6th Mar 2007 07:00
ASHTEAD GROUP PLC Unaudited results for the third quarter ended 31 January 2007 Financial summary Third quarter ----------------- 2007 2006 Growth ----- ---- ------ At actual rates At constant rates ‚£m ‚£m of exchange of exchange Revenue 240.0 162.5 +48% +59%Underlying operating profit [1] 32.1 24.1 +33% +49%Underlying profit before taxation [1] 11.3 12.8 -11% +6%Underlying earnings per share [1] - basic 1.3p 1.8p -27% -16% - cash tax 2.1p 3.2p -35% -24%Profit before taxation 2.1 27.1 -92% -92%
[1] See Explanatory Notes below
Highlights
----------
* Continued growth in revenue and profit in all divisions with underlying
operating profit up 49% at constant exchange rates.
* As anticipated, the relative phasing of savings against additional interest
costs arising from the NationsRent acquisition results in underlying
pre-tax profits being ‚£11.3m, a reduction of 11%.
* Profit before tax at ‚£2.1m (2006 - ‚£27.1m) is after charging exceptional
costs and intangible amortisation amounting to ‚£9.2m (2006 - ‚£14.3m
credit).
* On a proforma basis [1] Sunbelt Q3 underlying operating profit grew by 69% to
$58.1m reflecting the progress made to date on the NationsRent integration.
* Ongoing recovery at A-Plant delivered underlying operating profits 3x prior
year at ‚£3.1m (2006 - ‚£1.0m).
* Ashtead Technology continued to deliver good profits in strong markets and
grew operating profit 89% to ‚£1.1m.
Ashtead's chief executive, Geoff Drabble, commented:
"We are pleased to report a strong performance in the third quarter, traditionally our weakest, despite the prior year comparative being enhanced by hurricane activity.
Conditions in the markets we serve in North America remain good and the financial benefits, principally cost savings, from the integration of NationsRent began to flow in the period. We continue to meet our integration expectations.
A-Plant continued to improve its financial performance built upon greater market share and is well positioned for further improvements. Ashtead Technology continued to trade strongly.
Looking forward, the progress made to date in integrating the NationsRent acquisition and delivering the cost savings together with the expected realisation of improvements in its operational performance and the ongoing growth of A-Plant and Technology allow us to view future periods with confidence."
Contacts:---------Geoff Drabble Chief executive ) 01372 362 300 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.
b) The narrative that follows is based on underlying operating profit, profit
before tax and earnings per share as the Directors believe that these
provide a more consistent measure of operating performance.
c) Proforma basis adjusts for NationsRent throughout both periods.
Review of the quarter---------------------The major focus of the quarter was to drive the operational performance of allthree divisions. In North America we began to see the benefits of the costsavings and efficiencies realised to date from the integration of NationsRentand these will be more apparent in subsequent periods.As we reported at the half year the structural changes completed together withthe successful systems integration have allowed us to start to focus on theimprovement of the ex-NationsRent operational performance. This will continueto be an area of primary focus in Quarter 4 and beyond.
A-Plant's recovery programme has continued and it has once again delivered strong revenue and profit growth. Ongoing focus on revenue growth and operational efficiency will allow us to continue to improve margins and return on investment.
We have continued to invest in Ashtead Technology to support current buoyant market conditions contributing to good revenue and profit growth.
A quarter of operational growth-------------------------------Ashtead has continued to make good progress in the quarter to January 2007,sustaining the momentum established in recent periods.
* Revenue for the quarter was at ‚£240.0m up 47.6% on the revenue reported in
Quarter 3 2006. On a consolidated, proforma basis the organic revenue
growth was 6.3% at constant exchange rates.
* Underlying operating profit for the quarter at ‚£32.1m was 32.9% up on the
prior year, reflecting good performance in all three divisions.
* The underlying profit before tax of ‚£11.3m was down 10.8% on the prior
year, reflecting the financing costs of the NationsRent acquisition but not
yet benefiting from the full effects of the operational efficiencies and
cost savings.
* Profit before tax, which is calculated after exceptional items, non-cash
fair value remeasurements of embedded derivatives in long term debt and
amortisation of acquired intangibles, was ‚£2.1m in the quarter as compared
to ‚£27.1m reported in the prior year. This is due to the exceptional costs
associated with the restructuring of the NationsRent business and the
intangible amortisation in the quarter amounting to ‚£9.2m. In the same
period last year there was an exceptional credit of ‚£14.3m arising mainly
from the settlement of litigation against Head & Engquist.
* Basic earnings per share for the quarter were 0.3p (2006 - 4.1p) whilst
underlying earnings per share were 1.3p (2006 - 1.8p). On a cash tax basis
underlying earnings per share were 2.1p (2006 - 3.2p).
* Capital expenditure in the third quarter was ‚£43.5m (2006 - ‚£41.7m). Full
year gross capital expenditure remains forecast at approximately ‚£375m and
approximately ‚£275m net.
