15.7 =============5. Financing costs Three months to 31 July ----------------------- 2007 2006 ---- ---- ‚£m ‚£mInvestment income: Expected return on assets of defined benefit pension plan 1.1 1.0 --------------Total investment income 1.1 1.0 ==============Interest expense: Bank interest payable 9.3 4.7Interest on second priority senior secured notes 8.9
5.3
Interest payable on finance leases 0.3
0.3
Non-cash unwind of discount on defined benefit pension plan liabilities 0.7
0.7
Non-cash unwind of discount on self insurance provisions 0.3 0.1 Amortisation of deferred costs of debt raising
0.6 0.6 -------------- 20.1 11.7 ==============Fair value remeasurements of embedded derivatives in long-term debt - 15.4 --------------Total interest expense 20.1 27.1 ============== Net financing costs before fair value remeasurements 19.0
10.7
Fair value remeasurements of embedded derivatives in long-term debt - 15.4 --------------Net financing costs 19.0 26.1 ==============6. Taxation The tax charge for the period has been computed using an estimated effectiverate for the year of 40% in the US and 31% in the UK applied to the profitbefore tax and amortisation of acquired intangibles. The blended effective ratefor the Group as a whole is 35%. In addition, an exceptional tax charge of ‚£1.8m has been recognised in the quarter to reflect the reduction in the UKdeferred tax asset which arises as a result of the reduction in the UKstatutory corporation tax rate from 30% to 28% effective 1 April 2008 which wasenacted in the 2007 Finance Act.The tax charge of ‚£12.5m comprises a charge for current tax of ‚£3.8m and acharge for deferred tax of ‚£8.7m of which ‚£1.8m relates to the exceptional itemdescribed above. All of the charge relates to current year items and comprises‚£6.5m relating to the US, ‚£6.0m to the UK and ‚£nil to other jurisdictions.7. Earnings per share
Basic and diluted earnings per share for the three months ended 31 July 2007 have been calculated based on the profit for the relevant period and on the weighted average number of ordinary shares in issue during that period (excluding shares held by the ESOT over which dividends have been waived). Diluted earnings per share are computed using the result for the relevant period and the diluted number of shares (ignoring any potential issue of ordinary shares which would be anti-dilutive). These are calculated as follows:
Three months to 31 July ----------------------- 2007 2006 ----
----
Profit for the financial period (‚£m) 17.6
1.0
===============
Weighted average number of shares (m) - basic 551.7 434.4 =============== - diluted 557.6 442.6 ===============Basic earnings per share 3.2p 0.2p ===============Diluted earnings per share 3.2p 0.2p ===============The weighted average number of shares shown as being in issue in the prior yearhas been adjusted to take account of the bonus element of the rights issue on29 August 2006.Underlying earnings per share (defined in any period as the earnings beforeexceptional items, amortisation of acquired intangibles and fair valueremeasurements for that period divided by the weighted average number of sharesin issue in that period) and cash tax earnings per share (defined in any periodas underlying earnings before other deferred taxes divided by the weightedaverage number of shares in issue in that period) may be reconciled to thebasic earnings per share as follows: Three months to 31 July ----------------------- 2007 2006 ---- ----Basic earnings per share 3.2p 0.2p
Exceptional items, intangible amortisation & fair value remeasurements
0.4p
3.6p
---- Underlying earnings per share 3.6p 3.8pOther deferred tax 1.3p 0.5p -------------Cash tax earnings per share 4.9p 4.3p =============
8. Property, plant and equipment
2007 2006 ---- ---- Rental Rental equipment Total equipment Total --------- ----- --------- -----Net book value ‚£m ‚£m ‚£m ‚£mAt 1 May 920.6 1,048.0 559.9 646.7Exchange difference (11.1) (12.4) (10.5) (11.8)Additions 113.8 124.2 100.4 110.5Disposals (18.6) (19.6) (8.6) (9.5)Depreciation (38.3) (44.3) (26.0) (30.0)
------------------------------------------
At 31 July 966.4 1,095.9 615.2
705.9
==========================================
9. Called up share capital Ordinary shares of 10p each 2007 2006 2007 2006 ---- ---- ---- ---- Number Number ‚£m ‚£m Authorised 900,000,000 900,000,000 90.0 90.0
================================================
Allotted, called up and fully paid 559,973,028 405,776,875 56.0 40.6
================================================
Since 30 April 2007, 74,680 shares have been issued at an average price of 30.2p per share under the Company's share option plans raising ‚£22,535.
