28th Nov 2007 07:01
Speedy Hire PLC28 November 2007 28 November 2007 Speedy Hire Plc Interim results for the six months ended 30 September 2007 Speedy Hire is the number one provider of tool and equipment hire services in the UK Financial Highlights Unaudited Unaudited % 2007 2006 Change Revenue £209.5m £154.4m +35.7Profit Before Taxation £18.2m £15.5m +17.4Profit Before Amortisation Exceptionals and Taxation £22.9m £17.2m +33.1Basic Earnings Per Share 28.70p 24.94p +15.1Basic Earnings Per Share Before Amortisation and Exceptionals 35.60p 27.55p +29.2Dividend Per Share 6.4p 5.5p +16.4Return on Capital (before Amortisation and Exceptionals) 16.3% 15.9% -Gearing 107.5% 111.6% - • Strong performance across the Group • Integration of Hewden Tools on track and to plan • Legislation continues drive towards hire • Tool and plant hire ideally positioned within UK industry • Market expected to grow by 12% in period to 2010 Outlook 'I am delighted to report our best interim results ever. Construction activityis forecast to remain on a steady upward path and Health and Safety as well asEnvironmental legislation continues the drive towards hire. In addition, ourrecently acquired business Hewden Tools offers a great opportunity to grow theenlarged business. Consequently, we remain confident of reporting further goodprogress." David Wallis - Chairman For further information: Speedy Hire Plc Hudson SandlerSteve Corcoran (Chief Executive) Nick Lyon / Wendy Baker/ Neil O'Brien (Group Finance Director) Kate Hough Tel: 020 7796 4133Wednesday 28 November 2007 only: 020 7796 4133Thursday 29 November 2007 onwards: 01942 720000 High resolution photographs are available for download, free of charge, at www.vismedia.co.uk Interim Management Statement for the 6 months to 30 September 2007 Speedy Hire has achieved a great deal over the last six months. The existingbusinesses have enjoyed double digit organic growth, our start-up operationshave made strong progress and we have invested £120 million in acquisitionswhich have re-shaped the UK tool hire industry. To support this growth, we havecontinued to invest in the development of our internal infrastructure,particularly in the areas of new Management Information Systems and PeopleDevelopment and Training. As a result of all this activity, the company is in a strong financial positionwith record levels of profit, a strong balance sheet, substantial cash flows andrecord levels of earnings per share, pre amortisation of goodwill andintegration costs. Financial Performance I have summarised the financial results in the table below. Unaudited Unaudited % Change 2007 2006Revenue £209.5m £154.4m +35.7EBITDA £58.2m £44.7m +30.2Profit Before Tax (pre amortisation & exceptionals) £22.9m £17.2m +33.1Group EBIT Margin 14.0% 13.9% -Earnings Per Share 28.70pps 24.94pps +15.1Earnings Per Share (pre amortisation & 35.60pps 27.55pps +29.2exceptionals)Return on Capital (pre amortisation & exceptionals) 16.3% 15.9% -Total Equity £231.2m £154.1m +50.0Gearing 107.5% 111.6% - Your Board intends to pay an interim dividend of 6.4 pence per share (2006: 5.5pence) an increase of 16.4%, which will be paid on 25 January 2008, to thoseshareholders on the register as at 4 January 2008. Acquisitions Hewden On 1 August 2007, we completed the acquisition of Hewden Tools, the trade andassets of the tool hire division of Hewden Stuart Plc. This is already provingto be an excellent deal. The consideration of £115 million was met through aplacing of 4,359,800 new ordinary shares for cash at £12.50 per share and byincreasing bank borrowings. The Group has successfully negotiated a new fiveyear revolving credit facility of £325 million. Both the share placing and debtsyndication were substantially over-subscribed. This acquisition consolidates Speedy Hire's position as the market leader in thehire industry in the UK. With over 500 sites nationwide, we have a betternetwork for service and delivery and a strengthened business offering andcustomer reach. Speedy Hire's customer base has expanded by 40% to around100,000 accounts and established a stronger position with Industrial, Utilityand Government customers. This broader customer base will enable us to increasethe level of cross-selling across the Speedy Hire range and we have earmarked anadditional £10 million for investment in new fleet in order to meet the widerdemands of this enlarged customer base. Strategic planning is one thing, but good execution quite another. A verydetailed integration plan was immediately put in place, the first part of whichwas extensive communication with the 1,100 new people joining Speedy Hire andall Hewden Tools' customers. Where there was branch overlap, 21 depots of the188 acquired were integrated by the half year, with the employees beingre-deployed elsewhere in the business. All retained depots, hire assets andvehicles will be re-branded as Speedy Hire by January 2008. Early next year, wewill be on a common IT platform and be trading using a single product catalogue. Following our extensive due diligence, we have found the business and assetsas expected and feel even more confident of delivering the £20 million ofsynergy benefits forecast at the time of acquisition, whilst remaining withinthe budgeted level of £10 million of exceptional costs associated with thepurchase, resulting in enhanced value for shareholders. Our plans have beenenthusiastically received by our new employees and customers and I am pleased toreport that we are firmly on track. In summary, we could not be more pleasedwith progress thus far. Waterford Hire On 30 July 2007, we announced the acquisition of Waterford Hire Services Ltd, along-standing, well respected tool and equipment hire business, with two outletsin Waterford and Kilkenny in the Republic of Ireland, for a maximumconsideration of €6.5 million. Whilst at the opposite end of the scale in termsof size, this was nevertheless an important milestone in building our brand inthe Republic of Ireland, where our operations are already contributing tooperating profit during their second year, following the well established SpeedyHire business model. Board As