* Net debt at 31 January 2007 was ‚£972.1m (2006 - ‚£497.4m). The ratio of debt
to proforma LTM EBITDA, excluding cost savings, was 3.0 times at 31 January
2007. Availability under the $1.75bn asset based loan facility was $524m at
31 January 2007 ($283m at 30 April 2006).
Sunbelt------- 2007 2006 Growth 2007 2006 Growth
-----------------------------------------------------
$m $m ‚£m ‚£m Revenue ------- As reported 361.5 209.2 +72.8% 186.8 119.5 +56.4%NationsRent - 144.5 - 82.6
-----------------------------------------------------
Pro forma combined 361.5 353.7 +2.2% 186.8 202.1
-7.6%
-----------------------------------------------------
Underlying operating profit --------------------------- As reported 58.1 41.8 +39.1% 29.8 23.9 +24.3%NationsRent - (7.3) - (3.9)
-----------------------------------------------------
Proforma combined 58.1 34.5 +68.5% 29.8 20.0
+49.0%
-----------------------------------------------------
Following a successful first phase of integration, the operating efficienciesassociated with the restructuring and systems integration are beginning to bereflected in the Q3 proforma profit improvement. The fact that these benefitsare flowing to operating profit allows us to focus on the dollar utilisation ofthe combined business in future periods.Seasonally Q3 is our weakest period, although last year was improvedsignificantly by the high levels of hurricane activity, particularly inFlorida, Louisiana and Texas where we have a large proportion of our fleet. Thefact that NationsRent's geographic footprint was more northerly based increasesthis seasonality and historically NationsRent made losses in the third andfourth quarters.Exceptional costs incurred in the third quarter totalled ‚£5.4m and related toNationsRent redundancies, retention bonuses, rebranding and other costs. Wecontinue to anticipate further exceptionals of around ‚£10m in the fourthquarter but no further exceptional items relating to NationsRent thereafter.The charge for intangible amortisation for the third quarter was ‚£3.8m. Weexpect that fourth quarter amortisation will be at a similar level.A-Plant------- 2007 2006 Growth ------------------------ ‚£m ‚£m Revenue 48.2 39.2 +22.6% -------------- Underlying operating profit 3.1 1.0 +197.0% -------------- A-Plant continued its recovery with another quarter of good revenue growth,including for the first full period a contribution from Lux which is now fullyintegrated into our existing traffic business. Organic revenue growth for thequarter was circa 11% and A-Plant continues to regain market share.Ashtead Technology------------------ 2007 2006 Growth ------------------------ ‚£m ‚£m Revenue 5.0 3.8 +31.3% -------------- Operating profit 1.1 0.6 +88.6% --------------
Both Ashtead Technology's offshore and onshore markets remain good and the division has continued to invest in order to support these markets. This has enabled the business to deliver excellent revenue and profit growth.
Current trading and outlook---------------------------Based upon the current performance of all three divisions, together withfavourable market conditions the Board anticipates a satisfactory conclusion tothe financial year, despite the impact of the weaker US dollar.
Looking forward, the progress made to date in integrating the NationsRent acquisition and delivering the cost savings together with the expected realisation of improvements in its operational performance and the ongoing growth of A-Plant and Technology allow us to view future periods with confidence.
- o0o - Geoff Drabble and Ian Robson will host a conference call for equity analysts at9.30am on Tuesday 6 March and a further conference call for bondholders at 3pm(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
Three months to 31 January -------------------------- 2007 2006 Before exceptional items, Exceptional items, Before amortisation amortisation
exceptional items Exceptional items
and fair value and fair value and fair value and fair value remeasurements+ remeasurements+ Total remeasurements+ remeasurements+ Total --------------- --------------- ----- --------------- --------------- ----- ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m (restated) (restated) (restated) Revenue 240.0 - 240.0 162.5 - 162.5Staff costs (79.7) (1.2) (80.9) (52.2) - (52.2)Other operating costs (85.5) (4.5) (90.3) (57.7) (0.4) (58.1)Other income 2.0 - 2.0 1.3 11.8 13.1
------------------------------------------------------------------------------------
EBITDA* 76.5 (5.7) 70.8 53.9 11.4 65.3Depreciation (44.4) - (44.4) (29.8) - (29.8)Amortisation of intangibles - (3.8) (3.8) - - -
------------------------------------------------------------------------------------
Operating profit 32.1 (9.5) 22.6 24.1 11.4 35.5Investment income 1.1 - 1.1 0.6 2.9 3.5Interest expense (21.9) 0.3 (21.6) (11.9) - (11.9)
------------------------------------------------------------------------------------
Net financing costs (20.8) 0.3 (20.5) (11.3) 2.9 (8.4)
------------------------------------------------------------------------------------
Profit on ordinary activities before taxation 11.3 (9.2) 2.1 12.8 14.3 27.1Taxation: - current 0.1 - 0.1 0.9 - 0.9- deferred (4.1) 3.6 (0.5) (5.8) (4.5) (10.3)
------------------------------------------------------------------------------------
(4.0) 3.6 (0.4) (4.9) (4.5) (9.4)
------------------------------------------------------------------------------------
Profit attributable to equity shareholders 7.3 (5.6) 1.7 7.9 9.8 17.7
------------------------------------------------------------------------------------
Basic earnings per share 1.3p (1.0)p 0.3p 1.8p 2.3p 4.1p
------------------------------------------------------------------------------------
Diluted earnings per share 1.3p (1.0)p 0.3p 1.8p 2.3p 4.1p
------------------------------------------------------------------------------------
Nine months to 31 January------------------------- Revenue 662.3 - 662.3 476.3 - 476.3Staff costs (206.3) (8.7) (215.0) (147.9) (0.3) (148.2)Other operating costs (231.2) (10.4) (241.6) (163.6) (0.8) (164.4)Other income 6.6 - 6.6 5.5 15.4 20.9
-------------------------------------------------------------------------------------
EBITDA* 231.4 (19.1) 212.3 170.3 14.3 184.6Depreciation (116.6) - (116.6) (84.9) - (84.9)Amortisation of intangibles - (6.6) (6.6) - - -
-------------------------------------------------------------------------------------
Operating profit 114.8 (25.7) 89.1 85.4 14.3 99.7Investment income 3.1 - 3.1 2.1 7.3 9.4Interest expense (52.2) (68.5) (120.7) (34.5) (7.0) (41.5)
-------------------------------------------------------------------------------------
Net financing costs (49.1) (68.5) (117.6) (32.4) 0.3 (32.1)
-------------------------------------------------------------------------------------
Profit/(loss) on ordinary activities before taxation 65.7 (94.2) (28.5) 53.0 14.6 67.6Taxation: - current - - - (1.3) - (1.3)- deferred (23.1) 66.3 43.2 (18.9) (4.2) (23.1)
-------------------------------------------------------------------------------------
(23.1) 66.3 43.2 (20.2) (4.2) (24.4) Profit attributable to equity shareholders 42.6 (27.9) 14.7 32.8 10.4 43.2
-------------------------------------------------------------------------------------
Basic earnings per share 8.5p (5.6)p 2.9p 8.1p 2.6p 10.7p
-------------------------------------------------------------------------------------
Diluted earnings per share 8.4p (5.5)p 2.9p 8.0p 2.6p 10.6p
-------------------------------------------------------------------------------------
* EBITDA is presented here as an additional performance measure as it is commonly used by investors and lenders.
