13th Dec 2005 07:00
ASHTEAD GROUP PLC RECORD FIRST HALF PROFITS & DIVIDEND PAYMENTS RESUMED Unaudited results for the half year and second quarter ended 31 October 2005 Ashtead Group plc, the equipment rental group serving the US and UKconstruction, industrial and homeowner markets, announces its results for thehalf year and second quarter ended 31 October 2005.Highlights * Group Q2 profit before exceptional items & tax increases from ‚£13.4m to ‚£ 27.9m * Group H1 profit before exceptional items & tax increases from ‚£18.3m to ‚£ 40.2m * After exceptional items of ‚£1.9m, the H1 profit before tax is ‚£38.3m (2004 - ‚£18.3m) * Sunbelt's H1 operating profit before exceptional items rises 53.7% to $96.4m (2004 - $62.7m) * A-Plant's H1 operating profit is up 3.5% to ‚£8.9m (2004 - ‚£8.6m) * Market conditions in the United States expected to remain favourable * Payment of dividends resumed - interim dividend of 0.5p per share declared Ashtead's chief executive, George Burnett, commented:"Sunbelt achieved substantial first half profit growth by maintaining lastyear's record levels of utilisation on a fleet which was on average 7% largerthan a year ago and by continuing to grow its market share. Although A-Plant'sprofit growth was more modest, it did achieve improved return on capital yearon year through rigorous cost control. Ashtead Technology took advantage of thestrong offshore market to record a 67% profit increase.I am pleased that the strength of the Group's first half performance, ourconfidence in the outlook and the completion of the capital reorganisation hasenabled the Board to announce the resumption of dividend payments toshareholders for the first time since 2002.With interim profits more than double those of last year, continuing strongtrading conditions at Sunbelt and Ashtead Technology and a stable position atA-Plant, the Board looks forward with confidence."Contacts:Cob Stenham Non-executive chairman 020 7299 5562 George Burnett Chief executive ) Ian Robson Finance director ) 01372 362300 Brian Hudspith The Maitland Consultancy 020 7379 5151 PRESS RELEASEOverviewThe Group achieved a record first half performance with revenue up 14.2% to ‚£313.8m and a first half profit before tax and exceptional items of ‚£40.2m, morethan double last year's ‚£18.3m. After net exceptional items of ‚£1.9m, the firsthalf pre-tax profit was ‚£38.3m. Exchange rates were similar in both periods andconsequently currency translation changes did not have a significant effect onreported performance.Basic earnings per share were 6.9p before and 6.5p after exceptional itemscompared to 2.8p a year ago. On a cash tax basis, earnings per share beforeexceptional items were 10.6p (2004 - 5.5p). An interim dividend of 0.5p pershare will be paid on 28 February 2006.The Group now reports its results under international financial reportingstandards (IFRS) and comparatives have been restated accordingly. Full detailsof the migration to IFRS are included in the separate statement published on 20September 2005 and available on the Company's website at www.ashtead-group.com.Review of first half trading performance Revenue EBITDA* Profit* ------- ------- ------- 2005 2004 2005 2004 2005 2004 ----- ----- ----- ----- ----- -----Sunbelt in $m 406.8 342.0 159.8 120.2 96.4 62.7 ----- ----- ----- ----- ----- -----Sunbelt in ‚£m 226.1 188.1 88.9 66.1 53.6 34.5A-Plant 79.7 80.6 26.9 27.4 8.9 8.6Ashtead Technology 8.0 6.0 4.1 2.9 2.3 1.4Group central costs - - (3.5) (3.3) (3.5) (3.3) ----- ----- ----- ----- ----- ----- 313.8 274.7 116.4 93.1 61.3 41.2 ----- ----- ----- ----- Interest (21.1) (22.9) ----- ----- Profit before tax 40.2 18.3 ----- -----* in 2005 before exceptional itemsAs a result of Sunbelt's performance in particular and reflecting the Group'soperational gearing, the 14.2% revenue increase resulted in a 25.0% increase inEBITDA before exceptional items to ‚£116.4m and an increase of 48.8% inoperating profit before exceptional items to ‚£61.3m. These improvements werereflected in the Group's margins. EBITDA margins grew from 33.9% to 37.1% andoperating margins rose from 15.0% to 19.5%.SunbeltIn the six months to 31 October 2005 revenue grew 18.9% to $406.8m. This wasachieved through increased investment in the rental fleet which was 7% largerthan a year ago and by significant increases in rental rates which grewapproximately 10%. Average utilisation remained at last year's record level of72% despite the increased investment. Revenue growth was broadly based with allregions and all major product areas trading ahead of last year. In a strongtrading environment where US non-residential construction rose 7.4% in the 12months to end October according to figures published by the US Department ofCommerce, Sunbelt continued to take market share. Sunbelt's operating profitbefore exceptional items was up 53.7% to $96.4m, representing a margin of 23.7%(2004 - 18.3%).In the second quarter Sunbelt was actively involved in the clean-up efforts onthe US Gulf Coast and in Florida following hurricanes Katrina, Rita and Wilma.No Sunbelt store suffered significant damage from the hurricanes and none ofits staff was hurt. Sunbelt also incurred no significant costs for lost ordamaged rental equipment. Although we now expect that the impact of theclean-up and reconstruction work on the current financial year will be moresignificant than the impact we have seen from storms and natural disasters inearlier years, hurricane related revenues are still anticipated to account foronly around 2% of Sunbelt's full year revenues.Sunbelt invested $151.8m in the first half to maintain the quality of itsrental fleet and reduce its age as well as for growth. This included theopening of three new greenfield stores. A further fifteen new general equipmentrental stores have been acquired in the first half for a consideration ofapproximately $100m. In August Sunbelt also disposed of 12 west coastspecialist scaffold locations for approximately $24m generating an estimateddisposal profit of $5.4m (‚£3.0m) which is included in exceptional items. Thenew stores continue Sunbelt's strategy of clustering major metropolitanmarkets. Additional infill acquisition opportunities are under considerationbut Sunbelt also continues to emphasise organic growth. 