10. Statement of changes in shareholders' equity
Own Cumulative shares foreign Non held in exchange Share Share distributable treasury translation Distributable 31 Jul capital premium reserves (ESOT) differences reserves Total 2007 ------- ------- -------- ------ ----------- -------- ----- ---- ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m Total recognised income and expense - - - - (2.1) 17.6 15.5 (3.1)Shares issued - - - - - - - 0.6Share based payments - - - - - - - 0.3Vesting of share awards - - - 0.7 - - 0.7 -Own shares purchased - - - (0.5) - - (0.5) (2.5)
-------------------------------------------------------------------------------------------
Net changes in shareholders' equity - - - 0.2 (2.1) 17.6 15.7 (4.7)Opening shareholders' equity 56.0 3.3 90.7 (8.7) (30.2) 285.6 396.7 258.3
-------------------------------------------------------------------------------------------
Closing shareholders' equity 56.0 3.3 90.7 (8.5)
(32.3) 303.2 412.4 253.6
-------------------------------------------------------------------------------------------
11. Notes to the cash flow statement
Three months to 31 July ----------------------- 2007 2006 ---- ---- ‚£m ‚£ma) Cash flow from operating activities ----------------------------------- Operating profit 49.7 34.7Depreciation and amortisation 44.3 30.0Exceptional items - 0.3 --------------EBITDA before exceptional items 94.0
65.0
Profit on disposal of property, plant and equipment (4.2)
(2.2)
Decrease/(increase) in inventories 0.1
(1.6)
Increase in trade and other receivables (9.1)
(9.9)
Increase in trade and other payables 3.6 6.0Exchange differences 0.2 0.1Other non-cash movements 0.7 0.3 -------------Cash generated from operations before exceptional items 85.3 57.7 ============= b) Reconciliation to net debt -------------------------- Increase in cash in the period (0.2)
(0.1)
(Decrease)/increase in debt through cash flow (7.7)
14.3
--------------
Change in net debt from cash flows (7.9) 14.2Exchange difference (14.2) (10.1)Non-cash movements: - deferred costs of debt raising 0.5
0.6
- capital element of new finance leases 0.1
1.0
--------------
Movement in net debt in the period (21.5) 5.7Opening net debt 915.9 493.6 --------------Closing net debt 894.4 499.3 ==============c. Analysis of net debt -------------------- 1 May Exchange Cash Non-cash 31 July 2007 movement flow movements 2007 ---- -------- ---- --------- ---- ‚£m ‚£m ‚£m ‚£m ‚£m Cash (1.1) - (0.2) - (1.3)Debt due within 1 year 9.0 (0.2) (1.9) 1.5 8.4Debt due after 1 year 908.0 (14.0) (5.8) (0.9) 887.3
----------------------------------------------------
Total net debt 915.9 (14.2) (7.9) 0.6
894.4
====================================================
12. Acquisitions
NationsRent Companies, Inc. ("NationsRent")
On 31 August 2006, Sunbelt acquired the entire issued share capital of NationsRent for a total initial consideration of US$591.5m plus acquisition costs.
As part of the NationsRent acquisition, the Group has also agreed to paydeferred contingent consideration of up to $89m. The amount of the deferredcontingent consideration is linked to the Company's share price performanceover the three years from 1 September 2006 to 31 August 2009. In the event thatthe Company's share price (measured on a five day average basis) rises by morethan 22.2% above the reference price of 204p (as adjusted for the bonus elementof the rights issue), contingent consideration becomes payable at the rate of$5m for every additional 1% rise in the share price up to a maximum of 40%above the reference price. Accordingly, deferred contingent considerationstarts to become payable when the Company's share price reaches 250p with themaximum $89m being payable at 286p. The contingent consideration is payable ona quarterly basis in cash. It is not practicable to estimate reliably theamount of contingent consideration which will become payable and accordingly noprovision has been made.
