28th Jun 2006 07:00
ASHTEAD GROUP PLC Audited results for the year ended 30 April 2006 and unaudited results for the fourth quarter Continuing strong growth in a record yearAshtead Group plc, the equipment rental group serving principally the US and UKnon-residential construction markets, announces record results: Year ended Highlights Fourth quarter 30 April ---------- 2006 2005 2006 2005 ---- ---- ---- ---- ‚£m ‚£m ‚£m ‚£m Revenue 161.7 125.6 638.0 523.7Underlying profit before taxation* 14.5 4.2 67.5 22.4Profit before taxation 11.3 6.4 81.7 32.2Earnings per share - basic 2.4p 0.8p 14.7p 5.6pUnderlying earnings per share* - basic 3.4p 0.1p 12.2p 2.6p - cash tax 3.9p 1.3p 17.8p 6.7p* Underlying profit before tax and earnings per share are stated beforeexceptional items and fair value remeasurements related to embedded derivativesin long term debt instruments (see note 4). * Sunbelt's full year operating profit before exceptionals rises 62.7% to $175.5m (2005: $107.9m) * A-Plant's full year operating profit rises 22.0% to ‚£13.9m (2005: ‚£11.3m) * Final dividend of 1.0p per share proposed making 1.5p (2005: nil) for the full year * US market demand expected to remain strong * Pension fund is now fully funded * Chief executive to retire at the end of 2006; successor announced Ashtead's chief executive, George Burnett, commented:"A record fourth quarter continued the trend established earlier in the yearand delivered full year underlying pre-tax profits triple those of 2004/5. Allthree of our businesses performed well. Each continues to benefit from goodmarket conditions and has made an excellent start to the new year.In the US, where Sunbelt continues to gain market share, we are encouraged bothby the strength of the non-residential construction market which having risen10% in the 12 months to April 2006 is forecast to grow strongly for at leastthe next two years and by the ongoing shift from ownership to rental. Revenuesfrom house builders, where the short-term outlook is less certain, accountedfor just 6% of Sunbelt's revenues last year.The restructuring of A-Plant's sales force at the start of last year deliveredbenefits on a rising scale as the year progressed, a trend which has continuedinto our new financial year.With this strong, broadly-based momentum, the Board looks forward to reportingfurther significant progress in the coming year."Contacts:---------Cob Stenham Non-executive chairman 020 7299 5562 George Burnett Chief executive ) Ian Robson Finance director ) 01372 362 300 Brian Hudspith Maitland 020 7379 5151 PRESS RELEASEOverview--------The Group achieved a record performance in the year to April 2006. Revenueincreased by 21.8% to ‚£638.0m. The underlying profit for the year before tax of‚£67.5m was three times last year's ‚£22.4m, while the pre-tax profit for theyear was ‚£81.7m. Underlying basic earnings per share were 12.2p (2005: 2.6p)while basic earnings per share were 14.7p (2005: 5.6p). On a cash tax basis,underlying earnings per share were 17.8p (2005: 6.7p).The Group now reports its results under International Financial ReportingStandards (IFRS) and comparatives have been restated accordingly (see note 14to the attached financial information).Ashtead comprises three distinct divisions: Sunbelt Rentals, the fourth largestequipment rental company in the US; A-Plant, the UK's third largest equipmentrental company; and Ashtead Technology Rentals, a niche business, rentingspecialist electronic equipment worldwide.Review of trading for the year to 30 April------------------------------------------ Underlying Revenue EBITDA* profit ------- ------ ------ 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ----Sunbelt in $m 818.7 661.1 307.9 224.0 175.5 107.9Sunbelt in ‚£m 461.2 355.0 173.4 120.3 98.9 57.9A-Plant 160.7 156.3 48.9 48.2 13.9 11.3Ashtead Technology 16.1 12.4 8.0 6.5 4.0 3.4Group central costs - - (5.6) (5.5) (5.7) (5.5) ---- ---- ---- ---- ---- ---- 638.0 523.7 224.7 169.5 111.1 67.1 ---- ---- ---- ---- ---- ----Interest (43.6) (44.7) ---- ----Underlying profit before tax 67.5 22.4 ---- ---- * in 2006 before exceptional itemsReflecting the Group's operational gearing, the 21.8% revenue increase resultedin a 32.5% increase in EBITDA before exceptional items to ‚£224.7m and anincrease of 65.5% in operating profit before exceptional items to ‚£111.1m.Measured at constant exchange rates, to eliminate currency translation effects,revenue grew 17.8%, EBITDA before exceptional items grew 28.0%, operatingprofit before exceptional items grew 58.6% and underlying profit before tax wasstill almost three times that of last year. These improvements were reflectedin the Group's margins. EBITDA margins grew from 32.4% to 35.2% and operatingmargins (before exceptional items) rose from 12.8% to 17.4%.Sunbelt RentalsSunbelt is the fourth largest equipment rental company in the fragmented USmarket where it continues to increase market share. Sunbelt offers a broadrange of both general and specialist equipment, supported by high qualitycustomer service from 209 locations.In the year to 30 April 2006 revenue grew 23.8% to $818.7m. This was achievedthrough increased investment in the rental fleet which was on average 11%larger than a year ago and by significant increases in rental rates which wereincreased approximately 12% in strong market conditions. Average utilisationremained high at 70% (2005: 69%).Revenue growth was broadly based with all regions and all major product areastrading ahead of last year. Last summer's hurricanes are estimated to haveadded around 2% to 2005/6's revenues. In a strong trading environment where USnon-residential construction rose 10.2% in the 12 months to end April,according to figures published by the US Department of Commerce, Sunbeltcontinued to take market share. Revenues from house builders, where theshort-term outlook is less certain, accounted for just 6% of Sunbelt'srevenues. The shift from ownership to rental continued with the US rentalsector again growing faster than its key customer base, non-residentialconstruction, in calendar 2005.For the full year, Sunbelt's operating profit before exceptional items was up62.7% to $175.5m, representing a margin of 21.4% (2005: 16.3%).Sunbelt continued to invest to reduce the age of its rental fleet and forgrowth, spending $257.9m in the year, including the funding of six newgreenfield stores. A further sixteen new general equipment rental stores wereacquired during the year for a consideration, including costs, of approximately$100m. The acquired