26th Jun 2007 07:00
Audited results for the year and unaudited results for the fourth quarter ended 30 April 2007 Financial summary Fourth quarter Year ----------------- -------------- ---- 2007 2006 Growth* 2007 2006 Growth*
-------------------------------------------
‚£m ‚£m % ‚£m ‚£m % Revenue 233.8 161.7 +57% 896.1 638.0 +48%Underlying operating profit[1] 35.7 25.7 +54% 150.5 111.1 +45%Underlying profit before taxation [1] 15.7 14.5 +21% 81.4 67.5 +29%Underlying earnings per share1 - basic 1.8p 2.3p -14% 10.3p 11.3p -3% - cash tax 2.8p 3.6p -14% 15.8p 16.4p +3%(Loss)/profit before taxation (8.0) 14.1 n/a (36.5) 81.7 n/aBasic (loss)/earnings per share (1.2)p 2.8p n/a 1.5p
13.5p -88%
[1] See explanatory notes below * At constant exchange rates
Highlights
----------
* Continued growth in revenue and profit in all divisions with full year
underlying operating profit of ‚£150.5m, up 45% at constant exchange rates.
* On a pro forma basis [1](b) Sunbelt's underlying full year operating profit
grew by 43% to $272.3m reflecting the progress made to date on the
NationsRent integration.
* On the same pro forma [1](b) basis, A-Plant delivered underlying operating
profit growth of 40% to ‚£20.7m reflecting its strong 11% organic improvement in pro forma [1](b) revenues. * Underlying basic earnings per share declined 3% to 10.3p reflecting the expected first year dilution from the NationsRent acquisition.
* The loss before tax for the year of ‚£36.5m (2006 - profit of ‚£81.7m) is
after charging exceptional costs, fair value remeasurements and intangible
amortisation amounting to ‚£117.9m (2006 - ‚£14.2m credit). No further
exceptional costs relating to the NationsRent acquisition are expected.
* Final dividend of 1.1p per share proposed, making 1.65p for the year (2006
- 1.5p)
Ashtead's chief executive, Geoff Drabble, commented:
"The year saw substantial change and development across the Group. TheNationsRent acquisition was a significant step forward in enhancing the Group'spresence in the growing US rental market. I am pleased with the progress madeto date which is reflected in the strong fourth quarter performance. The majorelements of the integration are behind us and the combined business can nowfocus on gaining further market share and continuing to improve dollarutilisation [1](c).A-Plant also continued to improve its performance built upon double digit samestore growth. The Board's recent decision to invest in an improved profitcentre infrastructure better suited to our customers' needs in the UK in thecoming year will underpin delivery of improved returns. Ashtead Technology alsotraded well throughout the year.Looking forward, the markets in which we operate are strong and the drive torental, due to both the financial and operational benefits for customers ofoutsourcing, will continue, particularly in the US. Given the ongoingintegration benefits from the acquired NationsRent business, together with theimproving performance of both A-Plant and Ashtead Technology, we look forwardto 2008 with confidence."Contacts:Geoff Drabble Chief executive ) 01372 362300 Ian Robson Finance director ) Brian Hudspith Maitland 020 7379 5151 Explanatory notes
a) Underlying profit and earnings per share are stated before exceptional
items, amortisation of acquired intangibles and non-cash fair value
remeasurements of embedded derivatives in long term debt. The definition of
exceptional items is set out in note 4. The reconciliation of underlying
earnings per share and underlying cash tax earnings per share to basic
earnings per share is shown in note 7 to the attached financial
information. Underlying earnings per share for the fourth quarter of 2005/6
have also been adjusted to reflect the effective tax rate of 31% reported
for the whole of that year rather than the effective tax rate of 6%
actually reported in that quarter.
b) Pro forma basis includes the NationsRent and Lux Traffic acquisitions
throughout both periods. For this purpose the pre-acquisition results of
NationsRent have been derived from its reported performance under US GAAP
adjusted to exclude the large profits on disposal of rental equipment it
reported following the application of US "fresh start" accounting
principles and to include an estimated depreciation charge under Ashtead's
depreciation policies.
c) Dollar utilisation is defined as rental and rental related revenues divided
by the average original or "first" cost of rental equipment.
Review of the year------------------A year of significant change was dominated by the acquisition of NationsRent on31 August 2006 for approximately $1bn. The acquisition provided a uniqueopportunity to enhance our US footprint with minimal profit centre overlap. Italso allowed us to acquire an underperforming asset which provided significantcost saving and efficiency opportunities. A major focus for the year,therefore, has been ensuring we realised these integration opportunities.Our initial focus was to complete the internal activities such as systemschanges, head office closures, profit centre mergers and closures and fleetreconfiguration by the end of the financial year. This was to ensure that notonly will we enjoy a full year of the benefits accruing from this activity inthe coming year but also that the combined business could be focused fully onmarket share gains as we enter the busy summer period.
We are pleased with the success to date of the integration, the benefits of which are reflected in a strong fourth quarter performance. No further exceptional costs associated with the transaction are expected.
A-Plant's recent strong revenue and profit growth continued in the fourthquarter. Ongoing focus on revenue growth and operational efficiency supportsour expectation of continuing improvement in its margins and return oninvestment. During the year we acquired the Lux Traffic business creating aclear market leader in this sector. This was A-Plant's first acquisition forsome time and reflected our confidence in the business.
We have continued to invest in Ashtead Technology to support buoyant market conditions contributing to good revenue and profit growth.
Our prime market is non-residential construction. In the US, high corporate profits continue to support strong private and public expenditure, the latter due to federal and state tax receipts. We see increased expenditure in key areas such as education, healthcare and transportation.
A year of strong growth----------------------The Group made good progress in the year to 30 April 2007:
* Revenue for the year at ‚£896.1m was up 40.5% on the revenue reported in
2006 at actual exchange rates and 48.2% at constant rates. On a consolidated, pro forma basis the organic growth in rental and rental related revenues was 10% at constant exchange rates.
* Underlying operating profit for the year at ‚£150.5m was 35.5% up on the
prior year at actual exchange rates and 44.7% at constant rates, reflecting
good performance in all three divisions. Pro forma underlying operating
profit grew 43.1% to ‚£161.2m at constant exchange rates.
* The underlying profit before tax of ‚£81.4m grew 20.6% at actual rates of
exchange and by 28.9% at constant rates over last year's ‚£67.5m * After exceptional items, non-cash fair value remeasurements of embedded derivatives in long term debt and amortisation of acquired intangibles,
there was a loss before tax of ‚£36.5m in the year compared to last year's ‚£
81.7m profit. No further exceptional items relating to the NationsRent acquisition are expected in the coming year. * Basic earnings per share for the year were 1.5p (2006 - 13.5p) whilst underlying earnings per share were 10.3p (2006 - 11.3p). On a cash tax basis underlying earnings per share were 15.8p (2006 - 16.4p).
* Capital expenditure in the year was ‚£290.2m (2006 - ‚£220.2m) gross whilst
disposal proceeds totalled ‚£89.1m (2006 - ‚£63.7m) giving net capex of ‚£
201.1m (2006 - ‚£156.5m)
* Net debt at 30 April 2007 was ‚£915.9m (2006 - ‚£493.6m). The ratio of debt
to pro forma last twelve months' EBITDA was 2.7 times at 30 April 2007 down
from 3.2 times at closing.