foreshadowed in my letter to you in the Annual Report, a number of changes tothe composition of the Board have taken place or are planned for the nearfuture. At the AGM in July, I was able to welcome Ishbel Macpherson as an additionalnon-executive director. Ishbel, an experienced corporate financier, ispresently a non executive director of MITIE Group plc, GAME Group plc andHydrogen Group plc. I also announced that Frank Dee, Speedy Hire's senior nonexecutive director and chairman of the Remuneration Committee, would be steppingdown at the end of the financial year, having completed seven years' service. Asearch is currently underway for his replacement. I shall report more fully onthese changes in the 2008 Annual Report. In September, we announced that Neil O'Brien, the Group Finance Director,intends to leave the Group, after eight years' service, to pursue otheropportunities. However, to ensure a smooth transition of responsibilities, Neilhas agreed to remain in place until the publication of the results for the yearending 31 March 2008, or until a successor is found. This is typical of Neil'scommitment and professionalism demonstrating the significant role he has playedin building Speedy Hire into the business it is today. Neil has built a verystrong finance team to support him, which remains in place. The search for hisreplacement is now well advanced and a further update will be given early in theNew Year. Finally, I am delighted to report that we have further strengthened the boardwith the appointment as of today of Claudio Veritiero as Chief OperatingOfficer. Claudio joined the Group in 2004 from the Investment Banking arm ofRothschild, initially in Business Development with responsibility foracquisitions and strategic development. He later became Managing Director ofSpeedy Lifting, overseeing the acquisition and integration of Lifting Gear Hireand built the business into the clear UK market leader in its field. Outlook The financial markets remain uncertain, as global economic indicators continueto display mixed signals. Economic growth in the UK is forecast to slow over thenext 12 months, though will still remain positive and market conditions for themajority of our customers remain extremely encouraging. The construction "industry" has a number of distinct sub sectors influenced bydifferent market drivers. The level of activity within these sub sectors ebbsand flows and informed comment currently seems to point to more challengingtimes in the housebuilding market. It is worth restating that revenues fromthis sub sector are a minor part of our total revenues. The overallconstruction market has shown steady and progressive growth over many, manyyears. Speedy's record of 20 years of unbroken revenue and profit growth isbuilt on our ability to supply all construction sectors and in recent years wehave reached well beyond construction into new sectors such as petrochemicals,pharmachemicals and government. With projected investment in UK infrastructureexpected to continue in education, social housing, energy, water, transport andthe Olympics, all areas of substantial benefit to us, our key customers continueto report strong order books both in the short term and for a considerable timeinto the future. In addition, the Hewden Tools acquisition has given us an outstandingopportunity to enable us to grow the enlarged business across the whole range oftools and equipment. Although much work remains to be done, we are delightedwith progress to date. Finally, as legislation continues to develop, ensuring a safer environment foroperators of tools and equipment, along with increasing emphasis aroundenvironmental responsibility, additional impetus continues to be added to thehire market. Our product range, customer base and geographic spread are extensive andunrivalled in the industry. With strong foundations in place, and assuming nosignificant change in the performance of the economy, the Board remainsconfident of reporting further good progress. David Wallis Chairman Business Review Highlights of the six month period • Our largest ever, industry-transforming acquisition - Hewden Tools • 170 depots operating on our new IT system • Recent trading at record levels • Start up businesses, Pumps and Ireland, are moving into profit andgrowing in line with expectations • Our first acquisition in the Republic of Ireland - Waterford HireServices Financial performance The Group has delivered another very strong performance, with both divisionsreporting record revenue and operating profits. These results reflect thebenefit of organic growth, acquisitions and the development of the start-upbusinesses, Speedy Pumps and Speedy Ireland. The results include the two-monthimpact of the Hewden Tools acquisition, which is described in more detail below. Total revenue of £209.5m for the period is split approximately 52:48 between theTool and Equipment divisions, and represents an increase of 35.7% on the sametime last year. Operating profits before amortisation and integration costs amounted to £29.3m,an increase of 36.3% on the prior year (2006: £21.5m). The operating margin at14.0% was slightly higher than last year (2006: 13.9%). The improvement in theunderlying business has more than offset the anticipated dilutive effect of theHewden Tools acquisition which generated £0.3m operating profit on sales ofapproximately £13.4m. Return on capital (before amortisation and integrationcosts) is 16.3% compared to 15.9% in the comparative period. Profit before taxation rose by 17.4% to £18.2m, after charging net financialexpenses of £6.8m. Overall the exceptional costs charged in the 6 month periodwere £2.1m (2006: £nil) £1.7m of the exceptional costs were charged to tradingcosts reflecting onerous leases and project costs. The financial expenseincludes an exceptional £0.4m of accelerated amortisation of issue costsresulting from the re-financing undertaken in the period to support theacquisition of Hewden Tools. Earnings per share, adjusted for amortisation ofintangibles and integration costs were 35.60 pence, an increase of 29.2% on theprior year (2006: 27.55 pence). We have