+ Fair value remeasurements related to embedded derivatives in long term debt.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
Unaudited Three months to Nine months to 31 January 31 January 2007 2006 2007 2006
-----------------------------------
‚£m ‚£m ‚£m ‚£m (restated) (restated) Net profit for the period 1.7 17.7 14.7 43.2
Foreign currency translation differences (3.3) (0.6) (10.5) 19.3
-----------------------------------
Total recognised income and expense for the period (1.6) 17.1 4.2 62.5
-----------------------------------
CONSOLIDATED MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
Unaudited Three months to Nine months to 31 January 31 January 2007 2006 2007 2006
------------------------------------
‚£m ‚£m ‚£m ‚£m (restated) (restated) Total recognised income and expense for the period (1.6) 17.1 4.2 62.5
Issue of ordinary shares, net of expenses 0.8 1.1 148.2 69.5 Dividends paid
- - (4.0)
-
Credit in respect of share based payments 0.6 0.3 2.0
0.8
Own shares acquired by ESOT - - (4.9)
(2.8)
------------------------------------
Net (decrease)/increase in equity shareholders' funds (0.2) 18.5 145.5
130.0 Opening equity shareholders' funds 404.0 231.2 258.3 119.7
------------------------------------
Closing equity shareholders' funds 403.8 249.7 403.8 249.7
------------------------------------
CONSOLIDATED BALANCE SHEET Unaudited 31 January 2007 2006 --------------- ‚£m ‚£m (restated)Current assets Inventories 32.1 14.3Trade and other receivables 158.1 109.6Current tax asset recoverable 3.7 -Assets held for sale 35.4 -Cash and cash equivalents 1.2 1.3 ------------------ 230.5 125.2 ------------------Non-current assets Property, plant and equipment - rental equipment 946.1 557.2- other assets 131.9 89.0 ------------------ 1,078.0 646.2Intangible assets including goodwill 304.4
152.4
Deferred tax asset 41.5
-
Other financial assets - derivatives -
14.9
Defined benefit pension fund surplus 2.4 - ------------------ 1,426.3 813.5 ------------------Total assets 1,656.8 938.7 ------------------Current liabilities Trade and other payables 152.5 88.5Current tax liabilities 0.8 0.6Debt due in less than one year 9.5 11.0Provisions 14.9 6.8 ------------------ 177.7 106.9 ------------------Non-current liabilities Debt due in more than one year 963.8
487.7
Provisions 18.6
11.0
Defined benefit pension fund deficit - 15.8Deferred taxation liability 92.9 67.6 ------------------ 1,075.3 582.1 ------------------Total liabilities 1,253.0 689.0 ------------------Equity shareholders' funds Share capital 55.9 40.3Share premium account 2.7 1.9Non-distributable reserve 90.7 90.7Own shares held in treasury through the ESOT (8.6)
(4.2)
Cumulative foreign exchange translation differences (27.7) (13.3)Distributable reserves 290.8 134.3 ------------------Total equity shareholders' funds 403.8
249.7
------------------
Total liabilities and equity shareholders' funds 1,656.8
938.7
------------------
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Nine months to 31 January 2007 2006 ------------------- ‚£m ‚£m ‚£m ‚£mCash flows from operating activities
Cash generated from operations before exceptional items 236.2
158.3Exceptional items (9.7) 11.5 -------------------- Cash generated from operations 226.5
169.8
Financing costs paid before exceptional items (34.9) (27.7)
Exceptional financing costs paid (49.8) (14.5) -------------------- Financing costs paid (84.7) (42.2)Tax paid (6.0) (1.5) -------------------- Net cash from operating activities 135.8
126.1
-------------------- Cash flows from investing activities Acquisition of businesses (327.1) (56.8)Disposal of businesses - 12.5Payments for property, plant and equipment (265.6)
(184.0)
Proceeds on sale of property, plant and equipment 42.0
35.7
--------------------
Net cash used in investing activities (550.7)
(192.6)
--------------------
Cash flows from financing activities Drawdown of loans 883.3 238.9Redemption of loans (599.5) (230.3)Capital element of finance lease payments (8.0)
(9.6)
Purchase of own shares by the ESOT (4.9)
(2.8)
Dividends paid (4.0)
-
Proceeds from issue of ordinary shares 148.2
69.5
--------------------
Net cash from financing activities 415.1
65.7
--------------------
Increase/(decrease) in cash and cash equivalents 0.2
(0.8)
Opening cash and cash equivalents 1.0
2.1
Effect of exchange rate changes -
-
--------------------
Closing cash and cash equivalents 1.2
1.3
--------------------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
The financial statements for the nine months ended 31 January 2007 wereapproved by the directors on 5 March 2007. They have been prepared inaccordance with relevant International Financial Reporting Standards (`IFRS')and the accounting policies set out in the Group's Annual Report and Accountsfor the year ended 30 April 2006. 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 2006 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 2006 comparatives have been restated to include the fair value of embeddedderivatives included within our long term debt instruments in accordance withIAS 39. This increased investment income by ‚£5.1m and total assets by ‚£5.1m inthe nine months ended and as at 31 January 2006. In addition, the comparativefigures for operating profit for Sunbelt, A-Plant, Ashtead Technology andCorporate items in note 2 have been restated to include share basedremuneration costs within the operating segment results. In 2006 these costswere included within Corporate items.
