20th Sep 2005 07:02
Ashtead Group PLC20 September 2005 ASHTEAD GROUP PLC Unaudited first quarter results for the three months ended 31 July 2005 Ashtead Group plc, the equipment rental group serving the US and UKconstruction, industrial and homeowner markets, announces first quarter resultsfor the three months ended 31 July 2005. Highlights • Sunbelt's operating profit up 51% to $38.6m (2004 - $25.6m) • A-Plant's operating profit up 23% to £3.7m (2004 - £3.0m) • Group pre-tax profit of £12.3m (2004 - £4.9m) • Capital reorganisation announced in July successfully concluded • Strong market conditions in US continue • Admitted to the FTSE 250 effective 19 September 2005 Ashtead's chief executive, George Burnett, commented: "Sunbelt again delivered a strong performance with first quarter dollar revenueup 16.6% reflecting strong growth in its key non-residential constructionmarket, increasing market share and the shift from ownership to rental in theUS. As a result of this growth Sunbelt's operating profit grew 51% in thequarter. A-Plant and Ashtead Technology both also exceeded last year's firstquarter performance by more than 20%. We anticipate that Sunbelt, which now accounts for around three-quarters of theGroup's profits, and Ashtead Technology, will continue to perform strongly.A-Plant's rate of growth is expected to slow from the 23% achieved in the firstquarter reflecting the continued competitiveness of the UK market. The recentlycompleted capital reorganisation has strengthened our balance sheet and providesus with substantial flexibility to take advantage of the strong US market. TheBoard therefore looks forward to a successful outcome to the year." Contacts: Cob Stenham Non-executive chairman 020 7299 5562George Burnett Chief executive )Ian Robson Finance director ) 01372 362300 Brian Hudspith The Maitland Consultancy 020 7379 5151 PRESS RELEASE Overview The Group performed strongly in the first quarter with revenue up 12.3% to£145.9m and pre-tax profit of £12.3m, 2.5 times last year's £4.9m. Sunbelt againdelivered a good performance with first quarter dollar revenue up 16.6%reflecting strong growth in its key non-residential construction market,increasing market share and the shift from ownership to rental in the US. As aresult of this growth Sunbelt's operating profit grew 50.8% in the quarter.A-Plant and Ashtead Technology both also exceeded last year's first quarterperformance by more than 20%. The impact of changes in exchange rates in thequarter was insignificant. Cash tax earnings per share were 3.7p (2004 - 1.5p) and, after the accountingtax charge, basic earnings per share were 2.0p (2004 - 0.4p). For the first time this quarter the Group is reporting its results underinternational accounting standards. Full details of the impact of this change onpreviously reported results for the year ended 30 April 2005 are included in theseparate statement available on the Company's website, www.ashtead-group.com butthe overall effect has been generally small. Review of first quarter trading Revenue EBITDA Profit ------- ------ ------ 2005 2004 2005 2004 2005 2004 ------ ------ ------ ------ ------ ------- Sunbelt in $m 186.8 160.2 69.0 54.2 38.6 25.6 ====== ====== ====== ====== ====== ====== Sunbelt in £m 103.3 87.9 38.2 29.7 21.3 14.1A-Plant 38.8 39.0 12.6 12.3 3.7 3.0Ashtead Technology 3.8 3.0 1.9 1.5 1.0 0.7Group central costs - - (1.6) (1.8) (1.6) (1.8) ------ ------ ------ ------ ------ ------ 145.9 129.9 51.1 41.7 24.4 16.0 ====== ====== ====== ======Interest (12.1) (11.1) ------ ------Profit before tax 12.3 4.9 ====== ====== As a result of the Group's operational gearing the 12.3% revenue increaseresulted in a 22.5% increase in EBITDA to £51.1m and an increase of 52.5% inoperating profit to £24.4m. These improvements were reflected in the Group'smargins. EBITDA margins grew from 32.1% to 35.0% and operating margins rose from12.3% to 16.7%. Sunbelt Recently published figures show that, in the year to 31 December 2004, the USrental market grew by 10% to approximately $26.4 billion. During the same periodthe top ten players, including Sunbelt, grew 8.9% while Sunbelt itself achieveda 14.7% revenue increase. This strong performance has continued in 2005. In thequarter to 31 July 2005 revenue grew 16.6% to $186.8m reflecting strong growthof approximately 11% in rental rates and a 5% increase in the average fleetsize. Utilisation