31st May 2006 07:01
Speedy Hire PLC31 May 2006 31 May 2006 SPEEDY HIRE Plc PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2006 Speedy Hire is the UK's No. 1 provider of tools and equipment for hire. TheCompany operates from over 300 depots throughout the UK. The Group has alsorecently commenced trading in the Republic of Ireland. The Group's activities are the provision for hire of small tools, portableaccommodation, compressed air, pumps, lifting and material handling, survey andmeasurement instrumentation and power generation equipment. FINANCIAL HIGHLIGHTS 2006 2005 % Change Revenue £254.3m £206.5m +23Profit before tax £30.7m £24.5m +25Profit before tax, amortisation and exceptional items1 £32.2m £25.8m +25Basic earnings per share 50.44p 42.78p +18Adjusted earnings per share1 52.86p 45.15p +17Total dividend per share 14.3p 12.3p +16Return on capital employed (before amortisation and exceptionalitems) 17.5% 17.6%Gearing 72.9% 76.6% 1 Before amortisation and exceptional items. There were no exceptional items in2006. Exceptional items of £0.7m in 2005 relate solely to the disposal of ToiletHire UK. • Like for like tool hire turnover up 9% - market share increased• Utilisation in equipment hire up from 67% to 70%• Interest cover 6.2 times• Market outlook remains buoyant Outlook "The markets in which our major customers operate remain buoyant and show goodgrowth trends. New Health and Safety legislation provides additional impetustowards hiring rather than owning tools and equipment. With a favourable outlook in our main markets, ongoing investment instrengthening and improving the business, a strong financial position and afirst class team to execute our plans, I look forward to reporting furtherprogress in the year ahead." David Wallis - Chairman For further information: Speedy Hire Plc Hudson SandlerSteve Corcoran, Chief Executive Nick Lyon/James BenjaminNeil O'Brien, Group Finance Director Tel: 020 7796 4133Tel: 020 7796 4133 on Wednesday 31 May(thereafter tel: 01942 720000) Website: www.speedyhire.plc.uk High resolution photographs will be available to media from 12.00pm atwww.vismedia.co.uk SPEEDY HIRE Plc CHAIRMAN'S STATEMENT It has been another very busy and successful year for Speedy Hire. We havedelivered an excellent performance in all of our key business measures includingturnover, profit, return on capital and earnings per share and our balance sheetremains in excellent shape. Your board is therefore proposing a final dividendof 9.4 pence per share, making a total of 14.3 pence for the year, an increaseof 16% over 2005. Performance Revenue increased by 23% to £254.3 million (2005: £206.5 million). Profitbefore tax grew by 25% to £30.7 million (2005: £24.5 million). Group operatingmargins pre-amortisation and exceptional items increased from 14.8% to 15.0%.Earnings per share grew by 18% to 50.44 pence per share. Total equity increasedfrom £108.5 million to £141.3 million. All of our businesses have contributedto these excellent results. Our Tool Hire Division offers the widest range of tools from an unrivallednational depot network. Turnover has increased by 17.0% to £151.0 million(2005: £129.1 million) with growth being driven from a like for like salesincrease of 9.0%. Operating profits increased to £23.6 million (2005: £19.8million) representing a margin of 15.6% (2005: 15.3%). Our equipment businesses provide a range of complementary lifting, power, surveyand temporary accommodation products to a broad range of industry sectors. Inaddition, during the year we opened our first specialist pump operations.Turnover in the Equipment Division grew by 34% to £107.8 million (2005: £80.7million). Operating profit has increased from £14.8 million to £19.8 milliongiving the division an operating margin of 18.4% (2005: 18.3%). Our investment of £78.5 million (2005: £60.5 million) in new hire fleet wastargeted at enhancing our reputation for providing our clients with the widestand best range of tools and equipment. This has ensured that we retain ourcompetitive advantage of having the youngest hire fleet in the industry with anaverage age of 2.1 years. Return on our invested capital has remained stable at17.5%. To supplement our strong organic growth, during the financial year we acquiredfive businesses for a consideration of £35 million. These businesses have allbeen successfully integrated into the Speedy Hire network. Since the conclusionof the financial year we completed the acquisition of LCH, the UK's leadingindependent hirer of temporary power systems, for a total consideration of £59million, thus giving us an increasingly strong position in that market. To facilitate these acquisitions, we completed a £15 million share placing andnegotiated an enhanced £210 million bank facility. These have given the group