The exchange rates used in respect of the US dollar are:
2007
2006
---- ---- Average for the nine months ended 31 January 1.8932 1.7824At 31 January 1.9574 1.7774 2. Segmental analysis Operating profit before Exceptional exceptionals items and Operating Revenue and amorisation amortisation profit
---------------------------------------------------
Three months to 31 January ‚£m ‚£m ‚£m ‚£m2007 ---- Sunbelt 186.8 29.8 (9.0) 20.8A-Plant 48.2 3.1 (0.3) 2.8Ashtead Technology 5.0 1.1 - 1.1Corporate items - (1.9) (0.2) (2.1)
---------------------------------------------------
240.0 32.1 (9.5)
22.6
--------------------------------------------------- 2006 ---- Sunbelt 119.5 23.9 11.4 35.3A-Plant 39.2 1.0 - 1.0Ashtead Technology 3.8 0.6 - 0.6Corporate items - (1.4) - (1.4)
---------------------------------------------------
162.5 24.1 11.4
35.5
---------------------------------------------------
Nine months to 31 January 2007 ---- Sunbelt 506.3 102.1 (25.2) 76.9A-Plant 139.7 14.2 (0.3) 13.9Ashtead Technology 16.3 4.4 - 4.4Corporate items - (5.9) (0.2) (6.1)
---------------------------------------------------
662.3 114.8 (25.7)
89.1
---------------------------------------------------
2006 ---- Sunbelt 345.6 77.3 14.3 91.6A-Plant 118.9 9.6 - 9.6Ashtead Technology 11.8 2.9 - 2.9Corporate items - (4.4) - (4.4)
---------------------------------------------------
476.3 85.4 14.3
99.7
---------------------------------------------------
3. Operating costs 2007 2006 ---- ---- Before exceptional Exceptional Before items and items and exceptional Exceptional amortisation amortisation Total items items Total
--------------------------------------------------------------------
Three months to 31 January ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m-------------------------- Staff costs: Salaries 71.8 - 71.8 47.5 - 47.5Social security costs 6.4 - 6.4 4.1 - 4.1Other pension costs 1.5 - 1.5 0.6 - 0.6Redundancies and retention bonuses - 1.2 1.2 - - -
-------------------------------------------------------------
79.7 1.2 80.9 52.2
- 52.2
-------------------------------------------------------------
Other operating costs: Vehicle costs 17.3 - 17.3 14.2 - 14.2Spares, consumables & external repairs 14.6 - 14.6 11.6 - 11.6Facility costs 14.1 0.1 14.2 8.2 0.1 8.3Other external charges 39.8 4.4 44.2 23.7 0.3 24.0
-------------------------------------------------------------
85.8 4.5 90.3 57.7
0.4 58.1
-------------------------------------------------------------
Other income: Profit on disposal of fixed assets (2.0) - (2.0) (1.3) (0.5) (1.8)Other income - - - - (11.3) (11.3)
-------------------------------------------------------------
(2.0) - (2.0) (1.3)
(11.8) (13.1)
-------------------------------------------------------------
Depreciation and amortisation: Depreciation 44.4 - 44.4 29.8 - 29.8Amortisation of acquiredintangibles - 3.8 3.8 - - -
-------------------------------------------------------------
44.4 3.8 48.2 29.8
- 29.8
-------------------------------------------------------------
207.9 9.5 217.4 138.4
(11.4) 127.0
-------------------------------------------------------------
Nine months to 31 January ------------------------- Staff costs: Salaries 187.3 - 187.3 134.4 0.3 134.7Social security costs 15.3 - 15.3 11.3 - 11.3Other pension costs 3.7 - 3.7 2.2 - 2.2Redundancies and retentionbonuses - 8.7 8.7 - - -
-------------------------------------------------------------
206.3 8.7 215.0 147.9
0.3 148.2
-------------------------------------------------------------
Other operating costs: Vehicle costs 48.9 - 48.9 39.0 - 39.0Spares, consumables 42.2 - 42.2 32.4 - 32.4& external repairs Facility costs 34.5 4.1 38.6 22.9 0.5 23.4Other external charges 105.6 6.3 111.9 69.3 0.3 69.6
-------------------------------------------------------------
231.2 10.4 241.6 163.6
0.8 164.4
-------------------------------------------------------------
Other income: Profit on disposal (6.6) - (6.6) (5.5) (4.1) (9.6)of fixed assets Other income - - - - (11.3) (11.3)
-------------------------------------------------------------
(6.6) - (6.6) (5.5)
(15.4) (20.9)
-------------------------------------------------------------
Depreciation and amortisation: Depreciation 116.6 - 116.6 84.9 - 84.9Amortisation of acquired intangibles - 6.6 6.6 - - -
-------------------------------------------------------------
116.6 6.6 123.2 84.9
- 84.9
-------------------------------------------------------------
547.5 25.7 573.2 390.9
(14.3) 376.6
-------------------------------------------------------------
4. Exceptional items, amortisation and fair value remeasurements related to
embedded derivatives
`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 Nine months to 31 January 31 January 2007 2006 2007 2006
----------------------------------
‚£m ‚£m ‚£m ‚£m Senior note redemption costs (0.3) - 42.0 4.8Write off of deferred financing costs relating to debt redeemed (0.1) - 10.5 -Acquisition integraion costs 3.1 0.3 16.1 0.4Rebranding costs 2.1 - 2.5 -Litigation proceeds - (11.3) - (11.3)Profit on sale of scaffolding - (0.4) - (3.4)Other costs 0.6 - 1.1 - ---------------------------------- Total exceptional items 5.4 (11.4) 72.2
(9.5)
Amortisation of acquired intangibles 3.8 - 6.6
-
Fair value remeasurements of embedded derivatives - (2.9) 15.4
(5.1)
----------------------------------
9.2 (14.3) 94.2
(14.6)
----------------------------------
Senior note redemption costs include `make-whole' payments and associated costsof ‚£25.3m paid at closing on 31 August 2006 in connection with NationsRent's$400m secured and unsecured loan notes and ‚£16.7m paid on the same date inconnection with the redemption of the ‚£78m Ashtead secured loan notes due 2014.The write off of deferred financing costs relates to deferred costs previouslycarried forward on both Ashtead's sterling senior notes and its $800m assetbased bank facility which was replaced on 31 August 2006 by a new $1.75bn assetbased bank facility. Acquisition integration costs relate primarily to employeeretention and severance costs and vacant property costs following theNationsRent acquisition and rebranding relates to new signage and painting offormer NationsRent equipment. The items detailed in the table above arepresented in the income statement as follows: Three months to Nine months to 31 January 31 January 2007 2006 2007 2006
----------------------------------
‚£m ‚£m ‚£m ‚£m Staff costs 1.2 - 8.7 0.3Other operating costs 4.5 0.4 10.4 0.8Other income - (11.8) - (15.4)
Amortisation of acquired intangibles 3.8 - 6.6
-
----------------------------------
Charged/(credited) in arriving at operating profit 9.5 (11.4) 25.7 (14.3)Net financing (income)/costs (0.3) (2.9) 68.5 (0.3)
----------------------------------
Charged/(credited) in arriving at profitbefore tax 9.2 (14.3) 94.2
(14.6)
----------------------------------
5. Financing costs Three months to Nine months to 31 January 31 January 2007 2006 2007 2006
-------------------------------------
‚£m ‚£m ‚£m ‚£m (restated) (restated)Investment income: Interest and other financial income 0.1 - 0.1 0.2Expected return on assets of defined benefit pension plan 1.0 0.6
3.0 1.9
-------------------------------------
1.1 0.6 3.1 2.1Exceptional income and fair value remeasurement of embedded derivatives in long term debt - 2.9 - 7.3Total investment income 1.1 3.5
3.1 9.4
-------------------------------------
Interest expense: Bank interest payable 10.6 4.8 24.1 11.8Interest on second priority senior secured notes 9.3 5.3 22.6 14.3Interest payable on finance leases 0.5 0.4 1.2 1.45.25% unsecured convertible loan note, due 2008: - interest payable - - - 1.9- non-cash unwind of discount - - - 1.0Non-cash unwind of discount on defined benefit pension plan liabilities 0.7 0.6 2.0 2.0Non-cash unwind of discount on self insurance provisions 0.1 - 0.4 -
Amortisation of deferred costs of debt raising 0.7 0.7 1.9 2.0 Other
- 0.1
- 0.1
-------------------------------------
21.9 11.9
52.2 34.5
Exceptional costs and fair value remeasurements
of embedded derivatives in long term debt (0.3) - 68.5 7.0
-------------------------------------
Total interest expense 21.6 11.9
120.7 41.5
-------------------------------------
Net financing costs before exceptional items and
fair value remeasurement of embedded derivatives 20.8 11.3 49.1 32.4 Net exceptional items and fair value
remeasurements of embedded derivatives (0.3) (2.9)
68.5 (0.3)
-------------------------------------
Net financing costs 20.5 8.4
117.6 32.1
-------------------------------------
6. Taxation
Following the refinancing of the Group at the time of the NationsRent acquisition and the improved trading results at A-Plant, the Group has recognised in full, as an exceptional profit, the previously unrecognised UK deferred tax asset of ‚£37.3m.