decreased slightly from 70.7% to 70.4%. Revenue growth wasbroadly based with all regions and all major product areas trading ahead of lastyear. Sunbelt's revenue improvement reflected market share gains and growth innon-residential construction activity as well as the continued shift fromownership to rental. Sunbelt's operating profit was up 50.8% in the firstquarter from $25.6m to $38.6m, representing a margin of 20.7% (2004 - 16.0%). Sunbelt continued its investment programme to enable it to take advantage of thestrong market conditions in the US. $65m was invested in its rental fleet in thequarter, two new greenfield stores were opened and a further ten rental storeshave now been acquired since year-end for a total consideration of approximately$29m. Sunbelt also disposed of 12 west coast specialist scaffold locationsshortly after the quarter end for an estimated consideration of $24m. The newstores continue Sunbelt's strategy of clustering major markets to ensure thatthese are covered in depth. These steps are in line with our strategy to focuson growth markets and, based on the last 12 months performance, the net effectof the transactions is EBITDA positive. Additional infill acquisitionopportunities remain under consideration but Sunbelt also continues to emphasiseorganic growth. 14.0% of the total first quarter revenue growth of 16.6% wasdelivered by stores open throughout both periods. Since the end of the quarter, Sunbelt has been involved in the clean-up effortson the US Gulf Coast following hurricane Katrina. Sunbelt's two stores in theimmediately affected area experienced only minor damage and none of their staffwere hurt. As regards the impact on our revenues of the clean-up andreconstruction work, Sunbelt's pump and power business (16 of Sunbelt's 208stores) shipped equipment from as far afield as Baltimore and Charlotte into theaffected area as it did following 2004's Florida hurricane damage last Septemberand is currently experiencing high utilisation. We anticipate that this willincrease pump and power's revenue and that the Mobile general tool store willalso experience strong demand during both the immediate clean-up and longer-termreconstruction phase. A-Plant In a continued competitive market, A-Plant's revenue of £38.8m was similar tolast year's £39.0m but was achieved from a fleet which on average wasapproximately 3% smaller than last year. This reflected the year on year effectof last year's downsizing of the business which has now been concluded. Thegrowth in rental rates in the first quarter was approximately 5% whilst averageutilisation decreased from 65.6% to 63.6%. Against this market background, careful management of costs continued and thesedeclined 1.9% year over year mainly reflecting the full year impact of measurestaken last year. Although A-Plant's first quarter operating profit grew to £3.7m(2004 - £3.0m), representing a margin of 9.5% (2004 - 7.7%), given the continuedcompetitiveness of the UK market A-Plant is not expected to continue this rateof growth in the second quarter. Commencing at the start of the quarter, A-Plant launched a programme toreorganise the management of its sales force onto a national basis to improvefurther the level of service to its many large national and regional customersand to provide easier access for all our customers to the Company's wide rangeof specialist and general equipment. Ashtead Technology Ashtead Technology's performance continued the trend established in the secondhalf of last year with first quarter revenues up 26.7% from £3.0m to £3.8m andoperating profit up 42.9% from £0.7m to £1.0m. This performance reflects therecent increases in investment by the oil majors which is delivering higheroffshore exploration and construction activity as well as continued growth inour on-shore environmental business. These trends are expected to continue. Capital expenditure and net debt Capital expenditure in the three months was £61.5m of which £55.4m was on therental fleet (2004 - £34.4m in total) with the increased expenditure focussedmainly to enable Sunbelt to take advantage of the improving economic conditionsin the US. £28.2m of the fleet expenditure was for growth with the remainderbeing spent to replace existing equipment. First quarter disposal proceeds were£10.9m (2004 - £7.1m) generating a profit on disposal of £2.2m (2004 - £1.1m). Net debt at 31 