23rd May 2007 07:01
Speedy Hire PLC23 May 2007 23 May 2007 SPEEDY HIRE Plc PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2007 Speedy Hire is the UK's No.1 provider of tools and equipment for hire. TheCompany operates from over 350 depots throughout the UK. The Group alsooperates in the Republic of Ireland. The Group's activities are the provision for hire of small tools, portableaccommodation, compressed air, pumps, lifting, material handling, survey andmeasurement instrumentation and power generation equipment. FINANCIAL HIGHLIGHTS 2007 2006 % Change Revenue £335.5m £254.3m 31.9%Profit before tax £36.4m £30.7m 18.6%Profit before tax and amortisation £40.5m £32.2m 25.8%Basic earnings per share 58.74p 50.44p 16.5%Adjusted earnings per share1 65.00p 52.86p 23.0%Total dividend per share 17.0p 14.3p 18.9%Return on capital employed (before amortisation andexceptional items) 16.9% 17.5%Gearing 103.0% 72.9% 1 Before amortisation • Revenue growth in tools up 16.2%, like for like tool hire turnover up 7.3%• Revenue growth in equipment hire up 54.5%• Interest cover 4.8 times (2006: 6.2 times)• Market outlook remains buoyant Outlook "We have seen strong performance in all our key metrics and momentum in thebusiness remains strong. Health and Safety legislation together with customerrequirements for supply chain improvements continue to provide an increasedimpetus towards the hiring of tools and equipment. Faced with favourable markets, a strong financial position and an outstandingteam, and subject to no material change in the economic outlook, I am confidentof reporting further progress in the year ahead." David Wallis - Chairman For further information: Speedy Hire Plc Hudson SandlerSteve Corcoran, Chief Executive Nick Lyon/Wendy Baker/Kate HoughNeil O'Brien, Group Finance Director Tel: 020 7796 4133Tel: 020 7796 4133 on Wednesday 23 May(thereafter Tel: 01942 720000) Website: www.speedyhire.plc.uk High resolution photographs are available to media free of charge at www.vismedia.co.uk SPEEDY HIRE Plc CHAIRMAN'S STATEMENT I am pleased to report another highly successful year for your company. We haveseen strong performance in all our key metrics and I have summarised these inthe table below. Your board is therefore proposing an increase in the finaldividend to 11.5 pence making a total of 17.0 pence for the full year, 18.9% upon 2006. Our Performance 2007 2006Revenues £335.5m £254.3m +31.9%EBITDA £100.3m £77.0m +30.3%Profit before Tax £36.4m £30.7 m +18.6%Group operating margin pre amortisation 14.9% 15.0% -Earnings per share 58.74 pence 50.44 pence +16.5%Earnings per share pre amortisation of intangibles 65.00 pence 52.86 pence +23.0%Return on Capital 16.9% 17.5% -Total Equity £171.1m £141.3m +21.1% These results are testimony to the success of every member of the Speedy Hireteam, now over 3,800 strong and I would like to extend the thanks of both theboard and shareholders to each of them. Speedy Hire operates two divisions, Tool Hire and Equipment Hire, through anational network of 361 depots. Both divisions experienced impressive increasesin revenues and operating profit, achieved with strong and stable margins.Revenue expansion was a combination of organic growth, including 7.3% like forlike in the tool hire depots, 20 new greenfield sites and two significantacquisitions. We invested £83m in new hire fleet enabling us to continue to provide ourcustomers with the broadest range of tools and equipment and to maintain ourindustry leading position of owning the youngest tool fleet, with an average ageof 2.2 years. Despite this record investment in new fleet and consideration of £69m onacquisitions, year end gearing was 103%, testimony to the powerful cashgenerating ability of your company. Delivering Our Strategy Our strategy is to grow, with the aim of being number one or two in the marketsegments which we operate in. Our primary customers are the larger constructionand industrial companies which require tools and equipment for longer periods oftime and which have more complex needs. These market segments are continuing toexpand and our customer base has become broader as we service clients inindustry, utilities, steel, oil and gas and petrochemicals. We are beginning todevelop further added-value activities for our customers, beyond the initialhire of a product. These include Health and Safety training for their operatorsand fuel management services for equipment. One of our key challenges is to ensure that our own infrastructure can cope withthe increasing demands placed