The remaining tax credit for the nine month period of ‚£5.9m has been calculatedby applying the directors' best estimate of the effective annual tax rate(estimated at 40% for the US and 22% for the UK) to the Group's profit beforetax for the period and includes a deferred tax credit of ‚£29.0m(2006 - charge of ‚£4.2m) related to the exceptional items and amortisation ofacquired intangibles. The remaining tax credit of ‚£5.9m consists of a deferredtax credit of ‚£3.2m related to the UK (2006 - credit of ‚£1.4m) and a deferredtax credit of ‚£2.7m related to the US (2006 - charge of ‚£5.6m).
7. Earnings per share
Basic and diluted earnings per share for the three and nine months ended 31January 2007 have been calculated based on the profit for the relevant periodand on the weighted average number of ordinary shares in issue during thatperiod (excluding shares held by the ESOT over which dividends have beenwaived). 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 Nine months to 31 January 31 January 2007 2006 2007 2006
-------------------------------
Profit for the financial period (‚£m) 1.7 17.7 14.7
43.2
--------------------------------
Weighted average number of shares (m) - basic 550.5 426.7 499.7 402.3
--------------------------------
- diluted 557.0 435.2 506.4
409.4
--------------------------------
Basic earnings per share 0.3p 4.1p 2.9p
10.7p
--------------------------------
Diluted earnings per share 0.3p 4.1p 2.9p
10.6p
--------------------------------
The weighted average number of shares shown as being in issue in previous periods has been adjusted to take account of the bonus element of the rights issue on 29 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 Nine months to 31 January 31 January 2007 2006 2007 2006
-------------------------------
Basic earnings per share 0.3p 4.1p 2.9p
10.7p
Exceptional items, amortisation of acquired intangibles and fair value remeasurements 1.7p (3.3)p 18.9p
(3.6)p
Deferred tax on exceptional items,
amortisation and fair value remeasurements (0.7)p 1.0p (5.8)p
1.0p
Deferred tax credit for previously unrecognised UK tax losses - - (7.5)p
-
-------------------------------
Underlying earnings per share 1.3p 1.8p 8.5p 8.1pOther deferred tax 0.8p 1.4p 4.6p 4.7p
-------------------------------
Cash tax earnings per share 2.1p 3.2p 13.1p
12.8p
-------------------------------
8. Property, plant and equipment
2007 2006 ---- ---- Rental Rental equipment Total equipment Total --------------------------------------- Net book value ‚£m ‚£m ‚£m ‚£m-------------- At 1 May 559.9 646.7 452.9 537.1Exchange difference (35.9) (40.3) 22.7 25.9Reclassifications (0.4) (0.1) (0.2) (0.1)Additions 207.9 235.9 158.5 173.0Acquisitions 349.8 390.3 31.9 35.0Disposals (34.2) (37.9) (36.7) (39.8)Depreciation (101.0) (116.6) (71.9) (84.9)
-----------------------------------
At 31 January 946.1 1,078.0
557.2 646.2
-----------------------------------
9. Called up share capital Ordinary shares of 10p each: 31 January 31 January 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 559,215,991 403,285,036 55.9
40.3
----------------------------------------------
On 29 August 2006 the Group issued 152,240,015 ordinary shares of 10p each at ‚£1 per share through a 3 for 8 Rights Issue which raised ‚£152.2m before issueexpenses of ‚£5.5m. A further 2,641,910 shares were issued in the nine monthsended 31 January 2007 at an average price of 55.2p per share under share optionplans raising ‚£1.5m.