13. Contingent liabilities and contingent assets
There have been no significant changes in contingent liabilities from thosereported at 30 April 2007. The Group remains subject to periodic legal claimsin the ordinary course of its business. However, the claims outstanding at 31July 2007 are not expected to have a significant impact on the Group'sfinancial position.14. Seasonality Our business is subject to significant fluctuations in performance from quarterto quarter as a result of seasonal effects. Commercial construction activitytends to increase in the summer and during extended periods of mild weather andto decrease in the winter and during extended periods of inclement weather.Furthermore, due to the incidence of public holidays in the US and the UK,there are more billing days in the first half of our financial year than thesecond half leading to our revenues normally being higher in the first half. Ona quarterly basis, the second quarter is typically our strongest quarter,followed by the first and then the third and fourth quarters.Additionally, our equipment is used extensively in the recovery from naturaldisasters such as floods, wind and storm damage (including hurricanes),earthquakes etc. and the incidence of such events can impact the level of ourrevenues.
SEGMENTAL RESULTS AND REVIEW OF BALANCE SHEET AND CASH FLOW
Segmental results
Divisional results before exceptional items and amortisation of acquired intangibles for the three months ended 31 July 2007 are summarised below:
Revenue EBITDA Operating profit ------- ------ ---------------- 2007 2006 2007 2006 2007 2006 ---- ---- ---- ---- ---- ----Sunbelt in $m 388.5 234.0 150.7 93.2 84.8 57.1
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Sunbelt in ‚£m 194.1 126.3 75.3 50.3 42.4 30.8A-Plant 52.1 43.9 17.1 13.9 7.0 4.5Ashtead Technology 6.3 5.5 3.6 2.4 2.3 1.3Group central costs - - (2.0) (1.6) (2.0) (1.6)
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252.5 175.7 94.0 65.0 49.7 35.0 Net financing costs (19.0) (10.7) -------------- Profit before tax, exceptionals and amortisation 30.7 24.3Exceptional items and amortisation (0.6) (15.7) --------------Profit before taxation 30.1 8.6 ============== Revenue increased 43.7% to ‚£252.5m (2006 - ‚£175.7m) in the three months ended31 July 2007. This reflects the first time contribution from NationsRentpartially offset by the limiting effect of the weak dollar which, in thequarter, declined 8.1% from $1.85 = ‚£1 a year ago to $2.00 = ‚£1. Underlyingoperating profit increased 42.0% to ‚£49.7m (2006 - ‚£35.0m). Profit before tax,exceptionals and amortisation increased 26.3% to ‚£30.7m (2006 - ‚£24.3m). Afterexceptional items and amortisation, profit before tax was ‚£30.1m (2006 - ‚£8.6m).
Balance sheet
Capital expenditure in the quarter was ‚£124.2m of which ‚£113.8m was invested inthe rental fleet (2006 - ‚£110.5m in total). Expenditure on rental equipment was91.6% of total capital expenditure with the balance relating to our deliveryvehicle fleet, property improvements and to computer equipment. Capitalexpenditure by division was as follows: 31 July 2007 2006 ------------ ---- Growth Maintenance Total Total ------ ----------- ----- -----Sunbelt in $m 83.6 71.6 155.2 123.7
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Sunbelt in ‚£m 41.2 35.2 76.4 66.2A-Plant 9.1 25.9 35.0 31.0Ashtead Technology 1.7 0.7 2.4 3.2
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Total rental equipment 52.0 61.8
113.8 100.4
================= Delivery vehicles, property improvements & computers 10.4 10.1 ----------------Total additions 124.2 110.5 ================Including expenditure on the NationsRent fleet reconfiguration, the Group spent‚£52.0m of its rental equipment capital expenditure on growth in the quarterwhilst ‚£61.8m was spent on replacing existing fleet. The growth proportion isestimated on the basis of the assumption that maintenance capital expenditurein any period is equal to the original cost of equipment sold.In the coming year gross capital expenditure is expected to be approximately ‚£275m including approximately ‚£50m of NationsRent fleet reconfiguration spendrolled over from 2006/7. Net of disposal proceeds, 2007/8 capital expenditureis expected to be approximately ‚£225m.The average age of the Group's serialised rental equipment, which constitutesthe substantial majority of our fleet, at 31 July 2007 was 29 months (2006 - 33months) on a net book value basis. Sunbelt's fleet had an average age of 30months (2006 - 35 months) comprising 36 months for aerial work platforms whichhave a longer life and 25 months for the remainder of its fleet and A-Plant'sfleet had an average age of 24 months (2006 - 31 months).