stores were all immediately transferred onto Sunbelt'spoint of sale systems and staff incentive programmes and began trading asSunbelt stores from their acquisition closing date. Their financial performancesince acquisition has been strongly positive. In August Sunbelt also disposedof twelve specialist scaffold stores on the west coast and in Texas for $24.3mgenerating an exceptional disposal profit of $5.1m (‚£2.9m). The new storescontinue Sunbelt's strategy of clustering stores in major metropolitan markets.Sunbelt also continues to emphasise organic growth with an increase in samestore revenues for the year of 19.3%.In the fourth quarter Sunbelt delivered revenue growth of 27.1% and growth inoperating profit before exceptional items of 63.2%.A-PlantA-Plant is the UK's third largest equipment rental company with a fleet of morethan 95,000 units of non-operated equipment, including power tools, excavators,accommodation units and traffic management systems, available for hire from 193locations nationwide.A-Plant's revenue for the year was ‚£160.7m compared to ‚£156.3m last year. Thesuccessful restructuring of A-Plant's sales force undertaken in the first halfcontributed to a significantly improved performance in the second half of theyear and a particularly strong fourth quarter in which revenues increased by 8%to ‚£41.8m and operating profit by 47.1% to ‚£3.9m. Rental rates, average fleetsize and utilisation for the year were all at similar levels to those of lastyear. Revenues from A-Plant's largest 150 customers continued to grow andrepresented 39% of the year's total.Operating expenses were again carefully controlled, increasing by just 3.4%before depreciation. As a result A-Plant's operating profit for the year grew22.0% to ‚£13.9m (2005: ‚£11.3m), representing a margin of 8.6% (2005: 7.3%).The investment A-Plant makes in developing its staff, which is at the heart ofits improving performance, was recognised in May when Hire Association Europe("HAE") announced that A-Plant had won, amongst competition from rentalcompanies throughout Europe, HAE's "Excellence in Training" award. At the sametime, in recognition of the improvement in A-Plant's performance and thecontinuing development of the Group, the HAE also appointed George Burnett its"Hire Person of the Year".Ashtead TechnologyAshtead Technology rents specialised electronic equipment to the offshore oiland gas sectors and the environmental monitoring and testing industry from 11locations worldwide.Ashtead Technology's performance continued recent trends with revenue for theyear up 29.5% to ‚£16.1m (2005: ‚£12.4m) and operating profit up 19.9% to ‚£4.0m(2005: ‚£3.4m). This reflects increased investment by the oil majors which isdelivering higher offshore exploration and construction activity as well ascontinued growth in Ashtead Technology's onshore environmental business.Investment for future growth included a significantly enlarged onshore salesforce and a new profit centre opened in Chicago last November.Exceptional items and fair value remeasurements of embedded derivatives-----------------------------------------------------------------------In addition to the trading results discussed above, operating profit asreported in the consolidated income statement includes ‚£13.4m of netexceptional profits. These comprise the ‚£11.3m received when Sunbelt settledits long standing litigation with Head & Engquist last November, a ‚£2.9m profiton disposal of Sunbelt's 12 scaffold stores less ‚£0.8m of post acquisitionintegration costs. Included within finance costs is 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, and the ‚£5.6m (2005: ‚£9.8m) non-cash fair valueremeasurements of embedded derivatives in long term debt.Taxation--------Overall for the year the effective accounting tax rate on the underlying profitwas 31% whilst the cash tax rate on the same basis remained minimal. The recentincreases in Sunbelt's profitability together with the Head & Engquistlitigation receipt mean, however, that Sunbelt's US federal tax losses have nowbeen fully utilised and that consequently the Group's cash tax rate will riseinto double digits next year.Pensions--------Funding of the UK pension plan deficit as announced with the third quarterresults was completed at the end of March with the payment of ‚£17.1m, theamount recommended by the actuary, into the fund. As a result the Group'spension obligations are now fully funded. Funding of the deficit had nosignificant effect on the Group's income statement.Capital expenditure and net debt--------------------------------Capital expenditure in the year was ‚£220.2m (2005: ‚£138.4m) of which ‚£201.8mwas invested in the rental fleet. ‚£64.5m of the fleet expenditure was forgrowth, principally in Sunbelt, with the remainder spent to replace existingequipment. Disposal proceeds were ‚£50.8m (2005: ‚£37.6m) generating a recordprofit on disposal of ‚£9.1m (2005: ‚£7.1m).As indicated in March, capital expenditure for the year to 30 April 2007 iscurrently expected to total approximately ‚£250m.Net debt at 30 April 2006 was ‚£493.6m, an increase of ‚£11.3m since 30 April2005. At constant exchange rates the increase over the year was ‚£2.5m. Net debtto EBITDA leverage reduced from 2.85x a year ago to 2.2x at 30 April 2006.Availability under the asset based loan facility was $283m at 30 April 2006($157m at 30 April 2005).Dividends---------The directors intend proposing to shareholders at the Annual General Meetingthat a final dividend of 1.0p per share be paid making a total for the year of1.5p per share (2005: nil). Under IFRS the financial statements now reflectjust dividends paid in the year and therefore show only the ‚£2.0m cost of theinterim dividend paid in February. The final dividend, if approved byshareholders, will be paid on 28 September 2006 to shareholders on the registeron 28 July 2006.Retirement of George Burnett and appointment of successor---------------------------------------------------------George Burnett, Ashtead's chief executive has given the Company notice of hiswish to retire shortly after he reaches 60 in September 2006. George co-foundedAshtead in 1984 when he and a fellow investor purchased what was then a fivebranch business in the south-east of England with revenues of ‚£1m. George hasbeen instrumental in all the key steps undertaken by the Company since thattime. In recent years, as chief executive, George led the Group successfullythrough the US economic downturn of 2001/2 and the turbulent times whichfollowed and has overseen