July was £518.5m, an increase of £36.2m since 30 April 2005reflecting seasonal trends but a reduction of £5.7m since 31 July 2004. Atconstant exchange rates the increase since year end was £21.5m with debt loweredby £14.1m in the past year. Capital reorganisation The capital reorganisation closed shortly after the quarter end on 3 August andis therefore not reflected in the July balance sheet or in the net debt levelsdiscussed above. In the capital reorganisation the Group raised approximately£70m from the equity placing and open offer as well as $250m of new second lien8.625% senior secured notes due 2015. The proceeds of the placing and the debtissue were applied to redeem early, at an approximate 11% discount, the £134mconvertible loan note and to redeem £42m of the 12% second priority seniorsecured loan notes due 2014. After payment of transaction costs, the remaining£26.5m of funds raised were applied to reduce outstandings under our asset baseddebt facility. On a pro forma basis, net debt at 31 July adjusted for the effects of thesubsequent closing of the capital reorganisation is £467.0m and the ratio ofadjusted net debt to trailing twelve months EBITDA is 2.6 times. This compareswith a peak ratio of over 4 times at April 2003. Pro forma availability underthe asset based facility at 31 July was over £125m ($220m). Completion of the capital reorganisation means that the Group's debt facilitiesare now committed for a weighted average period of approximately 6.5 years andcarry a weighted average interest rate of approximately 7.5%. Following therecent strong share price growth and the £70m equity offering, debt now fundsjust under half the Group's enterprise value. Following approval by shareholders at the extraordinary general meeting of theCompany held on 1 August of the resolution to cancel the amount standing to thecredit of the share premium account, High Court of Justice approval of thecancellation was received on 24 August. Accordingly of the total amountcancelled of £163.8m, £93.8m has been credited to a special non-distributablereserve whilst the balance of £70m has been credited to the Company's profit andloss account reserve. This step and the finalisation of the capital reorganisation now mean that thelegal formalities necessary for the resumption of dividends in the currentfinancial year have been completed. Current trading and outlook We anticipate that Sunbelt, which now accounts for around three-quarters of theGroup's profits, and Ashtead Technology, will continue to perform strongly.A-Plant's rate of growth is expected to slow from the 23% achieved in the firstquarter reflecting the continued competitiveness of the UK market. The recentlycompleted capital reorganisation has strengthened our balance sheet and providesus with substantial flexibility to take advantage of the strong US market. TheBoard therefore looks forward to a successful outcome to the year. - o0o - There will be a meeting for equity analysts at the offices of JPMorgan Cazenoveat 20 Moorgate at 9.30am this morning and a conference call at 4.00pm thisafternoon (11.00am Eastern Standard Time) for debt investors. A simultaneouswebcast of the equity analysts presentation will be available through theCompany's website, www.ashtead-group.com and there will also be a recordedplayback available from shortly after the call finishes. CONSOLIDATED INCOME STATEMENT Unaudited Three months to 31 July ----------------------- 2005 2004 ------ ------ £m £m Revenue 145.9 129.9Staff costs (47.4) (42.8)Other operating costs (net) (47.4) (45.4) ------ ------EBITDA* 51.1 41.7 Depreciation (26.7) (25.7) ------ ------Operating profit 24.4 16.0Financing costs (12.1) (11.1) ------ ------Profit before taxation 12.3 4.9Taxation:- current (0.4) (0.1)- deferred (5.5) (3.4) ------ ------ (5.9) (3.5) ------ ------ Profit attributable to equity shareholders of the company 6.4 1.4 ====== ====== Basic and diluted earnings per share 2.0p 0.4p ====== ====== * EBITDA is presented here as an additional performance measure as it iscommonly used by investors and lenders. All results are from continuing operations. STATEMENT OF RECOGNISED INCOME AND EXPENSE £m £m ------ ------Net profit for the period 6.4 1.4Gain on cash flow hedges taken to equity 0.8 -Foreign currency translation differences 20.3 (4.6) ------ ------Total recognised income and expense for the period 27.5 (3.2) ====== ------ EQUITY SHAREHOLDERS' FUNDS RECONCILIATION £m £m ------ ------Total recognised income and expense for the period 27.5 (3.2)Issue of ordinary shares, net of expenses 0.3 -Share incentive plan awards 0.1 0.1 ------ ------Net increase in equity shareholders' funds 27.9 (3.1)Equity shareholders' funds at 30 April 109.9 120.5 ------ ------Equity shareholders' funds at 31 July 137.8 117.4 ====== ====== CONSOLIDATED BALANCE SHEET Unaudited Audited --------- ------- 31 July 30 April 2005 2004 2005 ------ ------ ------ £m £m £mNon-current assetsProperty, plant and equipment- rental equipment 496.2 464.7 452.9- other assets 88.9 84.2 84.2 ------ ------ ------ 585.1 548.9 537.1Intangible assets - goodwill 127.8 123.9 118.2 ------ ------ ------ 712.9 672.8 655.3 ------ ------ ------Current assetsInventory 14.9 15.7 13.8Trade and other receivables 103.1 96.9 91.9Cash and cash equivalents 1.2 11.6 2.1 ------ ------ ------ 119.2 124.2 107.8 ------ ------ ------Non-current assets held for sale 9.5 - - ------ ------ ------ Total assets 841.6 797.0 763.1 ====== ====== ====== Current liabilitiesTrade and other payables 100.2 80.2 95.0Debt due in less than one year 13.2 22.0 12.2Provisions 8.5 5.4 7.1 ------ ------ ------ 121.9 107.6 114.3 ------ ------ ------Non-current liabilitiesOther payables 7.9 9.5 7.9Debt due in more than one year 506.5 513.8 472.2Provisions 8.1 9.6 7.9Defined benefit pension fund deficit 16.1 12.8 16.2Deferred taxation 43.3 26.3 34.7 ------ ------ ------ 581.9 572.0 538.9 ------ ------ ------ Total liabilities 703.8 679.6 653.2 ------ ------ ------ Equity shareholders' fundsShare capital 32.7 32.6 32.6Share premium account 101.0 100.7 100.8Equity element of convertible loan note 24.3 24.3 24.3Own shares held by ESOT (1.6) (1.6) (1.6)Translation reserve (12.3) (21.2) (32.6)Retained earnings (6.3) (17.4) (13.6) ------ ------ ------Total equity shareholders' funds 137.8 117.4 109.9 ------ ------ ------ Total liabilities and equity shareholders' funds 841.6 797.0 763.1 ====== ====== ====== CONSOLIDATED CASH FLOW STATEMENT Unaudited Three months to 31 July ------------------------ 2005 2004 ------ ------ £m £mCash flows from operating activitiesCash generated from operations before non-recurringitems 38.3 32.7 Non-recurring items - (3.7) ------ ------Cash generated from operations 38.3 29.0Financing costs paid (11.2) (2.4)Tax paid (0.1) (0.3) ------ ------Net cash from operating activities 27.0 26.3 ------ ------ Cash flows from investing activitiesAcquisitions (2.0) -Purchase of property, plant and equipment (51.8) (27.3)Proceeds on disposal of property, plant andequipment 10.8 7.1 ------ ------Net cash used in investing activities (43.0) (20.2) ------ ------ Cash flows from financing activitiesDrawdown of loans 27.7 3.4Redemption of loans (9.6) (3.2)Capital element of finance lease payments (3.3) (4.4)Proceeds from issue of ordinary shares 0.3 - ------ ------Net cash from/(used) in financing activities 15.1 (4.2) ------ ------ (Decrease)/increase in cash and cash equivalents (0.9) 1.9 Cash and cash equivalents at 1 May 2.1 9.9Effect of exchange rate changes - (0.2) ------ ------Cash and cash equivalents at 31 July 1.2 11.6 ====== ====== NOTES TO THE FINANCIAL STATEMENTS 1. Basis of preparation The financial statements for the three months ended 31 July 2005 were approvedby the directors on 19 September 2005. They have been prepared in accordance with relevant International AccountingStandards and the accounting policies set out in the document entitled "Impactof adoption of International Accounting Standards and restatement of previouslyreported financial information" published on 20 September 2005 on the Company'swebsite at www.ashtead-group.com. They are unaudited and do not constitutestatutory accounts within the meaning of Section 240 of the Companies Act 1985. The statutory accounts for the year ended 30 April 2005 were prepared inaccordance with UK accounting standards and have been mailed to shareholders andfiled with the Registrar of Companies. The auditors' report on those accountswas unqualified and did not contain a statement under section 237 of theCompanies Act 1985. The exchange rates used in respect of the US dollar are: 2005 2004 ------ ------Average for the quarter ended 31 July 1.8085 1.8218Period end rate 1.7606 1.8184 2. Segmental analysis Operating Capital NetThree months to 31 July Revenue profit expenditure assets ------- ------ ----------- ------ £m £m £m £m2005----Sunbelt Rentals 103.3 21.3 42.3 518.6A-Plant 38.8 3.7 17.5 194.3Technology 3.8 1.0 1.7 13.2Corporate costs - (1.6) - (10.4)Central items* - - - (577.9) ------ ------ ------ ------ 145.9 24.4 61.5 137.8 ====== ====== ====== ======2004----Sunbelt Rentals 87.9 14.1 19.9 478.9A-Plant 39.0 3.0 13.0 204.6Technology 3.0 0.7 1.5 10.9Corporate costs - (1.8) - (13.7)Central items* - - - (563.3) ------ ------ ------ ------ 129.9 16.0 34.4 117.4 ====== ====== ====== ====== * Net borrowings, the provision for the defined benefit pension fund deficit anddeferred taxation. 