* Availability under the $1.75bn asset based loan facility was $589m at 30
April 2007 ($283m at 30 April 2006) providing substantial flexibility for future growth. Sunbelt------- Fourth quarter Year -------------- ---- 2007 2006 Growth 2007 2006 Growth
---------------------------------------------------
$m $m $m $m Revenue ------- As reported 349.4 202.7 +72% 1,307.9 818.7 +60%NationsRent - 144.5 230.7 605.8
----------------------------------------------------
Pro forma combined 349.4 347.2 +1% 1,538.6 1,424.5 +8%
====================================================
Underlying operating profit --------------------------- As reported 59.8 37.7 +59% 253.1 175.5 +44%NationsRent - (4.0) 19.2 14.9
----------------------------------------------------
Pro forma combined 59.8 33.7 +78% 272.3 190.4 +43%
====================================================
Pro forma margin 17.1% 9.7% 17.7% 13.4% ==================================================== The year was dominated by the acquisition of NationsRent on 31 August 2006 andthe subsequent operational integration of its 268 stores into the Sunbeltnetwork. Within two months of closing the transaction, a new combined regionaland district management structure had been introduced, overlapping profitcentres merged and the two point of sale computer systems combined. By the endof January the former NationsRent head office had been closed and Sunbelt'scorporate headquarters had been relocated to new larger premises. Sunbelt'sprofit share and sales commission programmes, with their strong focus on returnon investment, were also introduced to the NationsRent staff. In addition, weundertook a programme to reshape the acquired NationsRent fleet to contain asimilar proportion of higher returning assets to Sunbelt.These actions not only realised annual cost savings of approximately $48m,ahead of our $37m target, but have positioned Sunbelt to focus on improving thedollar utilisation and operational performance of the acquired profit centresas we enter the busy summer period. The year also saw an early improvement incombined pro forma dollar utilisation which rose to 62% from a combined 59% inthe year to 30 April 2006.The fourth quarter saw the operating margin enhancements at NationsRentaccelerate. Growth in pro forma fourth quarter revenues was just 1% as wecontinued the planned reduction in low margin new equipment sales atNationsRent. Excluding these sales revenues, rental and rental related revenuesgrew 3% in total to $319.1m. Away from the hurricane related states (Florida,Alabama, Louisiana and Mississippi) which were still affected by unusuallystrong comparatives, rental and rental related revenues in the rest of the USgrew 5% in the quarter.Operating margins benefited from the growth in rental revenues resulting fromfocusing the acquired profit centres on more profitable rental business andfrom the regional and head office cost savings which ran at an annual rate ofapproximately $48m in the quarter. Pro forma fourth quarter operating profitmargins increased from 9.7% a year ago to 17.1% giving a 78% increase in proforma operating profit to $59.8m.For the year as a whole, which on a pro forma basis includes four months priorto our taking ownership of NationsRent, total revenues grew 8% whilst rentaland rental related revenues grew 9%. Pro forma operating profit grew 43% to$272.3m representing an improvement in pro forma margins from 13.4% to 17.7%.Exceptional costs incurred in the year in relation to the NationsRentacquisition totalled ‚£31.5m and related to redundancies, retention bonuses,rebranding and other costs. In addition ‚£68.0m of exceptional financing costsand non-cash fair value remeasurements were incurred at closing relating todebt redeemed in connection with the acquisition. The charge for intangibleamortisation for the year was ‚£11.0m, mostly relating to the write off of theacquired NationsRent brand name which ceased to be used with the completion ofthe profit centre rebranding programme by year end.A-Plant------- Fourth quarter Year -------------- ---- 2007 2006 Growth 2007 2006 Growth
---------------------------------------------------
‚£m ‚£m ‚£m ‚£m Revenue ------- As reported 50.2 41.8 +20% 189.9 160.7 +18%Lux Traffic - 5.1 9.5 18.4
---------------------------------------------------
Pro forma combined 50.2 46.9 +7% 199.4 179.1 +11%
===================================================
Underlying operating profit --------------------------- As reported 5.9 4.3 +40% 20.1 13.9 +45%Lux Traffic - 0.3 0.6 0.8
---------------------------------------------------
Pro forma combined 5.9 4.6 +29% 20.7 14.7
+40%
===================================================
Pro forma margin 11.8% 9.8% 10.4% 8.2%
===================================================
The year also saw substantial progress at A-Plant where we continued to buildon the investment in additional sales resources made in the previous year anddelivered double digit same store revenue growth. The Lux Traffic businessacquired in October was integrated smoothly thereby making A-Plant the UKmarket leader in the rental of temporary traffic systems.
In April we began to implement a new investment programme for A-Plant. This will involve the restructuring of its profit centre infrastructure over the coming year to create fewer, larger sites with higher levels of activity. These larger pools of equipment and staff will improve operational efficiency and enable A-Plant to meet the needs of its customers better.
A-Plant continued to trade strongly in the fourth quarter with same storerevenue growth of 7%. For the year as a whole, the same store revenue growthwas 11% which reflected a 5% increase in average fleet size, a 5% increase inaverage fleet utilisation to 69% (2006 - 65%) and a 1% growth in rental ratesas A-Plant regained market share. On a pro forma basis, 2006/7's revenuesexceeded those of 2001/2, A-Plant's previous record year.The increased revenues and the acquisition of the higher margin, Lux Trafficbusiness drove improved pro forma margins which grew from 8.2% to 10.4% for theyear. As a result pro forma operating profit totalled ‚£20.7m.
An exceptional charge of ‚£6.2m was recorded in the fourth quarter in respect of, principally, vacant premises cost at the profit centres which will be closed as a result of the new investment plan.
Ashtead Technology------------------ Fourth quarter Year -------------- ---- 2007 2006 Growth* 2007 2006 Growth*
----------------------------------------------------
‚£m ‚£m ‚£m ‚£m Revenue 5.3 4.3 +30% 21.6 16.1 +39%
====================================================
Operating profit 1.8 1.1 +58% 6.2 4.0
+57%
====================================================
Margin 34.0% 25.6% 28.7% 24.8%
====================================================
* At constant exchange rates
Ashtead Technology rents specialist equipment including underwater survey andpositioning equipment, remote visual inspection and non-destructive testingequipment and environmental monitoring equipment. Both Ashtead Technology'soffshore and onshore markets remain good and the division has continued toinvest in order to take advantage of these markets. This has enabled thebusiness to deliver excellent revenue and profit growth all year, trends whichlook set to continue.Taxation--------Following the refinancing at the time of the NationsRent acquisition and theimprovement in A-Plant's profitability the Group has recognised ‚£35.9m of thepreviously unrecognised UK deferred tax asset as an exceptional item. As aresult the effective tax rate on underlying pre-tax profits for the year was35% (2006 - 31%) and is now expected to remain at around 35% in coming years.There was again no significant cash tax charge and, due to available tax lossesand the capital intensive nature of the business, the cash tax charge isexpected to remain well below the effective accounting tax charge for severalmore years.Earnings per share------------------Basic earnings per share for the year were 1.5p (2006 -13.5p) and 1.5p (2006 -13.2p) on a fully diluted basis reflecting the significant exceptionalintegration and financing costs incurred in the year, principally in connectionwith the NationsRent acquisition. Before these items, underlying earnings pershare were 10.3p (2006 - 11.3p) whilst, on a cash tax basis, underlyingearnings per share were 15.8p (2006 - 16.4p). The reduction in underlyingearnings per share was 3% at constant exchange rates reflecting the expectedfirst year dilution from the NationsRent acquisition.Return on Investment and Return on Equity-----------------------------------------Reflecting the inclusion of the lower margin NationsRent business Group returnon investment declined to 12.9% (2006 - 14.7%), still well above our cost ofcapital. RoI for Sunbelt was 14.0% (2006 - 17.2%) whilst that for A-Plantcontinued its recently improving trend and was 8.8% (2006 - 7.0%). Followingthe NationsRent and Lux acquisitions, RoI is now computed including goodwilland is defined as underlying operating profit divided by average shareholders'equity plus debt and deferred tax, less the pension fund surplus and financialassets - derivatives.