maintained our investment in the hire fleet ensuring that we have thelargest, most up to date and durable fleet available in the industry, sustaininga solid platform for continued growth. Gross capital expenditure in the periodwas £46.0m (2006: £47.7m). A further £120.2m was spent on acquisitions in theperiod. Net assets increased by £77.1m (50%) to £231.2m, aided by the shareplacings in June and July 2007. We remain a strongly cash-generative company, and have generated £49.4m ofoperating cash flow in the period, increasing by 36.5% on the previous period.Net debt at the end of the period was £248.7m, and interest costs were coveredby profit 3.7 times (3.9 times adjusted for exceptional interest costs). TheGroup increased its available bank facilities to £325m during the period, withthe facility available until June 2012. Our business Our business services the UK and Ireland hire markets. Our origins were in ToolHire, but as we have extended our product range and identified areas requiring amore detailed focus on a specific market, we have established new lines ofbusiness. Today, our UK business is structured into two divisions, Tool Hireand Equipment Hire. Our business in the Republic of Ireland provides a fullrange of hire services from one operating company. Tool Hire The Tool Hire business operates on a regional basis from over 400 depots. Thedivision offers an extensive range of products, including access towers, podiumsteps, drills, breakers, woodworking tools, heaters, dryers, temporary lighting,small generators, welders, and plumbing equipment. During the period, we acquired 188 depots from Hewden Stuart Plc as part of theacquisition of its Hewden Tools business ('Hewden Tools'). The acquisition isdiscussed in more detail below. We have also opened 5 greenfield sites inLondon, the North and the Isle of Wight, strengthening the depot network. Our UK network for the Tool Hire business is now in place. Whilst we are alwayslooking for potential new locations to strengthen the network, we do notanticipate significant additions of greenfield locations in the forthcomingyear. We expect the business to continue to grow as existing depots mature,through the extension of range of products and services we offer, and byidentifying opportunities to cross-sell the entire range of Speedy services. In the six months to 30 September 2007, the Tool Hire division saw total revenuegrow by 38.2% to £111.7m (2006: £80.8). Up to the time of the Hewden Toolsacquisition, like-for-like revenue growth for the Tool Hire division was 11.4%and strong momentum has been maintained since then. We have already outlined our decision not to report like-for-like revenue growthduring the integration period. The re-organisation of the depot network tointegrate the Hewden depots means that like-for-like measures are unreliable -customers acquired from Hewden Tools will be serviced from an existing Speedydepot, and other cases, trade may be transferred the other way. Comparingyear-on-year performance on a depot-by-depot basis is therefore not possible,until we are past the first anniversary of ownership. Operating profit before amortisation and integration costs for the six monthsincreased to £16.8m, (2006: £11.7m) an increase of 43.6% on the prior period.The division generated £28.6m EBITDA (earnings before interest, tax,depreciation and amortisation), an increase of £7.1m (33.0%) on the prior year(2006: £21.5m). On 30 July 2007 we announced our first acquisition in the Republic of Irelandwith the purchase of the entire share capital of Waterford Hire Services Limitedfor a maximum consideration of €6.5m. The consideration was made up as €5.2m incash, with the remainder in shares contingent upon performance. The businessgenerated revenues of €0.6m in the period of our ownership to 30 September2007. The business will be integrated into the Speedy Ireland operation, underthe control of the newly-appointed Managing Director, Eugene Heather. Eugenejoined the group on 27 September 2007 from SAM Hire, where he grew the businessfrom a single depot to a nation-wide network. Equipment Hire The Equipment division comprises five business units operated nationallyconcentrating on specific product ranges. Our customers require that weunderstand their business, and the unique requirements that many of them have.Structuring the businesses nationally allows us to provide greater expertise inmeeting their demands, and ensures that we provide excellent customer service. Revenue grew by 32.9% to £101.4m, reflecting a full six months contribution fromthe LCH Generators and Lifting Gear Hire businesses acquired in the previousyear and strong underlying growth within the existing businesses (2006: £76.3m). In total, 4 new depot locations have been opened. Operating profit before amortisation was £17.9m, representing an increase of27.0% over the same period last year (2006: £14.1m). As a result of theintegration of the two sizeable acquisitions, and the effect of expanding ourSpace business through opening in Scotland and offering modular accommodation,the operating margin for the period was 17.7% (2006: 18.5%). Equipment hireutilisation has continued to improve to 68.5% (2006: 67.5%). The Divisiongenerated £31.6m EBITDA, an increase of £5.7m (22.0%) on the prior year (2006:£25.9m). Hewden Tools The Hewden Tools business is a national network of 188 depots, withapproximately 1,100 employees. The business is an excellent strategic fit withthe existing Speedy depot network, and ensures that we are now within reach of95% of the UK population in less than an hour's travel time. Since theacquisition, we have been working to deliver the integration programme. Keyactions so far include: • the Hewden depots have been aligned with, and integrated into, theSpeedy Tools management structure; • following requests from the Hewden Tools employees, we haveaccelerated the process of aligning employee terms and conditions, including thelaunch of a Summer issue of the all-employee SAYE to include Hewden employeeswithin the Speedy share-owning workforce; • assets and employees at 21 depots have been re-organised to removesurplus