17.3% of the totalfirst half revenue growth of 18.9% was delivered by stores open throughout bothperiods.A-PlantIn a continued competitive market, A-Plant's first half revenue of ‚£79.7mcompares to ‚£80.6m last year but was achieved from a fleet which on average wasapproximately 2% smaller than last year. This reflected the year on year effectof last year's downsizing of the business which has now been concluded. Thegrowth in rental rates was approximately 3% whilst average utilisationdecreased from 66% to 65%.Careful management of operating expenses continued and these declined 0.8% yearover year reflecting principally the full year impact of measures taken lastyear. A-Plant's first half operating profit grew 3.5% to ‚£8.9m (2004 - ‚£8.6m),representing a margin of 11.2% (2004 - 10.7%).During the first half a major restructuring of A-Plant's sales operations wasintroduced with a view to serving, in a more focussed way, the differingrequirements of national, regional and local customers. Senior sales managementresources have been increased as has the size of the sales force with the costof this investment being largely funded by administrative savings elsewhere. InNovember, A-Plant returned to delivering year on year revenue growth.Ashtead TechnologyAshtead Technology's performance continued the trend established in the secondhalf of last year with revenues up 33.3% to ‚£8.0m (2004 - ‚£6.0m). This reflectsincreased investment by the oil majors which is delivering higher offshoreexploration and construction activity as well as continued growth inTechnology's on-shore environmental business. These trends are expected tocontinue. As a result Technology's first half operating profit grew 66.9% to ‚£2.3m (2004 - ‚£1.4m).Exceptional itemsIn addition to the trading results discussed above, operating profit asreported in the consolidated income statement below includes ‚£2.9m ofexceptional items. These comprise a ‚£3.0m estimated profit on disposal ofSunbelt's 12 scaffold stores on the US west coast and in Texas less ‚£0.1m ofpost acquisition integration costs. Additionally the ‚£4.8m net cost of lastsummer's capital reorganisation, mainly relating to the 12% premium payable onthe ‚£42m of sterling senior secured notes redeemed early out of the proceeds ofthe equity placing, is included as an exceptional item within finance costs.TaxationOverall for the first half, following the capital reorganisation and relatedinternal restructuring of our US financial structure, the effective accountingtax rate on the profit before exceptional items has fallen to a more normal 38%compared to the very high effective accounting tax rates seen in recent years.The cash tax rate remains low at 5%. Although the Group's cash tax rate islikely to remain well below the accounting rate, the rapid increase inSunbelt's profitability together with the $20.1m receipt discussed below fromthe Head & Engquist litigation now make it probable that the cash tax rate willrise into double digits in 2006/7.Capital expenditure and net debtCapital expenditure in the six months was ‚£131.3m of which ‚£120.0m was investedin the rental fleet (2004 - ‚£69.1m in total) with the increased expendituredirected towards expanding Sunbelt's rate of growth. ‚£53.8m of the fleetexpenditure was for growth with the remainder spent to replace existingequipment. Disposal proceeds were ‚£24.5m (2004 - ‚£15.5m) generating a profit ondisposal of ‚£4.2m (2004 - ‚£2.5m).Reflecting current strong market conditions, we now expect that gross capitalexpenditure for the year as a whole will be approximately ‚£220m, an increase of‚£40m over our previous guidance. After anticipated disposal proceeds ofapproximately ‚£55m (including those earned from the scaffold sale which havebeen reinvested in general equipment), net capital expenditure is anticipatedto be approximately ‚£165m. Approximately ‚£100m of the ‚£220m gross expenditurewill be for growth.Net debt at 31 October 2005 was ‚£515.6m, an increase of ‚£33.3m since 30 April2005 but still a reduction of ‚£3.4m since 31 October 2004. At constant exchangerates the increase since year end was ‚£19.6m with debt lowered by ‚£12.4m in thepast year. Availability under the asset based loan facility was $271m at 31October 2005 ($157m at 30 April 2005).Amended asset based loan facilityOn 14 November 2005, amended terms were agreed with the syndicate of lenderswho make available the Group's first priority asset based senior secured loanfacility to, inter alia, increase the amount, extend the maturity and reducethe cost of the facility. The amended facility provides us with substantialflexibility for continued investment in the Group's development.Following the amendment the weighted average financing cost of our borrowings(including amortisation of deferred debt raising costs) is currentlyapproximately 8% and their weighted average maturity is approximately 6.5years.Head & Engquist Equipment LLC (H&E) litigationAs announced on 24 November, Sunbelt and H&E have settled their litigation withH&E paying to Sunbelt the sum of $20.1m (‚£11.7m). The proceeds of thesettlement were applied to reduce borrowings under the Group's asset basedrevolver and will be recognised as an exceptional profit in the third quarter.DividendsIn light of the strong trading performance in the first half, its confidence inthe outlook and following the successful capital reorganisation, the Board ispleased to be able to announce today the resumption of dividend payments.Accordingly an interim dividend of 0.5p per share will be paid on 28 February2006 to shareholders on the register on 17 February 2006.Current trading and outlookWith interim profits more than double those of last year, continuing strongtrading conditions at Sunbelt and Ashtead Technology and a stable position atA-Plant, the Board looks forward with confidence. - o0o - There will be a presentation to equity analysts at 9.30am today at the officesof JPMorgan at 10 Aldermanbury, London, EC2V 7RF and a conference call forbondholders in the afternoon at 3.00pm. A simultaneous webcast of the equityanalysts presentation will be available via the Company's website at www.ashtead-group.com and there will also be a recorded playback available fromshortly after the call finishes.CONSOLIDATED INCOME STATEMENT Unaudited Unaudited Audited Three months Six months Year to to 31 October to 31 October 30 April 2005 2004 2005 2004 2005 ---- ---- ---- ---- ---- ‚£m ‚£m ‚£m ‚£m ‚£m Revenue 167.9 144.8 313.8 274.7 523.7Staff costs (48.7) (44.0) (96.1) (86.8) (172.9)Other operating costs (net) (51.0) (49.4) (98.4) (94.8) (181.3) ---- ---- ---- ---- ----EBITDA* 68.2 51.4 119.3 93.1 169.5Depreciation (28.4) (26.2) (55.1) (51.9) (102.4) ---- ---- ---- ---- ----Operating profit 39.8 25.2 64.2 41.2 67.1Financing costs (13.8) (11.8) (25.9) (22.9) (44.7) ---- ---- ---- ---- ----Profit on ordinary activities before taxation 26.0 13.4 38.3 18.3 22.4Profit before taxation and exceptional items 27.9 13.4 40.2 18.3 22.4Exceptional items (1.9) - (1.9) - - ---- ---- ---- ---- ----Profit on ordinary activities 26.0 13.4 38.3 18.3 22.4before taxation Taxation: - current (1.8) (0.4) (2.2) (0.5) (0.7)- deferred (7.3) (5.4) (12.8) (8.8) (13.3) ---- ---- ---- ---- ---- (9.1) (5.8) (15.0) (9.3) (14.0) ---- ---- ---- ---- ---- Profit attributable to equity shareholders of the company 16.9 7.6 23.3 9.0 8.4 ---- ---- ---- ---- ----Basic earnings per share 4.3p 2.4p 6.5p 2.8p 2.6p ---- ---- ---- ---- ----Diluted earnings per share 4.2p 2.4p 6.4p 2.8p 2.6p ---- ---- ---- ---- ----* EBITDA is presented here as an additional performance measure as it is commonly used by investors and lenders.STATEMENT OF RECOGNISED INCOME AND EXPENSE ‚£m ‚£m ‚£m ‚£m ‚£m ----- ----- ----- ---- ----- Net profit for the period 16.9 7.6 23.3 9.0 8.4Cash flow hedges (0.8) - - - -Actuarial loss on defined benefit pension plan - - - - (3.7) Foreign currency translation difference (0.4) (2.2) 19.9 (6.8) (16.0) ----- ----- ----- ---- -----Total recognised income and expense for the period 15.7 5.4 43.2 2.2 (11.3) ----- ----- ----- ---- -----MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS ‚£m ‚£m ‚£m ‚£m ‚£m ----- ----- ----- ---- ----- Total recognised income and expense for the period 15.7 5.4 43.2 2.2 (11.3)Issue of ordinary shares, net of expenses 68.1 - 68.4 - 0.1Share based payments 0.4 - 0.5 0.1 0.6Own shares acquired (2.8) - (2.8) - - ----- ----- ----- ---- -----Net increase in equity shareholders' funds 81.4 5.4 109.3 2.3 (10.6) Opening equity shareholders' funds 137.8 117.4 109.9 120.5 120.5 ----- ----- ----- ---- -----Closing equity shareholders' funds 219.2 122.8 219.2 122.8 109.9 ----- ----- ----- ---- -----CONSOLIDATED BALANCE SHEET Unaudited Audited 31 October 30 April 2005 2004 2005 ----- ----- ----- ‚£m ‚£m ‚£m Current assetsInventory 15.4 15.9 13.8Trade and other receivables 122.2 103.2 91.9Cash held as collateral - 9.9 -Cash and cash equivalents 0.9 7.3 2.1 ----- ----- ----- 138.5 136.3 107.8 ----- ----- -----Non-current assets Property, plant and equipment - rental equipment 554.3 463.6 452.9- other assets 91.1 84.6 84.2 ----- ----- ----- 645.4 548.2 537.1Intangible assets - goodwill 152.9 123.0 118.2 ----- ----- ----- 798.3 671.2 655.3 ----- ----- -----Total assets 936.8 807.5 763.1 ----- ----- ----- Current liabilities Trade and other payables 110.3 80.4 95.0Debt due in less than one year 13.1 17.0 12.2Provisions 7.1 6.7 7.1 ----- ----- ----- 130.5 104.1 114.3 ----- ----- -----Non-current liabilities Other payables - 7.6 7.9Debt due in more than one year 503.4 519.2 472.2Provisions 10.4 9.4 7.9Defined benefit pension fund deficit 15.9 12.9 16.2Deferred taxation 57.4 31.5 34.7 ----- ----- ----- 587.1 580.6 538.9 ----- ----- ----- Total liabilities 717.6 684.7 653.2 ----- ----- ----- Equity shareholders' funds Share capital 40.2 32.6 32.6Share premium account 0.9 100.7 100.8Non-distributable reserve 90.7 - -Equity element of convertible loan note - 24.3 24.3Own shares held in treasury through the ESOT (4.2) (1.6) (1.6)Cumulative foreign exchange translation differences (12.7) (23.4) (32.6)Distributable reserves 104.3 (9.8) (13.6) ----- ----- -----Total equity shareholders' funds 219.2 122.8 109.9 ----- ----- -----Total liabilities and equity shareholders'funds 936.8 807.5 763.1 ----- ----- ----- CONSOLIDATED CASH FLOW STATEMENT Unaudited Audited Six months Year to to 31 October 30 April 2005 2004 2005 ---- ---- ---- ‚£m ‚£m ‚£m ‚£m ‚£m ‚£mCash flows from operating activities Cash generated from operations before exceptional items 99.2 79.3 164.8Exceptional items - (3.7) (5.7) ----- ----- ----- Cash generated from operations 99.2 75.6 159.1Financing costs paid before exceptional items (18.6) (13.3) (30.2) Exceptional financing costs paid (13.3) - - ----- ----- ----- Financing costs paid (31.9) (13.3) (30.2)Tax paid (0.6) (0.6) (0.6) ----- ----- ----- Net cash from operating activities 66.7 61.7 128.3 ----- ----- ----- Cash flows from investing activities Acquisition of businesses (56.9) - -Disposal of businesses 11.8 0.4 0.5Payments for property, plant and equipment (124.3) (63.9) (111.2) Proceeds on sale of property, plant and equipment 22.4 16.4 35.9 ----- ----- -----Net cash used in investing activities (147.0) (47.1) (74.8) ----- ----- ----- Cash flows from financing activities Drawdown of loans 235.6 11.0 244.6Redemption of loans (215.6) (10.7) (293.3) (Increase)/decrease in cash held as collateral - (4.2) 5.8Capital element of finance lease payments (6.5) (7.2) (12.3)Purchase of own shares by the ESOT (2.8) - - Proceeds from issue of ordinary shares 68.4 - 0.1 ----- ----- -----Net cash from/(used in) financingactivities 79.1 (11.1) (55.1) ----- ----- -----(Decrease)/increase in cash and cash equivalents (1.2) 3.5 (1.6) Opening cash and cash equivalents 2.1 3.9 3.9Effect of exchange rate changes - (0.1) (0.2) ----- ----- -----Closing cash and cash equivalents 0.9 7.3 2.1 ----- ----- ----- NOTES TO THE INTERIM FINANCIAL STATEMENTS1. Basis of preparation These interim financial statements were approved by the directors on 12December 2005. They have been prepared in accordance with relevantInternational Financial Reporting Standards (including IAS 34 Interim FinancialReporting) and the accounting policies set out in the document entitled -"Impact of adoption of International Accounting Standards and restatement ofpreviously reported financial information" published on 20 September 2005 andavailable on the Company's website at www.ashtead-group.com. The interimfinancial statements are unaudited and do not constitute statutory accountswithin the meaning of Section 240 of the Companies Act 1985.The statutory accounts for the year ended 30 April 2005 were prepared inaccordance with UK generally accepted accounting standards and have been mailedto shareholders and filed with the Registrar of Companies. The auditors' reporton those accounts was unqualified and did not contain a statement under section237 of the Companies Act 1985.The exchange rates used in respect of the US dollar are: 2005 2004 ---- ---- Average for the six months ended 31 October 1.7988 1.8177At 31 October 1.7703 1.83232. Segmental analysis Operating profit before Exceptional Operating Capital Revenue exceptionals items profit Expenditure ------- ------------ ----------- --------- ----------- Three months to 31 October ‚£m ‚£m ‚£m ‚£m ‚£m2005 ---- Sunbelt Rentals 122.8 32.3 2.9 35.2 53.0A-Plant 40.9 5.2 - 5.2 15.0Technology 4.2 1.3 - 1.3 1.8Corporate costs - (1.9) - (1.9) - ----- ----- ----- ----- ----- 167.9 36.9 2.9 39.8 69.8 ----- ----- ----- ----- ----- 2004 ---- Sunbelt Rentals 100.2 20.4 - 20.4 22.4A-Plant 41.6 5.6 - 5.6 11.8Technology 3.0 0.7 - 0.7 0.5Corporate costs - (1.5) - (1.5) - ----- ----- ----- ----- ----- 144.8 25.2 - 25.2 34.7 Six months to 31 October 2005 ---- Sunbelt Rentals 226.1 53.6 2.9 56.5 95.3A-Plant 79.7 8.9 - 8.9 32.5Technology 8.0 2.3 - 2.3 3.5Corporate costs - (3.5) - (3.5) - ----- ----- ----- ----- ----- 313.8 61.3 2.9 64.2 131.3 ----- ----- ----- ----- -----2004 ---- Sunbelt Rentals 188.1 34.5 - 34.5 42.3A-Plant 80.6 8.6 - 8.6 24.8Technology 6.0 1.4 - 1.4 2.0Corporate costs - (3.3) - (3.3) - ----- ----- ----- ----- ----- 274.7 41.2 - 41.2 69.1 ----- ----- ----- ----- -----3. Operating costs 2005 2004 ---- ---- Before Before exceptional Exceptional exceptional Exceptional items items Total items items Total ----- ----- ----- ----- ----- -----Three months to 31 October ‚£m ‚£m ‚£m ‚£m ‚£m ‚£mStaff costs: Salaries 44.0 0.3 44.3 40.0 - 40.0Social security costs 3.6 - 3.6 3.1 - 3.1Other pension costs 0.8 - 0.8 0.9 - 0.9 ----- ----- ----- ----- ----- ----- 48.4 0.3 48.7 44.0 - 44.0 Other operating costs (net): Vehicle costs 13.4 - 13.4 11.0 - 11.0Spares, consumables & ext'l repairs 10.7 - 10.7 10.3 - 10.3 Facilities costs 7.5 0.4 7.9 7.1 - 7.1Other external charges 24.6 - 24.6 22.4 - 22.4Profit on disposal of fixed assets (2.0) (3.6) (5.6) (1.4) - (2.5) ----- ----- ----- ----- ----- ----- 54.2 (3.2) 51.0 49.4 - 49.4 ----- ----- ----- ----- ----- ----- Depreciation 28.4 - 28.4 26.2 - 26.2 ----- ----- ----- ----- ----- ----- 131.0 (2.9) 128.1 119.6 - 119.6 ----- ----- ----- ----- ----- ----- Six months to 31 October ------------------------ Staff costs: Salaries 87.0 0.3 87.3 78.3 - 78.3Social security costs 7.2 - 7.2 6.6 - 6.6Other pension costs 1.6 - 1.6 