the subsequent recovery with profits now at recordlevels. Consequently George leaves the Group well-positioned for the futurehaving already become the fourth largest construction equipment rental companyin the world.George will be succeeded by Geoff Drabble, currently an executive director ofThe Laird Group PLC where he is responsible for its Building Products divisionand a non-executive director of the Company since April 2005. Geoff hasextensive experience of managing businesses with operations in both the US andthe UK from both his time with Laird and previously with Black & Decker. Geoffemerged as the Nomination Committee's preferred candidate after an extensiveexternal and internal search and is expected to be available to start full-timein his new role on 2 October 2006. Geoff will then benefit from a handoverperiod working alongside George until his retirement at the end of the year. Inhis new role the Board expects that Geoff will bring both an understanding andcontinuity of strategy whilst also providing renewed focus on all aspects ofthe Group's operations.Current trading and outlook---------------------------All three of our businesses performed well in the past year. Each continues tobenefit from good market conditions and has made an excellent start to the newfinancial year.In the US, where Sunbelt continues to gain market share, we are encouraged bothby the strength of the non-residential construction market which having risen10% in the 12 months to April 2006 is forecast to grow strongly for at leastthe next two years and by the ongoing shift from ownership to rental. Revenuesfrom house builders, where the short-term outlook is less certain, accountedfor just 6% of Sunbelt's revenues last year.The restructuring of A-Plant's sales force at the start of last year deliveredbenefits on a rising scale as the year progressed, a trend which has continuedinto our new financial year.With this strong, broadly-based momentum, the Board looks forward to reportingfurther significant progress in the coming year. - o0o - There will be a presentation for equity analysts at 9.30am today at the officesof JPMorgan Cazenove at 20 Moorgate and a conference call for bondholders thisafternoon at 3.00pm (10.00am EST). For further details please contact EmmaBurdett at Maitland on 020 7379 5151 or the Company at 01372 362300. Asimultaneous webcast of the equity analysts' meeting will be available via theCompany's website at www.ashtead-group.com and there will also be a recordedplayback available from shortly after the presentation concludes.CONSOLIDATED INCOME STATEMENT Unaudited Audited Three months to Year to 30 April 30 April 2006 2005 2006 2005 ---- ---- ---- ---- ‚£m ‚£m ‚£m ‚£m Revenue 161.7 125.6 638.0 523.7Staff costs (52.3) (42.1) (200.7) (172.9)Other operating costs (59.1) (47.2) (223.3) (188.4)Other income 3.2 3.5 24.1 7.1 ---- ---- ---- ----EBITDA* 53.5 39.8 238.1 169.5Depreciation (28.7) (24.8) (113.6) (102.4) ---- ---- ---- ----Operating profit 24.8 15.0 124.5 67.1Investment income 0.9 3.4 10.5 12.7Interest expense (14.4) (12.0) (53.3) (47.6) ---- ---- ---- ----Profit on ordinary activities before taxation 11.3 6.4 81.7 32.2Underlying profit before taxation 14.5 4.2 67.5 22.4Exceptional items and fair value remeasurements related to embedded derivatives in long term debt (3.2) 2.2 14.2 9.8 ---- ---- ---- ----Profit on ordinary activities before taxation 11.3 6.4 81.7 32.2 ---- ---- ---- ----Taxation: - current (4.2) (0.1) (5.5) (0.7)- deferred 2.5 (3.7) (20.6) (13.3) ---- ---- ---- ---- (1.7) (3.8) (26.1) (14.0) Profit attributable to equity shareholders of the company 9.6 2.6 55.6 18.2 ---- ---- ---- ----Basic earnings per share 2.4p 0.8p 14.7p 5.6p ---- ---- ---- ----Diluted earnings per share 2.4p 0.8p 14.4p 5.6p ---- ---- ---- ---- * EBITDA is presented here as an additional performance measure as it iscommonly used by investors and lenders.CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE ‚£m ‚£m ‚£m ‚£m ---- ---- ---- ---- Net profit for the period 9.6 2.6 55.6 18.2Actuarial gain/(loss) on defined benefit 0.2 (3.7) 0.2 (3.7)pension plan Foreign currency translation difference (3.9) (2.5) 15.4 (16.0) ---- ---- ---- ----Total recognised income and expense for the period 5.9 (3.6) 71.2 (1.5) ---- ---- ---- ---- CONSOLIDATED MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS ‚£m ‚£m ‚£m ‚£m ---- ---- ---- ----Total recognised income and expense for the period 5.9 (3.6) 71.2 (1.5)Issue of ordinary shares, net of expenses 1.4 0.1 70.9 0.1Dividends paid (2.0) - (2.0) -Credit in respect of share based payments 0.5 0.2 1.3 0.6Own shares acquired by ESOT - - (2.8) - ---- ---- ---- ----Net increase/(decrease) in equity 5.8 (3.3) 138.6 (0.8)shareholders' funds Opening equity shareholders' funds 252.5 123.0 119.7 120.5 ---- ---- ---- ----Closing equity shareholders' funds 258.3 119.7 258.3 119.7 ---- ---- ---- ----CONSOLIDATED BALANCE SHEET Audited ------- 30 April 2006 2005 ---- ---- ‚£m ‚£mCurrent assetsInventories 12.7 13.8Trade and other receivables 110.4 91.9Cash and cash equivalents 1.0 2.1 ---- ---- 124.1 107.8 ---- ----Non-current assets Property, plant and equipment - rental equipment 559.9 452.9- other assets 86.8 84.2 ---- ---- 646.7 537.1Intangible assets - goodwill 149.0 118.2Deferred tax asset 2.9 -Other financial assets - derivatives 15.4 9.8Defined benefit pension fund surplus 1.7 - ---- ---- 815.7 665.1 ---- ---- Total assets 939.8 772.9 ---- ----Current liabilities Trade and other payables 99.1 94.3Current tax liabilities 3.3 0.7Debt due within one year 10.6 12.2Provisions 7.0 7.1 ---- ---- 120.0 114.3 ---- ---- Non-current liabilities Other payables - 7.9Debt due after more than one year 484.0 472.2Provisions 11.3 7.9Defined benefit pension fund deficit - 16.2Deferred tax liabilities 66.2 34.7 ---- ---- 561.5 538.9 ---- ----Total liabilities 681.5 653.2 ---- ---- Equity shareholders' funds Share capital 40.4 32.6Share premium account 3.2 100.8Non-distributable reserve 90.7 -Equity element of convertible loan note - 24.3Own shares held in treasury through the ESOT (4.2) (1.6)Cumulative foreign exchange translation differences (17.2) (32.6)Distributable reserves 145.4 (3.8) ---- ----Total equity shareholders' funds 258.3 119.7 ---- ----Total liabilities and equity shareholders' funds 939.8 772.9 ---- ----CONSOLIDATED CASH FLOW STATEMENT Audited Year to 30 April 2006 2005 ---- ---- ‚£m ‚£m ‚£m ‚£mCash flows from operating activities Cash generated from operations before exceptional items 215.2 164.8Exceptional