capacity, improve asset availability and enhance customer service; • supplier agreements have been consolidated to ensure consistency ofproduct across the enlarged business; • the vehicle fleet has been disposed of via a sale and lease-backarrangement, in line with Speedy's policy of leasing the delivery fleet, andmaintaining a modern fleet of delivery vehicles; • the new Speedy IT system is being installed to the Hewden depotnetwork. This is a rolling process which is expected to be completed by thefinancial year end; and • discussions with customers in order to align terms have commencedand are progressing well. A single customer catalogue with harmonised prices isexpected for 2008. We are confident of delivering the £20m synergy number referred to in June. We have made good progress on the integration programme in the short time wehave owned the business. We are confident that the long-term benefits to begained by bringing the businesses together will be achieved. The business istrading in line with the Board's expectations. We are expecting the Hewdendepots to deliver the same level of performance as any other Speedy depot, andto that extent, it will increasingly become 'business as usual'. Risks and Uncertainties Our 2007 Annual Report (pages 29 & 30) outlines the Board's assessment of theprincipal risks facing the business, together with a description of themitigating processes which are in place to monitor and address the risks.Looking forward to the second half of the current year, we believe that therisks and processes identified in the 2007 Annual Report are still applicable. Outlook in the wider economy has changed since our last report. Growth in theoverall economy is forecast to slow, and we are mindful of the potential impactthis may have on our own marketplace. We continually monitor market opportunityto assess the potential impact on the business. We have also completed our most significant acquisition in the period, HewdenTools. The successful integration of the acquisition into the existing SpeedyTools operation will play a major part in the success of our performance in thesecond half of the current year. Progress to date is extremely encouraging, andwe are confident we have the right people and resources to ensure that theintegration is successfully delivered. Our markets In our March 2007 Operating and Financial Review, we included an analysis of ourview of the UK hire market, and Speedy's positioning within it. The overallTool and Plant hire market is estimated to be worth around £4.4bn annually. Webelieve we provide products for hire that account for £3.5bn of this overallmarket. The market is expected to grow by 12% in the period to 2010, driven bya number of factors: • continued high levels of activity in the construction market; • increased legislative and regulatory emphasis on safer workingpractices; • the maintained drive towards outsourcing of non-core activities; and • customers increasing emphasis on quality assurance, supply chain andhealth & safety standards. We believe that our strategy is entirely consistent with these factors. Ournational network, modern fleet, range of products and commitment to safetystandards have been our core objectives for a number of years. We aim to offer our customers a service-based solution, rather than just asupply-based provision of tools and equipment for hire. Our 'Safety from theGround Up' campaign (which was awarded the Responsible Marketing award fromBITC) reflects our desire to provide customers with solutions to the problemsthey face. This campaign has become the platform upon which we communicate newproducts, legislation and operator awareness for changes in safe workingpractice. Whilst the construction market is undoubtedly still our prime market, the rangeof products and services we offer continues to widen. Our equipment businesses,notably the lifting and power businesses, have helped us widen our customer baseto include industrial markets, such as petrochemical plants and steelworks. Wealso provide a growing range of add-on services, including testing andcalibration, as well as servicing and inspection of the customers' ownequipment. We continue to monitor market activity closely. We regularly review marketopportunities that are available to us, and will continue to invest in thebusiness where we perceive the growth prospects to be sound. We are confidentthat there are further opportunities to expand our business, both geographicallyand in the range of products and services we offer. Our business strategy isdesigned to deliver success, growth and sustainable profitability for years tocome and we are confident it will do so. Steve Corcoran Chief Executive Directors' responsibility statement in respect of the interim financial report We confirm that to the best of our knowledge: • the condensed set of financial statements has been prepared in accordancewith IAS 34 Interim Financial Reporting as adopted by the EU; • the interim management report includes a fair review of the informationrequired by: (i) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indicationof important events that have occurred during the first six months of thefinancial year and their impact on the condensed set of financial statements;and a description of the principal risks and uncertainties for the remaining sixmonths of the year; and (ii) DTR 4.2.8R of the Disclosure and Transparency Rules, being related partytransactions that have taken place in the first six months of the currentfinancial year and that have materially affected the financial position orperformance of the entity during that period; and any changes in the relatedparty transactions described in the last annual report that could do so. For and on behalf of the Board of Directors SJ Corcoran NC O'Brien Director Director Consolidated income statement for the six months ended 30 September 2007 Note Before Exceptionals Unaudited Unaudited Audited Exceptionals (note 3) & Total Six months Year & amortisation ended 30 ended 31 amortisation September March 2007 2007 2007 2006 2007 £m £m £m £m £m Revenue 2 209.5 - 209.5 154.4 335.5 Cost of sales (72.5) - (72.5) (51.5) (118.7) Gross profit 137.0 - 137.0 102.9 216.8 Distribution costs (26.5) - (26.5) (17.1) (43.2)Administrative expenses (81.2) (4.3) (85.5) (66.0) (127.7) Analysis of operating profitOperating profit before 29.3 (1.7) 27.6 21.5 50.0amortisationAmortisation - (2.6) (2.6) (1.7) (4.1) Operating profit 2 29.3 (4.3) 25.0 19.8 45.9 Financial income 4 0.2 - 0.2 0.1 0.4Financial expense (6.6) (0.4) (7.0) (4.4) (9.9) Profit before taxation 22.9 (4.7) 18.2 15.5 36.4 Taxation 5 (6.0) 1.4 (4.6) (4.3) (9.8) Profit for the financial year 16.9 (3.3) 13.6 11.2 26.6 Attributable to:Equity holders of the parent 13.6 11.2 26.6Minority interests - - - 13.6 11.2 26.6 Pence Pence PenceEarnings per share- Basic 6 28.70 24.94 58.74 - Diluted 6 28.31 24.67 57.78 Dividend per share 6.40 5.50 17.00 Consolidated statement of recognised income and expensefor the six months ended 30 September 2007 Unaudited Unaudited Audited Six months Six months Year ended 30 ended 30 ended 31 September September March 2007 2006 2007 £m £m £m Cash flow hedges: Gains taken to equity - 0.2 0.5 Net income recognised directly in equity - 0.2 0.5 Profit for the period 13.6 11.2 26.6 Total recognised income and expense for the period 13.6 11.4 27.1 Attributable to: Equity holders of the Parent 13.6 11.4 27.1 Minority interests - - - 13.6 11.4 27.1 Consolidated Balance SheetAt 30 September 2007 Note Unaudited Unaudited Audited 30 30 31 September September March 2007 2006 2007 £m £m £mASSETSNon-current assetsIntangible assets 8 119.2 60.4 71.3Property, plant & equipment 9 360.9 283.5 295.7 480.1 343.9 367.0 Current assetsInventories 15.3 9.3 10.9Trade and other receivables 144.4 90.7 101.2Other financial receivables 10 0.7 0.2 0.7Cash 9.4 4.2 10.3 169.8 104.4 123.1 Total assets 649.9 448.3 490.1 LIABILITIESCurrent liabilitiesBorrowings 11 (10.0) - -Trade & other payables (118.7) (80.8) (91.8)Current income tax (6.7) (8.4) (6.0) (135.4) (89.2) (97.8) Non-current liabilitiesBorrowings 11 (248.1) (176.1) (186.5)Deferred tax liabilities (35.2) (28.9) (34.7) (283.3) (205.0) (221.2) Total liabilities (418.7) (294.2) (319.0) Net assets 231.2 154.1 171.1 EQUITYShare capital 12 2.5 2.3 2.3Share premium account 12 108.3 55.4 57.8Merger reserve 12 3.7 3.7 3.7Hedging reserve 12 0.5 0.2 0.5Retained earnings 12 116.0 92.3 106.6 Total equity attributable to equity holders of the parent 231.0 153.9 170.9Minority interests 12 0.2 0.2 0.2 Total equity 231.2 154.1 171.1 Consolidated cash flow statementfor the six months ended 30 September 2007 Unaudited Unaudited Audited 30 30 31 September September March 2007 2006 2007 £m £m £mCash flow from operating activitiesProfit before tax 18.2 15.5 36.4Financial income (0.2) (0.1) (0.4)Financial expense 7.0 4.4 9.9Intangible amortisation 2.6 1.7 4.1Depreciation 30.6 23.2 50.3Profit on disposal of property plant and (3.3) (2.9) (7.0)equipmentEquity-settled share-based payments 1.3 0.8 1.7 56.2 42.6 95.0Increase in inventories (2.4) (0.4) (0.8)Increase in trade and other receivables (21.1) (12.0) (19.1)Increase in trade and other payables 16.7 6.0 9.5 Cash generated from operations 49.4 36.2 84.6Interest received 0.1 0.1 0.5Interest paid (6.5) (4.3) (9.8)Income tax paid (3.4) (1.6) (6.1) Net cash flow from operating activities 39.6 30.4 69.2 Cash flow from investing activitiesAcquisition of businesses (120.2) (55.5) (61.9)Purchase of property, plant & equipment (46.0) (47.5) (93.4)Disposal of property, plant & equipment 9.3 7.9 19.7 Net cash flow from investing activities (156.9) (95.1) (135.6) Net cash flow before financing activities (117.3) (64.7) (66.4) Cash flow from financing activitiesProceeds from shares issued 50.7 - -Proceeds from new loans 71.2 66.7 77.0Dividends paid (5.5) (4.2) (6.7) Net cash flow from financing activities 116.4 62.5 70.3 (Decrease) / Increase in cash (0.9) (2.2) 3.9 Cash at the start of the year 10.3 6.4 6.4 Cash at the end of the period 9.4 4.2 10.3 Notes to the financial statements 1 Basis of preparation The interim financial statements of the Company as at and for the six monthsended 30 September 2007 comprise the Company and its subsidiaries ('togetherreferred to as 'the Group'). The financial statements of the Group for the year ended 31 March 2007 areavailable from the Company's registered office, or from the website:www.speedyhire.plc.uk. These interim financial statements have been prepared in accordance withInternational Financial Reporting Standard ('IFRS') IAS 34 Interim FinancialReporting. They do not include all the information required for full annualstatements, and should be read in conjunction with the Group's consolidatedfinancial statements for the year ended 31 March 2007. The accounting policiesapplied by the Group in these interim financial statements are the same as thoseapplied by the Group in its consolidated financial statements for the year ended31 March 2007. The preparation of interim financial statements requires management to makejudgements, estimates, and assumptions that affect the application of accountingpolicies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing the interimfinancial statements, the significant judgements made by management in applyingthe Groups accounting policies and key sources of estimation uncertainty werethe same as those that applied to the consolidated financial statements for theyear ended 31 March 2007. The comparative figures for the financial year ended 31 March 2007 are not thecompany's statutory accounts for that financial year. Those accounts have beenreported on by the company's auditors and delivered to the registrar ofcompanies. The report of the auditors was (i) unqualified, (ii) did not includea reference to any matters to which the auditors drew attention by way ofemphasis without qualifying their report, and (iii) did not contain a statementunder section 237(2) or (3) of the Companies Act 1985. These interim financial statements were approved by the Board of Directors on 27November 2007. 