1.9 - 1.9 ----- ----- ----- ----- ----- ----- 95.8 0.3 96.1 86.8 - 86.8 ----- ----- ----- ----- ----- -----Other operating costs (net): Vehicle costs 24.8 - 24.8 21.3 - 21.3Spares, consumables & ext'l repairs 20.8 - 20.8 20.2 - 20.2 Facilities costs 14.7 0.4 15.1 14.1 - 14.1Other external charges 45.5 - 45.5 41.7 - 41.7Profit on disposal of fixed assets (4.2) (3.6) (7.8) (2.5) - (2.5) ----- ----- ----- ----- ----- ----- 101.6 (3.2) 98.4 94.8 - 94.8 ----- ----- ----- ----- ----- ----- Depreciation 55.1 - 55.1 51.9 - 51.9 ----- ----- ----- ----- ----- ----- 252.5 (2.9) 249.6 233.5 - 233.5 ----- ----- ----- ----- ----- -----4. Exceptional items `Exceptional items' are those items of financial performance that are materialand non-recurring in nature that the Group believes should be disclosedseparately within their consolidated income statement category to assist in theunderstanding of the financial performance of the Group. Three months to Six months to Year to 31 October 31 October 30 April 2005 2005 2005 ---- ---- ---- ‚£m ‚£m ‚£m Debt facility costs 4.8 4.8 -Profit on sale of scaffolding (3.0) (3.0) -Post acquisition integration costs 0.1 0.1 - ---- ---- ---- 1.9 1.9 - ---- ---- ----Debt facility costs include the premium paid to redeem 35% of the secondpriority senior secured notes due 2014 (‚£5.0m), the write off of the portion ofdeferred debt issue costs related to the notes redeemed (‚£1.5m), otherrefinancing costs (‚£0.3m) and a gain on the repayment of the Rentokilconvertible loan note (‚£2.0m). Profit on sale of scaffolding relates to theestimated net gain on the disposal by Sunbelt of 12 west coast and Texasspecialist scaffold locations. Integration costs relate to costs incurred inintegrating acquisitions during the first half.Exceptional items are presented in the income statement as follows: Three months to Six months to Year to 31 October 31 October 30 April 2005 2005 2005 ---- ---- ---- ‚£m ‚£m Staff costs 0.3 0.3 -Other operating costs (3.2) (3.2) - ---- ---- ----Credited in arriving at operating profit (2.9) (2.9) - ---- ---- ----Financing costs 4.8 4.8 - ---- ---- ---- 1.9 1.9 - ---- ---- ----5. Financing costs Three months Six months to 31 October to 31 October 2005 2004 2005 2004 ---- ---- ---- ---- ‚£m ‚£m ‚£m ‚£m Bank interest payable 3.1 3.8 6.7 6.9Funding cost on trade debtors' securitisation - 1.0 - 1.9Interest on second priority senior secured notes 5.4 3.8 9.0 7.4Interest on 5.25% unsecured convertible loan note, due 2008 - 2.3 1.9 4.2Interest payable on finance leases 0.5 0.4 1.0 0.9Other - 0.5 2.5 1.6 ---- ---- ---- ---- 9.0 11.8 21.1 22.9Exceptional costs re debt facilities 4.8 - 4.8 - ---- ---- ---- ---- 13.8 11.8 25.9 22.9 ---- ---- ---- ----6. Taxation The tax charge for the period has been calculated by applying the directors'best estimate of the effective annual tax rate (estimated at 38%) to theGroup's profit before exceptional items and tax. Tax attributable toexceptional items has been calculated using the standard tax rates in eachjurisdiction in which the exceptional item arose. The tax charge comprises acredit of ‚£1.2m related to the UK (2004 - ‚£nil) and a charge of ‚£16.2m (2004 -‚£9.3m) related to the US.7. Earnings per share Basic and diluted earnings per share for the three and six months ended 31October 2005 have been calculated based on the profit for the relevant periodand on the weighted average number of ordinary shares in issue during thatperiod which excludes the shares held by the ESOT in respect of which dividendshave been waived. Diluted earnings per share is computed using the result forthe relevant period and the diluted number of shares (ignoring any potentialissue of ordinary shares which would be anti-dilutive). These are calculated asfollows: Three months Six months to 31 October 31 October 2005 2004 2005 2004 ----- ----- ----- ----- Profit for the financial period (‚£m) 16.9 7.6 23.3 9.0 ----- ----- ----- -----Weighted average number of shares (m) - basic 396.3 322.9 359.9 322.9 ----- ----- ----- ----- - diluted 402.7 322.9 366.4 322.9 ----- ----- ----- -----Basic earnings per share 4.3p 2.4p 6.5p 2.8p ----- ----- ----- -----Diluted earnings per share 4.2p 2.4p 6.4p 2.8p ----- ----- ----- -----Cash tax earnings per share (defined in any period as the earnings beforeexceptional items and deferred taxation for that period divided by the weightedaverage number of shares in issue in that period) may be reconciled to thebasic earnings per share as follows: Three months Six months to 31 October to 31 October 2005 2004 2005 2004 ----- ----- ----- ----- Basic earnings per share 4.3p 2.4p 6.5p 2.8pExceptional items 0.5p - 0.5p -Deferred tax on exceptional items (0.1)p - (0.1)p - ----- ----- ----- -----Earnings per share before exceptional items 4.7p 2.4p 6.9p 2.8pOther deferred tax 1.9p 1.6p 3.7p 2.7p ----- ----- ----- ----- Cash tax earnings per share 6.6p 4.0p 10.6p 5.5p ----- ----- ----- ----- 8. Property, plant and equipment 2005 2004 ---- ---- Rental Rental equipment Total equipment Total --------- ----- --------- ----- Net book value ‚£m ‚£m ‚£m ‚£m At 1 May 452.9 537.1 469.7 554.9Exchange difference 23.7 27.1 (10.0) (10.9)Additions 120.0 131.3 60.5 69.1Acquisitions 31.7 34.7 - -Disposals (27.4) (29.7) (12.3) (13.0)Depreciation (46.6) (55.1) (44.3) (51.9) ----- ----- ----- -----At 31 October 554.3 645.4 463.6 548.2 ----- ----- ----- ----- 9. Called up share capital Ordinary shares of 10p each: 31 October 30 April 31 October 30 April 2005 2004 2005 2005 2004 2005 ---- ---- ---- ---- ---- ---- Number Number Number ‚£m ‚£m ‚£m Authorised 900,000,000 900,000,000 900,000,000 90.0 90.0 90.0 ----------- ----------- ----------- ---- ---- ----Allotted, called up and fully paid 401,876,408 325,665,910 326,074,928 40.2 32.6 32.6 ----------- ----------- ----------- ---- ---- ----On 3 August 2005 the Group issued 73,350,352 ordinary shares of 10p each at95.5p through a Placing and Open Offer which raised ‚£70.0m before issueexpenses of ‚£3.1m.10. Statement of changes in shareholders' equity Equity Own Cumulative element shares foreign of Non held in exchange 31 30 Share Share convertible distributable treasury translation Distributable Oct April capital premium loan note reserves (ESOT) differences reserves Total 2004 2005 ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m Total recognisedIncome and expense - - - - - 19.9 23.3 43.2 2.2 (11.0)Shares issued 7.6 63.9 - (3.1) - - - 68.4 - 0.1Share basedpayments - - - - - - 0.5 0.5 0.1 0.3Capital reduction - (163.8) - 93.8 - - 70.0 - - -Vesting of share awards - - - - 0.2 - (0.2) - - -Own shares purchased - - - - (2.8) - - (2.8) - -Redemption of convertible loan note - - (24.3) - - - 24.3 - - -Net changes in shareholders' equity 7.6 (99.9) (24.3) 90.7 (2.6) 19.9 117.9 109.3 2.3 (10.6)At 1 May 2005 32.6 100.8 24.3 - (1.6) (32.6) (13.6) 109.9 120.5 120.5 ----- ----- ----- ----- ----- ----- ----- ----- ----- -----At 31 October 2005 40.2 0.9 - 90.7 (4.2) (12.7) 104.3 219.2 122.8 109.9 ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- At the extraordinary general meeting of the Company held on 1 August 2005,shareholders approved a resolution to cancel the amount standing to the creditof the share