items 11.1 (5.7)Pension payment (17.1) - ---- ----Cash generated from operations 209.2 159.1Financing costs paid before exceptional items (38.7) (30.2) Exceptional financing costs paid (13.3) - ---- ----Financing costs paid (52.0) (30.2)Tax paid (2.8) (0.6) ---- ----Net cash from operating activities 154.4 128.3 ---- ----Cash flows from investing activities Acquisition of businesses (57.0) -Disposal of businesses 12.8 0.5Payments for property, plant and (229.3) (111.2)equipment Proceeds on sale of property, plant and 50.4 35.9equipment ---- ----Net cash used in investing activities (223.1) (74.8) ---- ----Cash flows from financing activities Drawdown of loans 257.5 244.6Redemption of loans (244.0) (293.3)Decrease in cash held as collateral - 5.8Capital element of finance lease payments (12.1) (12.3)Purchase of own shares by the ESOT (2.8) -Dividends paid (2.0) -Proceeds from issue of ordinary shares 70.9 0.1 ---- ----Net cash from/(used in) financing activities 67.5 (55.1) ---- ----Decrease in cash and cash equivalents (1.2) (1.6) Opening cash and cash equivalents 2.1 3.9Effect of exchange rate changes 0.1 (0.2) ---- ----Closing cash and cash equivalents 1.0 2.1 ---- ---- NOTES TO THE FINANCIAL STATEMENTS1. Basis of preparation This preliminary announcement of the results for the year ended 30 April 2006contains information derived from the forthcoming 2006 Annual Report & Accountsand does not constitute the statutory accounts for either 2005/6 or 2004/5 forthe purposes of section 240(3) of the Companies Act 1985. The 2005/6 resultsare extracted from the audited accounts for that year which have not yet beenfiled with Companies House. Following the adoption of International FinancialReporting Standards (IFRS) the comparative figures for 2004/5 have beenextracted from the 2005/6 accounts. The statutory accounts for the year ended30 April 2005 were prepared in accordance with UK generally accepted accountingprinciples and have been mailed to shareholders and filed with the Registrar ofCompanies. The auditors' reports in respect of both years were unqualified anddo not contain a statement under section 237(2) or (3) of the Companies Act.The results for the year ended and quarter ended 30 April 2006 have beenprepared in accordance with relevant IFRS and the accounting policies set outin the document entitled "Impact of adoption of International AccountingStandards" and restatement of previously reported financial informationpublished on 20 September 2005 and available on the Company's website at www.ashtead-group.com. The figures for the fourth quarter are unaudited. Theduly authorised Board committee approved this preliminary announcement on 27June 2006.The exchange rates used in respect of the US dollar are: 2006 2005 ---- ---- Average for the year ended 30 April 1.7751 1.8624At 30 April 1.8176 1.90992. Segmental analysis Operating profit before Exceptional Operating Capital Revenue exceptionals items profit expenditure ------- ------------ ----- ------ -----------Three months to 30 ‚£m ‚£m ‚£m ‚£m ‚£mApril: 2006 Sunbelt Rentals 115.6 21.2 (0.9) 20.3 34.7A-Plant 41.8 3.9 - 3.9 10.6Technology 4.3 1.1 - 1.1 1.9Corporate - (0.5) - (0.5) - ---- ---- ---- ---- ---- 161.7 25.7 (0.9) 24.8 47.2 ---- ---- ---- ---- ----2005 Sunbelt Rentals 83.4 11.8 - 11.8 35.0A-Plant 38.7 2.6 - 2.6 9.8Technology 3.5 1.3 - 1.3 1.5Corporate - (0.7) - (0.7) - ---- ---- ---- ---- ---- 125.6 15.0 - 15.0 46.3 ---- ---- ---- ---- ---- Year ended 30 April: 2006 Sunbelt Rentals 461.2 98.9 13.4 112.3 156.5A-Plant 160.7 13.9 - 13.9 55.8Technology 16.1 4.0 - 4.0 7.9Corporate - (5.7) - (5.7) - ---- ---- ---- ---- ---- 638.0 111.1 13.4 124.5 220.2 ---- ---- ---- ---- ----2005 Sunbelt Rentals 355.0 57.9 - 57.9 93.5A-Plant 156.3 11.3 - 11.3 40.1Technology 12.4 3.4 - 3.4 4.8Corporate - (5.5) - (5.5) - ---- ---- ---- ---- ---- 523.7 67.1 - 67.1 138.4 ---- ---- ---- ---- ----3. Operating costs and other income 2006 2005 ---- ---- Before Before exceptional Exceptional exceptional Exceptional items items Total items items Total ----- ----- ----- ----- ----- -----Three months to 30 April ‚£m ‚£m ‚£m ‚£m ‚£m ‚£mStaff costs: Salaries 47.5 - 47.5 36.9 - 36.9Social security costs 4.2 - 4.2 4.2 - 4.2Other pension costs 0.6 - 0.6 1.0 - 1.0 ---- ---- ---- ---- ---- ---- 52.3 - 52.3 42.1 - 42.1 ---- ---- ---- ---- ---- ---- Other operating costs: Vehicle costs 12.7 - 12.7 10.1 - 10.1Spares, consumables & external repairs 12.9 - 12.9 9.9 - 9.9Facility costs 8.9 - 8.9 7.0 - 7.0Other external charges 24.1 0.5 24.6 20.2 - 20.2 ---- ---- ---- ---- ---- ---- 58.6 0.5 59.1 47.2 - 47.2 ---- ---- ---- ---- ---- ----Other income: Profit on disposal of fixed assets (3.6) 0.4 (3.2) (3.5) - (3.5)Other income - - - - - - ---- ---- ---- ---- ---- ---- (3.6) 0.4 (3.2) (3.5) - (3.5) ---- ---- ---- ---- ---- ---- Depreciation 28.7 - 28.7 24.8 - 24.8 ---- ---- ---- ---- ---- ---- 136.0 0.9 136.9 110.6 - 110.6 ---- ---- ---- ---- ---- ---- Year ended 30 April Staff costs: Salaries 182.1 0.3 182.4 156.2 - 156.2Social security costs 15.5 - 15.5 13.4 - 13.4Other pension costs 2.8 - 2.8 3.3 - 3.3 ---- ---- ---- ---- ---- ---- 200.4 0.3 200.7 172.9 - 172.9 ---- ---- ---- ---- ---- ----Other operating costs: Vehicle costs 51.7 - 51.7 42.0 - 42.0Spares, consumables & external repairs 45.3 - 45.3 39.7 - 39.7Facilities costs 31.8 0.5 32.3 27.8 - 27.8Other external charges 93.2 0.8 94.0 78.9 - 78.9 ---- ---- ---- ---- ---- ---- 222.0 1.3 223.3 188.4 - 188.4 ---- ---- ---- ---- ---- ----Other income: Profit on disposal offixed assets (9.1) (3.7) (12.8) (7.1) - (7.1)Other income - (11.3) (11.3) - - - ---- ---- ---- ---- ---- ---- (9.1) (15.0) (24.1) (7.1) - (7.1) ---- ---- ---- ---- ---- ---- Depreciation 113.6 - 113.6 102.4 - 102.4 ---- ---- ---- ---- ---- ---- 526.9 (13.4) 513.5 456.6 - 456.6 ---- ---- ---- ---- ---- ----4. Exceptional items and fair value remeasurements related to embedded derivatives `Exceptional items' are those items of financial performance that are materialand non-recurring in nature. Non-cash fair value remeasurements relate toembedded derivatives within long term debt instruments. The Group believesthese items should be disclosed separately within the consolidated incomestatement to assist in the understanding of the financial performance of theGroup. Exceptional items and fair value remeasurements are excluded fromunderlying profit and earnings per share. These are set out below: Three months to Year to 30 April 30 April 2006 2005 2006 2005 ---- ---- ---- ---- ‚£m ‚£m ‚£m ‚£m Litigation proceeds - - (11.3) -Capital reorganisation - - 4.8 -Fair value remeasurements of embeddedderivatives 2.3 (2.2) (5.6) (9.8)Profit on sale of scaffolding 0.5 - (2.9) -Post acquisition integration costs 0.4 - 0.8 - ---- ---- ---- ---- 3.2 (2.2) (14.2) (9.8) ---- ---- ---- ----Litigation proceeds relate to the Head & Engquist settlement. Capitalreorganisation 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 (‚£0.5m) offset by a gain on the repayment of the Rentokilconvertible loan note (‚£2.0m) and interest received relating to the redemptionof loan notes (‚£0.2m). Fair value remeasurements relate to the changes in fairvalue of the embedded prepayment options in our second priority senior securednotes (‚£5.6m). Profit on sale of scaffolding relates to the net gain on thedisposal by Sunbelt of twelve west coast and Texas specialist scaffoldlocations. Integration costs relate to costs incurred in integratingacquisitions during the period.Exceptional items and fair value remeasurements are presented in the incomestatement as follows: Three months to Year to 30 April 30 April 2006 2005 2006 2005 ---- ---- ---- ---- ‚£m ‚£m ‚£m ‚£mStaff costs - - 0.3 -Other operating costs 0.5 - 1.3 -Other income 0.4 - (15.0) - ---- ---- ---- ---- Charged/(credited) in arriving at 0.9 - (13.4) -operating profit Net finance costs/(income) 2.3 (2.2) (0.8) (9.8) ---- ---- ---- ----Charged/(credited) in arriving at profit before tax 3.2 (2.2) (14.2) (9.8) ---- ---- ---- ----5. Net financing costs Three months to Year to 30 April 30 April 2006 2005 2006 2005 ---- ---- ---- ---- ‚£m ‚£m ‚£m ‚£mInvestment income ----------------- Interest and other financial income 0.2 - 0.5 0.1Expected return on assets of defined benefitpension plan 0.7 0.5 2.2 2.1Fair value gains on derivatives - 0.7 - 0.7 ---- ---- ---- ---- 0.9 1.2 2.7 2.9Exceptional income and fair value remeasurements related to embedded derivatives in long term debt - 2.2 7.8 9.8 ---- ---- ---- ----Total investment income 0.9 3.4 10.5 12.7 ---- ---- ---- ----Interest expense ---------------- Bank interest payable 4.4 3.2 16.3 13.7Interest on second priority senior secured notes 5.4 3.6 19.7 14.5Interest payable on finance leases 0.4 0.5 1.8 1.9Funding cost on accounts receivablesecuritisation - - - 2.15.25% unsecured convertible loan note, due 2008: - interest payable - 1.9 1.9 7.6- non-cash unwind of discount - 1.3 1.0 3.7Non-cash unwind of discount on defined pension plan liabilities 0.7 0.6 2.2 2.5Non-cash unwind of discount on insuranceprovisions 0.4 0.2 0.4 0.2Fair value losses on derivatives not accountedaccounted for as hedges 0.2 - 0.3 -Amortisation of deferred costs of debt raising 0.6 0.7 2.7 1.4 ---- ---- ---- ---- 12.1 12.0 46.3 47.6 Exceptional costs and fair value remeasurements related to embedded derivatives in long term debt 2.3 - 7.0 - ---- ---- ---- ----Total interest expense 14.4 12.0 53.3 47.6 ---- ---- ---- ---- Net financing costs before exceptional itemsand fairvalue remeasurements of embedded derivatives 11.2 10.8 43.6 44.7Net exceptional costs/(income) & fair valueremeasurements 2.3 (2.2) (0.8) (9.8) ---- ---- ---- ----Net financing costs 13.5 8.6 42.8 34.9 ---- ---- ---- ---- 6. Taxation The effective rate of current year tax on the Group's underlying profit for theyear ended 30 April 2006 is 31% (2005: 63%). Tax attributable to exceptionalitems has been calculated using the standard tax rates in each jurisdiction inwhich the exceptional item arose and by considering the difference in the taxcharge arising as a result of the exceptional items.The tax charge comprises a credit of ‚£2.9m related to the UK (2005: ‚£nil), acharge of ‚£0.2m related to Singapore (2005: ‚£0.1m charge) and a charge of ‚£28.8m (2005: ‚£13.9m) related to the US. The tax charge also comprises ‚£21.1mrelating to tax on the profit before exceptional items (current tax of ‚£0.1mand deferred tax of ‚£21.0m) and ‚£5.0m relating to tax on exceptional items(current tax of ‚£5.4m offset by a deferred tax credit of ‚£0.4m.)7. Earnings per share Basic and diluted earnings per share for the three months and year ended 30April 2006 have been calculated based on the profit for the relevant period andon the weighted average number of ordinary shares in issue during that periodwhich excludes the shares held by the ESOT in respect of which dividends havebeen waived. Diluted earnings per share are computed using the result for therelevant period and the diluted number of shares (ignoring any potential issueof ordinary shares which would be anti-dilutive). These are calculated asfollows: Three months to Year to 30 April 30 April 2006 2005 2006 2005 ---- ---- ---- ----Profit for the financial period (‚£m) 9.6 2.6 55.6 18.2 ---- ---- ---- ----Weighted average number of shares (m) - basic 399.1 323.0 379.0 323.0 ---- ---- ---- ----- diluted 408.7 326.3 387.4 326.3 ---- ---- ---- ---- Basic earnings per share 2.4p 0.8p 14.7p 5.6p ---- ---- ---- ----Diluted earnings per share 2.4p 0.8p 14.4p 5.6p ---- ---- ---- ----Underlying earnings per share (defined in any period as the earnings beforeexceptional items and fair value remeasurements for that period divided by theweighted average number of shares in issue in that period) and cash taxearnings per share (defined as underlying earnings before deferred taxationdivided by the weighted average number of shares in issue in that period) maybe reconciled to the basic earnings per share as follows: Three months to Year to 30 April 30 April 2006 2005 2006 2005 ---- ---- ---- ---- Basic earnings per share 2.4p 0.8p 14.7p 5.6pExceptional items and fair valueremeasurements 0.8p (0.7)p (3.8)p (3.0)pTax on exceptional items and fair value remeasurements 0.2p - 1.3p - ---- ---- ---- ----Underlying earnings per share 3.4p 0.1p 12.2p 2.6pOther deferred tax 0.5p 1.2p 5.6p 4.1p ---- ---- ---- ----Cash tax earnings per share 3.9p 1.3p 17.8p 6.7p ---- ---- ---- ---- 8. Property, plant and equipment 2006 2005 ---- ---- 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 16.3 18.6 (21.5) (23.3)Reclassifications 0.3 - (0.1) -Additions 201.8 220.2 120.0 138.4Acquisitions 32.2 35.3 - -Disposals (47.4) (50.9) (28.6) (30.5)Depreciation (96.2) (113.6) (86.6) (102.4) ---- ---- ---- ----At 30 April 559.9 646.7 452.9 537.1 ---- ---- ---- ----9. Called up share capital Ordinary shares of 10p each: 30 April 30 April 2006 2005 2006 2005 ---- ---- ---- ---- Number Number ‚£m ‚£m Authorised 900,000,000 900,000,000 90.0 90.0 ----------- ----------- ---- ---- Allotted, called up and fully paid 404,334,066 326,074,928 40.4 