avery strong financial position to continue with our business development andacquisition strategy. Strategy Our strategy remains one of growth with the aim to be number one or number twoin all the markets in which we operate. This well proven strategy has resultedin several years of consistent growth, both organically and through acquisitionsand we see no reason why this should not continue for the foreseeable future. We will continue to open greenfield depots wherever our research indicates thereis a profitable opportunity to increase our geographic footprint and betterserve our customers. During the last financial year, we opened 22 such depotsacross the range of our activities. In addition, we will continue to acquire complementary businesses which meet ourstrict investment criteria. Several of these acquisitions over the last two orthree years have, as planned, enabled us to move into new markets and develop awider customer base in industrial services, utilities, steel, oil and gas, navaldockyards and petrochemicals, as well as facilitating a better service for ourtraditional construction clients. To support this growth, we continue to invest strongly in business systems,supply chain and customer support. Our vision is to create "One Speedy"whereby we co-ordinate the activities of the entire Group to cross sell andthereby provide a comprehensive and unparalleled level of service for ourcustomers, who are at the heart of our business. I would like to take this opportunity to expand on our approach and thinkingwhen considering acquisitions. When we first evaluate potential acquisitions,we begin with a few simple common sense questions such as "will Speedy Hire be agood owner of this business? Does it fit with our skill set and our marketposition? Does the target business enable Speedy Hire to sustain growth and addvalue for our shareholders?" Only when we are satisfied we have positiveanswers to these questions do we move forward. Executive management thenprepare a detailed business case and we only proceed where our target internalrate of return is exceeded when using conservative assumptions. Many potentialacquisitions are rejected because the infill and expansion opportunities offereddo not adequately answer our basic questions, do not meet our hurdle rates, orthey do not fit within our overall vision. It is the view of your board that the hire industry will undergo significantconsolidation over the next few years. However, research has shown that thetool and equipment hire market is becoming increasingly polarised between thosebusinesses supplying the larger construction and industrial companies, whichhave wider and more complex needs requiring tools and equipment for longerperiods of time and those servicing the smaller builders, DIY enthusiasts,maintenance trades and service industries which require equipment in lesservolumes and for shorter periods. Speedy Hire's current market position isclearly biased towards the larger, more regular hirer and our acquisitionstrategy reflects this. People As Speedy Hire has grown over the last year, an additional 395 people havejoined the business and I would like to extend a warm welcome to each. We nowemploy over 3,400 people. I would also like to extend the thanks of the boardand shareholders to all our people whether in management, operational or supportfunctions who provide their skill, enthusiasm and commitment every single day toensure we have satisfied customers. Our customer surveys run by externalconsultants continue to produce very high levels of satisfaction and as aresult, repeat business. At board level, we are fortunate to have an extremely able team. Mike McGrath,having worked with us for 14 years as our corporate lawyer, joined us in Marchas Commercial Director to work alongside and provide valuable support to Steveand Neil. In addition to overseeing our continuing acquisition programme, Mikewill take responsibility for driving forward two specific projects: firstly thefurther training and development of our people, and secondly propertyrequirements in terms of the number and size of depots for the future shape ofthe business. As previously announced, Andrew Simpson left the business at theend of the financial year to take up a senior role within Peel Holdings.Andrew's input over the last three years in creating value for shareholders hasbeen extremely valuable and we are greatly indebted to him. He leaves with ourbest wishes for success in the future. Outlook The markets in which our major customers operate remain buoyant. Investment ininfrastructure, supported by government spending, often through PFI / PPPschemes and commercial and industrial projects, all show good growth trends.Added to this, new Health and Safety legislation, such as the Working at Heightand Hand