1st Quarter Results
ASHTEAD GROUP PLC
Unaudited first quarter results for the three months ended 31 July 2006
Continued strong growth in the US ahead of the NationsRent acquisition
Ashtead Group plc, the equipment rental group serving principally the US and UK
non-residential construction markets, announces its results for the quarter
ended 31 July 2006.
Highlights First quarter
-------------
2006 2005
---- ----
£m £m
Revenue 175.7 145.9
Underlying profit before taxation * 24.3 12.3
Profit before taxation 8.6 13.6
Underlying earnings per share * - basic 4.1p 2.0p
- cash tax 4.7p 3.7p
* Underlying profit before tax and earnings per share are stated before
non-cash fair value remeasurements related to embedded derivatives in long term
debt and exceptional items.
* Group underlying pre-tax profit of £24.3m (2005 - £12.3m)
* Sunbelt's operating profit up 48.6% to $57.1m (2005 - $38.4m)
* A-Plant's operating profit up 25.7% to £4.5m (2005 - £3.6m)
* US market conditions remain favourable
* NationsRent acquisition completed on 31 August 2006
Ashtead's chief executive, George Burnett, commented:
"Sunbelt again delivered a strong performance with first quarter dollar revenue
up 25.3% and operating profit up 48.6% driven by strong growth in its key
non-residential construction market, the ongoing shift from ownership to rental
in the US and market share gains. In the UK A-Plant also grew strongly with
first quarter revenue up 13.3% and operating profit up 25.7%, trends we
anticipate continuing as they reflect last year's sales force reorganisation.
With the completion of the NationsRent acquisition, we now have more than 450
stores in America with revenues in excess of $1.4bn, making us number three in
the US and number two globally by revenue. Our detailed integration plans are
now being implemented and we aim to have the new combined regional and district
structure in place before the end of September.
With the continuing strength of our core non-residential market in the US and
the completion of the NationsRent acquisition the Group expects to continue to
make good progress."
Contacts:
Cob Stenham Non-executive chairman, Ashtead Group plc 020 7299 5562
George Burnett Chief executive, Ashtead Group plc )
Ian Robson Finance director, Ashtead Group plc ) 01372 362 300
Brian Hudspith Maitland 020 7379 5151
PRESS RELEASE
Overview
The Group's strong performance continued in the first quarter with revenue up
20.5% to £175.7m and underlying pre-tax profit of £24.3m, nearly twice last
year's £12.3m. Sunbelt again delivered a good performance with first quarter
dollar revenue up 25.3% reflecting strong growth in its key non-residential
construction market, increasing market share and the continuing shift from
ownership to rental in the US. Sunbelt's operating profit grew 48.6% in the
quarter. The improvements in A-Plant's performance, following last year's
reorganisation of its sales force, continued and Ashtead Technology also
exceeded significantly last year's first quarter performance.
After a non-cash charge of £15.4m in respect of fair value remeasurements of
embedded derivatives in long term debt and £0.3m of exceptional post
acquisition integration expenses, the profit before tax was £8.6m (2005 -
£13.6m).
First quarter underlying earnings per share more than doubled to 4.1p (2005 -
2.0p) whilst basic earnings per share after exceptional items and fair value
remeasurements related to embedded derivatives in long term debt were 0.2p
(2005 - 2.4p). Underlying earnings per share on a cash tax basis were 4.7p
(2005 - 3.7p).