10. Statement of changes in shareholders' equity
Own Cumulative shares foreign Non held in exchange Share Share distributable treasury translation Distributable 31 Jan capital premium reserves (ESOT) differences reserves Total 2006
-------------------------------------------------------------------------------
‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£mTotal recognised income and expense - - - - (10.5) 14.7 4.2 62.5Shares issued 15.5 (0.5) - - - 133.2 148.2 69.5Dividends paid - - - - - (4.0) (4.0) -Share based payments - - - - - 2.0 2.0 0.8Vesting of share awards - - - 0.5 - (0.5) - -Own shares purchased - - - (4.9) - - (4.9) (2.8)Net changes in 15.5 (0.5) - (4.4) (10.5) 145.4 145.5 130.0shareholders' equity Opening shareholders' equity 40.4 3.2 90.7 (4.2) (17.2) 145.4 258.3 119.7
-------------------------------------------------------------------------------
Closing shareholders'equity 55.9 2.7 90.7 (8.6) (27.7)
290.8 403.8 249.7
-------------------------------------------------------------------------------
11. Notes to the cash flow statement
Nine months to 31 January 2007 2006 ----------- ‚£m ‚£ma) Cash flow from operating activities ------------------------------------ Operating profit 89.1 99.7Depreciation and amortisation 123.2 84.9Exceptional items 19.1 (14.3) ------------EBITDA before exceptional items 231.4 170.3
Profit on disposal of property, plant and equipment (6.6) (5.5)
Decrease in inventories 9.4 0.8
Decrease/(increase) in trade and other receivables 6.4 (9.3)
(Decrease)/increase in trade and other payables (6.1) 1.9 Exchange differences (0.1) (0.8)Other non-cash movements 1.8 0.9 ------------
Cash generated from operations before exceptional items 236.2 158.3
------------ b)Reconciliation to net debt -------------------------- (Increase)/decrease in cash in the period (0.2) 0.8 Increase in debt through cash flow 275.8 (1.0) ------------Change in net debt from cash flows 275.6 (0.2) Debt acquired 232.8 -Exchange difference (44.7) 12.2Non-cash movements: - deferred costs of debt raising 12.4 2.2 - convertible loan note - (1.0)- capital element of new finance leases 2.4 1.9 ------------ Movement in net debt in the period 478.5 15.1 Opening net debt 493.6 482.3 ------------ Closing net debt 972.1 497.4 ------------ c) Analysis of net debt --------------------
1 May Exchange Cash Debt Non-cash 31 January 2006 movement flow acquired movements 2007 ----------------------------------------------------- ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m Cash (1.0) - (0.2) - - (1.2)Debt due within 1 year 10.6 (0.5) (11.5) 7.4 3.5 9.5Debt due after 1 year 484.0 (44.2) 287.3 225.4 11.3 963.8
------------------------------------------------------
Total net debt 493.6 (44.7) 275.6 232.8 14.8
972.1
------------------------------------------------------
Details of the changes in the Group's debt following the NationsRent acquisition are given in the Segmental Results and Review of Balance Sheet and Cashflow accompanying these interim financial statements.
a) Acquisitions ------------ Nine months to 31 January ------------------------- 2007 2006 NationsRent Lux Total Total ------------------------------------- ‚£m ‚£m ‚£m ‚£m Cash consideration 311.2 15.8 327.0 56.8Less: cash/overdrafts acquired (6.5) 0.3 (6.2)
-
Attributable costs paid 6.0 0.3 6.3
-
-------------------------------
310.7 16.4 327.1
56.8
-------------------------------
12. Acquisitions
NationsRent Companies Inc ("NationsRent")
On 31 August 2006, Sunbelt acquired the entire issued share capital ofNationsRent for a total consideration of US$592m plus acquisition costs. Aspart of the NationsRent acquisition, the Group has also agreed to pay deferredcontingent consideration of up to $89m. The amount of the deferred contingentconsideration is linked to the Company's share price performance over the threeyears from 1 September 2006 to 31 August 2009. In the event that the Company'sshare price (measured on a five day average basis) rises by more than 22.2%above the reference price of 204p (as adjusted for the bonus element of therights issue), contingent consideration becomes payable at the rate of $5m forevery additional 1% rise in the share price up to a maximum of 40% above thereference price. Accordingly, deferred contingent consideration starts tobecome payable when the Company's share price reaches 250p with the maximum$89m being payable at 286p. The contingent consideration is payable on aquarterly basis in cash. It is not practicable to estimate reliably the amountof contingent consideration which will become payable and accordingly noprovision has been made.NationsRent's revenues and estimated operating profits under IFRS and AshteadGroup plc specific accounting policies for the period pre-acquisition (1 May to31 August 2006) were $230.7m and $19m respectively.
Due to the operational integration of NationsRent and Sunbelt since acquisition, in particular the movement of rental equipment between profit centres and the merger of some profit centres, it is not practical to report the revenue and profit of the acquired business post acquisition.
The provisional goodwill arising on acquisition is as follows:
At estimated fair value ---------- ‚£m Net assets acquired: Inventory 30.0Trade and other receivables 55.2Cash and cash equivalents 6.5Property, plant and equipment: - rental equipment 341.1- other assets 39.4Intangible assets - tradename and distribution agreements 18.1Assets held for sale 41.0Trade and other payables (91.9)Deferred tax liability (35.1)Debt (232.6) ----- Net assets acquired 171.7 ----- Consideration paid: Cash 311.2Directly attributable costs 6.0 ----- 317.2 ----- Goodwill 145.5 ----- Fair values have been estimated and will be refined and adjusted during thefourth quarter. $28.0m of the consideration payable for the ordinary equityshare capital of NationsRent was paid at closing to an escrow agent to securethe warranties and indemnities given by the vendors in the merger agreement.$15.2m has recently been released to the vendors and the remainder will eitherbe released to the vendors in stages over the next six months as the relatedwarranties and indemnities expire or will be used to meet any agreed warrantyor indemnity claims.
Lux Traffic Controls Limited ("Lux")
On 16 October 2006, A-Plant purchased the entire issued share capital of Luxfor total consideration of ‚£15.8m and attributable costs of ‚£0.3m. Theacquisition included arrangements for the vendor to acquire from Lux for cashimmediately after closing assets valued at ‚£0.3m and consequently, beforecosts, there was a net cash outflow of ‚£15.5m in connection with theacquisition. The consideration payable is subject to downwards only adjustmentto the extent that Lux's net assets at closing are less than ‚£4.25m. Agreementof the closing balance sheet is in progress and, pending this agreement, ‚£0.5mof the total consideration paid is being held by an escrow agent for release tothe vendor or purchaser as appropriate following agreement of the closingbalance sheet.
The net assets acquired and the provisional goodwill arising on the acquisition are summarised in the table below:
Acquiree's At estimated book value fair value ------------------------ ‚£m ‚£m Net assets acquired: Inventory 0.3 0.1Trade and other receivables 3.0
2.9
Assets acquired by the vendor immediately after closing 0.2
0.3
Property, plant and equipment: - rental equipment 3.8 4.0- other assets 0.9 0.9
Intangible assets (tradenames, customer list and non-competes) -
5.0Trade and other payables (3.1) (3.2)Short term borrowings (0.3) (0.3)Deferred tax liabilities (0.4) (1.9)Debt (0.2) (0.2) ----------------- 4.2 7.6 -----------------Consideration paid: Paid in cash at closing 15.8Directly attributable costs 0.3 ---- 16.1 ---- Goodwill 8.5 ----
Fair values have been estimated and will be refined and adjusted during the fourth quarter.