Following the recognition of the UK deferred tax asset, the Group's tax position has normalised and return on equity (defined as underlying profit after tax and financing costs divided by average stockholders equity) has also become relevant. For the year, after tax, the return on equity was 15.3% indicating strong returns for shareholders.
Balance sheet and debt position-------------------------------Capital expenditure in the year totalled ‚£290.2m (2006 - ‚£220.2m) including ‚£256.4m on the rental fleet. ‚£181.7m of the rental fleet expenditure wasmaintenance or replacement expenditure with ‚£74.7m spent for growth. Disposalproceeds totalled ‚£89.1m (2006 - ‚£63.7m) giving net expenditure of ‚£201.1m(2006 - ‚£156.5m). The average age of the Group's rental fleet at 30 April 2007was 31 months (2006 - 37 months). In the coming year gross capital expenditureis expected to be approximately ‚£275m including ‚£50m of NationsRent fleetreconfiguration spend rolled over from 2006/7. Net of disposal proceeds, 2007/8capital expenditure is expected to be approximately ‚£225m.Net debt of ‚£916m at 30 April 2007 compares to pro forma net debt at closing ofthe NationsRent acquisition on 31 August 2006 of ‚£990m. The ratio of net debtto last twelve months pro forma EBITDA was 2.7 times at 30 April 2007 comparedto 3.2 times on 31 August 2006 when the NationsRent acquisition closed (in eachcase, not including pro forma cost savings).
Dividends
---------
The Board is proposing a final dividend of 1.1p (2006 - 1.0p) making 1.65p forthe year (2006 - 1.5p). If approved by shareholders at the forthcoming AnnualGeneral Meeting, the dividend will be paid on 28 September 2007 to shareholderson record as of 7 September 2007.Current trading and outlook---------------------------The new financial year has started with May results in line with ourexpectations. Looking forward, the markets in which we operate remain strongand the drive to rental, due to both the financial and operational benefits ofoutsourcing, will continue, particularly in the US. Given the ongoingintegration benefits from the acquired NationsRent business, together with theimproving performance of both A-Plant and Ashtead Technology, we look forwardto 2008 with confidence. - o0o - Geoff Drabble and Ian Robson will host a meeting for equity analysts to discussthe results at 10.30am on Tuesday 26 June at the offices of JPMorgan Cazenoveat 20 Moorgate, London EC2. For the information of shareholders and otherinterested parties, the analysts' meeting 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 this announcementand the slide presentation used for the meeting will also be available fordownload on the Company's website. There will also be a conference call forbondholders at 3pm (10am EST).
Analysts and bondholders have already been invited to participate in the meeting and conference call but anyone not having received dial-in details should contact the Company's PR advisers, Maitland (Jane Franklin) at +44 (0)20 7379 5151.
CONSOLIDATED INCOME STATEMENTThree months to 30 April - unaudited ------------------------ 2007 2006 Before exceptional Exceptional Before items, items, exceptional Exceptional amortisation amortisation items 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 Revenue 233.8 - 233.8 161.7 - 161.7Staff costs (78.3) (1.4) (79.7) (52.5) - (52.5)Other operating costs (81.8) (16.1) (97.9) (58.4) (0.5) (58.9)Other income 5.2 (0.9) 4.3 3.6 (0.4) 3.2
---------------------------------------------------------------------
EBITDA* 78.9 (18.4) 60.5 54.4 (0.9) 53.5Depreciation (43.2) (0.9) (44.1) (28.7) - (28.7)Amortisation of intangibles - (4.4) (4.4) - - -
---------------------------------------------------------------------
Operating profit 35.7 (23.7) 12.0 25.7 (0.9) 24.8Investment income 0.8 - 0.8 0.6 0.5 1.1Interest expense (20.8) - (20.8) (11.8) - (11.8)
---------------------------------------------------------------------
Net financing costs (20.0) - (20.0) (11.2) 0.5 (10.7)
---------------------------------------------------------------------
(Loss)/profit on ordinary activities before taxation 15.7 (23.7) (8.0) 14.5 (0.4) 14.1Taxation: - current (0.4) - (0.4) 1.2 (5.4) (4.2)- deferred (5.2) 6.8 1.6 (2.1) 4.6 2.5
---------------------------------------------------------------------
(5.6) 6.8 1.2 (0.9) (0.8) (1.7)
---------------------------------------------------------------------
(Loss)/profit attributable to equity shareholders 10.1 (16.9) (6.8) 13.6 (1.2) 12.4
=====================================================================
Basic earnings per share 1.8p (3.0p) (1.2p) 3.1p (0.3p) 2.8p
=====================================================================
Diluted earnings per share 1.8p (3.0p) (1.2p) 3.1p (0.3p) 2.8p
=====================================================================
Year to 30 April - audited ---------------- Revenue 896.1 - 896.1 638.0 - 638.0Staff costs (284.6) (10.1) (294.7) (200.1) (0.3) (200.4)Other operating costs (313.0) (26.5) (339.5) (222.3) (1.3) (223.6)Other income 11.8 (0.9) 10.9 9.1 15.0 24.1
---------------------------------------------------------------------
EBITDA* 310.3 (37.5) 272.8 224.7 13.4 238.1Depreciation (159.8) (0.9) (160.7) (113.6) - (113.6)Amortisation of intangibles - (11.0) (11.0) - - -
---------------------------------------------------------------------
Operating profit 150.5 (49.4) 101.1 111.1 13.4 124.5Investment income 3.9 - 3.9 2.7 7.8 10.5Interest expense (73.0) (68.5) (141.5) (46.3) (7.0) (53.3)
---------------------------------------------------------------------
Net financing costs (69.1) (68.5) (137.6) (43.6) 0.8 (42.8)
---------------------------------------------------------------------
(Loss)/profit on ordinary activities before taxation 81.4 (117.9) (36.5) 67.5 14.2 81.7Taxation: - current (0.4) - (0.4) (0.1) (5.4) (5.5)- deferred (28.3) 73.1 44.8 (21.0) 0.4 (20.6)
---------------------------------------------------------------------
(28.7) 73.1 44.4 (21.1) (5.0) (26.1)
---------------------------------------------------------------------
Profit attributable to equity shareholders 52.7 (44.8) 7.9 46.4 9.2 55.6
=====================================================================
Basic earnings per share 10.3p (8.8p) 1.5p 11.3p 2.2p 13.5p
=====================================================================
Diluted earnings per share 10.1p (8.6p) 1.5p 11.0p 2.2p 13.2p
* 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 Audited Three months to Year to 30 April 30 April 2007 2006 2007 2006
------------------------------
‚£m
‚£m ‚£m ‚£m
Net (loss)/profit for the period (6.8) 12.4 7.9 55.6Actuarial gain on defined benefit pension schemes 2.5 0.2 2.5 0.2Foreign currency translation differences (2.5) (3.9) (13.0) 15.4Tax on items taken directly to equity 1.6
- 1.6 -
------------------------------
Total recognised income and expense for the period (5.2)
8.7 (1.0) 71.2
==============================
CONSOLIDATED MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
Unaudited Audited Three months to Year to 30 April 30 April 2007 2006 2007 2006