Review of first quarter trading
Underlying
Revenue EBITDA* Profit
------- ------ ------
2006 2005 2006 2005 2006 2005
---- ---- ---- ---- ---- ----
Sunbelt in $m 234.0 186.8 93.2 68.9 57.1 38.4
----- ----- ---- ---- ---- ----
Sunbelt in £m 126.3 103.3 50.3 38.1 30.8 21.2
A-Plant 43.9 38.8 13.9 12.5 4.5 3.6
Ashtead Technology 5.5 3.8 2.4 1.9 1.3 1.0
Group central costs - - (1.6) (1.4) (1.6) (1.4)
--- --- --- --- --- ---
175.7 145.9 65.0 51.1 35.0 24.4
----- ----- ---- ---- ---- ----
Net financing costs (10.7) (12.1)
---- ----
Underlying profit before tax 24.3 12.3
---- ----
* In 2006 before exceptional items
In 2005 share based remuneration costs previously treated as central items have
been reallocated to operating segments in order to be consistent with the
treatment of these costs in 2006
Reflecting the Group's operational gearing, the 20.5% revenue increase produced
a 27.2% increase in EBITDA to £65.0m and a 43.5% increase in operating profit
to £35.0m (in each case before exceptional items of £0.3m). Measured at
constant rates of exchange, revenue grew 22.5%, EBITDA grew 29.5% and operating
profit rose 46.5%. These improvements were reflected in the Group's margins.
EBITDA margins grew from 35.0% to 37.0% and operating margins rose from 16.7%
to 19.9%. Group return on investment** (measured on a last twelve months basis)
rose from 13.6% a year ago to 18.9% at 31 July 2006.
** Underlying operating profit divided by LTM average net tangible assets
before deferred tax.
Sunbelt
In the quarter to 31 July 2006 revenue grew 25.3% to $234.0m reflecting growth
of approximately 7% in rental rates and a 17% increase in the average fleet
size. Average first quarter utilisation increased slightly from approximately
70% to 71%. Revenue growth continued to be broadly based with all regions and
major product areas trading ahead of last year. Organic growth was strong with
an increase in same store revenues for the period of 21.3%.
Sunbelt's revenue improvement reflected market share gains and growth in
non-residential construction activity, up 15.8% in the 12 months to end July
according to figures published by the US Department of Commerce, as well as the
continued shift from ownership to rental. Sunbelt's operating profit was up
48.6% in the first quarter from $38.4m to $57.1m, representing a margin of
24.4% (2005 - 20.6%). Last year's acquisitions continue to perform well.
Sunbelt continued its investment programme to enable it to take advantage of
the strong market conditions in the US with $123.7m invested in its rental
fleet in the quarter (2005 - $64.8m).
A-Plant
A-Plant continued its recent improvement with revenue growing by 13.3% to £
43.9m. This was achieved from a fleet which on average was approximately 4%
larger than last year. Average first quarter utilisation increased strongly
from approximately 64% to 69%. Rental rates remained broadly similar to those
of Q4 2006 but were approximately 3% below the first quarter of last year.
A-Plant's revenue improvement reflected a good UK construction market and
market share gains. First quarter operating profit grew 25.7% to £4.5m (2005 -
£3.6m), representing a margin of 10.2% (2005 - 9.2%).
Ashtead Technology
Ashtead Technology achieved strong growth in first quarter revenues which rose
43.5% from £3.8m to £5.5m, reflecting principally increased offshore
exploration and construction activity. Operating profit rose 29.7% from £1.0m
to £1.3m.
Capital expenditure and net debt
--------------------------------
In light of the strong US market conditions and the improvements in A-Plant,
the Group invested significantly for growth at the start of the seasonally
strong summer period. Capital expenditure for the quarter was £110.5m of which
£100.4m was on the rental fleet (2005 - £61.5m in total). £70.1m of the fleet
expenditure was for growth with the remainder being spent to replace existing
equipment. First quarter disposal proceeds were £11.7m (2005 - £10.9m)
generating a profit on disposal of £2.2m (2005 - £2.2m).
Net debt at 31 July 2006 was £499.3m, an increase of £5.7m since 30 April 2006
reflecting seasonal trends but a reduction of £19.2m since 31 July 2005. At
constant exchange rates the increase since year end was £11.4m. The ratio of
net debt to EBITDA reduced to 2.1 times.