Lux's revenue and operating profit in the period from 1 May 2006 to 16 October2006 was ‚£9.6m and ‚£0.3m, respectively. For the same reasons as NationsRent, itis not practical to report the revenue and profit of the acquired business postacquisition.
13. Contingent liabilities and contingent assets
There have been no significant changes in contingent liabilities from thosereported at 30 April 2006 or to the amount of performance guarantees issued bysubsidiaries and guaranteed by Ashtead Group plc. The Group remains subject toperiodic legal claims in the ordinary course of its business. However, theclaims outstanding at 31 January 2007 are not expected to have a significantimpact on the Group's financial 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 acquiredintangibles for the three months and nine months ended 31 January 2007 aresummarised below: Revenue EBITDA Operating profitThree months to 31 January 2007 2006 2007 2006 2007 2006
------------------------------------------------
Sunbelt in $m 361.5 209.2 121.9 76.1 58.1
41.8
------------------------------------------------- Sunbelt in ‚£m 186.8 119.5 62.7 43.5 29.8 23.9A-Plant 48.2 39.2 13.2 10.2 3.1 1.0Ashtead Technology 5.0 3.8 2.4 1.6 1.1 0.6Group central costs - - (1.8) (1.4) (1.9) (1.4)
-------------------------------------------------
240.0 162.5 76.5 53.9 32.1
24.1
-------------------------------------------------
Net financing costs (20.8) (11.3) ------------- Profit before tax, exceptionals and amortisation 11.3
12.8
Exceptional items and amortisation (9.2) 14.3 ------------- Profit before taxation 2.1 27.1 ------------- Nine months to 31 January ------------------------- Sunbelt in $m 958.5 616.0 352.2 235.5 193.3 137.8
-------------------------------------------------
Sunbelt in ‚£m 506.3 345.6 186.0 132.1 102.1 77.3A-Plant 139.7 118.9 43.2 36.9 14.2 9.6Ashtead Technology 16.3 11.8 8.0 5.7 4.4 2.9Group central costs - - (5.8) (4.4) (5.9) (4.4)
-------------------------------------------------
662.3 476.3 231.4 170.3 114.8
85.4
-------------------------------------------------
Net financing costs (49.1) (32.4) -------------Profit before tax, exceptionals and amortisation 65.7
53.0
Exceptional items and amortisation (94.2) 14.6 -------------(Loss)/profit before taxation (28.5) 67.6 ------------- Revenue increased 47.6% to ‚£240.0m (2006 - ‚£162.5m) in the quarter ended 31January 2007 and 39.0% to ‚£662.3m (2006 - ‚£476.3m) in the nine months thenended. This reflects the contribution from NationsRent since 31 August 2006 aswell as the limiting effect of the weak dollar which, in the third quarter,declined 11% from $1.75 = ‚£1 a year ago to $1.94 = ‚£1. Underlying operatingprofit increased 32.9% to ‚£32.1m (2006 - ‚£24.1m) in the quarter ended 31January 2007 and 34.4% to ‚£114.8m (2006 - ‚£85.4m) in the nine months thenended. Profit before tax, exceptionals and amortisation for the quarterdeclined to ‚£11.3m (2006 - ‚£12.8m) reflecting the financing costs of theacquisition but not the full effects of the operational efficiencies and costsavings and for the nine months ended 31 January 2007 was ‚£65.7m (2006 - ‚£53.0m).After exceptional items and amortisation, profit before tax for the quarterwas ‚£2.1m (2006 - ‚£27.1m) and for the nine months was a loss of ‚£28.5m (2006 - profit of ‚£67.6m).Balance sheetCapital expenditure in the nine months was ‚£235.9m of which ‚£207.9m wasinvested in the rental fleet (2006 - ‚£173.0m in total). Expenditure on rentalequipment was 88% of total capital expenditure with the balance relating to ourdelivery vehicle fleet, property improvements and to computer equipment.Capital expenditure by division was as follows: 31 January 2007 2006 --------------- ---- Growth Maintenance Total Total
-------------------------------------
Sunbelt in $m 140.6 139.1 279.7
195.6
------------------------------------
Sunbelt in ‚£m 71.8 71.1 142.9 110.0A-Plant 15.6 41.8 57.4 42.7Ashtead Technology 6.2 1.4 7.6 5.8
------------------------------------
Total rental equipment 93.6 114.3 207.9
158.5
------------------------------------
Delivery vehicles, property improvements & computers 28.0 14.5 -------------- Total additions 235.9 173.0 --------------With strong US market conditions and a much improved performance at A-Plant,the Group spent ‚£93.6m of its rental equipment capital expenditure on growthwith ‚£114.3m 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.The average age of the Group's serialised rental equipment, which constitutesthe substantial majority of our fleet, at 31 January 2007 was 31 months (2006 -38 months) on a net book value basis. Sunbelt's fleet had an average age of 32months (2006 - 40 months) comprising 38 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 30 months (2006 - 37 months).Assets held for sale--------------------This includes NationsRent equipment identified as held for sale as part of theprogram to reshape its fleet to contain a similar profile of higher returningassets to that of Sunbelt. The lower returning equipment is in the process ofbeing disposed of and has been treated as an asset held for sale effective asof the acquisition date.Trade receivables-----------------Receivable days were the same as last year at 47 days. The bad debt charge forthe nine months ended 31 January 2007 as a percentage of total turnover was0.7% (2006 - 0.7%).Trade and other payables------------------------Group payable days were 68 days in 2007 (2006 - 55 days). Capital expenditurerelated payables at 31 January 2007 totalled ‚£32.7m (2006 - ‚£24.4m). Paymentperiods for purchases other than rental equipment vary between 7 and 45 daysand for rental equipment between 30 and 90 days.