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. During the year an additional 4,908,786 shares were issuedat an average price of 81.5p per share under share option plans raising ‚£4.0m.10. Reconciliation of changes in shareholders' funds Equity Own Cumulative element shares foreign of Non held in exchange Share Share convertible distributable treasury translation Distributable 30 April capital premium loan note reserves (ESOT) differences reserves Total 2005 ------- ------- --------- -------- ------ ----------- -------- ----- ---- ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m Total recognised income and expense - - - - - 15.4 55.8 71.2 (1.5)Shares issued 7.8 66.2 - (3.1) - - - 70.9 0.1Dividends - - - - - - (2.0) (2.0) -Share based payments - - - - - - 1.3 1.3 0.6Capital reduction - (163.8) - 93.8 - - 70.0 - -Vesting of share - - - - 0.2 - (0.2) - -awards Own shares - - - - (2.8) - - (2.8) purchased Redemption of convertible loan note - - (24.3) - - - 24.3 - - ---- ---- ---- ---- ---- ---- ---- ---- ----Net changes in shareholders' equity 7.8 (97.6) (24.3) 90.7 (2.6) 15.4 149.2 138.6 (0.8) ---- ---- ---- ---- ---- ---- ---- ---- ---- Opening shareholders' equity 32.6 100.8 24.3 - (1.6) (32.6) (3.8) 119.7 120.5 ---- ---- ---- ---- ---- ---- ---- ---- ----Closing shareholders' equity 40.4 3.2 - 90.7 (4.2) (17.2) 145.4 258.3 119.7 ---- ---- ---- ---- ---- ---- ---- ---- ----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 April 2006 2005 ---- ---- ‚£m ‚£ma) Cash flow from operating activities ----------------------------------- Operating profit 124.5 67.1Depreciation 113.6 102.4Exceptional items (13.4) - ---- ---- EBITDA before exceptional items 224.7 169.5Profit on dispoal of property, plant and equipment (9.1) (7.1)Decrease in inventories 2.2 0.4Increase in trade and other receivables (11.2) (0.3)Increase in trade and other payables 7.5 1.5Exchange differences (0.3) 0.4Other non-cash movements 1.4 0.4 ---- ---- Cash generated from operations before exceptional items 215.2 164.8 ---- ---- b) Reconciliation to net debt -------------------------- Decrease in cash in the period 1.2 1.6Increase/decrease in debt through cash flow 1.4 (55.2) ---- ---- Change in net debt from cash flows 2.6 (53.6)Exchange differences 3.7 (15.1)Non-cash movements: - deferred costs of debt raising 4.0 1.2- convertible loan note (1.0) 3.8- capital 2.0 13.8 ---- ---- Movement in net debt in the period 11.3 (49.9)Opening net debt 482.3 532.2 ---- ----Closing net debt 493.6 482.3 ---- ----c) Analysis of net debt -------------------- 1 May Exchange Cash Non-cash 30 April 2005 movement flow movements 2006 ---- ------- ---- --------- ---- ‚£m ‚£m ‚£m ‚£m ‚£m Cash and cash equivalents (2.1) (0.1) 1.2 - (1.0)Debt due within 1 year 12.2 0.5 (12.1) 10.0 10.6Debt due after 1 year 472.2 3.3 13.5 (5.0) 484.0Total net debt 482.3 3.7 2.6 5.0 493.6 ---- ---- ---- ---- ----12. Acquisitions and disposals On 17 October 2005, Sunbelt acquired 100% of the issued share capital ofNorthridge Equipment Rentals, Inc for cash consideration of ‚£39.1m. NorthridgeEquipment Rentals traded through five stores located in central and southernCalifornia. In addition Sunbelt acquired the business and assets of elevenfurther stores in Florida, California, Nevada and Tennessee and A-Plantacquired one store in Bournemouth for a total cash consideration of ‚£17.5m.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 25.1 35.3Inventories 0.6 0.5Trade and other receivables 4.2 4.2Trade and other payables (1.7) (2.5)Deferred tax liabilities (3.3) (6.9) ---- ---- 24.9 30.6 ---- Goodwill 26.4 ---- Total consideration 57.0 ---- Satisfied by: Cash 56.6Directly attributable costs 0.4 ---- 57.0 ----On 15 August 2005 Sunbelt sold twelve specialist scaffold stores for a cashconsideration of ‚£13.8m. The profit on disposal is as follows: ‚£m Disposal proceeds: - cash received 13.8- disposal related costs paid (1.0) ---- 12.8- further disposal related costs payable (0.3) ---- Net consideration receivable 12.5 Net assets sold: - property, plant and equipment (9.5)- inventory (0.1) ---- Exceptional profit on disposal 2.9 ----13. Contingent liabilities and contingent assets At 30 April 2006, Sunbelt had provided performance guarantees to a value of ‚£1.1m. These obligations are guaranteed by Ashtead Group plc. The Group issubject to periodic legal claims in the ordinary course of its business.However, the claims outstanding at 30 April 2006 are not expected to have asignificant impact on the Group's financial position.14. 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". This is available on 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. It also includes the Group's detailed accounting policies under IFRS.The tables below give a summary of the impact of the move to IFRS on previouslyreported financial information.Reconciliation of equity 30 April 2005 ---- ‚£m Total equity presented under UK GAAP 126.9Additional non-cash convertible loan note interest (13.4)Equity element of convertible loan note 24.3Pensions (16.5)Share based payments (0.1)Restate $100m swap to fair value 0.6Fair value remeasurements of embedded derivatives * 9.8Reverse goodwill charged under UK GAAP in year ended 30 April 2005 8.9Revaluation of goodwill to current exchange rates (24.7)Deferred taxation 3.9 ----Total equity presented under IFRS 119.7 ----Reconciliation of profit attributable to equity shareholders of the Company 30 April 2005 ---- ‚£mAttributable profit under UK GAAP 2.4Goodwill 8.9Additional non-cash convertible loan note interest (3.0)Pensions (0.2)Share based payments (0.4)Restate $100m interest rate swap to fair value 0.7Fair value remeasurements of embedded derivatives * 9.8 ----Attributable profit under IFRS 18.2 ---- * This represents a further difference between UK GAAP and IFRS compared to thefinancial information published on 20 September 2005. This relates to thenon-cash fair value remeasurements of embedded derivatives within long termdebt instruments.