------------------------------
‚£m
‚£m ‚£m ‚£m
Total recognised income and expense for the period (5.2) 8.7 (1.0) 71.2Issue of ordinary shares, net of expenses 0.7 1.4 148.9 70.9Dividends paid (3.0) (2.0) (7.0) (2.0)Credit in respect of share based payments 0.4 0.5 2.4 1.3Own shares acquired by ESOT -
- (4.9) (2.8)
------------------------------
Net (decrease)/increase in equity shareholders' fund (7.1) 8.6 138.4 138.6Opening equity shareholders' funds 403.8
249.7 258.3 119.7
-------------------------------
Closing equity shareholders' funds 396.7
258.3 396.7 258.3
===============================
CONSOLIDATED BALANCE SHEET Audited 30 April 2007 2006 ------------ ‚£m ‚£m Current assets Inventories 24.2 12.7Trade and other receivables 163.7 110.4Current tax asset 2.0 -Assets held for sale 10.3 -Cash and cash equivalents 1.1 1.0 ------------- 201.3 124.1 ------------- Non-current assets Property, plant and equipment - rental equipment 920.6 559.9- other assets 127.4 86.8 ------------- 1,048.0 646.7
Intangible assets - brand names and other acquired intangibles 9.7
-Goodwill 289.6 149.0Deferred tax asset 41.7 2.9Other financial assets - derivatives -
15.4
Defined benefit pension fund surplus 5.2 1.7 ------------- 1,394.2 815.7 --------------- Total assets 1,595.5 939.8 ===============Current liabilities Trade and other payables 166.8 99.1Current tax liability 0.7 3.3Debt due in less than one year 9.0 10.6Provisions 12.7 7.0 ------------- 189.2 120.0 ------------- Non-current liabilities Debt due in more than one year 908.0 484.0Provisions 19.6 11.3Deferred tax liability 82.0 66.2 ------------- 1,009.6 561.5 --------------- Total liabilities 1,198.8 681.5 ===============Equity shareholders' funds Share capital 56.0 40.4Share premium account 3.3 3.2Non-distributable reserve 90.7 90.7Own shares held in treasury through the ESOT (8.7)
(4.2)
Cumulative foreign exchange translation differences (30.2) (17.2)Distributable reserves 285.6 145.4 -------------Total equity shareholders' funds 396.7
258.3
-------------
Total liabilities and equity shareholders' funds 1,595.5 939.8 ===============
CONSOLIDATED CASH FLOW STATEMENT
Audited Year to 30 April 2007 2006 ---- ---- ‚£m ‚£m ‚£m ‚£m Cash flows from operating activities Cash generated from operations before exceptional items 319.3 215.2Pension payment - (17.1)Exceptional items (19.0) 11.1
------------------------------
Cash generated from operations 300.3 209.2Financing costs paid before exceptional items (64.2) (38.7) Exceptional financing costs paid (49.8)
(13.3)
------------------------------ Financing costs paid (114.0) (52.0)Tax paid (5.0) (2.8)
------------------------------
Net cash from operating activities 181.3 154.4 ------------------------------ Cash flows from investing activities Acquisition of businesses (327.2) (57.0)Disposal of businesses - 12.8Payments for property, plant and equipment (308.3) (229.3)Proceeds on sale of property, plant and equipment and assets held for sale 78.5 50.4
------------------------------
Net cash used in investing activities (557.0) (223.1)
------------------------------
Cash flows from financing activities Drawdown of loans 890.5 257.5Redemption of loans (641.8) (244.0)Capital element of finance lease payments (9.9) (12.1)Purchase of own shares by the ESOT (4.9) (2.8)Dividends paid (7.0) (2.0)Proceeds from issue of ordinary shares 148.9 70.9
------------------------------
Net cash from financing activities 375.8 67.5
------------------------------
Increase/(decrease) in cash and cash equivalents 0.1 (1.2)Opening cash and cash equivalents 1.0 2.1Effect of exchange rate changes - 0.1
------------------------------
Closing cash and cash equivalents 1.1 1.0
==============================
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation
The financial statements for the year ended 30 April 2007 were approved by thedirectors on 25 June 2007. This preliminary announcement of the results for theyear ended 30 April 2007 contains information derived from the forthcoming 2007Annual Report & Accounts and does not constitute the statutory accounts foreither 2006/7 or 2005/6 for the purposes of section 240(3) of the Companies Act1985. The 2006/7 results are extracted from the audited accounts for that yearwhich have not yet been filed with Companies House. The comparative figures for2005/6 have been extracted from the accounts for that year which have beendelivered to Companies House. The auditors' reports in respect of both yearswere unqualified and do not contain a statement under section 237(2) or (3) ofthe Companies Act 1985. The results for the year ended and quarter ended 30April 2007 have been prepared in accordance with relevant IFRS and theaccounting policies set out in the Group's Annual Report & Accounts for theyear ended 30 April 2006.
The figures for the fourth quarter are unaudited.
The exchange rates used in respect of the US dollar are:
2007 2006 ---- ---- Average for the year ended 30 April 1.91 1.78At 30 April 2.00 1.822. Segmental analysis Operating profit before exceptionals Exceptional and items and Operating Revenue amortisation amortisation profit ------------------------------------------------- Three months to 30 April ‚£m ‚£m ‚£m ‚£m 2007 ---- Sunbelt 178.3 30.4 (17.1) 13.3A-Plant 50.2 5.9 (6.5) (0.6)Ashtead Technology 5.3 1.8 - 1.8Corporate costs - (2.4) (0.1) (2.5)
-------------------------------------------------
233.8 35.7
(23.7) 12.0
=================================================
2006 ---- Sunbelt 115.6 21.6 (0.9) 20.7A-Plant 41.8 4.3 - 4.3Ashtead Technology 4.3 1.1 - 1.1Corporate costs - (1.3) - (1.3)
-------------------------------------------------
161.7 25.7
(0.9) 24.8
=================================================
Year to 30 April 2007 ---- Sunbelt 684.6 132.5 (42.3) 90.2A-Plant 189.9 20.1 (6.8) 13.3Ashtead Technology 21.6 6.2 - 6.2Corporate costs - (8.3) (0.3) (8.6)
------------------------------------------------
896.1 150.5
(49.4) 101.1
================================================
2006 ---- Sunbelt 461.2 98.9 13.4 112.3A-Plant 160.7 13.9 - 13.9Ashtead Technology 16.1 4.0 - 4.0Corporate costs - (5.7) - (5.7)
-------------------------------------------------
638.0 111.1
13.4 124.5
=================================================
3. Operating costs 2007 2006 ---- ---- Before exceptional Exceptional Before items and items and exceptional Exceptional amortisation amortisation Total items items Total
---------------------------------------------------------------
‚£m ‚£m ‚£m ‚£m ‚£m ‚£mThree months to 30 April ------------------------ Staff costs: Salaries 71.2 - 71.2 47.7 - 47.7Social security costs 6.1 - 6.1 4.2 - 4.2Other pension costs 1.0 - 1.0 0.6 - 0.6Redundancies and retention bonuses - 1.4 1.4 - - -
--------------------------------------------------------
78.3 1.4 79.7 52.5 - 52.5
--------------------------------------------------------
Other operating costs: Vehicle costs 15.4 - 15.4 12.7 - 12.7Spares, consumables & external repairs 15.3 - 15.3 12.9 - 12.9Facility costs 13.3 6.1 19.4 8.9 - 8.9Other external charges 37.8 10.0 47.8 23.9 0.5 24.4