premium account. Subsequently the High Court of Justice approvedthe cancellation on 24 August 2005. Accordingly, of the total amount cancelledof ‚£163.8m, ‚£70.0m has been credited to distributable reserves while thebalance of ‚£93.8m has been credited to a non-distributable reserve.11. Notes to cash flow statement Year to 30 Six months to 31 October April 2005 2004 2005 ----- ----- ----- ‚£m ‚£m ‚£ma) Cash flow from operating activities -------------------------------------- Operating profit 64.2 41.2 67.1Depreciation 55.1 51.9 102.4Exceptional items (2.9) - - ----- ----- -----EBITDA before exceptional items 116.4 93.1 169.5Profit on disposal of property, plant and equipment (4.2) (2.5) (7.1)(Increase)/ decrease in inventories (0.2) (1.2) 0.4Increase in trade and other receivables (18.7) (12.6) (0.3)Increase in trade and other payables 5.5 1.9 1.5Exchange differences (0.2) 0.4 0.4Other non-cash movements 0.6 0.2 0.4 ----- ----- -----Cash generated from operations before exceptional items 99.2 79.3 164.8 ----- ----- ----- Year to 30 Six months to 31 October April April 2005 2004 2005 ‚£m ‚£m ‚£m ----- ----- ----- b)Reconciliation to net debt ---------------------------- Decrease/(increase) in cash in the period 1.2 (3.5) 1.6Increase/ (decrease) in debt through cash flow 13.5 (11.1) (55.2)Change in net debt from cash flows 14.7 (14.6) (53.6)Exchange difference 13.9 (6.4) (15.1)Non-cash movements: - deferred costs of debt raising 2.8 0.1 1.2- convertible loan note (1.0) 1.9 3.8- capital element of new finance leases 2.9 5.8 13.8 ----- ----- ----- Movement in net debt in the period 33.3 (13.2) (49.9)Opening debt 482.3 532.2 532.2 ----- ----- ----- Closing debt 515.6 519.0 482.3 ----- ----- -----c. Analysis of net debt----------------------- 1 May Exchange Cash Non-cash 31 October 2005 movement flow movements 2005 ----- ----- ----- ----- ----- ‚£m ‚£m ‚£m ‚£m ‚£m Cash (2.1) - 1.2 - (0.9)Debt due within 1 year 12.2 0.7 (6.5) 6.7 13.1Debt due after 1 year 472.2 13.2 20.0 (2.0) 503.4 ----- ----- ----- ----- -----Total net debt 482.3 13.9 14.7 4.7 515.6 ----- ----- ----- ----- -----12. Acquisitions and disposals On 17 October 2005, Sunbelt acquired 100% of the issued share capital ofNorthridge Equipment Rentals, Inc for cash consideration of ‚£39.7m. NorthridgeEquipment Rentals traded through five stores located in central and southernCalifornia. In addition, Sunbelt has acquired the business and assets of tenfurther stores during the first half in Florida, California, Nevada andTennessee for a total cash consideration of ‚£16.4m. A-Plant also acquired onestore in Bournemouth for a cash consideration of ‚£0.5m.The acquired businesses have been integrated into Sunbelt and A-Plant and theacquired rental fleets reorganised through additions, disposals and transfersof equipment. Accordingly, it is not practicable to disclose separately therevenue and profit of the acquired assets.The goodwill arising on these acquisitions which relates to the excess of theconsideration necessary to acquire these businesses over the fair market valueof the net assets acquired is summarised in the table below: Acquiree's Fair book value value ---------- ----- ‚£m ‚£mNet assets acquired: Property, plant and equipment 24.0 34.7Inventories 0.5 0.5Trade and other receivables 4.2 4.6Trade and other payables (1.8) (1.8)Deferred tax liabilities (3.0) (7.0) ----- ----- 23.9 31.0 ----- Goodwill 25.9 ----- Total consideration 56.9 ----- Satisfied by: Cash 56.6Directly attributable costs 0.3 ----- 56.9 -----The consideration paid for these acquisitions includes ‚£2.6m paid into escrowwhich remains subject to adjustment on agreement of closing net assetstatements. Such adjustments are not expected to result in a significantvariation in the total consideration payable.On 15 August 2005 Sunbelt sold 12 specialist scaffold locations on the US westcoast and in Texas for an estimated cash consideration of ‚£13.1m which issubject to adjustment once the closing balance sheet has been agreed with thepurchaser. The profit on disposal is as follows: ‚£mDisposal proceeds: - cash received to date 12.2- disposal related costs paid to date (0.4) ----- 11.8- estimated further proceeds due on agreement of closing balance sheet 0.9- estimated further disposal related costs (0.3) ----- Net consideration receivable 12.4Net assets sold: - property, plant and equipment (9.3)- inventory (0.1) ----- Exceptional profit on disposal 3.0 -----13. Contingent liabilities and contingent assets There have been no significant changes in contingent liabilities from thosereported at 30 April 2005. At 30 April 2005, Sunbelt had provided performanceguarantees to a value of ‚£1.6m to various state bodies. These obligations areguaranteed by Ashtead Group plc. The Group is subject to periodic legal claimsin the ordinary course of its business. However, the claims outstanding at 31October 2005 are not expected to have a significant impact on the Group'sfinancial position.14. Post balance sheet events On 14 November 2005 the Group agreed amended terms with the syndicate oflenders who make available the Group's first priority asset based seniorsecured loan facility to increase the amount of the facility from $675m to$800m, to extend its maturity by one year to November 2010 and to reduce theinterest rate payable under the facility.On 23 November 2005 Sunbelt and Head & Engquist Equipment LLC ("H&E") agreed tosettle their outstanding litigation with H&E paying to Sunbelt the sum of$20.1m (‚£11.7m). The proceeds of the settlement have been applied to reduceborrowings under the Group's asset based revolver and will be recognised as anexceptional profit in the third quarter.15. Reconciliation between UK GAAP and IFRS The Group published financial information in accordance with IFRS for 2004/5,as required by IFRS 1, on 20 September 2005 in its news release entitled"Adoption of International Accounting Standards". The news release is availableon the Group's website, www.ashtead-group.com and includes: * a summary of the main differences applicable to Ashtead between UK GAAP and IFRS * the restated income statement, balance sheet and cash flow statement under IFRS for the year ended 30 April 2005 * full reconciliations of the IFRS financial statements to the comparable information published previously under UK GAAP. These reconciliations cover income statement information for the quarter ended 31 July 2004, the six months ended 31 October 2004, the nine months ended 31 January 2005 and the year ended 30 April 2005 and balance sheet information as at 30 April 2004, 31 July 2004, 31 October 2004, 31 January 2005 and 30 April 2005. The news release also included the Group's detailed accounting policies underIFRS.The tables below give a summary of the impact of the move to IFRS on previouslyreported financial information. Reconciliation of equity 31 October 30 April 2004 2005 ----- ----- ‚£m ‚£m Total equity presented under UK GAAP 134.7 126.9Additional non-cash convertible loan note interest (11.9) (13.4)Equity element of convertible loan note 24.3 24.3Pensions (12.7) (16.5)Share based payments (0.1) (0.1)Lease reclassification (0.1) -Restate $100m swap to fair value - 0.6Goodwill 4.4 