17th Jun 2010 07:00
Audited results for the year and unaudited results for the fourth quarter ended 30 April 2010 Fourth quarter Year -------------- ---- 2010 2009 Change¹ 2010 2009 Change¹ ---- ---- ------ ---- ---- ------ £m £m % £m £m % Underlying results² -------------------Revenue 210.1 232.1 -3% 836.8 1,073.5 -25%EBITDA 61.3 68.2 -1% 255.1 356.1 -31%Operating profit 14.6 16.4 +26% 68.5 155.0 -58%Profit/(loss) before tax (3.1) (0.2) +20% 5.0 87.4 -95%Earnings per share (0.4p) 0.2p - 0.2p 11.9p -Statutory results----------------- Profit/(loss) before tax 1.9 (29.2) - 4.8 0.8 -Earnings per share³ 0.3p (3.3p) - 0.2p 0.4p -1) At constant exchange rates 2) Before exceptionals, intangible amortisation & fair value remeasurements
3) from continuing operations
Highlights
----------
* Profit of £5m (2009: £87m) in difficult market conditions * Strong full year EBITDA margin of 30.5% (2009: 33.2%) * Encouraging early signs of improvement in Q4, particularly in the US * £191m (2009: £157m) of cash generated from operations in the year * Net debt reduced to £829m (2009: £1,036m); net debt to EBITDA leverage of 3.1 times * $1.3bn ABL facility successfully refinanced in the year providing:
* long average debt maturity of 5 years at year end
* with $537m of year end availability, all our debt continues to be effectively covenant free * Final dividend of 2.0p per share proposed (2009: 1.675p) making 2.9p for the year (2009: 2.575p)
Ashtead's chief executive, Geoff Drabble, commented:
"Having taken decisive and prompt actions to prepare the business for thecontraction in our end markets we have maintained healthy margins and strongcash generation whilst gaining market share. Although market conditions remaindifficult we are pleased to have seen some early signs of improvement in Q4,particularly in the US.In the US we continue to believe that we will see stabilisation in markets inthe current year with improving trends through 2011. In the UK, whilst currentmarkets are also stabilising, uncertainty around the impact of public sectorspending cuts makes the medium term less certain.In preparation for the next phase of the cycle, we have started a fleetreinvestment programme, funded from operating cash flow. Our well structureddebt facility means that we can react quickly if markets differ materially fromthose we anticipate.
Having strengthened our market position in the year just ended and with the flexibility provided by our strong balance sheet, the Board believes that the Group is well positioned for the future."
Contacts:---------Geoff Drabble Chief executive 020 7726 9700 Ian Robson Finance director Brian Hudspith Maitland 020 7379 5151 Geoff Drabble and Ian Robson will host a meeting for equity analysts to discussthe results at 9.30 am on Thursday 17 June at the offices of RBS Hoare Govettat 250 Bishopsgate, London EC2M 4AA. This meeting will be webcast live via theCompany's website at www.ashtead-group.com and a replay will be available fromshortly after the call concludes. A copy of this announcement and the slidepresentation used for the meeting will also be available for download on theCompany's website. A conference call for bondholders will begin at 3.15pm(10.15am 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 (Ashley Forget) at +44 (0)20 7379 5151.
Overview
--------
The year's results reflect a full year's impact of the global recession whichproduced a significant reduction in construction volumes in both our markets.Against this backdrop our relative performance has been strong in both marketswhere we have made clear market share gains whilst maintaining good EBITDAmargins. These strong margins, together with tight control of capitalexpenditure, generated £191m of cash in the year and £348m from operations inthe past two years which has been applied to reduce net debt to £829m.Lack of available finance had a dramatic impact on the pace of the decline withconstruction projects being cancelled or suspended in an unprecedented manner.As a result our revenues were impacted by both a reduction in volume andsignificant yield declines as excess supply of equipment and future uncertaintyresulted in some irrational behaviour. Over the course of the year, the rentalindustry reacted to these conditions by removing surplus fleet and, as aresult, whilst construction markets remain difficult, there is evidence,particularly in the US, of price stabilisation.
We are pleased to be able report a return to profit growth in the US in the fourth quarter with an operating profit of $24m as compared to $17m in the prior year despite lower revenues.
Whilst this is an encouraging performance, construction markets remain fragileand we anticipate only moderate recovery in the US before 2011. In the UK,current activity levels remain stable due to committed infrastructure spend,particularly in utilities, but the medium term outlook is less certain.In the coming year, as we prepare for full recovery, we intend to increase ourgross capital expenditure from £63m in 2009/10 to around £225m. Currently ourplans are for this reinvestment to be largely for fleet replacement as we lookto broadly maintain the size of our rental fleets whilst holding or slightlyreducing their average age. However, if markets continue to improve, we havethe flexibility to make more of this expenditure available for fleet growth. Asa result of these expenditure plans, we are targeting debt to be broadly flatover the course of the year. Beyond next year, assuming improved markets, weexpect our ongoing strong operating cash flow generation to provide us with theability to fund significant organic fleet growth whilst, at the same time,reducing the level of net debt to EBITDA.Our well structured debt package also gives us the flexibility to makestrategic capital investments as appropriate. The strength of this structurehas been clearly demonstrated during an unprecedented downturn and is equallyappropriate as we plan for the next phase of our cycle with availability inexcess of $500m and long committed maturities.Trading results--------------- Revenue EBITDA Operating profit ------- ------ ---------------- 2010 2009 2010 2009 2010 2009 ---- ---- ---- ---- ---- ---- Sunbelt in $m 1,080.5 1,450.0 350.8 500.4 116.6 241.8 ======= ======= ===== ===== ===== =====Sunbelt in £m 674.5 865.5 219.0 298.7 72.7 144.4A-Plant 162.3 208.0 42.0 62.8 1.8 16.1Group central costs - - (5.9) (5.4) (6.0) (5.5) --- --- --- --- --- ---Continuing operations 836.8 1,073.5 255.1 356.1 68.5 155.0 ===== ======= ===== ===== Net financing costs (63.5) (67.6) ---- ----
Profit before tax, exceptionals and amortisation from continuing operations 5.0 87.4Ashtead Technology - 2.8Exceptional items (net) 3.3 (17.1)Amortisation (2.5) (3.4) --- ---Total Group profit before taxation 5.8 69.7Taxation (3.7) (6.7) --- ---Profit attributable to equity holders of the Company 2.1 63.0 === ==== Margins ------- Sunbelt 32.5% 34.5% 10.8% 16.7%A-Plant 25.9% 30.2% 1.1% 7.7%Group 30.5% 33.2% 8.2% 14.4%Underlying Group revenues were £837m (2009: £1.07bn) whilst the underlyingpre-tax profit was £5m (2009: £87m). Measured at constant exchange rates,underlying revenue declined 25% to £837m, underlying EBITDA by 31% to £255m andunderlying operating profit by 58% to £69m.Rental revenues declined 25% in Sunbelt to $989m and by 21% in A-Plant to £152mreflecting 10% less fleet on rent in both markets and average yield declines of16% in Sunbelt and 12% in A-Plant. Fleet size remained broadly flat throughoutthe year in both businesses at $2.1bn and £320m respectively whilst physicalutilisation remained comparatively strong.
Fourth quarter trends were encouraging with Sunbelt returning to operating profit growth in the quarter on rental revenues down 8%.
The prompt action we took in the winter of 2008/9 to right-size the cost baseto the lower activity levels and the tight cost control we maintained all yearensured that operating costs before depreciation and used equipment soldreduced by $204m (23%) in Sunbelt and by £21m (16%) in A-Plant. For the Groupas a whole, operating costs (before depreciation and used equipment sold) werereduced by £148m or 21%, at constant exchange rates, compared to the previousyear and by £191m compared to the 12 months ended 31 October 2008, the periodimmediately before we implemented the right sizing programme.
As a result, despite the significant revenue reductions, full year EBITDA margins declined by only 2% in Sunbelt and 4% in A-Plant and remained above 30% for the Group as a whole.