upon it. We are currently working on majorprojects in several areas, but I would like to focus on two of these, I.T. andPeople. A new I.T. system is being installed and is now operational in three regions.The planning and execution of the changeover went smoothly and the system willbe rolled out nationwide. Once fully applied, this will provide a much neededfoundation for our vision of "One Speedy" enabling a significant improvement inboth service and administrative ease for our customers, as well as providing uswith the means of better managing our assets. Speedy's ethos is to ensure that customers remain at the heart of the businessand our people are dedicated to providing the best possible service. It is onlyby having the very best people at every level will we achieve our vision. Tothis end, we have developed a People Plan covering the whole business, with thegoal of ensuring that through appropriate coaching, training and developmenteveryone is offered the opportunity to fulfil their potential. I am pleased to report significant progress in both areas, but we are under noillusion that we are only just at the start of a long road and there remainsmuch to do. In addition to growing the business organically, we continue to expand by makingcarefully targeted acquisitions. Over the past 5 years, Speedy Hire hasacquired over 20 businesses as the industry consolidates. Speedy has been, andwill continue to be at the forefront of this process. Inevitably the acquiredcompanies increase in size and complexity. In May 2006, we acquired LCHGenerators for £55m and in October 2006, Lifting Gear Hire, for £14m, bothsubstantial businesses in their own right. I am delighted to report that bothbusinesses have performed in line with our year one expectation, both in termsof financial performance and their smooth integration into the Speedy network.This has reinforced our confidence to continue with our strategy. Outlook The momentum in the business remains strong. We carefully monitor a series ofindicators covering both the economy and construction activity, as well as thecomments of our major customers. These all indicate a positive and progressivelevel of activity. Increased Health and Safety legislation, which in the past few years has seennew regulation introduced on Hand Arm Vibration and Working at Height, has beenextended to include noise and dust emissions. When combining legislativerequirements with customer demands for continued improvements in supply chainmanagement and quality assurance programmes, there is increasing impetus towardsthe hiring of tools and equipment. To meet these demands, we see furtherconsolidation of the hire sector as both desirable and necessary. Speedy Hire remains a well balanced business. No one customer accounts for morethan 4% of income and the diversity of markets, source of revenues and range ofactivities coupled with a national footprint brings added strength to thebusiness. Faced with favourable markets, a strong financial position and an outstandingteam, and subject to no material change in the economic outlook, I am confidentof reporting further progress in the year ahead. SPEEDY HIRE Plc CHIEF EXECUTIVE'S REVIEW The Business Speedy Hire is predominantly a business to business company providing a broadrange of products for hire to the construction, building and specialistmanufacturing industries across the UK and Republic of Ireland. From ourtraditional position in tool hire, we have expanded our market and complementedour brand by specialising in key areas of equipment rental. Speedy is a national business that can flex its resources and commitments towherever its services are in most demand, responding to regional variations inbuilding and economic activity. Our management structure is aimed at providingefficient support to the regions to ensure our customers receive consistentlyhigh standards of product quality and service delivery, whilst also ensuringthat we are able to closely monitor our markets and respond quickly to changesin demand. Our approach to customer service differentiates us from our competitors. Wealways seek to build strong local relationships with our customers, town by townand region by region. Our customers both nationally and locally recognise thebenefits of our reliable service, depot network and broad product range butperhaps more importantly they attribute value to the friendliness, knowledge andcommitment of our employees, and consider us to be professional, trustworthy andflexible in our approach. As we expand our businesses across both our Tool Hire and Equipment divisions,we continue to identify new markets and opportunities, increasing our ability toharness cross-selling potential and deliver better value and service to ourcustomers. Tool Hire division The Tool Hire division saw like-for-like revenue growth of 7.3% in 2006/07 andtotal revenue growth of 16.2%. This is significantly ahead of the general hiremarket growth of 6%. The division generated record levels of revenue and profitand further increased its market share. 