--------------------------------------------------------
81.8 16.1
97.9 58.4 0.5 58.9
--------------------------------------------------------
Other income: Profit on disposal of fixed assets (5.2) 0.9
(4.3) (3.6) 0.4 (3.2)
--------------------------------------------------------
Depreciation and amortisation: Depreciation 43.2 0.9 44.1 28.7 - 28.7Amortisation of acquired intangibles - 4.4 4.4 - - -
--------------------------------------------------------
43.2 5.3 48.5 28.7 - 28.7
--------------------------------------------------------
198.1 23.7
221.8 136.0 0.9 136.9
========================================================
Year to 30 April ---------------- Staff costs: Salaries 258.5 - 258.5 181.8 0.3 182.1Social security costs 21.4 - 21.4 15.5 - 15.5Other pension costs 4.7 - 4.7 2.8 - 2.8Redundancies and retention bonuses - 10.1 10.1 - - -
--------------------------------------------------------
284.6 10.1
294.7 200.1 0.3 200.4
-------------------------------------------------------- Other operating costs:
Vehicle costs 64.3 - 64.3 51.7 - 51.7Spares, consumables & external repairs 57.5 - 57.5 45.3 - 45.3Facility costs 47.8 10.2 58.0 31.8 0.5 32.3Other external charges 143.4 16.3 159.7 93.5 0.8 94.3
--------------------------------------------------------
313.0 26.5
339.5 222.3 1.3 223.6
-------------------------------------------------------- Other income: Profit on disposal of fixed assets (11.8) 0.9 (10.9) (9.1) (3.7) (12.8)Other income - - - - (11.3) (11.3)
--------------------------------------------------------
(11.8) 0.9
(10.9) (9.1) (15.0) (24.1)
-------------------------------------------------------- Depreciation and amortisation: Depreciation 159.8 0.9 160.7 113.6 - 113.6Amortisation of acquired intangibles - 11.0 11.0 - - -
--------------------------------------------------------
159.8 11.9 171.7 113.6 - 113.6
--------------------------------------------------------
745.6 49.4
795.0 526.9 (13.4) 513.5
========================================================
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 30 April Year to 30 April 2007 2006 2007 2006 --------------------------------- ‚£m ‚£m ‚£m ‚£m Senior note redemption costs - - 42.1 5.0Write off of deferred financing costs relating to debt redeemed - - 10.5 1.5Acquisition integration costs 5.2 0.4 21.3 0.8Rebranding costs 6.9 - 9.4 -UK restructuring 6.2 - 6.2 -Litigation proceeds - - - (11.3)Profit on sale of scaffolding - 0.5 - (2.9)
Gain on repayment of convertible loan note - - - (2.0) Other costs
1.0 - 2.0
0.3
---------------------------------
Total exceptional items 19.3 0.9 91.5
(8.6)
Amortisation of acquired intangibles 4.4 - 11.0
-
Fair value remeasurements of embedded derivatives - (0.5) 15.4
(5.6)
---------------------------------
23.7 0.4 117.9
(14.2)
=================================
Senior note redemption costs include `make-whole' payments and associated costsof ‚£25.4m paid at closing on 31 August 2006 for NationsRent's $400m secured andunsecured loan notes and ‚£16.7m paid on the same date on redemption of the ‚£78mAshtead secured loan notes due 2014. The write off of deferred financing costsrelates to deferred costs previously carried forward on both Ashtead's sterlingsenior notes and its $800m asset based bank facility which was replaced on 31August 2006 by a new $1.75bn asset based bank facility. Acquisition integrationcosts relate primarily to employee retention and severance costs and vacantproperty costs following the NationsRent acquisition while rebranding relatesto new signage and painting of former NationsRent facilities and equipment. TheUK restructuring relates to principally vacant property costs and the write offof leasehold improvements at profit centres that will be closed as a result ofthe A-Plant move to fewer, larger sites.The items detailed in the table above are presented in the income statement asfollows: Three months to 30 April Year to 30 April 2007 2006 2007 2006
---------------------------------
‚£m ‚£m ‚£m ‚£m Staff costs 1.4 - 10.1 0.3Other operating costs 16.1 0.5 26.5 1.3Other income 0.9 0.4 0.9 (15.0)Depreciation 0.9 - 0.9 -Amortisation of acquired intangibles 4.4 - 11.0
-
---------------------------------
Charged/(credited) in arriving atoperating profit 23.7 0.9 49.4 (13.4) Net financing (income)/costs - (0.5) 68.5 (0.8)
---------------------------------
Charged/(credited) in arriving at profit before tax 23.7 0.4 117.9 (14.2)
=================================
5. Financing costs Three months to Year to 30 April 30 April 2007 2006 2007 2006
---------------------------------
‚£m ‚£m ‚£m
‚£m
Investment income: Interest and other financial income - 0.3 0.1
0.5
Expected return on assets of defined benefit pension plan 0.8 0.3 3.8
2.2
--------------------------------- 0.8 0.6 3.9
2.7
Exceptionalincome and fair value remeasurements of embedded derivativesin long term debt - 0.5 -
7.8
---------------------------------
Total investment income 0.8 1.1 3.9
10.5
================================= Interest expense: Bank interest payable 9.9 4.4 34.0
16.3
Interest on second priority seniorsecured notes 9.1 5.4 31.7
19.7
Interest payable on finance leases 0.4 0.4 1.6
1.8
5.25% unsecured convertible loan note, due 2008: - interest payable - - -
1.9
- non-cash unwind of discount - - -
1.0
Non-cash unwind of discount on defined benefit pension plan liabilities 0.5 0.2 2.5
2.2
Non-cash unwind of discount on self insurance provisions 0.3 0.4 0.7
0.4
Amortisation of deferred costs of debt raising 0.6 0.7 2.5 2.7Other - 0.3 - 0.3 --------------------------------- 20.8 11.8 73.0
46.3
Exceptional costs and fair value remeasurements of embedded derivativesin long term debt - - 68.5
7.0
--------------------------------- Total interest expense 20.8 11.8 141.5
53.3
================================= Net financing costs before exceptional items and fair value remeasurements ofembedded derivatives 20.0 11.2 69.1
43.6
Net exceptional items and fair value remeasurements of embedded derivatives - (0.5) 68.5
(0.8)
---------------------------------
Net financing costs 20.0 10.7 137.6
42.8
=================================
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, as an exceptional tax credit, a previously unrecognised UK deferred tax asset of ‚£35.9m.
The remaining tax credit for the year of ‚£8.5m comprises a charge on profitsbefore tax, exceptional items and intangible amortisation of ‚£28.7m and adeferred tax credit of ‚£37.2m on the exceptional items and intangibleamortisation. The ‚£28.7m tax charge on the underlying pre-tax profit of ‚£81.4mrepresents an effective tax rate of 35% (2006 - 31%). The ‚£28.7m underlying taxcharge consists of a current tax charge of ‚£0.1m relating to Singapore (2006 -‚£0.1m), a current tax charge of ‚£0.3m relating to the US (2006 - ‚£0.4m), adeferred tax charge of ‚£6.0m relating to the UK (2006 - credit of ‚£2.9m), adeferred tax charge of ‚£22.2m relating to the US (2006 - charge of ‚£23.5m), anda deferred tax charge of ‚£0.1m relating to Singapore (2006 - ‚£nil).