Depreciation expense declined 7% at constant exchange rates reflecting the smaller average fleet size togive an underlying operating profit for the year of $117m (2009: $242m) in Sunbelt and £2m in A-Plant (2009: £16m).Group performance-----------------Reflecting the operating results discussed above and a US dollar exchange ratethat was on average 5% stronger against the pound ($1.60 in 2009/10 v $1.68 in2008/9), Group EBITDA before exceptional items declined £101m to £255m whilstthe underlying operating profit reduced from £155m to £69m.Lower average interest rates and significantly lower underlying average debtlevels partly offset by the higher margin payable from November on the extendedsenior debt resulted in a lower net financing cost of £64m (2009: £68m) despitean adverse translation effect from the stronger dollar in which all our debt isnow denominated.Exceptional items this year comprised the £3m non-cash write off of theremaining deferred financing costs on the 2006 senior debt facility followingits renewal in November 2009, a credit of £5m relating to the remeasurement atfair value of the embedded call options in the Group's senior secured notes anda £1m credit for the release of a provision for potential warranty claims onthe June 2008 sale of Ashtead Technology which proved not to be required. Afterexceptionals and amortisation of acquired intangibles of £2m, the reportedprofit before tax for the year was £5m (2009: £1m).The current year effective tax rate was stable at 35% (2009: 34%). In addition,there was an adjustment of £2m to prior year tax. Moving forward, onceeconomies in the UK and US recover from the current recession, we expect theGroup's effective tax rate to remain around 35% whilst the cash tax rate shouldcontinue to be substantially lower.
Underlying earnings per share for the year decreased to 0.2p (2009: 11.9p) whilst the basic earnings per share from continuing activities for the year was 0.2p (2009: 0.4p).
Capital expenditure-------------------Capital expenditure for the year was held to £63m (2009: £238m) or roughly onethird of the depreciation charge as we aged the fleet and maximised cashgeneration in tough markets. Despite this, the average age of the Group'srental fleet at 30 April 2010 was 44 months (2009: 35 months) on a net bookvalue weighted basis. Disposal proceeds were £32m (2009: £100m), including £2mfrom the disposal of assets held for sale at April 2009, giving net capitalexpenditure for the year of £31m (2009: £138m).
We anticipate investing around £225m gross and £175m net in the coming year which will be mostly replacement rather than growth expenditure.
Cash flow and net debt----------------------£191m (2009: £157m) was generated from operations in the year, of which £13mwas returned to equity shareholders by way of dividend and £178m was applied toreduce outstanding debt. Including a translation reduction of £37m, closing netdebt at 30 April 2010 reduced to £829m (30 April 2009: £1,036m). The ratio ofnet debt to underlying EBITDA at constant exchange rates was 3.1 times at 30April 2010 (2009: 2.6 times).Our debt package remains well structured for both the challenges of currentmarket conditions and to enable us to take advantage of the next phase in thecycle. We retain substantial headroom on facilities which are committed for thelong term, an average of 5.0 years at 30 April 2010 (2009: 4.6 years), with thefirst maturity being on our asset based senior bank facility which now extendsuntil November 2013. Availability at 30 April 2010 was $537m (2009: $550m) wellabove the $150m level at which the entire debt package is covenant free.
Dividends
---------
The Board is recommending a final dividend of 2.0p per share (2009: 1.675p)making 2.9p for the year (2009: 2.575p). Payment of the 2009/2010 dividend willcost £14.5m and, whilst not covered by 2009/10 earnings is, in the Board'sview, appropriate. If approved at the forthcoming Annual General Meeting, thefinal dividend will be paid on 10 September 2010 to shareholders on theregister on 20 August 2010.
In future the Board will aim to provide a progressive dividend having regard to both profits and cash generation whilst seeking to keep to levels that are sustainable over the cycle.
Current trading and outlook---------------------------Fleet on rent and revenue continued to be encouraging in both of our marketsduring May, supporting our view that the winter of 2010 was the bottom of thecycle.In the US we continue to believe that we will see stabilisation in markets inthe current year with improving trends through 2011. In the UK, whilst currentmarkets are also stabilising, uncertainty around the impact of public sectorspending cuts makes the medium term less certain.In preparation for the next phase of the cycle, we have started a fleetreinvestment programme, funded from operating cash flow. Our well structureddebt facility means that we can react quickly if markets differ materially fromthose we anticipate.
Having strengthened our market position in the year just ended and with the flexibility provided by our strong balance sheet, the Board believes that the Group is well positioned for the future.
Forward looking statements--------------------------This announcement contains forward looking statements. These have been made bythe directors in good faith using information available up to the date on whichthey approved this report. The directors can give no assurance that theseexpectations will prove to be correct. Due to the inherent uncertainties,including both business and economic risk factors underlying such forwardlooking statements, actual results may differ materially from those expressedor implied by these forward looking statements. Except as required by law orregulation, the directors undertake no obligation to update any forward lookingstatements whether as a result of new information, future events or otherwise.
Directors' responsibility statement on the annual report ------------------------------------------------------- The responsibility statement below has been prepared in connection with the Company's Annual Report & Accounts for the year ended 30 April 2010. Certain parts thereof are not included in this announcement.
"The Board confirms to the best of its knowledge (a) the consolidated financialstatements, prepared in accordance with IFRS as issued by the InternationalAccounting Standards Board and IFRS as adopted by the EU, give a true and fairview of the assets, liabilities, financial position and profit of the Group;and (b) the Directors' Report includes a fair review of the development andperformance of the business and the position of the Group, together with adescription of the principal risks and uncertainties that it faces.
By order of the Board 16 June 2010"
CONSOLIDATED INCOME STATEMENT FOR THE THREE MONTHS ENDED 30 APRIL 2010
2010 2009 ---- ---- Before exceptionals, Exceptionals, Before amortisation and amortisation and exceptional
items Exceptional items
remeasurements remeasurements Total and
amortisation and amortisation Total
-------------- -------------- -----
---------------- ---------------- -----
£m £m £m £m £m £m Fourth quarter - unaudited --------------------------Continuing operations Revenue Rental revenue 188.6 - 188.6 218.8 - 218.8Sale of new equipment, merchandise and consumables 10.0 - 10.0 12.2 - 12.2Sale of used rental equipment 11.5 - 11.5
1.1 30.5 31.6 ---- --- ---- --- ---- ---- 210.1 - 210.1 232.1 30.5 262.6 ----- --- ----- ----- ---- -----Operating costs Staff costs (66.8) - (66.8) (76.7) (2.9) (79.6)
Used rental equipment sold (8.3) - (8.3) 0.4 (30.3) (29.9)Other operating costs (73.7) - (73.7) (87.6) (16.9)(104.5) ---- --- ---- ---- ---- ----- (148.8) - (148.8) (163.9) (50.1)(214.0) ----- --- ----- ----- ---- -----EBITDA* 61.3 - 61.3 68.2 (19.6) 48.6Depreciation (46.7) - (46.7) (51.8) (8.2) (60.0)Amortisation - (0.5) (0.5) - (1.2) (1.2) --- --- --- --- --- ---Operating profit/(loss) 14.6 (0.5) 14.1 16.4 (29.0) (12.6)Net financing costs (17.7) 5.5 (12.2) (16.6) - (16.6) ---- --- ---- ---- --- ----Profit/(loss) on ordinary activities before taxation (3.1) 5.0 1.9 (0.2) (29.0) (29.2)Taxation: - current - - - (0.6) 1.3 0.7- deferred 1.2 (1.8) (0.6) 2.0 9.9 11.9 --- --- --- --- --- ---- 1.2 (1.8) (0.6) 1.4 11.2 12.6 --- --- --- --- ---- ----
Profit/(loss) from continuing operations (1.9) 3.2 1.3 1.2 (17.8) (16.6)Loss from discontinued operations - - - - (0.1) (0.1) --- --- --- --- --- --- Profit/(loss)attributable to equity holders of the Company (1.9) 3.2 1.3 1.2 (17.9) (16.7) === === === === ==== ====Continuing operations Basic earnings per share (0.4p) 0.7p 0.3p 0.2p (3.5p) (3.3p) ==== ==== ==== ==== ==== ====Diluted earnings per share (0.4p) 0.7p 0.3p 0.2p (3.5p) (3.3p) ==== ==== ==== ==== ==== ====Total continuing and discontinued operations Basic earnings per share (0.4p) 0.7p 0.3p 0.2p (3.5p) (3.3p) ==== ==== ==== ==== ==== ====Diluted earnings per share (0.4p) 0.7p 0.3p
0.2p (3.5p) (3.3p) ==== ==== ==== ==== ==== ====
* EBITDA is presented here as an additional performance measure as it is commonly used by investors and lenders.
Details of principal risks and uncertainties are given in the Review of Fourth Quarter, Balance Sheet and Cash Flow accompanying these financial statements.