3. Operating costs Three months to 31 July 2005 2004 ------ ------ £m £mStaff costs:Salaries 43.0 38.3Social security costs 3.6 3.5Other pension costs 0.8 1.0 ------ ------ 47.4 42.8 ------ ------Other costs (net):Vehicle costs 11.4 10.3Spares, consumables and external repairs 10.1 9.9Facilities costs 7.2 7.0Other external charges 20.9 19.3Profit on disposal of fixed assets (2.2) (1.1) ------ ------ 47.4 45.4 ------ ------ Depreciation 26.7 25.7 ------ ------ 121.5 113.9 ====== ====== 4. Financing costs Three months to 31 July 2005 2004 ------ ------ £m £m Bank interest payable 3.6 3.1Funding cost on trade debtors' securitisation - 0.9Interest on second priority senior secured notes 3.6 3.6Interest on 5.25% unsecured convertible loan note,due 2008 1.9 1.9Interest payable on finance leases 0.5 0.5Other 2.5 1.1 ------ ------ 12.1 11.1 ====== ====== 5. Taxation The effective rate of tax for the three months ended 31 July 2005 is nil% (2004- nil%) in the UK and 39.3% (2004 - 40.4%) in the US. The tax charge for theperiod has been calculated applying the directors' best estimate of the annualtax rate in each jurisdiction in which the Group operates to the relevantproportion of the profit before tax for the period. 6. Earnings per share Basic and diluted earnings per share for the three months ended 31 July 2005have been calculated based on the profit for the relevant period and on theweighted average number of ordinary shares in issue during that period whichexcludes the 2,723,461 shares held by the ESOT in respect of which dividendshave been waived. Diluted earnings per share is computed using the result forthe relevant period and the diluted number of shares (ignoring any potentialissue of ordinary shares which would be anti-dilutive). These are calculated asfollows: Three months to 31 July 2005 2004 ------ ------ Profit for the financial period (£m) 6.4 1.4 ====== ====== Weighted average number of shares (m) - basic 323.5 322.9 ====== ======- diluted 327.4 323.9 ====== ====== Basic/diluted earnings per share (p) 2.0p 0.4p ====== ====== Cash tax earnings per share (defined in any period as the earnings beforedeferred taxation for that period divided by the weighted average number ofshares in issue in that period) may be reconciled to the basic earnings pershare as follows: Three months to 31 July 2005 2004 ------ ------ Basic earnings per share 2.0p 0.4pDeferred tax 1.7p 1.1p ------ ------Cash tax earnings per share 3.7p 1.5p ====== ====== 7. Tangible fixed assets 2005 2004 ---- ---- Rental RentalNet book value equipment Total equipment Total-------------- --------- ----- --------- ----- £m £m £m £m At 1 May 452.9 537.1 469.7 554.9Exchange difference 25.8 29.4 (7.9) (8.7)Additions 55.4 61.5 30.3 34.4Acquisitions 2.0 2.0 - -Assets held for sale (9.1) (9.5) - -Disposals (8.1) (8.7) (5.6) (6.0)Depreciation (22.7) (26.7) (21.8) (25.7) ------ ------ ------ ------At 31 July 496.2 585.1 464.7 548.9 ====== ====== ====== ====== 8. Notes to cash flow statement Three months to 31 July ----------------------- 2005 2004 ------ ------ £m £ma) Cash flow from operating activities-------------------------------------- Operating profit 24.4 16.0Depreciation 26.7 25.7 ------ ------EBITDA 51.1 41.7Profit on disposal of property, plant and equipment (2.2) (1.1)Increase in inventories (0.1) (0.9)Increase in trade and other receivables (6.0) (4.1)Decrease in trade and other payables (4.4) (3.3)Exchange differences (0.3) 0.4Other non-cash movements 0.2 - ------ ------Cash generated from operations 38.3 32.7 ====== ====== b) Reconciliation to net debt----------------------------- Decrease/(increase) in cash in the period 0.9 (1.9)Increase/(decrease) in debt through cash flow 14.8 (4.2) ------ ------Change in net debt from cash flows 