8.9Revaluation of goodwill to current exchange rates (19.9) (24.7)Deferred taxation 4.1 3.9 ----- -----Total equity presented under IFRS 122.8 109.9 ----- ----- Reconciliation of profit attributable to equity shareholders of the company Three months Six months Year ended ended ended 31 October 31 October 30 April 2004 2004 2005 ----- ----- ----- ‚£m ‚£m ‚£m Attributable profit under UK GAAP 6.4 6.4 2.4Goodwill 2.2 4.4 8.9Additional non-cash convertible loan note interest (0.7) (1.5) (3.0)Pensions (0.1) (0.1) (0.2)Share based payments (0.1) (0.2) (0.4)Lease reclassification - (0.1) -Restate $100m interest rate swap to fair value (0.1) 0.1 0.7 ----- ----- -----Attributable profit under IFRS 7.6 9.0 8.4 ----- ----- ----- Reconciliation of cash flowsThe Group's cash flows under IFRS are unchanged from those under UK GAAP. TheIFRS cash flow format is similar to UK GAAP but presents various cash flows indifferent categories and in a different order from the UK GAAP cash flowstatement. All of the IFRS accounting adjustments net out within cash generatedfrom operations except for the reclassification of the debtors securitisationas debt under IFRS.OPERATING AND FINANCIAL REVIEWSecond quarter (to 31 October) results compared with prior yearOverview-------- 2005 2004 ---- ---- Before Exceptional Before Exceptional exceptionals items Total exceptionals items Total ----- ----- ----- ----- ----- ----- ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m Revenue 167.9 - 167.9 144.8 - 144.8Staff costs (48.4) (0.3) (48.7) (44.0) - (44.0)Other operating costs (net) (54.2) 3.2 (51.0) (49.4) - (49.4) ----- ----- ----- ----- ----- -----EBITDA* 65.3 2.9 68.2 51.4 - 51.4Depreciation (28.4) - (28.4) (26.2) - (26.2) ----- ----- ----- ----- ----- -----Operating profit 36.9 2.9 39.8 25.2 - 25.2Financing costs (9.0) (4.8) (13.8) (11.8) - (11.8) ----- ----- ----- ----- ----- -----Profit before taxation 27.9 (1.9) 26.0 13.4 - 13.4Taxation: - current (1.8) - (1.8) (0.4) - (0.4)- deferred (7.6) 0.3 (7.3) (5.4) - (5.4) ----- ----- ----- ----- ----- ----- (9.4) 0.3 (9.1) (5.8) - (5.8) ----- ----- ----- ----- ----- ----- Profit for the quarter 18.5 (1.6) 16.9 7.6 - 7.6 ----- ----- ----- ----- ----- ----- * EBITDA is presented here as an additional performance measure as it iscommonly used by investors and lenders.Second quarter revenue increased 14.9% at constant 2005 exchange rates to ‚£167.9m and by 16.0% at actual rates. EBITDA before exceptional items grew by25.9% at constant exchange rates to ‚£65.3m and by 27.0% at actual rates.Operating profit before exceptional items of ‚£36.9m in the quarter increased45.5% at constant 2005 exchange rates and 46.4% from ‚£25.2m in 2004 at actualrates. EBITDA margins before exceptional items grew from 35.5% to 38.9% andoperating margins before exceptional items rose from 17.4% to 22.0%. TotalEBITDA increased 32.7% to ‚£68.2m, at actual rates and total operating profit by57.9% to ‚£39.8m.SeasonalityOur business is subject to significant fluctuations in performance from quarterto quarter as a result of seasonal effects. Commercial construction activitytends to increase in the summer and during extended periods of mild weather andto decrease in the winter and during extended periods of inclement weather.Furthermore, due to the incidence of public holidays in the US and the UK,there are more billing days in the first half of our financial year than thesecond half leading to our revenues normally being higher in the first half.Typically, the second quarter of our fiscal year is our strongest quarter withrevenue and operating results reflecting generally good weather conditions inthe late summer and early autumn and few public holidays.Divisional performanceDivisional results before exceptional items are summarised below: Revenue EBITDA Operating profit ------- ------ ---------------- 2005 2004 2005 2004 2005 2004Sunbelt in $m 220.0 181.8 90.8 66.0 57.8 37.1 ----- ----- ----- ----- ----- ----- Sunbelt in ‚£m 122.8 100.2 50.7 36.4 32.3 20.4A-Plant 40.9 41.6 14.3 15.1 5.2 5.6Ashtead Technology 4.2 3.0 2.2 1.4 1.3 0.7Group central costs - - (1.9) (1.5) (1.9) (1.5) ----- ----- ----- ----- ----- ----- 167.9 144.8 65.3 51.4 36.9 25.2 ----- ----- ----- ----- ----- -----SunbeltRevenue increased 21.0% to $220.0m reflecting strong growth of approximately 9%in rental rates and a 9% increase in the average fleet size. Utilisation wasbroadly unchanged at approximately 74%. Revenue growth was broadly based withall regions and all major product areas trading ahead of last year. Sunbelt'srevenue improvement reflected market share gains and growth in non-residentialconstruction activity as well as the continued shift from ownership to rental.Costs (excluding depreciation) rose 11.6% to $129.2m in 2005. This reflectedprincipally increased headcount, higher commissions and profit share paymentsto staff as a result of the increased activity levels and increased fuel costsfor Sunbelt's delivery fleet. As a result, EBITDA grew 37.6% to $90.8m and theEBITDA margin for the quarter improved to 41.3% from 36.3% in 2004. Sunbelt'soperating profit increased 55.8% to $57.8m representing a margin of 26.3% (2004- 20.4%). Sunbelt's results in sterling reflected the factors discussed aboveand the slightly stronger US dollar.In the second quarter Sunbelt was actively involved in the clean-up efforts onthe US Gulf Coast and in Florida following hurricanes Katrina, Rita and Wilma.Sunbelt's stores in affected areas suffered no significant damage from thehurricanes and none of its staff were hurt. Sunbelt also incurred nosignificant costs for lost or damaged rental equipment. As regards the effecton Sunbelt's revenues of the clean-up and reconstruction work, we now expectthat the impact on the current financial year will be more significant than theimpact we have seen from storms and natural disasters in earlier years but thatit will still amount to less than 2% of Sunbelt's full year revenues.A-PlantIn a continued competitive market, A-Plant's second quarter revenue of ‚£40.9mcompares with ‚£41.6m last year, reflecting rental rates similar to last year, afleet size which was approximately 1% smaller than in the equivalent period ayear ago and utilisation at approximately 66% compared to approximately 67%last year. Against this background, careful management of costs (excludingdepreciation) continued and these increased 0.4% year over year mainlyreflecting the full year impact of cost reduction measures taken last year. Asa result EBITDA decreased 5.3% to ‚£14.3m and the EBITDA margin decreased from36.3% to 35.0% in 2005. A-Plant's operating profit decreased 7.1% to ‚£5.2mrepresenting a margin of 12.7% (2004 - 13.5%).Ashtead TechnologyAshtead Technology's performance continued the trend established in the secondhalf of last year with second quarter revenues up 40.0% to ‚£4.2m at actualrates and up 37.8% at constant exchange rates. Ashtead Technology's operatingprofit of ‚£1.3m increased from ‚£0.7m in 2004 at both actual and constantexchange rates. These results reflected recent increases in investment in thedevelopment of oil supplies which is delivering higher offshore exploration andconstruction activity as well as continued