The NationsRent acquisition
---------------------------
Operational integration
The NationsRent acquisition was completed on 31 August 2006. Following
announcement of the acquisition in mid July we developed detailed plans for the
integration of NationsRent. Prior to closing NationsRent's store managers and
sales staff were briefed on Sunbelt's operating methods, sales techniques and
incentives and, now that the acquisition has closed, the new combined regional
and district structure will be implemented during September. Execution of the
detailed integration plan to combine the two back office functions and deliver
the integration cost savings has also begun.
Financing
The acquisition was financed through the £152m rights issue and through debt.
Existing share holders subscribed for 96.2% of their rights and the balance was
successfully placed in the market on 29 August. In relation to the debt, $550m
of new ten year second priority senior notes were raised carrying an interest
rate of 9% per annum and a new five year $1.75bn first priority asset-based
bank loan was arranged. The new asset-based facility carries an initial
interest rate of LIBOR plus 175bp and is on substantially similar terms to the
Group's existing $800m asset-based facility which was repaid at closing.
On closing of the acquisition on 31 August the enlarged Group had pro-forma
debt of approximately £990m comprising approximately £546m under the asset
based senior credit facility, $250m of 8.625% 2015 notes, $550m of 9% 2016
notes and approximately £23m of finance lease indebtedness. Availability under
the new asset based facility was approximately $430m, substantially in excess
of the $125m level above which the facility effectively carries no quarterly
financial performance covenants. At the same date the weighted average maturity
of the Group's debt facilities was 7 years with the earliest significant
maturity being in August 2011. The weighted average interest cost of these
facilities (including non-cash amortisation of deferred debt raising costs) is
approximately 8%, most of which is tax deductible in the US where the tax rate
is 39%.
The ratio of pro-forma debt to EBITDA at closing (based on Ashtead's LTM EBITDA
through 31 July 2006 of £238.6m combined with NationsRent's LTM EBITDA less
gains through June 2006 and the pro-forma £20m of central overhead savings, a
combined total pro-forma LTM EBITDA of £331.9m) was 3.0 times. The Board
considers that these facilities and the rights issue funding provide the Group
with an appropriate balance sheet structure to deliver the integration and the
future development of the enlarged Group.
Outlook
-------
Our core market in the US - non-residential construction - is forecast to
continue its recent growth, with demand for our services also being supported
by the continuing structural shift from ownership to rental. The completion of
the NationsRent acquisition strengthens our position in this growing market.
Consequently the Board expects the Group to continue to make good progress.
- o0o -
George Burnett (chief executive), Ian Robson (finance director) and Geoff
Drabble (chief executive designate) will host a presentation to equity analysts
at 9.30 am today at the offices of JPMorgan Cazenove at 20 Moorgate and a
conference call for bondholders at 3.00pm this afternoon (10.00am Eastern
Standard Time). A simultaneous webcast of the equity analysts' presentation
will be available through the Company's website, www.ashtead-group.com and
there will also be a recorded playback available from shortly after the
presentation concludes.
CONSOLIDATED INCOME STATEMENT
Audited
Unaudited Year to
Three months to 31 July 30 April
2006 2005 2006
---- ---- ----
£m £m £m
(restated)
Revenue 175.7 145.9 638.0
Staff costs (53.3) (47.4) (200.7)
Other operating costs (59.9) (49.6) (223.3)
Other income 2.2 2.2 24.1
--- --- ----
EBITDA* 64.7 51.1 238.1
Depreciation (30.0) (26.7) (113.6)
Operating profit 34.7 24.4 124.5
Investment income 1.0 2.0 10.5
Interest expense (27.1) (12.8) (53.3)
---- ---- ----
Profit on ordinary activities before taxation 8.6 13.6 81.7
Underlying profit before taxation 24.3 12.3 67.5
Exceptional items and fair value remeasurements
related to embedded derivatives in long term debt (15.7) 1.3 14.2
---- --- ----
Profit on ordinary activities before taxation 8.6 13.6 81.7
--- ---- ----
Taxation:
- current (5.4) (0.4) (5.5)
- deferred (2.2) (5.5) (20.6)
--- --- ----
(7.6) (5.9) (26.1)
--- --- ----
Profit attributable to equity shareholders of
the company 1.0 7.7 55.6
--- --- ----
Basic earnings per share 0.2p 2.4p 14.7p
--- --- ----
Diluted earnings per share 0.2p 2.4p 14.4p
--- --- ----
* EBITDA is presented here as an additional performance measure as it is
commonly used by investors and lenders.