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 APRIL 2010
2010 2009 ---- ---- Before exceptionals, Exceptionals, Before amortisation and amortisation and exceptional
items Exceptional items
remeasurements remeasurements Total and
amortisation and amortisation Total
-------------- -------------- -----
---------------- ---------------- -----
£m £m £m £m £m £m Year to 30 April 2010- audited ------------------------------
Continuing operations Revenue Rental revenue 769.6 - 769.6 974.0 - 974.0Sale of new equipment,
merchandise and consumables 40.6 - 40.6 55.6 - 55.6Sale of used rental equipment 26.6 1.6 28.2
43.9 50.5 94.4 ---- --- ---- ---- ---- ---- 836.8 1.6 838.4 1,073.5 50.5 1,124.0 ----- --- ----- ------- ---- -------Operating costs Staff costs (266.3) - (266.3) (313.4) (4.5) (317.9)
Used rental equipment sold (24.6) (1.6) (26.2) (37.3) (50.3) (87.6)Other operating costs (290.8) - (290.8) (366.7) (35.0) (401.7) ----- --- ----- ----- ---- ----- (581.7) (1.6) (583.3) (717.4) (89.8) (807.2) ----- --- ----- ----- ---- ----- EBITDA* 255.1 - 255.1 356.1 (39.3) 316.8Depreciation (186.6) - (186.6) (201.1) (43.9) (245.0)Amortisation - (2.5) (2.5) - (3.4) (3.4) --- --- --- --- --- ---Operating profit 68.5 (2.5) 66.0 155.0 (86.6) 68.4
Net financing costs (63.5) 2.3 (61.2) (67.6) - (67.6) ---- --- ---- ---- --- ---- Profit on ordinary activities before taxation 5.0 (0.2) 4.8
87.4 (86.6) 0.8Taxation: - current (2.2) - (2.2) (2.7) 2.6 (0.1)- deferred (1.7) 0.2 (1.5) (26.9) 28.2 1.3 --- --- --- ---- ---- --- (3.9) 0.2 (3.7) (29.6) 30.8 1.2 --- --- --- ---- ---- ---Profit from continuing operations 1.1 - 1.1 57.8 (55.8) 2.0Profit from discontinued operations - 1.0 1.0 2.0 59.0 61.0 --- --- --- --- ---- ----Profit attributable to
equity holders of the Company 1.1 1.0 2.1 59.8 3.2 63.0 === === === ==== === ====Continuing operations Basic earnings per share 0.2p - 0.2p 11.5p (11.1p) 0.4p ==== === ==== ===== ===== ====Diluted earnings per share 0.2p - 0.2p 11.4p (11.0p) 0.4p ==== === ==== ===== ===== ====Total continuing and discontinued operations Basic earnings per share 0.2p 0.2p 0.4p 11.9p 0.6p 12.5p ==== ==== ==== ===== ==== =====Diluted earnings per share 0.2p 0.2p 0.4p 11.8p 0.7p 12.5p ==== ==== ==== ===== ==== =====
* EBITDA is presented here as an additional performance measure as it is commonly used by investors and lenders.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Audited --------- ------- Three months to Year to 30 April 30 April 2010 2009 2010 2009 ---- ---- ---- ---- £m £m £m £m Profit/(loss) attributable to equity holders of the Company for the period 1.3 (16.7) 2.1 63.0Foreign currency translation differences 8.8 (3.4) (9.0) 59.8Actuarial gain/(loss) on defined benefit pension scheme 4.8 (7.4) (9.2) (7.4)Tax on foreign currency translation differences - - - (3.7)Tax on defined benefit pension scheme
(1.3) 2.4 2.6 2.0Tax on share-based payments 0.1 0.4 0.1 0.4 --- --- --- ---
Total comprehensive income for the period
13.7 (24.7) (13.4) 114.1 ==== ==== ==== =====
CONSOLIDATED BALANCE SHEET AT 30 APRIL 2010
Audited 2010 2009 ---- ---- £m £m Current assets Inventories 9.9 10.4Trade and other receivables 134.7 148.3Current tax asset 1.1 1.5Cash and cash equivalents 54.8 1.7 ---- --- 200.5 161.9Assets held for sale - 1.6 --- --- 200.5 163.5 ----- ----- Non-current assets
Property, plant and equipment
- rental equipment 969.7 1,140.5- other assets 131.9 153.5 ----- ----- 1,101.6 1,294.0
Intangible assets - brand names and other acquired intangibles 3.3
5.9Goodwill 373.6 385.4Deferred tax asset 7.8 12.3
Other financial assets - derivatives 5.7
-
Defined benefit pension fund surplus -
0.3 --- --- 1,492.0 1,697.9 ------- ------- Total assets 1,692.5 1,861.4 ======= ======= Current liabilities Trade and other payables 130.6 106.7Current tax liability 2.1 -Debt due within one year 3.1 6.9Provisions 12.0 17.4 ---- ---- 147.8 131.0 ----- ----- Non-current liabilities
Debt due after more than one year 880.7
1,030.7Provisions 29.4 36.8Deferred tax liabilities 126.6 136.9
Defined benefit pension fund deficit 7.7
- --- --- 1,044.4 1,204.4 ------- ------- Total liabilities 1,192.2 1,335.4 ------- ------- Equity Share capital 55.3 55.3Share premium account 3.6 3.6Capital redemption reserve 0.9 0.9Non-distributable reserve 90.7 90.7
Own shares held by the Company (33.1)
(33.1)
Own shares held through the ESOT (6.3)
(6.3)
Cumulative foreign exchange translation differences 20.1
29.1Retained reserves 369.1 385.8 ----- -----
Equity attributable to equity holders of the Company 500.3
526.0
-----
-----
Total liabilities and equity 1,692.5
1,861.4
=======
=======
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 APRIL 2010
Cumulative Audited Own foreign Share Capital Non- shares exchange Share premium redemption distributable
Treasury held by translation Retained
capital account reserve reserve stock ESOT differences reserves Total ------- ------- ------- ------- ----- ---- ----------- -------- ----- £m £m £m £m £m £m £m £m £m At 1 May 2008 56.2 3.6 - 90.7 (23.3) (7.0) (28.2) 348.3 440.3
Total comprehensive income
for the period - - - - - - 56.1 58.0 114.1Shares issued - - - - 0.5 - - (0.3) 0.2Dividends paid - - - - - - - (12.9) (12.9)Share-based payments - - - - - - - (0.8) (0.8)Vesting of share awards - - - - - 1.1 - (1.1) -Own shares purchased - - - - (15.7) (0.4) - - (16.1)Cancellation of shares held by the Company (0.9) - 0.9 - 5.4 - - (5.4) -Realisation of foreign exchange translation differences - - - - - - 1.2 - 1.2 --- --- --- --- --- --- --- --- ---At 30 April 2009 55.3 3.6 0.9 90.7 (33.1) (6.3) 29.1 385.8 526.0 Total comprehensive income for the period - - - - - - (9.0) (4.4) (13.4)Dividends paid - - - - - - - (12.8) (12.8)Share-based payments - - - - - - - 0.5 0.5 --- --- --- --- --- --- --- --- ---At 30 April 2010 55.3 3.6 0.9 90.7 (33.1) (6.3) 20.1 369.1 500.3 ==== === === ==== ==== === ==== ===== =====
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 APRIL 2010
Audited 2010 2009 ---- ---- £m £m
Cash flows from operating activities Cash generated from operations before exceptional items and changes in rental fleet 265.6 373.6Exceptional costs paid (8.2) (9.4)Payments for rental property, plant and equipment (36.1) (208.5)Proceeds from disposal of rental property, plant and equipment before exceptional disposals 25.2 39.2Exceptional proceeds from disposal of rental property, plant and equipment
1.6 46.1
--- ----Cash generated from operations 248.1 241.0Financing costs paid (net) (54.7) (64.7)Tax received (net) 0.3 0.8 --- ---Net cash from operating activities
193.7 177.1
----- ----- Cash flows from investing activities Acquisition of businesses (0.2) (0.3)Disposal of business (costs)/proceeds (0.5) 89.3Payments for non-rental property, plant and equipment
(6.7) (27.1) Proceeds from disposal of non-rental property, plant and equipment 4.0 6.6
--- ---Net cash (used in)/from investing activities
(3.4) 68.5
--- ----Cash flows from financing activities Drawdown of loans 290.7 147.8Redemption of loans (410.8) (353.4)Capital element of finance lease payments (4.3) (11.6)Purchase of own shares by the Company - (15.7)Purchase of own shares by the ESOT - (0.4)Dividends paid (12.8) (12.9)Proceeds from issue of ordinary shares
- 0.2
--- ---Net cash used in financing activities
(137.2) (246.0)
----- ----- Increase/(decrease) in cash and cash equivalents 53.1 (0.4)Opening cash and cash equivalents 1.7 1.8Effect of exchange rate differences
- 0.3
--- ---Closing cash and cash equivalents
54.8 1.7
==== ===
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation
The financial statements for the year ended 30 April 2010 were approved by thedirectors on 16 June 2010. This preliminary announcement of the results for theyear ended 30 April 2010 contains information derived from the forthcoming 2009/10 Annual Report & Accounts and does not contain sufficient information tocomply with International Financial Reporting Standards (IFRS) and does notconstitute the statutory accounts for the purposes of section 435 of theCompanies Act 2006. The 2008/9 Annual Report & Accounts has been delivered tothe Registrar of Companies. The 2009/10 Annual Report & Accounts will bedelivered to the Registrar of Companies and made available on the Group'swebsite at www.ashtead-group.com in July 2010. The auditors' reports in respectof both years are unqualified, do not include a reference to any matter by wayof emphasis without qualifying the report and do not contain a statement undersection 498(2) or (3) of the Companies Act 2006.The financial statements have been prepared on the going concern basis. Afterreviewing the Group's annual budget, plans and financing arrangements, thedirectors consider that the Group has adequate resources to continue inoperation for the foreseeable future and consequently that it is appropriate toadopt the going concern basis in preparing the financial statements.The results for the year ended and quarter ended 30 April 2010 have beenprepared in accordance with relevant IFRS and the accounting policies set outin the Group's Annual Report & Accounts for the year ended 30 April 2009 exceptfor the adoption, with effect from 1 May 2009, of new or revised accountingstandards as set out below.`IAS 1 (revised) Presentation of financial statements' has been adopted and hasresulted in the `Consolidated statement of changes in equity' being presentedas a primary statement (previously disclosed as a note titled `Reconciliationof changes in equity'). In addition, the Group has continued to present aseparate `Income statement' and `Statement of comprehensive income' (previouslytitled `Statement of recognised income and expense'). The adoption of IAS 1(revised) has had no impact on the consolidated results or financial positionof the Group.