growth in our on-shore environmentalbusiness. These trends are expected to continue.Exceptional itemsExceptional items can be summarised as follows: Three months to 31 October 2005 2004 ----- ----- ‚£m ‚£m Debt facility costs 4.8 -Profit on sale of scaffolding (3.0) -Post acquisition integration costs 0.1 - ----- ----- 1.9 - ----- -----Debt facility costs include the premium paid to redeem 35% of the secondpriority senior secured notes due 2014 (‚£5.0m), the write off of the portion ofdeferred debt issue costs related to the notes redeemed (‚£1.5m), otherrefinancing costs (‚£0.3m) and a gain on the repayment of the Rentokilconvertible loan note (‚£2.0m). Profit on sale of scaffolding relates to theestimated net gain on the disposal by Sunbelt of 12 west coast and Texasspecialist scaffold locations. Integration costs relate to costs incurred inintegrating acquisitions during the first half.Exceptional items are presented in the profit and loss account as follows: Three months to 31 October 2005 2004 ----- ----- ‚£m ‚£m Staff costs 0.3 -Other operating costs (3.2) - -----Credited in arriving at operating profit (2.9) -Financing costs 4.8 - ----- ----- 1.9 - ----- -----Financing costsFinancing costs increased to ‚£13.8m from ‚£11.8m in 2004. Financing costs beforeexceptional items decreased to ‚£9.0m from ‚£11.8m in 2004 reflecting loweraverage debt levels and an average interest rate which were similar to theprior period. Compared to the previous year, the average interest ratebenefited from the repayment of ‚£42.0m of our 12% notes and from a lower marginunder our first priority asset based senior secured loan facility due 2014 butthese benefits have been offset by increases in US dollar interest ratespayable under our floating rate senior facility.TaxationFollowing last summer's capital reorganisation the Group is now anticipatingearning taxable profits in the United Kingdom as well as in the United States.Whilst the substantial available tax losses in the UK (‚£127m at 30 April 2005)make it probable that no cash tax will be payable in the UK for several years,the Group is consequently now, for the first time, able to recognise a portionof the UK deferred tax asset (‚£1.2m) attributable to these losses. This hasresulted in a more normal effective accounting tax rate compared to the veryhigh effective accounting tax rates seen in recent years.In the US the recent rapid improvement in Sunbelt's profitability, togetherwith the $20.1m receipt from the Head & Engquist litigation has accelerated,relative to our earlier expectations, the time at which our US tax group islikely to fully utilise its tax losses and start paying significant cash taxesto 2006/7. In most market conditions, even once the US tax group becomes aregular taxpayer, capital investment levels are likely to keep the US cash taxrate well below its 39% effective accounting tax rate.The tax charge for the quarter of ‚£9.1m (2004 - ‚£5.8m) comprised a charge forcurrent tax of ‚£1.8m and a charge for deferred tax of ‚£7.3m. Overall for thefirst half the effective accounting tax rate on the profit before exceptionalitems is 38% whilst the cash tax rate is 5%.Balance sheetProperty, plant and equipment----------------------------- 31 October 2005 31 October 2004 --------------- --------------- Rental Rental Net book value equipment Total equipment Total ----- ----- ----- ----- ‚£m ‚£m ‚£m ‚£m At 1 May 452.9 537.1 469.7 554.9Exchange difference 23.7 27.1 (10.0) (10.9)Additions 120.0 131.3 60.5 69.1Acquisitions 31.7 34.7 - -Disposals (27.4) (29.7) (12.3) (13.0)Depreciation (46.6) (55.1) (44.3) (51.9) ----- ----- ----- -----At 31 October 554.3 645.4 463.6 548.2 ----- ----- ----- -----Capital expenditure in the six months was ‚£131.3m of which ‚£120.0m was investedin the rental fleet (2004 - ‚£69.1m in total). Expenditure on rental equipmentwas 91.4% of total capital expenditure. Capital expenditure by division was asfollows: 31 October 2005 2004 --------------- ----- Growth Maintenance Total Total ----- ----- ----- ----- Sunbelt in $m 70.1 81.7 151.8 65.1 ----- ----- ----- -----Sunbelt in ‚£m 39.6 46.2 85.8 35.5A-Plant 11.5 19.3 30.8 23.0Ashtead Technology 2.7 0.7 3.4 2.0 ----- ----- ----- -----Total rental equipment 53.8 66.2 120.0 60.5 ----- ----- Other fixed assets 11.3 8.6 ----- -----Total additions 131.3 69.1 ----- -----With the improvement in market conditions in the US, the Group spent ‚£53.8m ofits rental equipment capital expenditure on growth with ‚£66.2m spent onreplacing existing fleet. The growth proportion is estimated on the basis ofthe assumption that maintenance capital expenditure in any period is equal tothe original cost of equipment sold in that period.The average age of the Group's serialised rental equipment, which constitutesthe substantial majority of our fleet, at 31 October 2005 was 39 months (2004 -46 months) on a net book value basis. Sunbelt's fleet had an average age of 40months (2004 - 48 months) comprising 51 months for aerial work platforms whichhave a longer life and 27 months for the remainder of its fleet and A-Plant'sfleet had an average age of 39 months (2004 - 41 months).Reflecting the recent strengthening of the dollar which raises the sterlingvalue of Sunbelt's capital expenditure and the strong trading conditions in theUS, we now anticipate that gross capital expenditure for the current financialyear will be in the region of ‚£220m.Trade debtorsDebtor days remained at 51 days (2004 - 51 days). The bad debt charge as apercentage of total turnover was 0.9% in 2005 compared with 1.5% in 2004.Trade and other creditorsGroup creditor days were 58 days in 2005 (2004 - 63 days). Capital expenditurerelated payables at 31 October 2005 totalled ‚£40.6m (2004 - ‚£20.3m). Paymentperiods for purchases other than rental equipment vary between 30 and 60 daysand for rental equipment between 30 and 90 days.Cash flow and net debtFree cash flow in the three months ended 31 October 2005 (which is defined asour net cash inflow from operations less net maintenance capital expenditure,financing costs paid and tax paid) is summarised below: Six months LTM Year ended to 31 October to 31 October 30 April 2005 2004 2005 2005 ----- ----- ----- ----- ‚£m ‚£m ‚£m ‚£m EBITDA before exceptional items 116.4 93.1 192.8 169.5 ----- ----- ----- -----Cash inflow from operations before exceptional items 99.2 79.3 184.7 164.8Cash efficiency ratio* 85.2% 85.2% 95.8% 97.2%Maintenance capital expenditure (78.8) (50.4) (129.4) (101.0)Proceeds from sale of used rental equipment 22.4 16.4 41.9 35.9Tax paid (0.6) (0.6) (0.6) (0.6) ----- ----- ----- -----Free cash flow before interest 42.2 44.7 96.6 99.1Financing costs paid (18.6) (13.3) (35.5) (30.2) ----- ----- ----- -----Free cash flow after interest 23.6 31.4 61.1 68.9Growth capital expenditure (45.5) (13.5) (42.2) (10.2)Acquisitions and disposals (45.1) 0.4 (45.0) 0.5Issue of ordinary share capital 68.4 - 68.5 0.1Purchase of own shares by ESOT (2.8) - (2.8) -Exceptional refinancing costs paid (13.3) (3.7) (15.3) (5.7) ----- ----- ----- -----(Increase)/reduction in total debt (14.7) 14.6 24.3 53.6 ----- ----- ----- -----* Cash inflow from operations before exceptional items as a percentage