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.BUSINESS AND FINANCIAL REVIEWFourth quarter (to 30 April) results compared with prior yearOverview-------- 2006 2005 ---- ---- Before Before exceptional Exceptional exceptional Exceptional items items items items and fair value and fair value and fair value and fair value remeasurements remeasurements+ Total remeasurements remeasurements Total -------------- --------------- ----- -------------- -------------- ----- ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m Revenue 161.7 - 161.7 125.6 - 125.6Staff costs (52.3) - (52.3) (42.1) - (42.1)Other operating costs (58.6) (0.5) (59.1) (47.2) - (47.2)Other income 3.6 (0.4) 3.2 3.5 - 3.5 ---- ---- ---- ---- ---- ----EBITDA* 54.4 (0.9) 53.5 39.8 - 39.8Depreciation (28.7) - (28.7) (24.8) - (24.8) ---- ---- ---- ---- ---- ----Operating profit 25.7 (0.9) 24.8 15.0 - 15.0Investment income 0.9 - 0.9 1.2 2.2 3.4Interest expense (12.1) (2.3) (14.4) (12.0) - (12.0) ---- ---- ---- ---- ---- ----Profit/(loss) before taxation 14.5 (3.2) 11.3 4.2 2.2 6.4Taxation: - current 1.2 (5.4) (4.2) (0.1) - (0.1)- deferred (2.1) 4.6 2.5 (3.7) - (3.7) ---- ---- ---- ---- ---- ---- (0.9) (0.8) (1.7) (3.8) - (3.8) ---- ---- ---- ---- ---- ----Profit for the quarter 13.6 (4.0) 9.6 0.4 2.2 2.6 ---- ---- ---- ---- ---- ---- * EBITDA is presented here as an additional performance measure as it iscommonly used by investors and lenders.+ Fair value remeasurements related to embedded derivatives in long term debt.Fourth quarter revenue increased 21.3% at constant exchange rates to ‚£161.7mand by 28.7% at actual rates. EBITDA before exceptional items grew by 28.1% atconstant exchange rates to ‚£54.4m and by 36.6% at actual rates. Operatingprofit before exceptional items of ‚£25.7m in the quarter increased 58.1% atconstant exchange rates and 70.9% from ‚£15.0m in 2005 at actual rates. EBITDAmargins before exceptional items grew from 31.7% to 33.6% and operating marginsbefore exceptional items rose from 12.0% to 15.9%. Total EBITDA increased 34.4%to ‚£53.5m, at actual rates and total operating profit increased from ‚£15.0m to‚£24.8m.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 over Thanksgiving,Christmas and Easter, there are more billing days in the first half of ourfinancial year than the second half leading to our revenues normally beinghigher in the first half. Accordingly the third and fourth quarters of ourfiscal year typically are significantly weaker than the first and second.Divisional performance----------------------Divisional results before exceptional items are summarised below:Fourth quarter (to 30 April) Revenue EBITDA Operating profit ---------------------------- ------- ------ ---------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Sunbelt in $m 202.7 159.5 71.8 52.2 37.1 22.8 ---- ---- ---- ---- ---- ----Sunbelt in ‚£m 115.6 83.4 40.9 27.3 21.2 11.8A-Plant 41.8 38.7 11.7 11.1 3.9 2.6Ashtead Technology 4.3 3.5 2.3 2.1 1.1 1.3Group central costs - - (0.5) (0.7) (0.5) (0.7) ---- ---- ---- ---- ---- ---- 161.7 125.6 54.4 39.8 25.7 15.0 ---- ---- ---- ---- ---- ----SunbeltRevenue increased 27.1% to $202.7m in the fourth quarter reflecting stronggrowth of approximately 10% in rental rates and a 15% increase in the averagefleet size. Utilisation increased 3% to approximately 67% from 65% last year.Revenue growth was broadly based with all regions and all major product areastrading ahead of last year. Sunbelt's revenue improvement reflected marketshare gains and growth in non-residential construction activity as well as thecontinued shift from ownership to rental.Costs (excluding depreciation) increased 22.1% to $130.9m in 2006. Thisreflected principally increased headcount, higher commissions and profit sharepayments to staff as a result of the increased activity levels and increasedfuel costs for Sunbelt's delivery fleet as well as the impact of acquisitions.As a result, EBITDA grew 37.3% to $71.8m and the EBITDA margin for the quarterimproved to 35.4% from 32.7% in 2005. Sunbelt's operating profit increased63.2% to $37.1m representing a margin of 18.3% (2005: 14.2%). Sunbelt's resultsin sterling reflected the factors discussed above and the stronger US dollarcompared with the same period in the previous year.A-PlantThe improved revenue performance following the sales force restructuringundertaken in the first half of the year, continued in the fourth quarter.Revenue in the fourth quarter increased 8.0% to ‚£41.8m (2005: ‚£38.7m)reflecting a fleet size which was approximately 4% larger than in theequivalent period a year ago, utilisation at approximately 68% compared toapproximately 65% last year and rental rates approximately 2% lower than lastyear. Costs (excluding depreciation) increased 9.3% reflecting predominantlyincreased salary and fuel costs. As a result EBITDA increased 4.8% to ‚£11.7mand the EBITDA margin was 28.0% (2005: 28.9%). A-Plant's operating profitincreased from ‚£2.6m to ‚£3.9m representing a margin of 9.2% (2005: 6.7%).Ashtead TechnologyAshtead Technology delivered fourth quarter revenue growth of 21.8% to ‚£4.3m atactual rates (16.3% at constant exchange rates). This growth reflected higheroffshore exploration and construction activity as well as continued growth inits on-shore environmental business, including at the new store opened inChicago last November.Exceptional items and fair value remeasurements of embedded derivatives-----------------------------------------------------------------------Exceptional items and fair value remeasurements can be summarised as follows: Three months to 30 April 2006 2005 ---- ---- ‚£m ‚£m Costs on sale of scaffolding stores 0.5 -Post acquisition integration costs 0.4 - ---- ----Charged in arriving at operating profit 0.9 -Fair value remeasurements of embedded derivatives 2.3 (2.2) ---- ----Charged/(credited) in arriving at profit before tax 3.2 (2.2) ---- ----The additional costs on sale of scaffolding reflects the final gain on thedisposal by Sunbelt of twelve specialist scaffold stores. Integration costsrelate primarily to costs incurred in rebranding fleet acquired during theyear. Fair value remeasurements relate to embedded derivatives in long termdebt.Net financing costs-------------------Net financing costs, before fair value remeasurements related to embeddedderivatives in long term debt, in the fourth quarter increased to ‚£11.2m from ‚£10.8m in 2005 reflecting slightly lower average debt levels and an averageinterest rate slightly higher than the prior period. Compared to the previousyear, the average interest rate benefited from the repayment of our 5.25% notesand from a lower margin under our first priority asset based senior securedloan facility but these benefits have been offset by increases in US dollarinterest rates which are payable under our floating rate senior facility.Taxation--------The tax charge for the quarter of ‚£1.7m (2005: ‚£3.8m) comprised a charge forcurrent tax of ‚£4.2m and a credit for deferred tax of ‚£2.5m. The current taxcharge arose in the US on the exceptional profits included in