The following new standards, amendments to standards or interpretations are effective for the Group's accounting period beginning on 1 May 2009 and, where relevant, have been adopted. They have not had a material impact on the consolidated results or financial position of the Group:
* IFRS 1 (revised) First time adoption of IFRS;* IFRS 3 (revised) Business combinations;* Amendments to IFRS 2 Group cash-settled share-based payment transactions;* Amendment to IFRS 7 Improving disclosures about financial instruments;* Amendments to IAS 27 Consolidated and separate financial statements; * Amendment to IAS 32 Financial instruments: presentation: classification of rights issues;* Amendment to IAS 39 Reclassification of financial assets: effective date and transition;* Amendment to IAS 39 Financial instruments: recognition and measurement:eligible hedged items;* Amendment to IFRIC 9 and IAS 39 Embedded derivatives;* IFRIC 15 Agreements for the construction of real estate;* IFRIC 16 Hedges of a net investment in a foreign operation;* IFRIC 17 Distributions of non-cash assets to owners;* IFRIC 18 Transfers of assets from customers;* Improvements to IFRSs (April 2009).
The figures for the fourth quarter are unaudited.
The exchange rates used in respect of the US dollar are:
2010
2009
---- ---- Average for the quarter ended 30 April 1.53
1.44
Average for the year ended 30 April 1.60 1.68At 30 April 1.53 1.482. Segmental analysis Operating Revenue profit before Exceptional before exceptionals items and Operating exceptionals and amortisation amortisation profit/(loss) ------------ ---------------- ------------ ------------- Three months to 30 April £m £m £m £m2010 ---- Sunbelt 169.0 16.0 (0.3) 15.7A-Plant 41.1 0.5 (0.2) 0.3Corporate costs - (1.9) - (1.9) --- --- --- --- 210.1 14.6 (0.5) 14.1 ===== ==== === ==== 2009 ---- Sunbelt 189.4 16.2 (13.4) 2.8A-Plant 42.7 1.6 (15.6) (14.0)Corporate costs - (1.4) - (1.4) --- --- --- --- 232.1 16.4 (29.0) (12.6) ===== ==== ==== ==== Year to 30 April 2010 ---- Sunbelt 674.5 72.7 (1.9) 70.8A-Plant 162.3 1.8 (0.6) 1.2Corporate costs - (6.0) - (6.0) --- --- --- --- 836.8 68.5 (2.5) 66.0 ===== ==== === ==== 2009 ---- Sunbelt 865.5 144.4 (54.8) 89.6A-Plant 208.0 16.1 (31.8) (15.7)Corporate costs - (5.5) - (5.5) --- --- --- --- 1,073.5 155.0 (86.6) 68.4 ======= ===== ==== ==== Other financial Taxation assets - Segment assets Cash assets derivatives Total assets -------------- ---- ------ ----------- ------------At 30 April 2010 Sunbelt 1,332.0 - - - 1,332.0A-Plant 290.9 - - - 290.9Corporate items 0.2 54.8 8.9 5.7 69.6 --- ---- --- --- ---- 1,623.1 54.8 8.9 5.7 1,692.5 ======= ==== === === ======= At 30 April 2009 Sunbelt 1,514.7 - - - 1,514.7A-Plant 331.0 - - - 331.0Corporate items 0.2 1.7 13.8 - 15.7 --- --- ---- --- ---- 1,845.9 1.7 13.8 - 1,861.4 ======= === ==== === =======3. Operating costs 2010 2009 ---- ---- Before Before exceptional Exceptional exceptional Exceptional items and items and items and items and amortisation amortisation Total
amortisation amortisation Total
£m £m £m £m £m £m Three months to 30 April Staff costs: Salaries 61.0 - 61.0 69.2 2.9 72.1 Social security costs 5.6 - 5.6 6.0 - 6.0Other pension costs 0.2 - 0.2 1.5 - 1.5 --- --- --- --- --- --- 66.8 - 66.8 76.7 2.9 79.6 ---- --- ---- ---- --- ----Used rental equipment sold 8.3 - 8.3 (0.4) 30.3 29.9 --- --- --- --- ---- ----Other operating costs Vehicle costs 17.1 - 17.1 18.0 0.3 18.3
Spares, consumables & external repairs 11.1 - 11.1
14.9 0.4 15.3Facility costs 11.7 - 11.7 12.8 10.9 23.7Other external charges 33.8 - 33.8 41.9 5.3 47.2 ---- --- ---- ---- --- ---- 73.7 - 73.7 87.6 16.9 104.5 ---- --- ---- ---- ---- -----
Depreciation and amortisation: Depreciation 46.7 - 46.7 51.8 8.2 60.0Amortisation of acquired intangibles - 0.5 0.5
- 1.2 1.2 --- --- --- --- --- --- 46.7 0.5 47.2 51.8 9.4 61.2 ---- --- ---- ---- --- ---- 195.5 0.5 196.0 215.7 59.5 275.2 ===== === ===== ===== ==== =====Year to 30 April Staff costs: Salaries 244.7 - 244.7 284.6 4.5 289.1Social security costs 20.2 - 20.2 23.0 - 23.0Other pension costs 1.4 - 1.4 5.8 - 5.8 --- --- --- --- --- --- 266.3 - 266.3 313.4 4.5 317.9 ----- --- ----- ----- --- -----Used rental equipment sold 24.6 1.6 26.2 37.3 50.3 87.6 ---- --- ---- ---- ---- ----Other operating costs: Vehicle costs 66.2 - 66.2 84.0 0.5 84.5
Spares, consumables & external repairs 48.9 - 48.9
61.9 1.9 63.8Facility costs 44.9 - 44.9 47.3 25.3 72.6Other external charges 130.8 - 130.8 173.5 7.3 180.8 ----- --- ----- ----- --- ----- 290.8 - 290.8 366.7 35.0 401.7 ----- --- ----- ----- ---- -----
Depreciation and amortisation: Depreciation 186.6 - 186.6 201.1 43.9 245.0Amortisation of acquired intangibles - 2.5 2.5
- 3.4 3.4 --- --- --- --- --- --- 186.6 2.5 189.1 201.1 47.3 248.4 ----- --- ----- ----- ---- ----- 768.3 4.1 772.4 918.5 137.1 1,055.6 ===== === ===== ===== ===== =======
4. Exceptional items, amortisation and fair value remeasurements
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. Fair value remeasurements relate to embedded calloptions in the Group's senior secured note issues. The Group believes theseitems should be disclosed separately within the consolidated income statementto assist in the understanding of the financial performance of the Group.Underlying revenue, profit and earnings per share are stated before exceptionalitems, amortisation of acquired intangibles and fair value remeasurements.Exceptional items, amortisation and fair value remeasurements are set outbelow: Three months to 30 April Year to 30 April 2010 2009 2010 2009 ---- ---- ---- ---- £m £m £m £m US cost reduction programme - (12.3) - (52.2)UK cost reduction programme - (15.6) - (31.7)Profit on sale of property from closed sites - 0.1 - 0.7Write off of deferred financing costs - - (3.2) -Fair value remeasurements of embedded derivatives 5.5