Arm Vibration directives, together with the new legislation on noiseemissions is providing additional impetus towards hiring, rather than owningtools and equipment. It is worth re-stating that one of Speedy Hire's greatstrengths is the diversity of its markets, its customers, its range ofactivities and its national spread, which brings a good balance to the business. With a favourable outlook in our main markets, ongoing investment instrengthening and improving the business, a strong financial position and afirst class team to execute our plans, I look forward to reporting furtherprogress in the year ahead. SPEEDY HIRE Plc CHIEF EXECUTIVE'S REVIEW The business Speedy Hire operates a broad range of products for hire available throughout theUK, and as of February 2006, the Republic of Ireland. From our traditionalposition in tool hire, we have expanded our market and complemented our brand byspecialising in key areas of equipment rental. The equipment division offers a range of portable accommodation, lifting andmaterial handling equipment, surveying and measurement instruments, compressedair and power generating equipment and pumps. Our expansion into these productareas of the hire market has led to a significant increase in complementarypurchases by our customers, and created unique cross-selling opportunities. We have always concentrated on understanding the local market and offeringmaximum flexibility to our local customers. Because tool and equipment hire istypically a local business, we have sought to build strong local relationships,town by town and region by region. Our local approach to customer servicedifferentiates us from our competitors. Our success has consistently delivered record results from the business over theyears. Our approach to business is simple: we aim to make the widest range ofproducts from the best manufacturers rapidly available to our customers throughour depot network. Tool Hire division This division saw 9% like-for-like turnover growth in 2005/06, which once moreconsiderably outpaces the overall market growth level of 4%, driving a furtherincrease in our market share. This year we added 22 new depots, 17 of which weregreenfield developments. The Tool Hire division operates in a growing market and the drive towardsoutsourcing continues. The division generated record turnover and profit and ourcontinued confidence led us to opening our first depots in the Republic ofIreland and Northern Ireland. Building on the tremendous success of our Safety-From-the-Ground-Up campaign, in2005/06 we began anticipating our customers' training needs resulting from newhand/arm vibration legislation, by working together with our suppliers andindependent researchers. Some of the highlights of our Tool Hire division - A cluster of four depots was acquired in North Wales - New depots opened in Dublin and Belfast - Our first distribution centre was opened in Heathrow servicing the West London region - The successful roll out of specialist access centres - Extension of the product range to include mini plant Equipment Hire division We have continued to innovate, develop and push the boundaries of our businessinto adjacent product areas that are complementary to our traditional tool hireoperations. These separate, specialised businesses grew profitably in 2005/06both organically and through the successful integration of five majoracquisitions. Turnover for the division was £107.8 million and grew by £27.1 million, whilstmaintaining utilisation at 70% (2005: 67%). We expect the fast-growingbusinesses of this division to continue fuelling the group's growth strategy inthe coming years. Our equipment rental businesses form part of the plant hiremarket which is valued in excess of £4 billion. - Speedy Space specialises in the hire of accommodation and storage units.It operates from 21 depots and has 22,500 units for hire. In 2005/06, fouracquisitions were made in the Space business. Our concentration has been on thegrowth area of steel anti-vandal units. - Speedy Power provides portable generation, compressed air and lightingequipment from 15 separate locations. This business has established us as theUK's leading hirer of compressed air and portable lighting. Last year thisbusiness continued to grow sales and profits rapidly and added 4 new greenfielddepots. - Speedy Lifting rents lightweight lifting and material handling equipment.The business has performed strongly since it was established in 2003. SpeedyLifting operates from 33 locations. - Speedy Survey focuses on the supply of specialist surveying andmeasurement instruments. The business now operates from 16 locations. - Speedy Pumps. While pumps have been part of our core hire catalogue forseveral years, this year the product line was given a separate and specialistfocus