10 greenfield depots were added to our national network providing greatercoverage and improved customer service. Our new operations in Dublin andBelfast are providing a solid platform from which to drive further growth inNorthern Ireland and in the Irish Republic. This will be driven through a mix ofadditional greenfield depots and via acquisitions. We continue to target growth through new product areas and by identifying growthopportunities from within our existing product range - such as Concreting,Access and Engineering. We have also developed our overall service offering byexpanding into non-hire related activities, e.g. training, health and safety "tool box talks" and improved safety products. Some of the highlights of our Tool Hire division: • The opening of 10 new greenfield depots.• An additional 14 on-site depots with major construction companies.• Establishing new "Centres of Excellence" to increase specialisation, customer focus and operational efficiencies in Access, Concreting and Light Plant products.• The launch of our 'Let's clear the air' dust campaign to instruct employees and customers about the dangers associated with dust inhalation.• The provision of a new range of consumable safety products, e.g. site safety glasses, gloves and boots. Equipment Hire division Our Equipment division grew rapidly in 2006/07, both organically and through theaddition of two major acquisitions. The £55m acquisition of LCH GeneratorsLimited in May 2006 was our largest ever, while the acquisition of Lifting GearHire Limited in October 2006 has made Speedy the leading national liftingbusiness, enabling us to provide additional services in the testing, servicingand inspection of customers' own fleets whilst broadening our customer base. The operational integration of LCH is now complete. The integration of LGH isproceeding in accordance with plan. The strong focus on employee retention andcustomer management have ensured an orderly brand migration. In the year, we have further expanded our presence beyond our traditionalconstruction market into new areas such as events, petrochemicals andtelecommunications. February 2007 saw the launch of the first Speedy depotdedicated to safety products. As part of Speedy Survey the depot based in EastLondon will support construction and infrastructure projects such as the 2012Olympic Games. The depot provides a full range of safety equipment includingnoise and dust monitors, breathing apparatus, gas monitors and safety harnessesand is one of the first in the country to hire marine safety equipment tosupport waterside infrastructure projects. Some of the highlights for our Equipment division: • The successful completion and managed integration of the LCH and Lifting Gear Hire acquisitions.• Revenue growth of 54.5%.• The opening of 10 new greenfield depots.• All four Equipment businesses achieved Investor in People status.• The successful expansion of the Pumps business to five dedicated stand-alone depots.• The extension of our Speedy Space business into modular accommodation and welfare facilities providing our clients with improved services. The Market The U.K hire market has a total market size of at least £4.5bn giving us amarket share of c.7.6% and making us the market leader in what is still a veryfragmented industry. Latest market research projects that the UK hire market will grow by 19% betweennow and 2010, driven by continued high levels of activity in the constructionmarket, increased legislation to encourage safer working practices and themaintained drive towards outsourcing of non-core activities. These initiatives, when added to the increasing emphasis on quality assurance,supply chain and health and safety standards, determine that customers thatoperate nationally require consistency in their services. This has continued themomentum towards hire and away from ownership. Our national network, modernfleet, range of product and commitment to safety standards differentiate us frommany of our competitors - especially