The original cost of the Group's rental fleet and the pro forma dollar utilisation for the twelve months ended 31 July 2007 are shown below:
Pro forma rental fleet at original cost --------------------------------------- LTM rental Dollar 31 July 2007 30 April 2007 LTM average revenues utilisation ------------ ------------- ----------- -------- -----------Sunbelt in $m 2,229 2,147 2,225 1,398 63%
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Sunbelt in ‚£m 1,097 1,074 1,111 698 63%A-Plant 330 321 323 197 61%Ashtead Technology 41 39 39 22 57% ------------------------------------------------ 1,468 1,434 1,473 917 ================================================ Pro forma dollar utilisation at Sunbelt for the twelve months ended 31 July2007 improved to 63% from 62% in the year ended 30 April 2007 and 59% in theyear to April 2006 as Sunbelt focused on improving the previously low dollarutilisation in the acquired NationsRent profit centres. Dollar utilisation of61% at A-Plant reflects the lower pricing (relative to equipment cost)prevalent in the competitive UK market and the higher average time utilisationit achieves.Assets held for sale--------------------This comprises the remaining NationsRent equipment identified as held for saleas part of the programme to reshape its fleet to contain a similar profile ofhigher returning assets to that of Sunbelt. The lower returning equipment wastreated as an asset held for sale effective as of the acquisition date and theremaining items are expected to be disposed in the second quarter.Trade receivables-----------------
Receivable days at 31 July 2007 were 49 days (2006 - 48 days). The bad debt charge for the three months ended 31 July 2007 as a percentage of total turnover was 0.5% (2006 - 0.5%).
Trade and other payables------------------------Group payable days were 70 days in 2007 (2006 - 59 days). Capital expenditurerelated payables at 31 July 2007 totalled ‚£87.5m (2006 - ‚£69.1m). Paymentperiods for purchases other than rental equipment vary between 7 and 45 daysand for rental equipment between 30 and 120 days.
Cash flow
Free cash flow (defined as the net cash inflow from operations less netmaintenance capital expenditure, financing costs paid and tax paid) issummarised below: Three months to LTM to Year to 31 July 31 July 30 April 2007 2006 2007 2007 ---- ---- ---- ---- ‚£m ‚£m ‚£m ‚£m EBITDA before exceptional items 94.0 65.0 339.3
310.3
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Cash inflow from operations before exceptional items 85.3 57.7 346.9 319.3Cash efficiency ratio* 90.7% 88.8% 102.2% 102.9%
Maintenance rental capital expenditure (57.3) (28.2) (242.2)
(213.1)
Non-rental capital expenditure (10.5) (9.3) (33.5)
(32.3)
Proceeds from sale of used rental equipment 30.4 13.7 95.2
78.5
Tax paid (0.3) (3.7) (1.6)
(5.0)
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Free cash flow before interest 47.6 30.2 164.8
147.4
Financing costs paid (13.0) (9.4) (67.8)
(64.2)
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Free cash flow after interest 34.6 20.8 97.0 83.2Growth capital expenditure (20.8) (32.8) (50.9) (62.9)Acquisitions and disposals - - (327.2) (327.2)Issue of ordinary share capital - 0.6 148.3
148.9
Dividends paid - - (7.0)
(7.0)
Purchase of own shares by ESOT (0.5) (2.5) (2.9)
(4.9)
Exceptional costs paid (net) (5.4) (0.3) (73.9)
(68.8)
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Reduction/(increase) in total debt 7.9 (14.2) (216.6)
(238.7)
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* Cash inflow from operations before exceptional items as a percentage of EBITDA before exceptional items.