in response to our customers' needs. The market Our core customers are optimistic in their business outlook and continue toreport strong order books for significant periods of time into the future, whileconstruction output data also remains positive not withstanding some consumercaution. Our market place is supplied by a range of competitors from small localindependents, all the way to national 'one-stop' rental equipment providers. Ouroperations remain attentive to customer needs and we deliver this by ensuringeach Speedy business is focused on its geographical region and productexpertise. We market ourselves most actively to the regular, high-volume customers whoappreciate our range of product offering, fleet availability and the customerservice ethic of our teams. We therefore occupy a virtually unrivalled positionin the market with the "heavy" end users who depend on Speedy to provide goodkit and good service while maintaining value for money. Our strong local relationships in the towns and regions in which we operatemeans we are able to monitor market activity closely and be prepared to respondquickly to changes in demand. Contractors look to Speedy for industry-leading health and safety guidance andthe very best product expertise. These factors give us a unique sellingproposition and differentiate us from those who primarily supply the fragmented"light" end of the market that is being addressed by independents, merchants andregional chains. A large proportion of Speedy Hire's business is servicing public sector-basedprojects such as schools and hospitals which continue to be planned anddeveloped. Our strategy of continually broadening our business activities andgeographical presence means our customer base is also highly diverse, and nosingle customer account represents more than 4% of our revenues. Speedy Hire is one of the main consolidators of the hire market and we willcontinue to pursue this same successful strategy as new opportunities arise.Last year we successfully completed five key acquisitions, including four in ourportable accommodation business. Following the year end, in May 2006 weannounced the acquisition of LCH Generators Limited, further strengthening ourpresence in the hire of temporary power generation. Our strategy of expanding products and services through acquisitions has beenhighly successful. We believe significant opportunities still exist both withinour current product portfolio and in new areas identified for continuedexpansion and development. This will enable us to leverage the Speedy Hire brand further to ensure futuregrowth by expanding our existing operations, increasing our cross-sellingopportunities and developing new business services. Capital Structure and Investment Net assets at the year end were £141.3 million (2005: £108.5 million), anincrease of 30%. We have continued to invest in hire assets to achieve the 23%increase in turnover. Gross capital expenditure was £78.5 million (2005: £60.5million) with a further £35.2 million (2005: £18.7 million) of expenditure onacquisitions as Speedy continues to lead the consolidation of the sector. Last year saw a record level of investment that has led debt to increase to £103million (2005: £83.1 million) but gearing remains at a comfortable level of72.9% (2005: 76.6%). We received the positive support of shareholders for a 5% placing in September2005 which raised £15 million and has helped contribute to our strong balancesheet position. The shares were issued at a nil discount to the prevailingmarket price. The depreciation charge increased by 25% to £38.9 million (2005: £31.2 million)assisting an operating cash flow of £76.6 million (2005: £56.6 million). Thisstrong performance gives us confidence in investing for future growth. Free cashflow was £6.5 million (2005: £0.9 million). This positive free cash flow wasachieved in a year of record investment, funding a 23% increase in turnover. Return on capital, a key indicator of financial performance, has remained strongat 17.5% (2005: 17.6%). This return is industry leading and is substantiallyahead of our average cost of capital. We aim to retain a high degree of flexibility in our funding options.Commercially we are gaining market share and are happy to invest to fund thisgrowth. With high growth in turnover we expect to see debt and gearing levelsrise. We invest with the confidence of knowing that if the rate of growth shouldfall then our investment level would be reduced and the business would generatesubstantial free cash flow to invest in other areas. Looking ahead Speedy Hire will continue to expand organically whilst also seeking new andprofitable consolidation opportunities. Customer service will remain central toour strategy, and as we consolidate our brand under the "One