ofEBITDA before exceptional items.Cash inflow from operations increased 25.1% to ‚£99.2m and the cash efficiencyratio was 85.2% (2004 - 85.2%) reflecting seasonal increases in workingcapital. After net maintenance capital expenditure of ‚£56.4m (2004 - ‚£34.0m)and tax, free cash flow before interest was ‚£42.2m (2004 - ‚£44.7m). Financingcosts (excluding exceptional financing costs) paid this year were broadly inline with the accounting charge. Last year's financing costs of ‚£13.3m wereunusually low compared to last year's ‚£22.9m accounting charge and reflectedthe timing of interest payments. Consequently, after interest, there was a freecash inflow of ‚£23.6m (2004 - ‚£31.4m).Including payments of ‚£45.5m in respect of growth capital expenditure, ‚£45.1min respect of acquisitions and disposals, ‚£2.8m for the purchase of shares bythe ESOT and exceptional refinancing costs of ‚£13.3m and taking into accountthe net proceeds received from share issues of ‚£68.4m, there was a net drawunder our bank facilities in the six months of ‚£14.7m. The largest outflow wasfor purchases of rental equipment which give rise to a corresponding increasein the borrowing base under our asset based facilities. Accordingly, combinedwith amendments to our asset based debt facility discussed below, availabilityunder the facility increased from $157m at 30 April 2005 to $271m at 31 October2005.Net debt-------- 31 October ---------- 2005 2004 ----- ----- ‚£m ‚£m First priority senior secured bank debt 274.7 272.2Finance lease obligations 30.2 29.812% second priority senior secured notes, due 2014 75.4 115.78.625% second priority senior secured notes, due 2015 136.2 -5.25% unsecured convertible loan note, due 2008 - 118.5 ----- ----- 516.5 536.2Cash held as collateral - (9.9)Cash and cash equivalents (0.9) (7.3) ----- -----Total net debt 515.6 519.0 ----- -----At 31 October 2005 total net debt was ‚£515.6m (31 October 2004 - ‚£519.0m and 30April 2005 - ‚£482.3m). Measured at constant (31 October 2005) exchange rates,the decrease in total net debt since 31 October last year was ‚£12.4m whilstdebt has increased ‚£19.6m in the six months since year end.On 3 August the Group completed a capital reorganisation which raisedapproximately ‚£70m from an equity placing and open offer as well as $250m ofnew second lien 8.625% senior secured notes due 2015. The proceeds of theplacing and the debt issue were applied to redeem early, at an approximate 11%discount, the ‚£134m convertible loan note and to redeem ‚£42m of the 12% secondpriority senior secured loan notes due 2014. After payment of transactioncosts, the remaining ‚£26.5m of funds raised were applied to reduce outstandingsunder our asset based debt facility.Amended first priority asset based senior secured loan facilityOn 14 November 2005, the Group agreed amended terms with the syndicate oflenders who make available its first priority asset based senior secured loanfacility to increase the amount, extend the maturity and reduce the cost of thefacility. The principal changes were to: * increase in the size of the facility from $675m to $800m * extend its maturity to November 2010 * lower the interest rate grid from its current range of LIBOR plus 225bp to 300bp to a new range of LIBOR plus 150bp to 250bp * revise the calculation of the borrowing base providing an increase in the amount of the facility available of approximately $90m * remove the maximum capital expenditure and minimum EBITDA covenants. As a result of this amendment and the earlier capital re-organisation theGroup's debt facilities are now committed for a weighted average period ofapproximately 6.5 years and carry a weighted average interest rate ofapproximately 8%.Head & Engquist Equipment LLC (H&E) litigationAs announced on 24 November, Sunbelt and H&E have settled their litigation withH&E paying to Sunbelt the sum of $20.1m (‚£11.7m). The proceeds of thesettlement were applied to reduce borrowings under the Group's asset basedrevolver and will be recognised as an exceptional profit in the third quarter.DividendsIn light of the strong trading performance in the first half, its confidence inthe outlook and following the successful capital reorganisation, the Board ispleased to be able to announce today the resumption of dividend payments.Accordingly an interim dividend of 0.5p per share will be paid on 28 February2006 to shareholders on the register on 17 February 2006.OPERATING STATISTICS Profit centre numbers Staff numbers --------------------- ------------- 31 October 30 April 31 October 30 April ---------- -------- ---------- -------- 2005 2004 2005 2005 2004 2005 ----- ----- ----- ----- ----- -----Sunbelt Rentals 206 200 200 4,061 3,902 3,854A-Plant 198 225 202 1,997 2,029 1,973Ashtead Technology 10 10 10 87 81 94Corporate office - - - 14 15 14 ----- ----- ----- ----- ----- -----Group 414 435 412 6,159 6,027 5,935 ----- ----- ----- ----- ----- -----INDEPENDENT REVIEW REPORT TO ASHTEAD GROUP PLCIntroductionWe have been instructed by the company to review the financial information forthe six months ended 31 October 2005 which comprises the income statement, thestatement of recognised income and expense, movement in equity shareholders'funds, the balance sheet, the cash flow statement and related notes 1 to 15 andexcludes the financial information for the three months ended 31 October 2005.We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information.This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone otherthan the company, for our review work, for this report, or for the conclusionswe have formed.Directors' responsibilitiesThe interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority and the requirements of IAS 34 whichrequire that the accounting policies and presentation applied to the interimfigures are consistent with those applied in preparing the preceding annualaccounts except where any changes, and the reasons for them, are disclosed.International Financial Reporting StandardsThe next annual financial statements of the group will be prepared inaccordance with International Financial Reporting Standards as adopted for usein the EU. Accordingly, the interim report has been prepared in accordance withInternational Accounting Standard 34, "Interim Financial Reporting" and therequirements of International Financial Reporting Standard 1, "First TimeAdoption of International Financial Reporting Standards" relevant to interimreports.Review work performedWe conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management andapplying analytical procedures to the financial information and underlyingfinancial data and, based thereon, assessing whether the accounting policiesand presentation have been consistently applied unless otherwise disclosed. Areview excludes audit procedures such as tests of controls and verification ofassets, liabilities and transactions. It is substantially less in scope than anaudit performed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information.Review conclusionOn the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 31 October 2005.Deloitte & Touche LLPChartered AccountantsLondon12 December 2005ENDASHTEAD GROUP PLCRelated Shares:
Ashtead Group