First quarter cash inflow from operations increased 47.8% to ‚£85.3m whilst thecash efficiency ratio was 90.7% (2006 - 88.8%). Net cash capital expenditure inthe three months ended 31 July 2007 was broadly unchanged at ‚£58.2m (2006 - ‚£56.6m). Financing costs paid increased 38.3% to ‚£13.0m reflecting interest onthe additional debt assumed last year at the time of the NationsRentacquisition. Interest on the two senior notes issues is paid semi-annually inthe second and fourth quarters explaining the large difference this quarterbetween the income statement interest charge and cash interest payments.The Group continues to generate strong free cash flow after interest with ‚£34.6m (2006 - ‚£20.8m) generated in the three months to 31 July 2007. There wereno acquisitions in the quarter whilst ‚£5.4m of exceptional costs relating tothe NationsRent acquisition were paid in the quarter, all of which were accruedat 30 April 2007. As a result ‚£7.9m of net cash flow was generated in thequarter which was applied to reduce outstanding senior debt.On a last twelve months basis, free cash flow before one time and discretionaryitems now reflects eleven months contribution from the acquired NationsRentstores and remains strong at ‚£97.0m (‚£83.2m in the year ended 30 April 2007).Net debt 31 July 30 April 2007 2006 2007 ---- ---- ---- ‚£m ‚£m ‚£m First priority senior secured bank debt 493.0 274.3
506.1
Finance lease obligations 19.9 21.4
22.0
12% second priority senior secured notes, due 2014 - 75.5
-
8.625% second priority senior secured notes, due 2015 118.7 129.2 120.69% second priority senior secured notes, due 2016 264.1 - 268.3 ------------------------- 895.7 500.4 917.0Cash and cash equivalents (1.3) (1.1) (1.1) -------------------------Total net debt 894.4 499.3 915.9 =========================Group net debt reduced from ‚£915.9m at 30 April 2007 to ‚£894.4m at 31 July 2007reflecting principally the impact of the weaker US dollar. The ratio of netdebt to pro forma EBITDA was 2.6 times at 31 July 2007. Pro forma EBITDA forthis purpose was ‚£348.7m and includes NationsRent's EBITDA for the month ofAugust excluding its profit on used equipment sales but not the pro formaeffect of the $48m of integration cost savings, around $11m of which remain tobe reflected in the pro forma results.The Group's debt facilities are now committed for a weighted average period ofapproximately 6 years with the earliest significant maturity being in August2011. The weighted average interest cost of these facilities (includingnon-cash amortisation of deferred debt raising costs) is approximately 8%, mostof which is tax deductible in the US where the tax rate is 39%. Financialperformance covenants under the two senior secured notes issues are measuredonly at the time new debt is raised. There are two financial performancecovenants under the asset based first priority senior bank facility (fundeddebt to EBITDA before exceptional items and a fixed charge ratio comparingEBITDA less net capital expenditure to the sum of scheduled debt repayments,interest, tax and dividends paid). These covenants are not, however, requiredto be adhered to when availability (the difference between the borrowing baseand facility utilisation) exceeds $125m. At 31 July 2007 availability under thebank facility was $671m ($589m at 30 April 2007).
Currency translation
Following the NationsRent acquisition approximately 99% of our debt isdenominated in US dollars. At 31 July 2007 our dollar denominated debtrepresented approximately 86% of the value of our dollar denominated net assets(other than debt) providing a partial hedge against the translation effects ofchanges in the dollar exchange rate. The dollar interest payable on this debtalso limits the impact of changes in the dollar exchange rate on our pre-taxprofits and earnings. Based on the estimated currency mix of our profits in thecoming year and on current dollar debt levels and interest rates, every 1%change in the US dollar exchange rate would impact pro-forma pre-tax profit by0.8%.OPERATING STATISTICS Profit centre numbers Staff numbers --------------------- ------------- 31 July 30 April 31 July 30 April 2007 2006 2007 2007 2006 2007 ---- ---- ---- ---- ---- ----Sunbelt 451 210 445 7,531 4,330 7,524A-Plant 201 193 201 2,385 2,091 2,424Ashtead Technology 13 11 13 119 103 115Corporate office - - - 14 14 14
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Group 665 414 659 10,049 6,538
10,077
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ASHTEAD GROUP PLCRelated Shares:
Ashtead Group