Cash flow and net debt
Free cash flow (defined as the net cash inflow from operations less netmaintenance capital expenditure, financing costs paid and tax paid) issummarised below: Nine months to Year to Year to 31 January 31 January 30 April 2007 2006 2007 2006
-----------------------------------
‚£m ‚£m ‚£m
‚£m
EBITDA before exceptional items 231.4 170.3 285.8
224.7
------------------------------------
Cash inflow from operations before exceptional items 236.2 158.3 293.1 215.2Cash efficiency ratio* 102.1% 93.0% 102.6% 95.8%
Maintenance rental capital expenditure (119.0) (106.3) (162.6) (149.9) Non-rental capital expenditure
(26.2) (12.5) (30.5)
(16.8)
Proceeds from sale of used rental equipment 42.0 35.7 56.7 50.4 Tax paid
(6.0) (1.5) (7.3)
(2.8)
------------------------------------ Free cash flow before interest 127.0 73.7 149.4
96.1
Financing costs paid (34.9) (27.7) (45.9)
(38.7)
------------------------------------ Free cash flow after interest 92.1 46.0 103.5 57.4Growth capital expenditure (120.4) (65.2) (117.8) (62.6)Acquisitions and disposals (327.1) (44.3) (327.0) (44.2)Issue of ordinary share capital 148.2 69.5 149.6
70.9
Dividends paid (4.0) - (6.0)
(2.0)
Purchase of own shares by ESOT (4.9) (2.8) (4.9) (2.8)Pension plan funding - - (17.1) (17.1)Exceptional costs paid (net) (59.5) (3.0) (58.7) (2.2)
------------------------------------
Increase in total debt (275.6) 0.2 (278.4)
(2.6)
------------------------------------
* Cash inflow from operations before exceptional items as a percentage of EBITDA before exceptional items.
Cash inflow from operations increased 49% to ‚£236.2m and the cash efficiencyratio was 102.1% (2006 - 93.0%). Cash inflow from operations in the nine monthsended 31 January 2007 has benefited from cash generated from NationsRentreceivables which were seasonally higher when acquired in August compared tothe seasonally lower level in January. Net cash capital expenditure in the ninemonths ended 31 January 2007 increased to ‚£223.6m (2006 - ‚£148.3m) reflectingthe strong US market conditions and the improved performance of A-Plant. Thisresults in net cash capital expenditure in the year to 31 January 2007 of ‚£254.2m.Financing costs (excluding exceptional financing costs) paid of ‚£34.9m werelower than the ‚£49.1m accounting charge reflecting the timing of interestpayments on the new $550m senior secured notes and non-cash items included inthe latter. Payments for exceptional items of ‚£59.5m differ from theexceptional income statement expense of ‚£72.2m due to (a) the inclusion inexceptional payments of ‚£7.2m of interest paid at closing on the NationsRentdebt redeemed which was expensed prior to the acquisition; (b) non cash itemsincluded in the income statement expense; and (c) accrued integration costs of‚£9.4m which have not yet been paid.The Group continues to generate strong free cash flow after interest with ‚£92.1m(2006 - ‚£46.0m) generated in the nine months and free cash flow of ‚£103.5m in the year to 31 January 2007.Acquisition and disposal expenditure of ‚£327.1m relates to the acquisition ofNationsRent and Lux with the majority of the proceeds from the issue of sharecapital of ‚£148.2m relating to the rights issue in connection with theNationsRent acquisition.Net debt 31 January 30 April ---------- -------- 2007 2006 2006 ----------------------- ‚£m ‚£m ‚£mFirst priority senior secured bank debt 552.1 261.6
263.2
Finance lease obligations 24.0 26.0
23.2
12% second priority senior secured notes, due 2014 - 75.4
75.5
8.625% second priority senior secured notes, due 2015 123.2 135.7 132.7 9% second priority senior secured notes, due 2016 274.0 -
- ------------------------ 973.3 498.7 494.6Cash and cash equivalents (1.2) (1.3) (1.0) ------------------------Total net debt 972.1 497.4 493.6 ------------------------Group net debt doubled from ‚£493.6m at 30 April 2006 to ‚£972.1m at 31 January2007 reflecting the impact of the NationsRent acquisition which, together withthe Lux acquisition increased net debt by ‚£472.9 (net of the net rights issueproceeds of ‚£146.7m). The ratio of net debt to pro forma EBITDA was 3.0 timesat 31 January 2007. Pro forma EBITDA for this purpose was ‚£324.3m and includesNationsRent's EBITDA excluding its profit on used equipment sales for thepre-acquisition period but not any benefit from central overhead savings.
New first and second priority senior secured loan facilities
In connection with the NationsRent acquisition, on 31 August 2006, the Grouprepaid the outstanding borrowings under its $800m first priority asset basedsenior secured loan facility and replaced it with a new $1.75bn facility onsubstantially the same terms as the previous facility. The interest rate onborrowings under the new facility varies, according to a grid linked to theratio of funded debt to EBITDA before exceptional items, between LIBOR plus150bp and LIBOR plus 225bp. Currently the Group borrows at LIBOR plus 175bp. Inaddition, during August 2006 the Group raised $550m of new ten year secondpriority senior secured notes carrying an interest rate of 9% per annum.The Group's debt facilities are now committed for a weighted average period ofapproximately 6.5 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 onlymeasured 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 January 2007 availability underthe bank facility was $524m ($283m under the old facility at 30 April 2006).Currency translation--------------------Following the NationsRent acquisition approximately 96% of our debt isdenominated in US dollars. At 31 January 2007 our dollar denominated debtrepresented approximately 88% of the value of our dollar denominated net assets(other than debt) providing a partial, but substantial, hedge against thetranslation effects of changes in the dollar exchange rate. The dollar interestpayable on this debt also limits the impact of changes in the dollar exchangerate on our pre-tax profits and earnings. Based on the currency mix of ourprofits we anticipate prevailing in the coming year and on current dollar debtlevels and interest rates, every 1% change in the US dollar exchange rate wouldimpact pro-forma pre-tax profit by 1.0%.OPERATING STATISTICS Profit centre numbers Staff numbers --------------------- ------------- 31 January 30 April 31 January 30 April
-----------------------------------------------
2007 2006 2006 2007 2006 2006 ---- ---- ---- ---- ---- ----Sunbelt Rentals 454 206 209 7,475 4,067 4,266A-Plant 231 196 193 2,592 2,052 2,081Ashtead Technology 12 11 11 116 103 104Corporate office - - - 14 14 14
----------------------------------------------
Group 697 413 413 10,197 6,236
6,465
----------------------------------------------
ASHTEAD GROUP PLCRelated Shares:
Ashtead Group