- 5.5 -Sale of Ashtead Technology - (0.1) 1.0 66.1 --- --- --- ----Total exceptional items before taxation 5.5 (27.9) 3.3 (17.1)Taxation on exceptional items (2.0) 10.7 (0.7) 22.4 --- ---- --- ----Total exceptional items 3.5 (17.2) 2.6 5.3Amortisation of acquired intangibles (net of tax credit) (0.3) (0.7) (1.6) (2.1) --- --- --- --- 3.2 (17.9) 1.0 3.2 === ==== === ===The write off of deferred financing costs consists of the unamortised balanceof costs related to the 2006 ABL facility refinanced in November 2009. Fairvalue remeasurements relate to the changes in the fair value of the embeddedcall options in our senior secured note issues. The income from the sale ofAshtead Technology relates to the release of a provision, established at thetime of the disposal, against potential warranty claims.The items detailed in the table above are presented in the income statement asfollows: Three months to 30 April Year to 30 April 2010 2009 2010 2009 ---- ---- ---- ---- £m £m £m £m Sale of used rental equipment - 30.5 1.6 50.5Staff costs - (2.9) - (4.5)Used rental equipment sold - (30.3) (1.6) (50.3)Other operating costs - (16.9) - (35.0)Depreciation - (8.2) - (43.9)
Amortisation of acquired intangibles (0.5) (1.2)
(2.5) (3.4)
--- --- --- ---Charged in arriving at operating profit (0.5) (29.0)
(2.5) (86.6)Net financing income 5.5 - 2.3 - --- --- --- ---
Charged in arriving at profit before tax 5.0 (29.0)
(0.2) (86.6)Taxation (1.8) 11.2 0.2 30.8 --- ---- --- ---- 3.2 (17.8) - (55.8)
(Loss)/profit after taxation from discontinued operations - (0.1)
1.0 59.0 --- --- --- ---- 3.2 (17.9) 1.0 3.2 === ==== === ===5. Financing costs Three months to 30 April Year to 30 April 2010 2009 2010 2009 ---- ---- ---- ---- £m £m £m £m Investment income:
Expected return on assets of defined benefit
pension plan (0.8) (1.0) (3.2) (4.1) --- --- --- ---Interest expense: Bank interest payable 4.2 3.8 13.4 21.6
Interest payable on second priority senior secured notes 11.6 12.0 44.4 42.4Interest payable on finance leases 0.1 0.1 0.3 0.7Non-cash unwind of discount on defined benefit pension plan liabilities 0.7 0.8 3.0 3.1Non-cash unwind of discount on self insurance provisions 0.5 0.1 1.5 1.1Amortisation of deferred costs of debt raising 1.4 0.8
4.1 2.8 --- --- --- ---Total interest expense 18.5 17.6 66.7 71.7 ---- ---- ---- ----
Net financing costs before exceptional items 17.7 16.6
63.5 67.6Exceptional items - - 3.2 -Fair value remeasurements (5.5) - (5.5) - --- --- --- ---Net financing costs 12.2 16.6 61.2 67.6 ==== ==== ==== ====6. Taxation The tax charge for the period has been computed using an estimated effectiverate for the year of 37% in the US (2009: 40%) and 29% in the UK (2009: 29%)applied to the profit before tax, exceptional items and amortisation ofacquired intangibles. The blended current year effective rate for the Group asa whole is 35%.The tax charge of £3.9m (2009: £29.6m) on the underlying pre-tax profit of £5.0m (2009: £87.4m) from continuing operations can be explained as follows: Year to 30 April 2010 2009 ---- ---- £m £m Current tax
- Current tax on income for the year 3.9
2.7
- Adjustments to prior year (1.7)
- --- --- 2.2 2.7 --- --- Deferred tax
- Origination and reversal of temporary differences (2.1)
26.9
- Adjustments to prior year 3.8
- --- --- 1.7 26.9 --- ----
Tax on underlying activities 3.9
29.6 === ====Comprising: - UK tax 10.0 13.0- US tax (6.1) 16.6 --- ---- 3.9 29.6 === ====
In addition, the tax credit of £0.2m (2009: £30.8m) on exceptional costs(including amortisation and fair value remeasurements) of £0.2m (2009: £86.6m)relating to continuing operations consists of a current tax credit of £nilrelating to the UK (2009: £2.6m), a deferred tax charge of £0.2m (2009: creditof £5.9m) relating to the UK and a deferred tax credit of £0.4m (2009: £22.3m)relating to the US.7. Earnings per share
Basic and diluted earnings per share for the three and twelve months ended 30April 2010 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 in treasury and by the ESOT over which dividends havebeen waived). Diluted earnings per share is computed using the result for therelevant period and the diluted number of shares (ignoring any potential issueof ordinary shares which would be anti-dilutive). These are calculated asfollows: Three months to Year to 30 April 30 April 2010 2009 2010 2009 ---- ---- ---- ----
Profit/(loss) for the financial period(£m)
From continuing operations 1.3 (16.6) 1.1 2.0From discontinued operations - (0.1) 1.0 61.0 --- --- --- ----
From continuing and discontinued operations 1.3 (16.7) 2.1
63.0 === ==== === ====
Weighted average number of shares (m) - basic 497.6 497.9 497.6
504.5 ===== ===== ===== ===== - diluted 503.5 498.0 501.4 504.7 ===== ===== ===== =====Basic earnings per share From continuing operations 0.3p (3.3p) 0.2p 0.4pFrom discontinued operations - - 0.2p 12.1p --- --- ---- -----
From continuing and discontinued operations 0.3p (3.3p) 0.4p
12.5p ==== ==== ==== =====Diluted earnings per share From continuing operations 0.3p (3.3p) 0.2p 0.4pFrom discontinued operations - - 0.2p 12.1p --- --- ---- -----
From continuing and discontinued operations 0.3p (3.3p) 0.4p
12.5p
==== ==== ====
=====
Underlying earnings per share (defined in any period as the earnings beforeexceptional items and amortisation of acquired intangibles for that perioddivided by the weighted average number of shares in issue in that period) andcash tax earnings per share (defined in any period as underlying earningsbefore other deferred taxes divided by the weighted average number of shares inissue in that period) may be reconciled to the basic earnings per share as
follows: Three months to Year to 30 April 30 April 2010 2009 2010 2009 ---- ---- ---- ---- Basic earnings per share 0.3p (3.3p) 0.4p 12.5p
Exceptional items and amortisation of acquired intangibles (1.0p) 5.8p (0.2p) 4.1pTax on exceptional items and amortisation 0.3p (2.3p) -
(4.7p) ---- ---- ---- ---- Underlying earnings per share (0.4p) 0.2p 0.2p 11.9pOther deferred tax (0.2p) (0.4p) 0.4p 5.4p ---- ---- ---- ----Cash tax earnings per share (0.6p) (0.2p) 0.6p 17.3p ==== ==== ==== ===== 8. Dividends During the year, a final dividend in respect of the year ended 30 April 2009 of1.675p (2008: 1.675p) per share and an interim dividend for the year ended 30April 2010 of 0.9p (2009: 0.9p) per share were paid to shareholders.