Speedy" initiative,our ability to service high-volume customers who value our extensive product andservice offering, will continue to grow. Our post year end acquisition of LCH Generators on May 12, 2006 is acceleratingthe development of a specialist power generation business through Speedy'sexisting generator fleet within Speedy Power. The rapid growth of our customerbase and product offering brings Speedy into new markets and creates excellentcross-selling opportunities. We believe that our proactive approach to health and safety practices in theconstruction industry will remain a competitive driver for the business goingforward. By helping customers identify their needs at an early stage, andforging long-term partnerships with suppliers, we are helping to secure ourmarket leading position and grow our future market share. We are confident that our growth strategy will deliver further value to ourcustomers and our shareholders going forward. Looking ahead to a new financialyear, we are confident of reporting further progress. Consolidated Income Statement For the year ended 31 March 2006 2006 2005 Note £m £mRevenue 1 254.3 206.5Cost of sales (81.8) (58.2)Gross profit 172.5 148.3 Other operating income 0.1 0.2Distribution costs (23.5) (22.0)Administrative expenses (112.5) (96.5)Analysis of profit from operationsOperating profit before amortisation 38.1 30.6Intangible amortisation (1.5) (0.6)Profit from operations 1 36.6 30.0 Loss on disposal of operation 1 - (0.7)Profit before financing costs 36.6 29.3 Financial income 0.2 0.1Financial expense (6.1) (4.9)Profit before taxation 30.7 24.5 Taxation 5 (8.4) (6.3)Profit for the year 22.3 18.2Attributable to:Equity holders of the parent 22.1 18.2Minority interests 0.2 - 22.3 18.2 Pence PenceEarnings per share- Basic 2 50.44 42.78- Diluted 2 50.03 42.55 Consolidated Statement of Changes in Equity For the Year Ended 31 March 2006 2006 2005 Note £m £m Profit for the year 22.3 18.2Dividends (5.6) (4.7)Net proceeds on issues of ordinary shares 14.8 -Movement relating to share-based payments 0.9 0.6Deferred tax effect of share based payments 0.4 - 32.8 14.1Equity at the start of the year 108.5 94.4Equity at the end of the year 141.3 108.5 Consolidated Balance Sheet As at 31 March 2006 2006 2005 Note £m £mASSETSNon-current assetsIntangible assets 22.7 10.7Property, plant and equipment 241.4 187.9Total non-current assets 264.1 198.6 Current assetsInventories 6.9 4.8Trade and other receivables 72.6 55.1Assets classified as held for sale - 1.7Cash and cash equivalents 6.4 5.9Total current assets 85.9 67.5Total assets 350.0 266.1 LIABILITIESCurrent liabilitiesBorrowings 3 - (0.3)Trade and other payables (69.5) (47.4)Current income tax (6.7) (2.6)Total current liabilities (76.2) (50.3)Non-current liabilitiesFinancial liabilities - Borrowings 3 (109.4) (88.7)Deferred tax liabilities (23.1) (18.6)Total non-current liabilities (132.5) (107.3)Total liabilities (208.7) (157.6)Net Assets 141.3 108.5 EQUITYIssued share capital 2.2 2.1Share premium account 47.4 32.7Merger reserve 3.7 3.7Retained earnings 87.8 70.0Total equity attributable to equity holders of the parent 141.1 108.5Minority interests 0.2 -Total equity 141.3 108.5 Consolidated Cash Flow Statement For the year ended 31 March 2006 2006 2005 Note £m £mCash flow from operating activitiesProfit before income tax 30.7 24.5Financial income (0.2) (0.1)Financial expense 6.1 4.9Intangible amortisation 1.5 0.6Depreciation 38.9 31.2Profit on disposal of property plant and equipment (5.8) (3.8)Loss on disposal of operation - 0.7Equity-settled share-based payments 0.9 0.6 72.1 58.6Increase in inventories (2.1) (0.9)Increase in trade and other receivables (15.8) (8.8)Increase in trade and other payables 22.4 7.7Cash generated from operations 76.6 56.6Interest received 0.2 0.1Interest paid (5.6) (4.8)Income tax paid (1.4) (2.7)Net cash flow from operating activities 69.8 49.2 Cash flow from investing activitiesAcquisition of businesses (35.2) (18.7)Purchase of property, plant and equipment (78.5) (60.5)Disposal of businesses - 0.5Disposal of property, plant and equipment 15.2 12.2Net cash flow from investing activities (98.5) (66.5)Net cash flow before financing activities (28.7) (17.3)Cash flow from financing activitiesProceeds from shares issued 14.8 -Proceeds from new loans 20.3 21.7Capital element of Hire Purchase agreements (0.3) (0.7)Dividends paid (5.6) (4.7)Net cash flow from financing activities 29.2 16.3Increase / (decrease) in cash and cash equivalents 3 0.5 (1.0)Cash and cash equivalents at the beginning of the year 5.9 6.9Cash and cash equivalents at the end of the year 6.4 5.9 Notes to the Financial Statements For the year ended 31 March 2006 Preparation of preliminary results The preliminary results have been prepared on the basis of the