those that service the more opportunisticor localised hire markets. A large proportion of Speedy Hire's business services contractors are engaged inpublic sector-based projects such as schools, hospitals and other infrastructureprojects. According to the latest DTI information, 34% of construction output inthe UK came from the public sector. The government's commitment to improvingUK infrastructure is expected to continue into 2007 and beyond. These dynamics will increase demand for more modern, compliant fleet and we areconfident that these changes will continue to provide clear opportunities forour Company. Our customers play a central role in our product development. Many of our newproducts and service initiatives have been driven by the market. Working inconjunction with our suppliers, we identify solutions to their challenges anddevise effective marketing campaigns to help communicate these developments. Aprime example of this approach led to the implementation of our groundbreaking,hugely successful and award winning 'Safety from the ground up' campaign. While our prime market is the construction sector in its widest sense, Speedy isincreasingly offering its services to a broader range of clients with otherareas of speciality. Our strategy of continually broadening our businessactivities and geographical presence means our customer base is also highlydiverse, with no single customer accounting for more than 4% of our revenues. Our Equipment businesses have enabled us to provide a more diverse offering forspecific areas of the market. We are now increasingly active in industrialmarkets, where we provide site-based service support at large-scale facilitiessuch as steel works and petrochemical plants. Our recent acquisitions have alsoextended further our reach into the events and industrial sectors with not onlya wider product range but also additional services in testing, servicing andinspection of the customers' own fleet. In Speedy Power we have increased ourassociation with the mobile telecommunications industry, while in Speedy Spacewe have moved into modular accommodation to give our customers solutions thatare better suited to their specific requirements. Geographically, our market is expanding beyond the UK. In March 2006, SpeedyHire began operating in Dublin. We believe the Irish market holds enormouspotential for Speedy. Investment in the Irish infrastructure is estimated toreach some £67bn over the next six years, with a resulting increase inconstruction activity. We continue to closely monitor market activity, looking ahead, marketcircumstances may well present further consolidation opportunities and we arewell placed to take advantage of these as they may arise. Capital structure and treasury We continued our high level of investment in new hire assets in the year. Thiscommitment significantly contributed to the growth in Group turnover. Net assetsincreased by 21.1% to £171.1m (2006: £141.3m), as we grew our business and ourmarket share. Gross capital expenditure was £93.6m (2006: £78.5m) with a further£69m of consideration on the acquisitions of LCH Limited and Lifting Gear HireLimited. Shares to a value of £6.8m were issued as part payment for the acquisitions ofLCH Limited and Lifting Gear Hire Limited, to help maintain a balance betweendebt and equity and ensure we have finance available to continue to grow thebusiness. This equated to 755,000 new shares issued. Debt increased to £176.2min the year (2006: £103m), while gearing was reduced, as planned from theinterim period to remain at a comfortable 103% (2006: 73%). There were nochanges made to our depreciation policies and the year end charge stood at£50.3m (2006: £38.9m). The Board is comfortable with the increase in the debt used to fund theacquisitions. We remain a strongly cash generative company and are confident inour ability to invest for future growth. Our cash flows are strong and stableand highly predictable as shown by the ratio of EBITDA to revenues. These havebeen consistently around 30% for each of the last five years. Gross capitalexpenditure in the current year included £28.2m of a "growth capex" directed atstart-up companies, greenfield depots and in fuelling like-for-like growth.Operating cash flow grew by 10.7% to £84.8m (2006: £76.6m). During the year the Group increased available bank facilities to £210m. Bankaccounts are pooled Group-wide for interest rate calculation and authoritylimits are set across the Group. One of the key indicators of financial performance is Return on