9. Property, plant and equipment
2010 2009 ---- ---- Rental Rental equipment Total equipment Total --------- ----- --------- ----- Net book value £m £m £m £m-------------- At 1 May 1,140.5 1,294.0 994.0 1,130.1Exchange difference (35.0) (39.3) 233.4 262.9Reclassifications (3.6) (0.1) (0.6) -Additions 55.6 63.4 207.5 238.3Acquisitions 0.1 0.1 0.1 0.1Disposals (25.2) (29.9) (43.6) (50.6)Depreciation (162.7) (186.6) (210.8) (245.0)Transfer to assets held for sale - - (39.5) (41.8) --- --- ---- ----At 30 April 969.7 1,101.6 1,140.5 1,294.0 ===== ======= ======= =======
10. Called up share capital
Ordinary shares of 10p each:
2010 2009 2010 2009 ---- ---- ---- ---- Number Number £m £m Authorised 900,000,000 900,000,000 90.0 90.0 =========== =========== ==== ====
Allotted, called up and fully paid 553,325,554 553,325,554 55.3 55.3
=========== =========== ====
====
There were no movements in shares authorised or allotted during the period. At30 April 2010, 50m shares were held by the Company and a further 5.7m shareswere held by the Company's Employee Share Ownership Trust.
11. Notes to the cash flow statement
Year to 30 April 2010 2009 £m £m a. Cash flow from operating activities
-----------------------------------
Operating profit before exceptional items and amortisation:
- continuing operations 68.5 155.0 - discontinued operations - 2.8 --- --- 68.5 157.8 Depreciation 186.6 201.1 ----- -----EBITDA before exceptional items 255.1 358.9 Profit on disposal of rental equipment (2.0) (6.6)
Profit on disposal of other property, plant and equipment (0.1) (0.9)
Decrease in inventories 0.2 10.5 Decrease in trade and other receivables 10.8
47.1
Increase/(decrease) in trade and other payables 1.0 (34.5) Exchange differences 0.1 0.1 Other non-cash movements 0.5 (1.0) Cash generated from operations before exceptional items --- --- and changes in rental equipment 265.6 373.6 ===== ===== Year to 30 April 2010 2009 ---- ---- £m £m
b. Reconciliation of net debt
--------------------------
(Increase)/decrease in cash in the period (53.1)
0.4
Decrease in debt through cash flow (124.4)
(217.2)
-----
-----
Change in net debt from cash flows (177.5) (216.8)Exchange differences (36.9) 285.0Non-cash movements:
- deferred costs of debt raising 7.3
2.8
- capital element of new finance leases 0.2
1.7
---
---
(Reduction)/increase in net debt in the period (206.9)
72.7Opening net debt 1,035.9 963.2 ------- -----Closing net debt 829.0 1,035.9 ===== ======= c. Analysis of net debt -------------------- 1 May Exchange Cash Non-cash 30 April 2009 movement flow movements 2010 ---- -------- ---- --------- ---- £m £m £m £m £m Cash (1.7) - (53.1) - (54.8)Debt due within 1 year 6.9 (0.2) (4.1) 0.5 3.1Debt due after 1 year 1,030.7 (36.7) (120.3) 7.0 880.7 ------- ---- ----- --- -----Total net debt 1,035.9 (36.9) (177.5) 7.5 829.0 ======= ==== ===== === =====
Details of the Group's cash and debt are given in the Review of Fourth Quarter, Balance Sheet and Cash Flow accompanying these financial statements.
d. Acquisitions ------------ Year to 30 April 2010 2009 ---- ---- £m £m Cash consideration 0.2 0.3 === ===12. Contingent liabilities The Group is subject to periodic legal claims and tax audits in the ordinarycourse of its business, none of which is expected to have a significant impacton the Group's financial position.
REVIEW OF FOURTH QUARTER, BALANCE SHEET AND CASH FLOW
Fourth quarter Revenue EBITDA Operating profit ------- ------ ---------------- 2010 2009 2010 2009 2010 2009 ---- ---- ---- ---- ---- ----Sunbelt in $m 259.2 266.2 81.4 78.2 24.4 17.3 ===== ===== ==== ==== ==== ====Sunbelt in £m 169.0 189.4 53.2 57.6 16.0 16.2A-Plant 41.1 42.7 10.0 11.9 0.5 1.6Group central costs - - (1.9) (1.3) (1.9) (1.4) --- --- --- --- --- --- 210.1 232.1 61.3 68.2 14.6 16.4 ===== ===== ==== ==== ==== ====Net financing costs (17.7) (16.6)
Loss before tax, exceptionals and amortisation from continuing operations (3.1) (0.2)Exceptional items 5.5 (27.9)Amortisation (0.5) (1.2) --- ---Total Group profit/(loss) before taxation 1.9 (29.3)Taxation (0.6) 12.6 --- ----Profit/(loss) attributable to equity holders of the Company 1.3 (16.7) === ====Margins-------Sunbelt 31.4% 29.4% 9.4% 6.5%A-Plant 24.4% 27.9% 1.2% 3.7%Group 29.2% 29.3% 7.0% 7.0%
Fourth quarter results reflect the prevailing market conditions with rentalrevenues declining by 8% to $229.7m at Sunbelt and also by 8% to £38.5m atA-Plant. Total revenue reductions were 3% in Sunbelt and 4% in A-Plant due toincreased sales of used equipment offsetting declines in rental revenues andsales of new equipment, merchandise and consumables.The volume of fleet on rent held up well as a result of market share gains.Average fleet on rent in the fourth quarter reduced 5% year on year at Sunbeltand was broadly flat at A-Plant. Pricing continued to be soft in both marketswith yield declining 5% in Sunbelt and 9% in A-Plant compared to the sameperiod in the prior year but, particularly in the US, the yield decline wassignificantly lower than in recent quarters.Now a year has elapsed since we undertook the right-sizing of our business inwinter 2008/9, fourth quarter operating costs declined 5% in Sunbelt and werebroadly flat in A-Plant. After an interest charge of £17.7m, the pre-tax lossbefore exceptionals and amortisation for the fourth quarter was £3.1m (2009: £0.2m).Balance sheetFixed assets------------Capital expenditure in the year was £63.4m (2009: £238.3m) of which £55.6m wasinvested in the rental fleet (2009: £207.5m).Expenditure on rental equipment was 88% of total capital expenditure with thebalance relating to the delivery vehicle fleet, property improvements and tocomputer equipment. Capital expenditure by division was as follows: 2010 2009 ---- ---- Sunbelt in $m 69.6 221.0 ==== =====Sunbelt in £m 45.5 149.1A-Plant 10.1 58.4 ---- ----Total rental equipment 55.6 207.5
Delivery vehicles, property improvements & computers 7.8 30.8 --- ----Total additions 63.4 238.3 ==== =====
Reflecting the recession, all this year's capital expenditure was for replacement, as was the case in 2008/9.
The average age of the Group's serialised rental equipment, which constitutesthe substantial majority of our fleet, at 30 April 2010 was 44 months (2009: 35months) weighted on a net book value basis. Sunbelt's fleet had an average ageof 46 months (2009: 38 months) whilst A-Plant's fleet had an average age of 36months (2009: 27 months).
The original cost of the Group's rental fleet and the dollar and physical utilisation for the year ended 30 April 2010 is shown below:
Rental fleet at original cost ----------------------------- LTM LTM LTM LTM rental dollar physical 30 April 2010 30 April 2009 average revenue
utilisation utilisation
------------- ------------- ------- ------- ----------- ----------- Sunbelt in $m 2,094 2,136 2,124 989 47% 64% ===== ===== ===== === === ===Sunbelt in £m 1,368 1,442 1,388 618 47% 64%A-Plant 321 321 319 152 48% 69% --- --- --- --- === === 1,689 1,763 1,707 770 ===== ===== ===== ===Dollar utilisation is defined as rental revenues divided by average fleet atoriginal (or "first") cost and, in the year ended 30 April 2010, was 47% atSunbelt (2009: 57%) and 48% at A-Plant (2009: 52%). Physical utilisation istime based utilisation, which is calculated as the daily average of theoriginal cost of equipment on rent as a percentage of the total value ofequipment in the fleet at the measurement date and, in the year ended 30 April2010, was 64% at Sunbelt (2009: 66%) and 69% at A-Plant (2009: 67%).Trade receivables-----------------Receivable days at 30 April were 45 days (2009: 47 days). The bad debt chargefor the year ended 30 April 2010 as a percentage of total turnover was 1.2%(2009: 1.6%). Trade receivables at 30 April 2010 of £114.2m (2009: £124.0m) arestated net of provisions for bad debts and credit notes of £15.6m (2009: £17.6m) with the provision representing 12.0% (2009: 12.4%) of grossreceivables.Trade and other payables------------------------Group payable days were 88 days in 2010 (2009: 53 days) with capitalexpenditure related payables, which have longer payment terms, totalling £27.6m(2009: £9.4m). Payment periods for purchases other than rental equipment varybetween seven and 45 days and for rental equipment between 30 and 120 days.