2 Segmental analysis The Group's primary segmental reporting format is class of business, as theGroup's management and internal reporting are structured in this manner. TheGroup's activity is conducted solely within the United Kingdom & Republic ofIreland. Unaudited Unaudited Audited 30 30 31 September September March 2007 2006 2007 £m £m £mRevenueTools 111.7 80.8 175.5Equipment 101.4 76.3 166.6 213.1 157.1 342.1Intra-group revenue (3.6) (2.7) (6.6) 209.5 154.4 335.5 Operating profitTools - pre-amortisation & exceptional items 16.8 11.7 27.7- amortisation (0.6) (0.3) (0.4)- exceptional items (1.7) - - 14.5 11.4 27.3 Equipment - pre-amortisation 17.9 14.1 31.3- amortisation (2.0) (1.4) (3.7) 15.9 12.7 27.6 Operating profit before corporate costs 30.4 24.1 54.9 Corporate costs (5.4) (4.3) (9.0) 25.0 19.8 45.9 Net assetsTools 277.1 122.9 146.6Equipment 236.3 200.6 221.2 513.4 323.5 367.8Unallocated net (liabilities)/assets (33.4) 2.5 (20.5)Net debt (248.7) (171.9) (176.2) 231.3 154.1 171.1 Capital expenditureTools 76.4 20.7 38.7Equipment 22.5 45.7 71.1Intangible assets 50.4 35.1 51.5Unallocated capital expenditure 2.8 4.8 7.5 152.1 106.3 168.8 3 Exceptional items 'Exceptional items' relate to the costs associated with the integration of theHewden Tools acquisition. On 1 August 2007, the Group acquired the trade andassets of the tool hire operations of Hewden Stuart Plc. The costs incurred inthe period relate to a provision for lease costs associated with properties madevacant by the relocation into other depots within the tool network (£1.0m),together with consultancy and other one-off costs associated with theintegration (£0.7m). In addition, and in connection with the acquisition, theGroup re-negotiated its banking facilities, increasing the available facilitiesto £325m. Costs associated with the bank original facility amounting to £0.4mwhich were being charged to profit over the life of the facility have beenwritten off during the period. Further details of the acquisition are containedin note 8 below. A description of the progress made on the integrationprogramme is included in the business review above. 4 Net financial expense Unaudited Unaudited Audited 30 30 31 September September March 2007 2006 2007 £m £m £mFinancial incomeBank interest received 0.2 0.1 0.2Gains on hedging instruments - - 0.2 0.2 0.1 0.4 Financial expenseInterest on bank loans and overdrafts (6.5) (4.3) (9.7)Amortisation of issue costs (0.1) (0.1) (0.2)Exceptional amortisation of issue costs (0.4) - - (7.0) (4.4) (9.9) Net financial expense (6.8) (4.3) (9.5) 5 Taxation The corporation tax charge for the six months ended 30 September 2007 is basedon an effective rate of taxation of 25% (2006: 27.5%). This has been calculatedby reference to the projected charge for the full year ending 31 March 2008,applying the applicable UK corporation tax rate of 30%. Deferred taxliabilities have been calculated using the reduced corporation tax rate of 28%applicable to future periods following the enactment of the changes to thestandard rate of corporation tax and capital allowance legislation outlined inthe March 2007 budget. 6 Earnings per share The calculation of basic earnings per share is based on the profit attributableto equity holders of the parent of £13.6m (2006: £11.2m) and the weightedaverage number of 5 pence ordinary shares in issue during the six months ended30 September 2007 calculated as follows: Unaudited Unaudited Audited 30 30 31 September September March 2007 2006 2007 Earnings (£m)Profit for the period after tax- basic earnings 13.6 11.2 26.6Intangible amortisation charge (after tax) 1.8 1.2 2.8Exceptional items (after tax) 1.5 - - Adjusted earnings - before amortisation and exceptional items 16.9 12.4 29.4 Weighted average number of shares in issue (million)At the beginning of the period 45.2 43.7 43.7Issue of ordinary shares 2.0 1.4 1.5Exercise of share options 0.2 - - At the end of the period - Basic number of shares 47.4 45.1 45.2 Share options 0.3 0.3 0.4Employee share scheme 0.4 0.2 0.3 At the end of the period - Diluted number of shares 48.1 45.6 45.9 Earnings per share (pence)Basic earnings per share 28.70 24.94 58.74 Amortisation of issue costs 3.74 2.61 6.26Exceptional items 3.16 - - Adjusted earnings per share 35.60 27.55 65.00 Basic earnings per share 28.70 24.94 58.74 Share options (0.18) (0.17) (0.55)Employee share scheme (0.21) (0.10) (0.41) Diluted earnings per share 28.31 24.67 57.78 7 Dividends Unaudited Unaudited Audited 30 30 31 September September March 2007 2006 2007 £m £m £m 2006 final dividend (9.4 pence per share on 45.2m shares) - 4.2 4.22007 interim dividend (5.5 pence per share on 45.4m shares) - - 2.52007 final dividend (11.5 pence per share on 48.2m shares) 5.5 - - 5.5 4.2 6.7 Subsequent to the end of the period, the directors declared an interim dividendof 6.4 pence per share (2006: 5.5 pence), to be paid on 25 January toshareholders on the register on 4 January. 8 Acquisitions Hewden Tools During the period, the Group acquired the trade and assets of the Hewden Toolsbusiness from Hewden Stuart Plc. Total consideration for the acquisitionamounted to £115.4m paid entirely in cash. Tangible assets acquired on the acquisition have been estimated at £53.0m, basedon an initial assessment of fair values. Intangible assets in respect ofcustomer list, non-compete agreements, and the use of the Hewden brand (for afive-month period to 31 December 2007) have been identified, and valuedprovisionally at £17.8m based on an independent valuation. Working capitalbalances comprising inventory, trade and other receivables, and trade and otherpayables amounting to a net £14.0m have also been acquired. Goodwill arising on the acquisition is estimated to be in the region of £30.6m,pending completion of the fair value exercise in the second half of thefinancial year. Further disclosures are considered impractical at this time (in accordance withIFRS3 para 67f), due to the acquisitions occurring close to the end of thefinancial period. Waterford Hire The Group also acquired the entire share capital of Waterford Hire ServicesLimited, a company registered in the Republic of Ireland for a maximumconsideration of €6.5m. The consideration is made up of €5.2m in the form ofcash, together with a maximum of 74,587 shares in Speedy Hire Plc payable on 28February 2008 depending on the company's performance in the year ending 31December 2007. Goodwill arising on the acquisition has been estimated at £2.0m pendingfinalisation of the exercise to determine the fair value of assets acquired. Further disclosures are considered impractical at this time (in accordance withIFRS3 para 67f), due to the acquisitions occurring close to the end of thefinancial period. 