15.7 (6.1)Exchange difference 16.9 (5.7)Non cash movements:- amortisation of deferred costs of debt raising 0.7 0.1- convertible loan note interest 1.1 0.9- capital element of new finance leases 1.8 2.8 ------ ------Movement in net debt in the period 36.2 (8.0)Opening bank debt 482.3 532.2 ------ ------Closing debt 518.5 524.2 ====== ====== c) Analysis of net debt ----------------------- 1 May Exchange Cash Non-cash 31 July 2005 movement flow movements 2005 ------ -------- ------ --------- ------ £m £m £m £m £m Cash (2.1) - 0.9 - (1.2)Debt due within 1 year 12.2 0.8 (3.3) 3.5 13.2Debt due after 1 year 472.2 16.1 18.1 0.1 506.5 ------ ------ ------ ------ ------Total net debt 482.3 16.9 15.7 3.6 518.5 ====== ====== ====== ====== ====== OPERATING AND FINANCIAL REVIEW First quarter (to 31 July) results compared with prior year Overview 2005 2004 ------ ------ £m £m Revenue 145.9 129.9Staff costs (47.4) (42.8)Other operating costs (net) (47.4) (45.4) ------ ------EBITDA* 51.1 41.7Depreciation (26.7) (25.7) ------ ------Operating profit 24.4 16.0Financing costs (12.1) (11.1) ------ ------Profit before taxation 12.3 4.9Taxation:- current (0.4) (0.1)- deferred (5.5) (3.4) ------ ------ (5.9) (3.5) ------ ------Profit for the quarter 6.4 1.4 ====== ====== * EBITDA is presented here as an additional performance measure as it iscommonly used by investors and lenders. First quarter revenue increased 11.7% at constant 2005 exchange rates to £145.9mand by 12.3% at actual rates. EBITDA grew by 21.6% at constant exchange rates to£51.1m and by 22.5% at actual rates. Operating profit of £24.4m in the quarterincreased 50.8% at constant 2005 exchange rates and 52.5% from £16.0m in 2004 atactual rates. EBITDA margins grew from 32.1% to 35.0% and operating margins rosefrom 12.3% to 16.7%. Divisional performance Divisional results are summarised below: Revenue EBITDA Operating profit ------- ------ ---------------- 2005 2004 2005 2004 2005 2004 ------ ------ ------ ------ ------ ------ Sunbelt in $m 186.8 160.2 69.0 54.2 38.6 25.6 ====== ====== ====== ====== ====== ====== Sunbelt in £m 103.3 87.9 38.2 29.7 21.3 14.1A-Plant 38.8 39.0 12.6 12.3 3.7 3.0Ashtead Technology 3.8 3.0 1.9 1.5 1.0 0.7Group central costs - - (1.6) (1.8) (1.6) (1.8) ------ ------ ------ ------ ------ ------ 145.9 129.9 51.1 41.7 24.4 16.0 ====== ====== ====== ====== ====== ====== Sunbelt Revenue increased 16.6% to $186.8m reflecting strong growth of approximately 11%in rental rates and a 5% increase in the average fleet size. Utilisationdecreased slightly from 70.7% to 70.4%. Revenue growth was broadly based withall regions and all major product areas trading ahead of last year. Sunbelt'srevenue improvement reflected market share gains and growth in non-residentialconstruction activity as well as the continued shift from ownership to rental. Costs (excluding depreciation) rose 11.1% to $117.8m in 2005. This reflectedprincipally increased headcount, higher commissions and profit share payments tostaff as a result of the increased activity levels and increased fuel costs forSunbelt's delivery fleet. As a result, EBITDA grew 27.3% to $69.0m and theEBITDA margin for the quarter improved to 36.9% from 33.8% in 2004. Sunbelt'soperating profit increased 50.8% to $38.6m representing a margin of 20.7% (2004- 16.0%). Sunbelt's results in sterling reflected the factors discussed aboveand the slightly stronger US dollar. A-Plant First quarter revenue was similar to last year at £38.8m, reflecting improvedrental rates (up approximately 5%), a fleet size which was approximately 3%smaller than in the equivalent period a year ago whilst utilisation decreasedfrom 65.6% to 63.6%. Against this market background, strong management of costs(excluding depreciation) continued and these declined 1.9% year over year mainlyreflecting the full year impact of cost reduction measures taken last year. As aresult EBITDA increased 2.4% to £12.6m and the EBITDA margin increased from31.5% to 32.5% in 2005. A-Plant's operating profit increased 23.3% to £3.7mrepresenting a margin of 9.5% (2004 - 7.7%). Ashtead Technology Ashtead Technology's performance continued the trend established in the secondhalf of last year with first quarter revenues up 26.7% to £3.8m at actual andconstant exchange rates. Ashtead Technology's operating profit of £1.0mincreased from £0.7m in 2004 at both actual and constant exchange