Cash flow and net debt Year to 30 April 2010 2009 ---- ---- £m £m
EBITDA before exceptional items 255.1 358.9 ===== ===== Cash inflow from operations before exceptional items and changes in rental equipment 265.6 373.6Cash conversion ratio* 104.1%
104.1%
Maintenance rental capital expenditure paid (36.1)
(208.5)
Payments for non-rental capital expenditure (6.7)
(27.1)
Rental equipment disposal proceeds 26.8 85.3Other property, plant and equipment disposal proceeds 4.0 6.6
Tax received (net) 0.3 0.8Financing costs paid (net) (54.7) (64.7) ---- ----
Cash flow before payment of exceptional costs 199.2 166.0Exceptional costs paid (8.2)
(9.4)
--- --- Total cash generated from operations 191.0 156.6Business (acquisitions)/disposals (0.7) 89.0
--- ---- Total cash generated 190.3 245.6Dividends paid (12.8) (12.9)Share buy-backs and other equity transactions (net) - (15.9) --- ---- Decrease in net debt 177.5 216.8 ===== =====
* Cash inflow from operations before exceptional items and changes in rental equipment as a percentage of EBITDA before exceptional items.
Cash inflow from operations before exceptional items and changes in rentalequipment decreased 29% to £265.6m reflecting the lower EBITDA in 2010 whilstthe cash conversion ratio was 104.1% (2009: 104.1%) reflecting reduced workingcapital in the recession.
Total payments for capital expenditure (rental equipment and other PPE) were £ 42.8m whilst disposal proceeds received totalled £30.8m. Net capital expenditure payments were therefore £12.0m in the year (2009: £143.7m).
There were again no net tax payments as a result of the reduced profitabilityin the recession. Financing costs paid differ from the accounting charge in theincome statement due to the timing of interest payments in the year andnon-cash interest charges. They reduced significantly due to the impact of bothlower average interest rates and lower average debt levels, partially offset bythe higher margin payable on the extended tranche of the ABL facility fromNovember. Exceptional costs paid of £8.2m represented mostly staff severanceand vacant property costs, all of which were provided for at 30 April 2009.Accordingly the Group generated £190.3m (2009: £245.6m) of net cash inflow inthe year. This reflected net cash generation of £191.0m from operations (2009:£156.6m) while in 2008/9 a further £89.0m was generated from the June 2008 saleof Ashtead Technology. £12.8m of the net inflow was returned to equityshareholders by way of dividends with the balance of £177.5m applied to reduceoutstanding debt.Over the past two years, a total of £435.9m has been generated with £41.6mreturned to stockholders in dividends and buy-backs, and £394.3m applied toreduce net outstanding debt.Net debt-------- 2010 2009 ---- ---- £m £m First priority senior secured bank debt 367.5
501.1
Finance lease obligations 3.5
7.9
8.625% second priority senior secured notes, due 2015 160.2 165.19% second priority senior secured notes, due 2016 352.6 363.5 ----- ----- 883.8 1,037.6Cash and cash equivalents (54.8) (1.7) ---- --- Total net debt 829.0 1,035.9 ===== =======Net debt at 30 April 2010 was £829.0m (30 April 2009: £1,035.9m) which includesa translation reduction since year end of £36.9m reflecting the strengtheningof the pound against the dollar. The Group's underlying EBITDA for the yearended 30 April 2010 was £255.1m and the ratio of net debt to reportedunderlying EBITDA was therefore 3.2 times at 30 April 2010 (2009: 2.9 times).At constant rates of exchange leverage was 3.1 times based on EBITDA for theyear of £265.3m at closing exchange rates.Substantially all of the Group's cash and cash equivalents at 30 April 2010 aredeposited with one large UK based financial institution which is not expectedto fail.Under the terms of our extended asset-based senior bank facility, $1.3bn iscommitted until November 2013 whilst an additional $0.5bn continues to beavailable until August 2011. Our debt facilities remain committed for the longterm, with an average of 5.0 years remaining at 30 April 2010. The weightedaverage interest cost of these facilities (including non-cash amortisation ofdeferred debt raising costs) is approximately 7.4%. Financial performancecovenants under the two senior secured note issues are only measured at thetime new debt is raised. There are two financial performance covenants underthe asset-based first priority senior bank facility:
* funded debt to LTM EBITDA before exceptional items not to exceed 4.0 times;
and
* a fixed charge ratio (comprising LTM EBITDA before exceptional items less
LTM net capital expenditure paid in cash over the sum of scheduled debt
repayments plus cash interest, cash tax payments and dividends paid in the
last twelve months) which must be equal to or greater
than 1.1.
These covenants do not, however, apply when availability (the differencebetween the borrowing base and facility utilisation) exceeds $150m. At 30 April2010 excess availability under the bank facility was $537m ($550m at 30 April2009) making it unlikely that covenants will be measured. Additionally,although the senior debt covenants were not required to be measured at 30 April2010, the Group was in compliance with both of them at that date. Accordingly,the Board continues to believe that it is appropriate to prepare the accountson a going concern basis.Financial risk management
The Group's trading and financing activities expose it to various financial risks that, if left unmanaged, could adversely impact on current or future earnings. Although not necessarily mutually exclusive, these financial risks are categorised separately according to their different generic risk characteristics and include market risk (foreign currency risk and interest rate risk), credit risk and liquidity risk.
Market risk-----------The Group's activities expose it primarily to interest rate and currency risk.Interest rate risk is monitored on a continuous basis and managed, whereappropriate, through the use of interest rate swaps whereas the use of forwardforeign exchange contracts to manage currency risk is considered on anindividual non-trading transaction basis. The Group is not exposed to commodityprice risk or equity price risk as defined in IFRS 7.
Interest rate risk
The Group has fixed and variable rate debt in issue with 58% of the drawn debtat a fixed rate as at 30 April 2010. The Group's accounting policy requires allborrowings to be held at amortised cost. As a result, the carrying value offixed rate debt is unaffected by changes in credit conditions in the debtmarkets and there is therefore no exposure to fair value interest rate risk.The Group's debt that bears interest at a variable rate comprises alloutstanding borrowings under the senior secured credit facility. The interestrates currently applicable to this variable rate debt are LIBOR as applicableto the currency borrowed (US dollars or pounds) plus 350bp on the $1.3bnrevolver, LIBOR plus 200bp on the additional $0.3bn revolver and LIBOR plus175bp on the $0.2bn term loan.The Group periodically utilises interest rate swap agreements to manage andmitigate its exposure to changes in interest rates. However, during the yearended and as at 30 April 2010, the Group had no such outstanding swapagreements. The Group also holds cash and cash equivalents, which earn interestat a variable rate.Currency exchange riskCurrency exchange risk is limited to translation risk as there are notransactions in the ordinary course of business that take place between foreignentities. The Group's reporting currency is the pound sterling. However, amajority of our assets, liabilities, revenue and costs is denominated in USdollars. The Group has arranged its financing such that virtually all of itsdebt is also denominated in US dollars so that there is a natural partialoffset between its dollar-denominated net assets and earnings and itsdollar-denominated debt and interest expense. At 30 April 2010, dollardenominated debt represented approximately 82% of the value of dollardenominated net assets (other than debt). Based on the current currency mix ofour profits and on dollar debt levels, interest and exchange rates at 30 April2010, a 1% change in the US dollar exchange rate would impact pre-tax profit by£40,000.The Group's exposure to exchange rate movements on trading transactions isrelatively limited. All Group companies invoice revenues in their respectivelocal currency and generally incur expense and purchase assets in their localcurrency. Consequently, the Group does not routinely hedge either forecastforeign exchange exposures or the impact of exchange rate movements on thetranslation of overseas profits into sterling. Where the Group does hedge, itmaintains appropriate hedging documentation. Foreign exchange risk onsignificant non-trading transactions (e.g. acquisitions) is considered on anindividual basis.Credit risk-----------
The Group's financial assets are cash and bank balances and trade and otherreceivables. The Group's credit risk is primarily attributable to its tradereceivables. The amounts presented in the balance sheet are net of allowancesfor doubtful receivables. The credit risk on liquid funds and derivativefinancial instruments is limited because the counterparties are banks with highcredit ratings assigned by international credit rating agencies.The Group has a large number of unrelated customers, serving over 580,000during the financial year, and does not have any significant credit exposure toany particular customer. Each business segment manages its own exposure tocredit risk according to the economic circumstances and characteristics of themarkets they serve. The Group believes that management of credit risk on adevolved basis enables it to assess and manage credit risk more effectively.However, broad principles of credit risk management practice are observedacross the Group, such as the use of credit rating agencies and the maintenanceof a credit control function.Liquidity risk--------------Liquidity risk is the risk that the Group could experience difficulties inmeeting its commitments to creditors as financial liabilities fall due forpayment.