Capital. Thisremained strong at 16.9% (2006: 17.5%). This return is amongst the best in theindustry and is substantially ahead of our average cost of capital. Looking ahead Through our proven, successful strategy Speedy is well positioned to grow itsshare of the UK hire market. Our customers have expressed confidence in theirorder books and the mid-term outlook of their businesses is positive. In the UK, some £26bn of PFI work across 200 projects is in the pipeline toclose by 2010, according to HM Treasury. There is also further growth linked tothe 2012 Olympic Games in London. Industry information providers Emap Gleniganhave suggested that the capital cost of installing and developing the Olympicvenues will be in excess of the estimated £10bn across 250 projects. Speedy has achieved its success by staying close to its customers andunderstanding their needs. Today our customers regard our brand and ourproactive approach to Health & Safety practices as the gold standard in the tooland equipment hire business. We are confident there are further opportunities to expand our business, bothgeographically and in the range of products and services we offer. As theleading consolidator of the UK market, we will continue to be mindful of new andprofitable market opportunities whenever these emerge. With this in mind, at the end of April 2007, we acquired the business and assetsof Network Plant. As part of that agreement we have entered into a 4 yearsupply agreement with Mansell, a subsidiary of Balfour Beatty. We look forward to developing more long-term relationships with our customersand our suppliers and to investing more in our business, our products and ourpeople. We are confident that our business strategy will continue to deliversuccess, growth and sustainable profitability. Consolidated Income Statement For the year ended 31 March 2007 2007 2006 Note £m £m Revenue 1 335.5 254.3Cost of sales (118.7) (81.8)Gross profit 216.8 172.5 Other operating income - 0.1Distribution costs (43.2) (23.5)Administrative expenses (127.7) (112.5)Analysis of operating profitOperating profit before amortisation 50.0 38.1Intangible amortisation (4.1) (1.5)Operating profit 1 45.9 36.6 Financial income 0.4 0.2Financial expense (9.9) (6.1)Profit before taxation 36.4 30.7 Taxation 5 (9.8) (8.4)Profit for the year 26.6 22.3Attributable to:Equity holders of the parent 26.6 22.1Minority interests - 0.2 26.6 22.3 Pence PenceEarnings per share- Basic 2 58.74 50.44- Diluted 2 57.78 50.03 Consolidated Statement of recognised income and expense For the Year Ended 31 March 2007 2007 2006 Note £m £m Cash flow hedges: gains taken to equity 0.5 -Net income recognised directly in equity 0.5 -Profit for the period 26.6 22.3Total recognised income and expense for the period 27.1 22.3 Attributable to:Equity holders of the parent 27.1 22.1Minority interests - 0.2 27.1 22.3 Consolidated Balance Sheet As at 31 March 2007 2007 2006 Note £m £mASSETSNon-current assetsIntangible assets 71.3 23.9Property, plant and equipment 295.7 241.4Total non-current assets 367.0 265.3 Current assetsInventories 10.9 6.9Trade and other receivables 101.2 72.6Other financial assets 0.7 -Cash and cash equivalents 3 10.3 6.4Total current assets 123.1 85.9Total assets 490.1 351.2 LIABILITIESCurrent liabilitiesTrade and other payables (91.8) (69.5)Current income tax (6.0) (6.7)Total current liabilities (97.8) (76.2)Non-current liabilitiesFinancial liabilities - Borrowings 3 (186.5) (109.4)Deferred tax liabilities (34.7) (24.3)Total non-current liabilities (221.2) (133.7)Total liabilities (319.0) (209.9)Net Assets 171.1 141.3EQUITYIssued share capital 2.3 2.3Share premium account 57.8 51.0Merger reserve 3.7 3.7Hedging reserve 0.5 -Retained earnings 106.6 84.1Total equity attributable to equity holders of the parent 170.9 141.1Minority interests 0.2 0.2Total equity 171.1 141.3 Consolidated Cash Flow Statement For the year ended 31 March 2007 2007 2006 Note £m £mCash flow from operating activitiesProfit before income tax 36.4 30.7Financial income (0.4) (0.2)Financial expense 9.9 6.1Intangible amortisation 4.1 1.5Depreciation 50.3 38.9Profit on disposal of property plant and equipment (7.0) (5.8)Equity-settled share-based payments 1.7 0.9 95.0 72.1Increase in inventories (0.7) (2.1)Increase in trade and other receivables (19.2) (15.8)Increase in trade and other payables 9.7 22.4 Cash generated from operations 84.8 76.6 Interest received 0.5 0.2Interest paid (9.8) (5.6)Income tax paid (6.1) (1.4) Net cash flow from operating activities 69.4 69.8 Cash