7. Earnings per share
Basic and diluted earnings per share for the three and twelve months ended 30April 2007 have been calculated based on the profit for the relevant period andon the weighted average number of ordinary shares in issue during that period(excluding shares held by the ESOT over which dividends have been waived).Diluted earnings per share is computed using the result for the relevant periodand the diluted number of shares (ignoring any potential issue of ordinaryshares which would be anti-dilutive). These are calculated as follows: Three months to Year to 30 April 30 April 2007 2006 2007 2006
---------------------------------
Profit for the financial period (‚£m) (6.8) 12.4 7.9
55.6
Weighted average number of shares (m) - basic 551.4 432.7 512.3
410.9
==================================
- diluted 562.1 443.0 519.0
419.9
================================== Basic earnings per share (1.2p) 2.8p 1.5p
13.5p
================================== Diluted earnings per share (1.2p) 2.8p 1.5p
13.2p
==================================
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 Year to 30 April 30 April 2007 2006 2007 2006
---------------------------------
Basic earnings per share (1.2p) 2.8p 1.5p
13.5p
Exceptional items, amortisation of acquired
intangibles and fair value remeasurements 4.3p 0.1p 23.0p
(3.4p)
Tax on exceptional items, amorisation and fair value remeasurements (1.5p) 0.2p (7.2p)
1.2p
Exceptional deferred tax credit for previously unrecognised UK tax losses 0.2p - (7.0p)
-
---------------------------------
Underlying earnings per share 1.8p 3.1p 10.3p 11.3pOther deferred tax 1.0p 0.5p 5.5p 5.1p
---------------------------------
Cash tax earnings per share 2.8p 3.6p 15.8p
16.4p
=================================
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 (48.4) (54.4) 16.3 18.6Reclassifications (0.4) - 0.3 -Additions 256.4 290.2 201.8 220.2Acquisitions 344.6 385.2 32.2 35.3Disposals (53.1) (59.0) (47.4) (50.9)Depreciation (138.4) (160.7) (96.2) (113.6) ---------------------------------- At 30 April 920.6 1,048.0 559.9
646.7
==================================
9. Called up share capital Ordinary shares of 10p each: 2007 2006 2007 2006 ---- ---- ---- ---- Number Number ‚£m ‚£m Authorised 900,000,000 900,000,000 90.0 90.0
==============================================
Allotted, called up and fully paid 559,898,348 404,334,066 56.0
40.4
==============================================
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 3,324,267 shares were issued in the year ended 30April 2007 at an average price of 64.6p per share under share option plansraising ‚£2.2m.
10. Statement of changes in shareholders' equity
Own Cumulative shares foreign Non held in exchange Share Share distributable treasury translation Distributable 30 April capital premium reserves (ESOT)
differences reserves Total 2006
-----------------------------------------------------------------------------------------
‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m Total recognised income and expense - - - - (13.0) 12.0 (1.0) 71.2Shares issued 15.6 0.1 - - - 133.2 148.9 70.9Dividends paid - - - - - (7.0) (7.0) (2.0)Share based payments - - - - - 2.4 2.4 1.3Vesting of share awards - - - 0.4 - (0.4) - -Own shares purchased - - - (4.9) - - (4.9) (2.8)
--------------------------------------------------------------------------------------
Net changes inshareholders' equity 15.6 0.1 - (4.5) (13.0) 140.2 138.4 138.6Opening shareholders'equity 40.4 3.2 90.7 (4.2) (17.2) 145.4 258.3 119.7
--------------------------------------------------------------------------------------
Closing shareholders' equity 56.0 3.3 90.7 (8.7)
(30.2) 285.6 396.7 258.3
======================================================================================
11. Notes to the cash flow statement
Year to 30 April 2007 2006 ---------------- ‚£m ‚£ma) Cash flow from operating activities ----------------------------------- Operating profit 101.1 124.5Depreciation and amortisation 171.7 113.6Exceptional items 37.5 (13.4) -----------------EBITDA before exceptional items 310.3
224.7
Profit on disposal of property, plant and equipment (11.8)
(9.1)
Decrease in inventories 14.8
2.2
Decrease/(increase) in trade and other receivables 7.2
(11.2)
(Decrease)/increase in trade and other payables (4.6) 7.5Exchange differences 1.1 (0.3)Other non-cash movements 2.3 1.4 -----------------
Cash generated from operations before exceptional items 319.3 215.2
=================
b) Reconciliation to net debt -------------------------- (Increase)/decrease in cash in the period (0.1)
1.2
Increase in debt through cash flow 238.8
1.4
------------------
Change in net debt from cash flows 238.7 2.6Debt acquired 232.8 -Exchange difference (64.7) 3.7Non-cash movements: - deferred costs of debt raising 13.0
4.0
- convertible loan note -
(1.0)
- capital element of new finance leases 2.5
2.0
------------------
Movement in net debt in the period 422.3 11.3Opening net debt 493.6 482.3 ------------------Closing net debt 915.9 493.6 ==================c) Analysis of net debt -------------------- 1 May Exchange Cash Debt Non-cash 30 April 2006 movement flow acquired movements 2007 ---------------------------------------------------- ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m Cash (1.0) - (0.1) - - (1.1)Debt due within 1 year 10.6 (0.6) (13.4) 7.3 5.1 9.0Debt due after 1 year 484.0 (64.1) 252.2 225.5 10.4 908.0
-----------------------------------------------------
Total net debt 493.6 (64.7) 238.7 232.8 15.5
915.9
=====================================================
Details of the changes in the Group's debt following the NationsRent acquisition are given in the Review of Results, Balance Sheet and Cashflow accompanying these financial statements.
d) Acquisitions Year to 30 April ---------------- 2007 2006 NationsRent Lux Total Total ----------- --- ----- ----- ‚£m ‚£m ‚£m ‚£m Initial consderation 311.2 15.8 327.0 57.0Less: cash/overdrafts required (6.5) 0.3 (6.2)
-
Attributable costs paid 6.1 0.3 6.4
-
--------------------------------
310.8 16.4 327.2
57.0
================================
12. Acquisitions
NationsRent Companies Inc ("NationsRent")
On 31 August 2006, Sunbelt acquired the entire issued share capital ofNationsRent for an initial consideration of $592m plus acquisition costssubject to adjustment under closing balance sheet mechanisms. $28m of theinitial consideration was paid to an escrow agent to secure any claims underthe warranties and indemnities with the balance being paid to the vendors atclosing. $0.5m of the escrow amount was returned to Sunbelt on 5 June 2007 byway of an agreed reduction in consideration resulting from warranty claims.Following the latest release from the escrow account to the vendors on 5 June2007 $6m remains in escrow.As part of the NationsRent acquisition, the Group has 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 $19.2m respectively. For the previous fullyear (1 May 2005 to 30 April 2006) NationsRent's estimated revenue andoperating profit were $605.8m and $14.9m respectively on the same accountingbasis.
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 the NationsRent acquisition is as follows: At estimated fair value ---------- ‚£mNet assets acquired: Inventory 28.0Trade and other receivables 54.4Cash and cash equivalents 6.5Property, plant and equipment: - rental equipment 340.4- other assets 39.8Intangible assets - tradename and distribution agreements 17.9Assets held for sale 31.1Trade and other payables (90.8)Deferred tax liability (net of acquired tax losses of ‚£28.7m) (29.2)Debt (232.6) ----- Net assets acquired 165.5 ----- Consideration paid: Cash 311.2
Amount receivable relating to adjustment to initial consderation (0.3) Directly attributable costs
6.1 ----- 317.0 ----- Goodwill 151.5 =====
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 was subject to downwards only adjustmentto the extent that Lux's net assets at closing are less than ‚£4.25m. Thenecessary closing accounts have now been prepared and agreed with ‚£60,000 ofthe ‚£0.5m escrow amount being returned and the balance released to the vendor.