The Group generates significant free cash flow (defined as cash flow from operations less replacement capital expenditure net of proceeds of asset disposals, interest paid and tax paid). This free cash flow is available to the Group to invest in growth capital expenditure, acquisitions and dividend payments or to reduce debt.
In addition to the free cash flow from normal trading activities, additional liquidity is available through the Group's ABL facility. At 30 April 2010, availability under this facility was $537m (£351m).
Principal risks and uncertainties
The Group faces a number of risks and uncertainties in its day-to-dayoperations and it is management's role to mitigate and manage these risks. TheBoard has established a formal risk management process which has identified thefollowing principal risks and uncertainties which could affect employees,operations, revenues, profits, cash flows and assets of the Group.Economic conditions-------------------Potential impactThe construction industry, from which we earn the majority of our revenues, iscyclical with construction industry cycles typically lagging the generaleconomic cycle by between six and eighteen months. We may suffer a protractedreduction in demand for our products and services if the construction industrytakes longer than expected to come out of the downward phase of the industrycycle or has a weaker than anticipated recovery.
Mitigation
* Prudent management through the different phases of the cycle. * Flexibility in the business model maintained to ensure adaptability whatever
the economic environment. * Capital structure and financing arranged in recognition of the cyclical nature
of our industry. Competition-----------
Potential impact The already competitive market becomes even more competitive and we suffer increased competition from large national competitors or small companies operating at a local level resulting in reduced market share and lower revenue.
Mitigation
* Create commercial advantage by providing the highest level of service,consistently
and at a price which offers value. * Excel in the areas that provide barriers to entry to newcomers: industryleading
application of IT, experienced personnel and a broad network and equipment fleets. * Regularly estimate and monitor our market share and track the performance
of our competitors to ensure that we are performing effectively.
Exchange rates--------------Potential impact
Exchange rate exposure arises from translation risk due to the majority of ourassets, liabilities, revenues and costs being denominated in US dollars. Therelative value of sterling and the US dollar can fluctuate widely and couldhave a material effect on our financial condition and results of operations.
Mitigation
* Financing arranged so that virtually all our debt is denominated in US
dollars providing a partial, but substantial, hedge against the translation
effects of changes in the dollar exchange rate.
* Dollar interest payable on this debt also limits the impact of changes in
the dollar exchange rate on our earnings.
Supply chain------------Potential impactWe source equipment and parts from a small number of principal suppliers. If weare unable to obtain the right equipment and parts at the right time for areasonable cost from our suppliers, this could have an adverse impact on theGroup's financial performance.
Mitigation
* Partnering relationships with suppliers that have a strong reputation for
product quality and reliability and good after-sales service and support. * Sufficient alternative sources of supply for the equipment we purchase in each
product category.* Size and scale of our business and of our rental fleets enables us to
negotiate favourable delivery, pricing, warranty and other terms with our
suppliers. Financing---------Potential impact
Debt facilities are provided for a finite period of time and we could fail torenew facilities prior to their maturity. Such renewal could be affected by anystructural issues in the credit markets. Debt facilities become unavailable byvirtue of non-compliance with their terms. If we fail to renew required debtfacilities, we might be unable to meet our obligations as they fall due.
Mitigation
* The weighted average remaining life of our debt facilities is 5 years with
the first significant maturity being the asset-based senior bank debt
facility which now extends until November 2013.* Our facilities have no quarterly monitored financial covenants provided
availability maintained on the asset-based senior bank debt exceeds $150m.
At 30 April 2010 availability was $537m.* If they are ever required to be calculated, covenants are computed at
constant exchange rates and before exceptional items.
Acquisitions------------
Potential impact Acquisitions may not deliver the expected benefits through over paying, acquiring unforeseen liabilities or failure to integrate effectively.
Mitigation
* Detailed operational and financial due diligence to ensure particularly
that operational and financial risks are identified and appropriately
factored into our valuation of the target.* Development of a rigorous post-acquisition integration plan with close
management and monitoring to ensure synergies are realised fully.
Accounting/fraud----------------Potential impactAccounting or fraud discrepancies could occur if our financial and operationalcontrol framework is inadequate resulting in a loss and/or misstatement of theGroup's financial performance.
Mitigation
* Maintain a robust internal financial control framework. * A strong internal financial and operational audit function reviews the
operation of the control framework and reports regularly to management and
to the Audit Committee. IT systems----------Potential impact
We own over 250,000 units of rental equipment and in the past year entered intoapproximately 2.0m rental contracts which are tracked and controlled usingfully integrated computer systems in the US and UK. A serious uncured failurein this area would have an immediate impact on our business, rendering usunable to record and track our high volume of relatively low valuetransactions.
Mitigation
* Robust and well protected data centres with multiple data links to protect
against the risk of failure. * Detailed business recovery plans which are tested periodically. * Separate near-live back-up data centres which are designed to be able to
provide the necessary services in the event of a failure at the primary
site. People------Potential impactRetaining and attracting good people is key to delivering superior performanceand customer service. Excessive staff turnover is likely to impact on ourability to maintain the appropriate quality of service to our customers andwould ultimately impact our financial performance adversely.
Mitigation
* Provide well structured and competitive reward and benefit packages that
ensure our ability to attract and retain the employees we need. * Ensure that our staff have the right working environment and equipment to
enable them to do the best job possible and maximise their satisfaction and
fulfilment at work. * Invest in opportunities for our people to enhance their skills and develop
their careers to the mutual benefit of both themselves and the Company.
Health and safety-----------------Potential impactAccidents happen which might result in injury to an individual, claims againstthe Group and damage to our reputation.
Mitigation
* Maintain appropriate health and safety policies and procedures to
reasonably guard our employees against the risk of injury. * Induction and training programmes reinforce health and safety policies and
procedures.
* Programmes to support our customers exercising their responsibility to
their own workforces when using our equipment.
Compliance with laws and regulations------------------------------------
Potential impact Failure to comply with the frequently changing regulatory environment could result in reputational damage or financial penalty.
Mitigation
* Maintaining a legal function to oversee management of these risks and to
achieve compliance with relevant legislation.* Group-wide ethics policy and `whistle blowing' arrangements, by which
employees may, in confidence, raise concerns about any alleged
improprieties.
* Policies and practices evolve to take account of changes in legal
obligations.
* Training and induction programmes ensure our staff receive appropriate
training and briefing on the relevant policies.
Environmental-------------Potential impactWe could fail to comply with the numerous laws governing environmentalprotection and occupational health and safety matters. These laws regulate suchissues as wastewater, stormwater, solid and hazardous wastes and materials, andair quality. This potentially creates hazards to our employees, damage to ourreputation and exposes the Group to, amongst other things, the cost ofinvestigating and remediating contamination at our sites as well as sites towhich we send hazardous wastes for disposal or treatment regardless of fault,and also fines and penalties for non-compliance.
Mitigation
* Stringent policies and procedures in place at all our stores. * Procurement policies reflect the need for the latest available emissions
management and fuel efficiency tools.* Monitoring and reporting of carbon emissions. OPERATING STATISTICS Profit centre numbers Staff numbers --------------------- ------------- 2010 2009 2010 2009 ---- ---- ---- ---- Sunbelt Rentals 393 398 5,334 6,072A-Plant 105 122 1,872 2,077Corporate office - - 12 13 --- --- -- --Group 498 520 7,218 8,162 === === ===== =====
Sunbelt's profit centre numbers include 89 Sunbelt at Lowes stores at 30 April 2010 (90 at 30 April 2009).
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