the year'sresults and reflected the use during the year of all brought forward federaltax losses.Balance sheetProperty, plant and equipment----------------------------- 30 April 2006 30 April 2005 ------------- ------------- 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 16.3 18.6 (21.5) (23.3)Reclassifications 0.3 - (0.1) -Additions 201.8 220.2 120.0 138.4Acquisitions 32.2 35.3 - -Disposals (47.4) (50.9) (28.6) (30.5)Depreciation (96.2) (113.6) (86.6) (102.4) ---- ---- ---- ----At 30 April 559.9 646.7 452.9 537.1 ---- ---- ---- ---- Capital expenditure in the year was ‚£220.2m of which ‚£201.8m was invested inthe rental fleet (2005: ‚£138.4m in total). Expenditure on rental equipment was91.6% of total capital expenditure. Capital expenditure by division was asfollows: 30 April 2006 2005 ------------- ---- Growth Maintenance Total Total ------ ----------- ----- ----- Sunbelt in $m 81.1 176.8 257.9 152.7 ---- ---- ---- ----Sunbelt in ‚£m 44.6 97.3 141.9 79.9A-Plant 14.1 38.0 52.1 35.4Ashtead Technology 5.8 2.0 7.8 4.7 ---- ---- ---- ----Total rental equipment 64.5 137.3 201.8 120.0 ---- ---- ---- ----Other fixed assets 18.4 18.4 ---- ----Total additions 220.2 138.4 ---- ----With the improvement in market conditions in the US and a return to fleetinvestment in the UK, the Group spent ‚£64.5m of its rental equipment capitalexpenditure on growth with ‚£137.3m spent on replacing existing fleet. Thegrowth proportion is estimated on the basis of the assumption that maintenancecapital expenditure in any period is equal to the original cost of equipmentsold in that period.The average age of the Group's serialised rental equipment, which constitutesthe substantial majority of the fleet, at 30 April 2006 was 37 months (2005: 45months) on a net book value basis. Sunbelt's fleet had an average age of 38months (2005: 46 months) comprising 49 months for aerial work platforms whichhave a longer life and 28 months for the remainder of its fleet and A-Plant'sfleet had an average age of 36 months (2005: 43 months).As indicated in March, gross capital expenditure for the year ending 30 April2007 is currently expected to total approximately ‚£250m.Trade and other receivables---------------------------The Group continues to focus on collection of its accounts receivable with theresult that receivable days were reduced to 49 days at 30 April 2006 (2005: 53days). The bad debt charge as a percentage of total revenue was 0.7% in 2006compared with 1.1% in 2005.Trade and other payables------------------------Group payable days were 57 days in 2006 (2005: 74 days). Capital expenditurerelated payables at 30 April 2006 totalled ‚£30.0m (2005: ‚£35.9m). Paymentperiods for purchases other than rental equipment vary between 7 and 60 daysand for rental equipment between 30 and 90 days.Cash flow and net debtFree cash flow in the year ended 30 April 2006 (which is defined as our netcash inflow from operations less net maintenance capital expenditure, financingcosts paid and tax paid) is summarised below: Year ended 30 April 2006 2005 ---- ---- ‚£m ‚£m EBITDA before exceptional items 224.7 169.5 ---- ----Cash inflow from operations before exceptional items 215.2 164.8Cash efficiency ratio* 95.8% 97.2%Maintenance rental capital expenditure (149.9) (95.6)Non rental capital expenditure (16.8) (5.4)Proceeds from sale of used rental equipment 50.4 35.9Tax paid (2.8) (0.6) ---- ----Free cash flow before interest 96.1 99.1Financing costs paid (38.7) (30.2) ---- ----Free cash flow after interest 57.4 68.9Growth capital expenditure (62.6) (10.2)Acquisitions and disposals (44.2) 0.5Issue of ordinary share capital 70.9 0.1Dividends paid (2.0) -Purchase of own shares by ESOT (2.8) -Pension plan funding (17.1) -Exceptional costs paid (2.2) (5.7) ---- ----(Increase)/reduction in total debt (2.6) 53.6 ---- ----* Cash inflow from operations before exceptional items as a percentage ofEBITDA before exceptional items.Cash inflow from operations increased 30.6% to ‚£215.2m and the cash efficiencyratio was 95.8% (2005 - 97.2%). After net maintenance capital expenditure of ‚£99.5m (2005: ‚£59.7m), non-rental capital expenditure and tax, free cash flowbefore interest was ‚£96.1m (2005: ‚£99.1m). Financing costs (excludingexceptional financing costs) paid this year were more in line with theaccounting charge. Last year's financing costs of ‚£30.2m were unusually lowcompared to last year's ‚£44.7m accounting charge and reflected the timing ofinterest payments. After interest, there was a free cash inflow of ‚£57.4m(2005: ‚£68.9m).Including payments of ‚£62.6m in respect of growth capital expenditure, ‚£44.2min respect of acquisitions and disposals, ‚£2.8m for the purchase of shares bythe ESOT in connection with employee share plans, ‚£2.0m for dividends, aone-off ‚£17.1m contribution to the defined benefit pension plan and netexceptional costs of ‚£2.2m and taking into account the net proceeds receivedfrom share issues of ‚£70.9m, there was a net draw under our bank facilities inthe year of ‚£2.6m. The largest outflow was for purchases of rental equipmentwhich give rise to a corresponding increase in the borrowing base under theasset based facilities. Accordingly, combined with amendments to the assetbased debt facility in November, availability under the facility increased from$157m at 30 April 2005 to $283m at 30 April 2006.Net debt-------- 30 April 2006 2005 ---- ---- ‚£m ‚£m First priority senior secured bank debt 263.2 216.2Finance lease obligations 23.2 32.012% second priority senior secured notes, due 2014 75.5 115.88.625% second priority senior secured notes, due 2015 132.7 -5.25% unsecured convertible loan note, due 2008 - 120.4 ---- ---- 494.6 484.4Cash and cash equivalents (1.0) (2.1) ---- ----Total net debt 493.6 482.3 ---- ---- At 30 April 2006 total net debt was ‚£493.6m (2005: ‚£482.3m). Measured atconstant (30 April 2006) exchange rates, the increase in total net debt since30 April last year was ‚£2.5m.At 30 April 2006, the Group's debt facilities were committed for a weightedaverage period of approximately 6.25 years and carried a weighted averageinterest rate of approximately 8%.OPERATING STATISTICS Profit centre numbers Staff numbers --------------------- ------------- 30 April 30 April -------- -------- 2006 2005 2006 2005 ---- ---- ---- ----Sunbelt Rentals 209 200 4,266 3,854A-Plant 193 202 2,081 1,973Ashtead Technology 11 10 104 94Corporate office - - 14 14 ---- ---- ---- ----Group 413 412 6,465 5,935 ---- ---- ---- ----ENDASHTEAD GROUP PLCRelated Shares:
Ashtead Group