The net assets acquired and the goodwill arising on the acquisition are summarised in the table below:
At fair value ------------- ‚£mNet assets acquired: Inventory 0.1Trade and other receivables 2.8Assets acquired by the vendor immediately after closing
0.3
Property, plant and equipment - rental equipment 4.2- other assets 0.5Intangible assets (tradenames, customer list and non-competes) 3.1Trade and other payables (2.8)Short term borrowings (0.3)Deferred tax liabilities (1.3)Debt (0.2) ---- 6.4 ---- Consideration paid: Paid in cash at closing 15.8Directly attributable costs 0.3 ---- 16.1 ---- Goodwill 9.7 ====Lux's revenue and operating profit in the period from 1 May 2006 to 16 October2006 were ‚£9.5m and ‚£0.6m, respectively and, for the year ended 30 April 2006,‚£18.4m and ‚£0.8m respectively. For the same reasons as NationsRent, it is notpractical to report the revenue and profit of the acquired business postacquisition.
13. Contingent liabilities and contingent assets
The Group is subject to periodic legal claims in the ordinary course of its business. However, net of provisions held, the claims outstanding at 30 April 2007 are not expected to have a significant impact 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.
REVIEW OF RESULTS, BALANCE SHEET AND CASH FLOW
Results
Segmental results
Divisional results before exceptional items and amortisation of acquiredintangibles for the three months and year ended 30 April 2007 are summarisedbelow: Revenue EBITDA Operating profitThree months to 30 April 2007 2006 2007 2006 2007 2006------------------------
----------------------------------------------------
Sunbelt in $m 349.4 202.7 122.8 72.4
59.8 37.7
=====================================================
Sunbelt in ‚£m 178.3 115.6 62.6 41.3 30.4 21.6A-Plant 50.2 41.8 15.7 12.0 5.9 4.3Ashtead Technology 5.3 4.3 3.0 2.3 1.8 1.1Group central costs - - (2.4) (1.2) (2.4) (1.3)
-----------------------------------------------------
233.8 161.7 78.9 54.4 35.7 25.7 ===================================Net financing costs (20.0) (11.2) -------------Profit before tax, exceptionals and amortisation 15.7 14.5Exceptional items (19.3) (0.4)Amortisation (4.4) - ------------- (Loss)/profit before taxation (8.0) 14.1 =============Year to 30 April ---------------- Sunbelt in $m 1,307.9 818.7 475.0 307.9 253.1 175.5
=======================================================
Sunbelt in ‚£m 684.6 461.2 248.6 173.4 132.5 98.9A-Plant 189.9 160.7 58.9 48.9 20.1 13.9Ashtead Technology 21.6 16.1 11.0 8.0 6.2 4.0Group central costs - - (8.2) (5.6) (8.3) (5.7)
-------------------------------------------------------
896.1 638.0 310.3 224.7 150.5 111.1 ===================================== Net financing costs (69.1) (43.6) -------------Profit before tax, exceptionals and amorisation 81.4 67.5Exceptional items (106.9) 14.2Amortisation (11.0) - -------------(Loss)/profit before taxation (36.5) 81.7taxation ============= Revenue increased 44.6% to ‚£233.8m (2006 - ‚£161.7m) in the quarter ended 30April 2007 and 40.5% to ‚£896.1m (2006 - ‚£638.0m) in the year then ended. Thisreflects the contribution from NationsRent since 31 August 2006 as well as thelimiting effect of the weak dollar which, in the fourth quarter, declined 10%from $1.82 = ‚£1 a year ago to $2.00 = ‚£1. Underlying operating profit increased39.2% to ‚£35.7m (2006 - ‚£25.7m) in the quarter ended 30 April 2007 and 35.5% to‚£150.5m (2006 - ‚£111.1m) in the year then ended. Profit before tax,exceptionals and amortisation for the quarter increased to ‚£15.7m (2006 - ‚£14.5m) and for the year ended 30 April 2007 was ‚£81.4m (2006 - ‚£67.5m)reflecting the financing costs of the acquisition but not the full effects ofthe operational efficiencies and cost savings. After exceptional items andamortisation, the loss before tax for the quarter was ‚£8.0m (2006 - profit of ‚£14.1m) and for the year was a loss of ‚£36.5m (2006 - profit of ‚£81.7m).
Net financing costs
Net financing costs, before exceptional costs and fair value remeasurements,increased from ‚£43.6m to ‚£69.1m reflecting higher average debt levels followingthe NationsRent acquisition and slightly higher average interest rates.Compared to the previous year, the average interest rate benefited from therepayment of the remaining 12% notes and from a lower margin under our firstpriority asset based senior secured loan facility, but these benefits have beenoffset by increases in US dollar interest rates payable under our floating ratesenior facility. The average interest rate payable at 30 April 2007 on all ofour debt facilities (including the impact of amortisation of deferred debtraising costs) was 8%.
Exceptional items
In addition to the trading results and financing costs discussed above, theconsolidated income statement includes significant exceptional costs relatingto the acquisitions of NationsRent and Lux as well as to the programme toimprove A-Plant's operational efficiency. The key elements of these costs are: NationsRent Lux UK restructuring Other Total ----------- --- ---------------- ----- ----- ‚£m ‚£m ‚£m ‚£m ‚£mDebt redemption costs paid at closing 42.1 - - - 42.1Non-cash financing costs 25.9 - - - 25.9Integration & closure costs 31.5 0.5 6.2 0.7 38.9
------------------------------------------------------
99.5 0.5 6.2
0.7 106.9
======================================================
Paid in cash in the year 60.1 0.4 0.4 0.7 61.6Payable in future years - in less than one year 9.8 0.1 0.6 - 10.5- in more than one year 2.0 - 3.8 - 5.8Non-cash items 27.6 - 1.4 - 29.0
------------------------------------------------------
99.5 0.5 6.2
0.7 106.9
======================================================
NationsRent debt redemption costs relate to the premia payable on redeeming (a)the outstanding NationsRent secured bonds and (b) the outstanding Ashtead 12%senior secured notes. These amounts were paid in cash on 31 August 2006 but arerequired to be expensed in the income statement and not taken to cost ofacquisition because Ashtead made the decision to redeem in order to facilitatethe financing of the acquisition.Non-cash costs relating to NationsRent comprise (a) the non-cash write off ofthe value placed on the early prepayment option in the Ashtead notes; and (b)the write off of deferred financing costs on the Ashtead debt redeemed in theacquisition refinancing.NationsRent integration and closure costs comprise (a) redundancies andseverance costs of ‚£7.2m to deliver the head office and regional integrationcost savings; (b) retention bonuses of ‚£2.0m paid largely to redundant staff toretain them until their services were no longer required; (c) provision forfuture rent on facilities vacated in Fort Lauderdale and in the merged profitcentres (‚£6.2m); (d) rebranding costs of ‚£9.4m for the NationsRent profitcentres and fleet; and (e) ‚£6.7m of other costs.Lux integration costs totalled ‚£0.5m as analysed in the table above. UKrestructuring costs relate principally to a provision of ‚£4.5m to write offleasehold improvements and for future rent and rates on facilities vacated inthe UK as we invest in additional larger, better quality premises which willserve a larger area with a bigger fleet than the facilities they replace andaccordingly provide greater efficiency through increased scale.Of the total exceptional costs incurred of ‚£106.9m, ‚£29.0m are non-cash itemswhilst ‚£61.6m of the cash items had been paid by year end with ‚£16.3m to bepaid in future periods. ‚£10.5m of this amount, mostly relating to therebranding programme and to NationsRent redundancy payments deferred for sixmonths under the US tax code will be paid in 2007/8. The remainder, mostlyrelating to vacant property provisions, will be payable over the following twoto three years.
Amortisation of acquired brand names and other acquired intangibles
‚£11.0m of intangible amortisation, relating mostly to the NationsRentacquisition was incurred in the year. This included the amortisation of theacquired NationsRent brand name (appraised cost - ‚£9.4m) over the period fromacquisition until 30 April 2007 when the rebranding of the acquired fleet andproperties was essentially completed and the name was no longer in use.