accountingpolicies which are to be set out in Speedy Hire Plc's annual report and accountsfor the year ended 31 March 2006. EU Law (IAS Regulation EC1606/2002) requires that the consolidated accounts ofthe group for the year ended 31 March 2006 be prepared in accordance withInternational Financial Reporting Standards ('IFRS') as adopted for use in theEU ('adopted IFRS'). The comparative figures for the year ended 31 March 2005 are not the statutoryaccounts for that financial year. Those accounts, which were prepared under UKGAAP, have been reported on by the auditors and delivered to the registrar ofcompanies. The report of the auditors was unqualified and did not containstatements under section 237(2) or (3) of the Companies Act 1985. Details ofhow the group's results and financial position are impacted by the change toIFRS are set out in the group's IFRS restatement report which was issued on 3October 2005. The preliminary results were approved by the board of directors on 30 May 2006. The financial information contained in this announcement does not comprise fullaccounts within the meaning of Section 240 of the Companies Act 1985. Thefinancial information contained in this announcement in respect of the yearended 31 March 2005 has been extracted from the financial statements which havebeen audited and reported upon without qualification by KPMG Audit Plc and didnot contain a statement under Section 237 (2) or (3) of the Companies Act 1985. 1. Turnover and profit on ordinary activities before taxation The group's primary reporting format is class of business, as the group'smanagement and internal reporting are structured in this manner. The groupsactivity is conducted solely within the United Kingdom and Republic of Ireland. Tools Equipment Total 2006 2005 2006 2005 2006 2005Class of Business £m £m £m £m £m £mAnalysis of segmental resultTotal revenue 151.0 129.1 107.8 80.7 258.8 209.8Internal revenue (0.5) (0.4) (4.0) (2.9) (4.5) (3.3)Revenue 150.5 128.7 103.8 77.8 254.3 206.5Segment result before dep'n & 45.1 38.7 37.0 27.2 82.1 65.9amortisationDepreciation (20.9) (18.3) (16.3) (12.4) (37.2) (30.7)Amortisation (0.6) (0.6) (0.9) - (1.5) (0.6)Result before corporate costs 23.6 19.8 19.8 14.8 43.4 34.6Corporate costs (6.8) (4.6)Loss on disposal - (0.7)Profit before net financing costs 36.6 29.3Net financing costs (5.9) (4.8)Income tax (8.4) (6.3)Profit for the year 22.3 18.2 Central overheads net of property income includes £ nil (2005: £0.2 million) ofprofit on disposal of properties. Results include turnover of £ nil (2005: £4.1 million) and an operating (loss)/profit of £ nil (2005: £0.1 million) relating to the disposed business of ToiletHire UK. 2. Earnings per Share Basic earnings per share is based on the profit after taxation of £22.1 million(2005: £18.2 million) and the weighted average number of 5p ordinary shares inissue during the year of 43,659,084 (2005: 42,510,914). The weighted average number of ordinary shares used for the diluted earnings pershare is calculated as follows: 2006 2005 Weighted Weighted Average Average Shares Earnings Shares Earnings Earnings Number per share Earnings Number per share £m million pence £m million penceBasic earnings 22.1 43.7 50.44 18.2 42.5 42.78Share options - 0.2 (0.26) - 0.1 (0.12)All - Employee share scheme - 0.1 (0.15) - 0.1 (0.11)Diluted earnings 22.1 44.0 50.03 18.2 42.7 42.55 The table below reconciles basic earnings per share to earnings per sharepre-amortisation and loss on disposal of operation. 2006 2005 Pence PenceBasic earnings per share 50.44 42.78Amortisation charge after tax per share 2.42 1.22Loss on disposal of operation after tax per share - 1.15Basic earnings per share pre amortisation and loss ondisposal of operation 52.86 45.15 3. Analysis of net debt At At 1 Apr Cash 31 Mar 2005 flow 2006 £m £m £m Cash at bank and in hand (per the cash flow statement) 5.9 0.5 6.4Current debt - hire purchase and finance lease obligations (0.3) 0.3 -Non-current debt (88.7) (20.7) (109.4)Net debt (83.1) (19.9) (103.0) 4. Year end gearing (calculated as net debt as a percentage of shareholders funds) stands at 72.9% (2005: 76.6%). 5. The charge for taxation for the year represents an effective tax rate of 27.5% (2005: 25.7%). The effective tax rate excluding adjustments in respect of prior years is 30% (2005: 25.3%). 6. The board has proposed a final dividend of 9.4 pence per share to be paid on 29 August 2006 to shareholders on the register at 30 June 2006. This, together with an interim dividend of 4.9 pence per share paid on 27 January 2006, makes a total dividend for the year of 14.3 pence per share. 7. The Annual Report and Accounts for the year ended 31 March 2006 will be posted to shareholders on or about 15 June 2006. 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