flow from investing activitiesAcquisition of businesses (62.0) (35.2)Purchase of property, plant and equipment (93.6) (78.5)Disposal of property, plant and equipment 19.7 15.2 Net cash flow from investing activities (135.9) (98.5) Net cash flow before financing activities (66.5) (28.7) Cash flow from financing activitiesProceeds from shares issued - 14.8Proceeds from new loans 77.1 20.3Capital element of Hire Purchase agreements - (0.3)Dividends paid (6.7) (5.6) Net cash flow from financing activities 70.4 29.2 Increase in cash and cash equivalents 3 3.9 0.5Cash and cash equivalents at the beginning of the year 6.4 5.9Cash and cash equivalents at the end of the year 10.3 6.4 Notes to the Financial Statements For the year ended 31 March 2007 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 2007. EU Law (IAS Regulation EC1606/2002) requires that the consolidated accounts ofthe group for the year ended 31 March 2007 be prepared in accordance withInternational Financial Reporting Standards ('IFRS') as adopted for use in theEU ('adopted IFRS'). The financial information set out above does not constitute the company'sstatutory accounts for the years ended 31 March 2007 or 2006 but is derived fromthose accounts. Statutory accounts for 2006 have been delivered to the registrarof companies, and those for 2007 will be delivered in due course. The auditorshave reported on those accounts; their reports were (i) unqualified, (ii) didnot include references to any matters to which the auditors drew attention byway of emphasis without qualifying their reports, and (iii) did not containstatements under section 237(2) or (3) of the Companies Act 1985. The preliminary results were approved by the board of directors on 21 May 2007. 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 group'sactivity is conducted solely within the United Kingdom and Republic of Ireland. Tools Equipment Total 2007 2006 2007 2006 2007 2006Class of Business £m £m £m £m £m £mAnalysis of segmental resultTotal revenue 175.5 151.0 166.6 107.8 342.1 258.8Internal revenue (0.8) (0.5) (5.8) (4.0) (6.6) (4.5) Revenue 174.7 150.5 160.8 103.8 335.5 254.3 Segment result before dep'n &amortisation 50.5 45.1 56.3 37.0 106.8 82.1Depreciation (22.8) (20.9) (25.0) (16.3) (47.8) (37.2)Amortisation (0.4) (0.6) (3.7) (0.9) (4.1) (1.5) Result before corporate costs 27.3 23.6 27.6 19.8 54.9 43.4Corporate costs (9.0) (6.8) Profit before net financing costs 45.9 36.6Net financing costs (9.5) (5.9)Income tax (9.8) (8.4) Profit for the year 26.6 22.3 Central overheads net of property income includes £0.3m (2006: nil) of profit ondisposal of properties. 2. Earnings per Share Basic earnings per share is based on the profit after taxation of £26.6 million(2006: £22.1 million) and the weighted average number of 5p ordinary shares inissue during the year of 45,194,250 (2006: 43,659,084). The weighted average number of ordinary shares used for the diluted earnings pershare is calculated as follows: 2007 2006 Weighted Weighted Average Average Shares Earnings Shares Earnings Earnings Number per share Earnings Number per share £m million pence £m million pence Basic earnings 26.6 45.2 58.74 22.1 43.7 50.44Share options - 0.4 (0.55) - 0.2 (0.26)All - Employee share scheme - 0.3 (0.41) - 0.1 (0.15)Diluted earnings 26.6 45.9 57.78 22.1 44.0 50.03 The table below reconciles basic earnings per share to earnings per sharepre-amortisation and loss on disposal of operation. 2007 2006 Pence PenceBasic earnings per share 58.74 50.44Amortisation charge after tax per share 6.26 2.42Basic earnings per share pre amortisation and loss ondisposal of operation 65.00 52.86 3. Analysis of net debt At Non- At 31 Mar Cash Cash 31 Mar 2006 Movement flow 2007 £m £m £m £m Cash 6.4 - 3.9 10.3Non-current debt (109.4) (0.1) (77.0) (186.5)Net debt (103.0) (0.1) (73.1) (176.2) 4. Year end gearing (calculated as net debt as a percentage of shareholders funds) stands at 103.0% (2006: 72.9%). 5. The charge for taxation for the year represents an effective tax rate of 26.9% (2006: 27.5%). 6. The board has proposed a final dividend of 11.5 pence per share to be paid on 21st August 2007 to shareholders on the register at 22nd June 2007. This, together with an interim dividend of 5.5 pence per share paid on 26th January 2007, makes a total dividend for the year of 17.0 pence per share. 7. The Annual Report and Accounts for the year ended 31 March 2007 will be posted to shareholders on or about 14th June 2007. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Speedy Hire