Balance sheet
Capital expenditure in the year was ‚£290.2m of which ‚£256.4m was invested inthe rental fleet (2006 - ‚£220.2m in total). Expenditure on rental equipment was88.3% of total capital expenditure with the balance relating to the deliveryvehicle fleet, property improvements and to computer equipment. Capitalexpenditure by division was as follows: 2007 2006 ---- ---- Growth Maintenance Total Total
----------------------------------
Sunbelt in $m 102.2 246.0
348.2 257.9
--------------------------------- Sunbelt in ‚£m 51.2 123.0 174.2 141.9A-Plant 17.1 56.7 73.8 52.1Ashtead Technology 6.4 2.0 8.4 7.8 --------------------------------- Total rental equipment 74.7 181.7
256.4 201.8
=================================
Delivery vehicles, property improvements & computers 33.8 18.4 ------------Total additions 290.2 220.2 =============With strong US market conditions and a much improved performance at A-Plant,the Group spent ‚£74.7m of its rental equipment capital expenditure on growthwith ‚£181.7m 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 30 April 2007 was 31 months (2006 -37 months) on a net book value basis. Sunbelt's fleet had an average age of 32months (2006 - 38 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 29 months (2006 - 36 months).
The original cost of the Group's rental fleet and the pro forma dollar utilisation for the year ended 30 April 2007 are shown below:
Pro forma rental fleet at original cost --------------------------------------- Dollar 30 April 2007 30 April 2006 Average utilisation ------------- ------------- ------- -----------Sunbelt in $m 2,147 2,213 2,244 62%
--------------------------------------------
Sunbelt in ‚£m 1,074 1,218 1,122 62%A-Plant 321 306 321 60%Ashtead Technology 39 35 38 56%
--------------------------------------------
1,434 1,559 =====================
Dollar utilisation is defined as pro forma rental and rental related revenues divided by pro forma average fleet at original (or "first") cost.
Dollar utilisation at Sunbelt rose to 62% from 59% in the year ended 30 April2006 as Sunbelt focused on improving the previously low dollar utilisation inthe acquired NationsRent profit centres. Dollar utilisation of 60% at A-Plantreflects the lower pricing (relative to equipment cost) prevalent in thecompetitive UK market.Assets held for sale--------------------This category comprises the remaining NationsRent equipment identified as heldfor sale as part of the programme to reshape its fleet to contain a similarproportion of higher returning assets as Sunbelt. The lower returning equipmentis in the process of being disposed of and has been treated as an asset heldfor sale, on which no depreciation is charged, effective as of the acquisitiondate.Trade receivables-----------------Receivable days increased to 54 days (2006 - 49 days) reflecting the fact thatthe NationsRent receivables historically collected more slowly than those ofSunbelt. The bad debt charge for the year ended 30 April 2007 as a percentageof total turnover was 0.7% (2006 - 0.7%).Trade and other payables------------------------Group payable days were 72 days in 2007 (2006 - 57 days) with the increaseattributable to increased payment periods agreed with certain suppliers ofrental equipment following the NationsRent acquisition. Capital expenditurerelated payables at 30 April 2007 totalled ‚£47.0m (2006 - ‚£30.0m). Paymentperiods for purchases other than rental equipment vary between 7 and 45 daysand for rental equipment between 30 and 120 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: Year to Year to 30 April 30 April 2007 2006 ---- ---- ‚£m ‚£m EBITDA before exceptional items 310.3 224.7 =================== Cash inflow from operations before exceptional items 319.3 215.2Cash efficiency ratio* 102.9% 95.8%Maintenance rental capital expenditure (213.1)
(149.9)
Non-rental capital expenditure (32.3)
(16.8)
Proceeds from sale of used rental equipment 78.5 50.4Tax paid (5.0) (2.8) ------------------- Free cash flow before interest 147.4 96.1Financing costs paid (64.2) (38.7) -------------------Free cash flow after interest 83.2 57.4Growth capital expenditure (62.9) (62.6)Acquisitions and disposals (327.2) (44.2)Issue of ordinary share capital 148.9
70.9
Dividends paid (7.0)
(2.0)
Purchase of own shares by ESOT (4.9)
(2.8)
Pension plan funding -
(17.1)
Exceptional costs paid (net) (68.8) (2.2) ------------------ Increase in total debt (238.7) (2.6) ===================
* Cash inflow from operations before exceptional items as a percentage of EBITDA before exceptional items.
Cash inflow from operations increased 48.4% to ‚£319.3m and the cash efficiencyratio was 102.9% (2006 - 95.8%). Cash inflow from operations in the year ended30 April 2007 has benefited from cash generated from reducing NationsRentinventory and receivable levels from those prevailing when it was acquired on31 August 2006. Net cash capital expenditure in the year ended 30 April 2007increased to ‚£229.8m (2006 - ‚£178.9m) reflecting the strong US marketconditions and the improved performance of A-Plant.Financing costs (excluding exceptional financing costs) paid of ‚£64.2m werelower than the ‚£68.5m accounting charge reflecting non-cash items included inthe latter. Payments for exceptional items of ‚£68.8m differ from theexceptional income statement expense of ‚£91.5m 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‚£16.3m which had not been paid at 30 April 2007.
The Group continues to generate strong free cash flow after interest with ‚£ 83.2m (2006 - ‚£57.4m) generated in the year.
Acquisition and disposal expenditure of ‚£327.2m relates to the acquisitions ofNationsRent and Lux with the majority of the proceeds from the issue of sharecapital of ‚£148.9m relating to the rights issue in connection with theNationsRent acquisition.Net debt-------- 30 April 30 April 2007 2006 ---- ---- ‚£m ‚£m First priority senior secured bank debt 506.1
263.2
Finance lease obligations 22.0
23.2
12% second priority senior secured notes, due 2014 -
75.5
8.625% second priority senior secured notes, due 2015 120.6 132.7 9% second priority senior secured notes, due 2016
268.3 - ------------------ 917.0 494.6Cash and cash equivalents (1.1) (1.0) ------------------ Total net debt 915.9 493.6 ==================Group net debt increased from ‚£493.6m at 30 April 2006 to ‚£915.9m at 30 April2007 reflecting the impact of the NationsRent acquisition which, together withthe Lux acquisition increased net debt by approximately ‚£470m (net of the netrights issue proceeds of ‚£146.7m). The ratio of net debt to pro forma EBITDAwas 2.7 times at 30 April 2007. Pro forma EBITDA for this purpose was ‚£341.3mand includes NationsRent's EBITDA excluding its profit on used equipment salesfor the pre-acquisition period from 1 May 2006 to 31 August 2006 (but not anypro forma benefit from central overhead savings) together with Lux's EBITDAfrom 1 May 2006 to 16 October 2006.
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 6.25 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 30 April 2007 availability underthe bank facility was $589m ($283m under the old facility at 30 April 2006).Currency translation--------------------Following the NationsRent acquisition approximately 98% of our debt isdenominated in US dollars. At 30 April 2007 our dollar denominated debtrepresented approximately 86% 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 0.8%.OPERATING STATISTICS Profit centre numbers Staff numbers --------------------- ------------- 30 April 30 April 30 April 30 April -------- -------- -------- -------- 2007 2006 2007 2006 ---- ---- ---- ---- Sunbelt Rentals 445 209 7,524 4,266A-Plant 201 193 2,424 2,081Ashtead Technology 13 11 115 104Corporate office - - 14 14 ---------------------------------------- Group 659 413 10,077
6,465
========================================
ASHTEAD GROUP PLCRelated Shares:
Ashtead Group