rates. Theseresults reflected recent increases in investment by the oil majors which isdelivering higher offshore exploration and construction activity as well ascontinued growth in our on-shore environmental business. These trends areexpected to continue. Financing costs Financing costs increased to £12.1m from £11.1m in 2004 reflecting marginallylower average debt levels but higher average interest rates following the recentrises in US dollar interest rates. Taxation The tax charge for the quarter of £5.9m (2004 - £3.5m) comprised a charge forcurrent tax of £0.4m and a charge for deferred tax of £5.5m. The Group remainsin a tax loss position in the UK for which it is unable to take benefit throughits deferred tax charge and, accordingly, the deferred tax charge reflects onlya charge on US profits which accounts for the high reported effective tax rate.Cash tax payments remain low. Profit before taxation The profit before taxation for the first quarter was £12.3m compared with £4.9min 2004. After taxation, there was a profit for the quarter of £6.4m compared to£1.4m in 2004. Balance sheet Tangible fixed assets 2005 2004 ---- ---- Rental RentalNet book value equipment Total equipment Total-------------- --------- ------ --------- ------ £m £m £m £m At 1 May 452.9 537.1 469.7 554.9Exchange difference 25.8 29.4 (7.9) (8.7)Additions 55.4 61.5 30.3 34.4Acquisitions 2.0 2.0 - -Assets held for sale (9.1) (9.5) - -Disposals (8.1) (8.7) (5.6) (6.0)Depreciation (22.7) (26.7) (21.8) (25.7) ------ ------ ------ ------At 31 July 496.2 585.1 464.7 548.9 ====== ====== ====== ====== Capital expenditure in the first quarter was £61.5m of which £55.4m was on therental fleet (2004 - £34.4m in total). Expenditure on rental equipment was 90.1%of total capital expenditure. Capital expenditure by division was as follows: 2005 2004 ---- ---- Growth Maintenance Total Total ------ ----------- ----- ----- Sunbelt in $m 27.6 37.2 64.8 29.8 ====== ====== ====== ====== Sunbelt in £m 15.7 21.1 36.8 16.4A-Plant 11.1 5.8 16.9 12.5Ashtead Technology 1.4 0.3 1.7 1.4 ------ ------ ------ ------Total rental equipment 28.2 27.2 55.4 30.3 ====== ======Other fixed assets 6.1 4.1 ------ ------Total additions 61.5 34.4 ====== ====== With the improvement in market conditions in the US, the Group spent £28.2m ofits rental equipment capital expenditure on growth with £27.2m spent onreplacing existing fleet. The growth proportion is estimated on the basis of theassumption that maintenance capital expenditure in any period is equal to theoriginal cost of equipment sold in that period. The average age of the Group's serialised rental equipment, which constitutesthe substantial majority of our fleet, at 31 July 2005 was 43 months (2004 - 46months) on a net book value basis. At 31 July, Sunbelt's fleet had an averageage of 44 months (2004 - 48 months) comprising 60 months for aerial workplatforms which have a longer life and 28 months for the remainder of its fleet.At the same date A-Plant's fleet had an average age of 42 months (2004 - 42months). Reflecting the recent strengthening of the dollar which raises the sterlingvalue of Sunbelt's capital expenditure, we now expect that gross capitalexpenditure for the current financial year will be in the region of £180m. Trade debtors Debtor days improved to 51 days (2004 - 54 days). The bad debt charge as apercentage of total turnover was 0.7% in 2005 compared with 1.2% in 2004. Trade and other creditors Group creditor days were 67 days in 2005 (2004 - 65 days). Capital expenditurerelated payables at 31 July 2005 totalled £44.8m (2004 - £25.0m). Paymentperiods for purchases other than rental equipment vary between 30 and 60 daysand for rental equipment between 60 and 90 days. Cash flow and net debt Free cash flow in the three months ended 31 July 2005 (which is defined as ournet cash inflow from operations less net maintenance capital expenditure,financing costs paid and tax paid) is summarised below: Three months to 31 July ------------------------- 2005 2004 ------ ------ £m £m EBITDA before non-recurring items 51.1 41.7 ====== ====== Cash inflow from operations before non-recurringitems 38.3 32.7Cash efficiency ratio* 75.0% 78.4%Maintenance capital expenditure (38.1) (24.5)Proceeds from sale of used rental equipment 10.8 7.1Tax paid (0.1) (0.3) ------ ------Free cash flow before interest 10.9 15.0Financing costs paid (11.2) (2.4) ------ ------Free cash flow after interest (0.3) 12.6Growth capital expenditure (13.7) (2.8)Acquisitions and disposals (2.0) -Issue of ordinary share capital 0.3 -Non recurring refinancing costs paid - (3.7) ------ ------(Increase)/reduction in total debt (15.7) 6.1 ------ ====== * Cash inflow from operations before non-recurring items as a percentage ofEBITDA before non-recurring items. Cash inflow from operations increased 17.1% to £38.3m and the cash efficiencyratio was 75.0% (2004 - 78.4%) reflecting seasonal increases in working capital.After net maintenance capital expenditure of £27.3m (2004 - £17.4m) and tax,free cash flow before interest was £10.9m (2004 - £15.0m). Financing costs paidthis year were broadly in line with the accounting charge. Last year's financingcosts of £2.4m were exceptionally low compared to last year's £11.1m accountingcharge and reflected an unusual timing of interest payments. Consequently, afterinterest, there was a free cash outflow of £0.3m (2004 - inflow of £12.6m). Including payments of £13.7m in respect of growth capital expenditure and £2.0min respect of acquisitions there was a net draw under our bank facilities in thequarter of £15.7m. Because this outflow resulted principally from investment inrental equipment, there was a corresponding increase in the borrowing base underour asset based facilities so that, despite the cash outflow, availability underthe asset based debt facility increased from $156.7m at 30 April 2005 to $175.4mat 31 July 2005. Net debt 31 July ------- Pro forma 2005 2005 2004 -------------- ------ ------ £m £m First priority senior secured bank debt 223.4 249.8 217.8Finance lease obligations 32.5 32.5 29.712% second priority senior secured notes, due 2014 75.3 115.9 115.6New 8.625% second priority senior securednotes, due 2015 137.0 - -Non-recourse finance received under debtorssecuritisation - - 55.15.25% unsecured convertible loan note, due 2008 - 121.5 117.6 ------ ------ ------ 468.2 519.7 535.8Cash at bank and in hand (1.2) (1.2) (11.6) ------ ----- ------Total net debt 467.0 518.5 524.2 ====== ====== ====== At 31 July 2005 total net debt was £518.5m (31 July 2004 - £524.2m and 30 April2005 - £482.3m). Measured at constant (31 July 2005) exchange rates, thedecrease in total net debt since 31 July last year was £14.1m whilst debt hasincreased £21.5m in the three months since year end. Capital reorganisation The capital reorganisation closed shortly after the quarter end on 3 August andis therefore not reflected in the July balance sheet or in the net debt levelsdiscussed above. In the capital reorganisation the Group raised approximately£70m from the equity placing and open offer as well as $250m of new second lien8.625% senior secured notes due 2015. The proceeds of the placing and the debtissue were applied to redeem early, at an approximate 11% discount, the £134mconvertible loan note and to redeem £42m of the 12% second priority seniorsecured loan notes due 2014. After payment of transaction costs, the remaining£26.5m of funds raised were applied to reduce outstandings under our asset baseddebt facility. On a pro forma basis, net debt at 31 July adjusted for the effects of thesubsequent closing of the capital reorganisation is £467.0m and the ratio of netdebt to trailing twelve months EBITDA is 2.6 times. This compares with a peakratio of over 4 times at April 2003. Pro forma availability under the assetbased facility at 31 July was over £125m ($220m). Completion of the capital reorganisation means that the Group's debt facilitiesare now committed for a weighted average period of approximately 6.5 years andcarry a weighted average interest rate of approximately 7.5%. Following therecent strong share price growth and the £70m equity offering, debt now fundsjust under half the Group's enterprise value. OPERATING STATISTICS Profit centre numbers Staff numbers --------------------- ------------- 31 July 30 April 31 July 30 April ------- -------- ------- -------- 2005 2004 2005 2005 2004 2005 ------ ------ ------ ------ ------ ------ Sunbelt Rentals 208 200 200 4,034 3,802 3,854A-Plant 201 225 202 1,977 2,053 1,973Ashtead Technology 10 10 10 80 81 94Corporate office - - - 14 14 14 ------ ------ ------ ------ ------ ------Group 419 435 412 6,105 5,950 5,935 ====== ====== ====== ====== ====== ====== This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Ashtead Group