9 Property, plant & equipment Land and Hire Fixtures Total buildings equipment fittings & motor vehicles £m £m £m £mCostAt 31 March 2006 16.5 340.0 16.3 372.8Additions 2.0 43.4 2.3 47.7Arising on acquisition of businesses - 33.3 - 33.3Disposals (0.2) (9.4) (0.1) (9.7) At 30 September 2006 18.3 407.3 18.5 444.1Additions 2.7 38.9 4.0 45.6Arising on acquisition of businesses 0.2 7.1 8.4 15.7Disposals (0.8) (15.0) (2.3) (18.1) At 31 March 2007 20.4 438.3 28.6 487.3Additions 1.4 40.7 3.9 46.0Arising on acquisition of businesses 0.7 94.8 12.9 108.4Disposals - (17.1) (1.9) (19.0) At 30 September 2007 22.5 556.7 43.5 622.7 DepreciationAt 31 March 2006 6.8 116.6 8.0 131.4Charged in the year 1.0 21.2 1.0 23.2Arising on acquisition of businesses - 10.7 - 10.7On disposal - (4.7) - (4.7) At 30 September 2006 7.8 143.8 9.0 160.6Charged in the year 1.5 24.1 1.5 27.1Arising on acquisition of businesses 0.1 8.2 6.0 14.3On disposal (0.1) (8.2) (2.1) (10.4) At 31 March 2007 9.3 167.9 14.4 191.6Charged in the year 1.5 27.8 1.3 30.6Arising on acquisition of businesses 0.7 43.6 8.3 52.6On disposal - (11.3) (1.7) (13.0) At 30 September 2007 11.5 228.0 22.3 261.8 Net book valueAt 30 September 2007 11.0 328.7 21.2 360.9 At 31 March 2007 11.1 270.4 14.2 295.7 At 30 September 2006 10.5 263.5 9.5 283.5 10 Financial risk management The Group holds and uses financial instruments to finance its operations and tomanage its interest rate and liquidity risks. The Group primarily finances itsoperations using share capital, retained profits and borrowings. The main risksarising from the Group's financial instruments are credit, interest rate,foreign currency and liquidity risk. The Board reviews and agrees the policiesfor managing each of these risks and they have remained unchanged since the endof the last financial year. A full description of the Group's approach tomanaging these risks is set out in the 2007 Annual Report on pages 65 & 65. The notional contract amounts and the related fair value of the Group'sfinancial instruments can be analysed as follows: 30 September 2007 30 September 2006 31 March 2007 Notional Notional Notional Fair value amount Fair value amount Fair value amount £m £m £m £m £m £m Designated as cash flow hedgesFixed interest rate swaps 0.5 55.0 0.1 30.0 0.5 55.0Interest rate collars - 62.0 - 27.5 - 20.0Interest rate caps - 25.0 0.1 15.0 - 25.0 0.5 142.0 0.2 72.5 0.5 100.0Other instrumentsFixed interest rate swaps 0.1 5.0 - 5.0 0.1 5.0Interest rate collars - - - 12.0 - 12.0Interest rate caps 0.1 5.0 - 5.0 0.1 5.0 0.2 10.0 - 22.0 0.2 22.0 0.7 152.0 0.2 94.5 0.7 122.0 The weighted average interest rate of the fixed interest rate hedge is 6.136%(31 March 2007: 5.703%) and the instruments are for a weighted average period of13 months (31 March 2007: 18 months). Collar instruments bear interest rates between 4.770% and 7.450% (31 March 2007:between 4.395% and 7.075%), for a weighted average period of 27 months (31 March2007: 25 months) Capped rate instruments bear a weighted average maximum interest rate of 6.384%(31 March 2007: 6.420%) for a weighted average period of 21 months (31 March2007: 23 months) 11 Borrowings and net debt The Group had available a £325m term and revolving credit facility, and a £5moverdraft facility as at 30 September 2007. Of these facilities, £64.8mremained unutilised at 30 September 2007, comprising £59.8m of the revolvingcredit facility and £5m of the overdraft facility. The term and revolving loanfacility was entered into in June 2007 and is sub-divided into: (i) an A Facility of £100m, which is repayable in four equal annualinstalments of £10m on the anniversary of the issue date, with the remaining£60m being due for repayment in June 2012; and (ii) a B Facility of £225m repayable on the fifth anniversary of theissue date. The Group's overdrafts are secured by cross guarantees and debentures given byGroup companies in favour of Barclays Bank Plc. The revolving credit facilityis secured by a fixed and floating charge over all the assets of the Group. The maturity profile of the borrowings is as follows: Unaudited Unaudited Audited 30 30 31 September September March 2007 2006 2007 £m £m £mCurrent borrowings- term loan 10.0 - - Non-current borrowingsMaturing between two and five years- term loan 90.0 - -- revolving credit facility 160.2 176.7 187.0- unamortised issue costs (2.1) (0.6) (0.5) Total non-current borrowings 248.1 176.1 186.5 Total borrowings 258.1 176.1 186.5 Less; cash at bank and in hand (9.4) (4.2) (10.3) Net debt 248.7 171.9 176.2 The revolving credit facility can be drawn for various periods specified by theCompany, up to the maturity date, with interest being calculated for the drawnperiod by reference to the London Inter Bank Offer Rate applicable to the perioddrawn. 12 Reconciliation of movements in Equity Share Share Merger Hedging Retained Sub-total Minority Total capital premium reserve reserve earnings interest equity £m £m £m £m £m £m £m £m Total equity as at 1 April 2006 2.3 51.0 3.7 - 84.1 141.1 0.2 141.3Profit and total recognised income& expense for the period - - - - 11.2 11.2 - 11.2Dividends - - - - (4.2) (4.2) - (4.2)Gains on cash flow hedges - - - 0.2 - 0.2 - 0.2Cost of share-based payments - - - - 0.8 0.8 - 0.8Tax on share based payments takendirectly to equity - - - - 0.4 0.4 - 0.4Issue of ordinary shares - 4.4 - - - 4.4 - 4.4 Total equity as at 30 September 2.3 55.4 3.7 0.2 92.3 153.9 0.2 154.12006 Profit and total recognised income& expense for the year - - - - 15.4 15.4 - 15.4Dividends - - - - (2.5) (2.5) - (2.5)Gains & losses on cash flow hedges - - - 0.3 - 0.3 - 0.3Cost of share-based payments - - - - 0.9 0.9 - 0.9Tax on share based payments takendirectly to equity - - - - 0.5 0.5 - 0.5Issue of ordinary shares - 2.4 - - - 2.4 - 2.4 Total equity as at 31 March 2007 2.3 57.8 3.7 0.5 106.6 170.9 0.2 171.1 Profit and total recognised income& expense for the period - - - - 13.6 13.6 - 13.6Dividends - - (5.5) (5.5) - (5.5)Cost of share-based payments - - 1.3 1.3 - 1.3Issue of ordinary shares 0.2 50.5 - - 50.7 - 50.7 Total equity at 30 September 2007 2.5 108.3 3.7 0.5 116.0 231.0 0.2 231.2 The movement in share capital during the period was as follows: Number 000s £m At 31 March 2007 46,034 2.3Placing of ordinary shares - 20 June 2007 2,180 0.1- 27 July 2007 2,180 0.1Other share issues 4 - At 30 September 2007 50,398 2.5 13 Contingent liabilities The Group has given warranties (including taxation warranties) to the purchasersof eight businesses disposed of over the last seven years. These warrantiesexpire at various dates up to seven years from the date of disposal. The Group has given guarantees with a value of up to £0.3m (2006: £0.3m) inrespect of ongoing contractual commitments. 14 Related party disclosures David Galloway is a Non-Executive Director of May Gurney Integrated Services Plc("May Gurney"). May Gurney is a customer of the Group, and trade with it on anarm's length basis in the normal course of business. During the period, thevalue of sales to May Gurney amounted to £0.6m, and the outstanding debtor at 31March 2007 amounted to £0.2m. David Galloway is a Non-Executive Director of Carter & Carter Plc ("Carter &Carter"). Carter & Carter is a supplier to the Group, and trades with it on anarm's length basis in the normal course of business. During the period, Carter& Carter provided training and associated services to the Group with a value of£0.3m, and the outstanding creditor at 30 September 2007 amounted to £0.3m. Ishbel Macpherson is a Non-Executive Director of MITIE Group Plc ("MITIE").MITIE is both a supplier and customer of the Group, and trades with it on anarm's length basis in the normal course of business. From 17 July 2007 (thedate of appointment), the Group provided hire services to MITIE amounting to£0.3m, and the outstanding debtor at 30 September 2007 amounted to £0.2m. The Group's key management personnel are the Executive and Non-ExecutiveDirectors. In addition to their salaries, the Group also provides non-cash benefits toExecutive Directors, and contributes to approved pension schemes on theirbehalf. Executive Directors also participate in the Group's share optionschemes. Non-Executive Directors receive a fee for their services to the Speedy Hire PlcBoard. Full details of key management personnel interests in the share capital of theCompany as at 31 March 2007 are given in the Remuneration report on pages 38 to40 of the 2007 Annual Report. Total remuneration in respect of key managementpersonnel for the six months ended to 30 September 2007 amounted to £0.8m (2006:£0.7m). During the period, 247,304 share options relating to the 2004Performance and Co-investment Plans were awarded with and exercised by keymanagement personnel. The options were awarded with an exercise price of nilpence per share. A further 130,333 options were granted in respect of the 2007Performance and Co-investment Plans with performance criteria in line with theprior share option scheme outlined in the Remuneration report contained in the2007 Annual Report. Independent review report by KPMG Audit Plc to Speedy Hire Plc Introduction We have been engaged by the company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 30September 2007 which comprises the Consolidated Income Statement, ConsolidatedStatement of Recognised Income and Expense, Consolidated Balance Sheet,Consolidated Cash Flow Statement and the related explanatory notes. We haveread the other information contained in the half-yearly financial report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the information in the condensed set of financialstatements. This report is made solely to the company in accordance with the terms of ourengagement to assist the company in meeting the requirements of the Disclosureand Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA"). Our review has been undertaken so that we might state to thecompany those matters we are required to state to it in this report and for noother purpose. To the fullest extent permitted by law, we do not accept orassume responsibility to anyone other than the company for our review work, forthis report, or for the conclusions we have reached. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approvedby, the directors. The directors are responsible for preparing the half-yearlyfinancial report in accordance with the DTR of the UK FSA. As disclosed in note 1, the annual financial statements of the Group areprepared in accordance with IFRSs as adopted by the EU. The condensed set offinancial statements included in this half-yearly financial report has beenprepared in accordance with IAS 34 Interim Financial Reporting as adopted by theEU. Our responsibility Our responsibility is to express to the company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. Scope of review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410 Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity issued by the AuditingPractices Board for use in the UK. A review of interim financial informationconsists of making enquiries, primarily of persons responsible for financial andaccounting matters, and applying analytical and other review procedures. Areview is substantially less in scope than an audit conducted in accordance withInternational Standards on Auditing (UK and Ireland) and consequently does notenable us to obtain assurance that we would become aware of all significantmatters that might be identified in an audit. Accordingly, we do not express anaudit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the half-yearly financialreport for the six months ended 30 September 2007 is not prepared, in allmaterial respects, in accordance with IAS 34 as adopted by the EU and the DTR ofthe UK FSA. KPMG Audit Plc Chartered Accountants St James Square Manchester M2 6DS This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Speedy Hire