All results are from continuing operations.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
£m £m £m
-- -- --
(restated)
Net profit for the period 1.0 7.7 55.6
Actuarial gain on defined benefit pension plan - - 0.2
Gain on cash flow hedges taken to equity - 0.8 -
Foreign currency translation differences (4.1) 20.3 15.4
--- ---- ----
Total recognised income and expense for the period (3.1) 28.8 71.2
--- ---- ----
CONSOLIDATED MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
£m £m £m
-- -- --
(restated)
Total recognised income and expense for the period (3.1) 28.8 71.2
Issue of ordinary shares, net of expenses 0.6 0.3 70.9
Dividends paid - - (2.0)
Credit in respect of share based payments 0.3 0.1 1.3
Own shares acquired by ESOT (2.5) - (2.8)
--- --- ---
Net (decrease)/increase in equity shareholders'funds (4.7) 29.2 138.6
Opening equity shareholders' funds 258.3 119.7 119.7
----- ----- -----
Closing equity shareholders' funds 253.6 148.9 258.3
----- ----- -----
CONSOLIDATED BALANCE SHEET
Unaudited Audited
--------- -------
31 July 30 April
2006 2005 2006
---- ---- ----
£m £m £m
(restated)
Current assets
Inventories 14.0 14.9 12.7
Trade and other receivables 116.6 103.1 110.4
Cash and cash equivalents 1.1 1.2 1.0
--- --- ---
131.7 119.2 124.1
----- ----- -----
Non-current assets
Property, plant and equipment
- rental equipment 615.2 496.2 559.9
- other assets 90.7 88.9 86.8
---- ---- ----
705.9 585.1 646.7
Intangible assets - goodwill 145.1 127.8 149.0
Deferred tax asset 3.3 - 2.9
Other financial assets - derivatives - 11.1 15.4
Defined benefit pension fund surplus 1.9 - 1.7
--- --- ---
856.2 724.0 815.7
----- ----- -----
Non-current assets held for sale - 9.5 -
--- --- ---
Total assets 987.9 852.7 939.8
----- ----- -----
Current liabilities
Trade and other payables 143.1 99.2 99.1
Current tax liabilities 4.8 1.0 3.3
Debt due in less than one year 10.1 13.2 10.6
Provisions 6.7 8.5 7.0
--- --- ---
164.7 121.9 120.0
----- ----- -----
Non-current liabilities
Other payables - 7.9 -
Debt due in more than one year 490.3 506.5 484.0
Provisions 12.2 8.1 11.3
Defined benefit pension fund deficit - 16.1 -
Deferred taxation 67.1 43.3 66.2
---- ---- ----
569.6 581.9 561.5
----- ----- -----
Total liabilities 734.3 703.8 681.5
----- ----- -----
Equity shareholders' funds
Share capital 40.6 32.7 40.4
Share premium account 3.6 101.0 3.2
Non-distributable reserve 90.7 - 90.7
Equity element of convertible loan note - 24.3 -
Own shares held in treasury through the ESOT (6.7) (1.6) (4.2)
Cumulative foreign exchange translation
differences (21.3) (12.3) (17.2)
Distributable reserves 146.7 4.8 145.4
----- --- -----
Total equity shareholders' funds 253.6 148.9 258.3
----- ----- -----
Total liabilities and equity shareholders' funds 987.9 852.7 939.8
----- ----- -----
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Audited
Three months to Year to
31 July 30 April
2006 2005 2006
---- ---- ----
£m £m £m
Cash flows from operating activities
Cash generated from operations before
exceptional items 57.7 38.3 215.2
Exceptional items (0.3) - 11.1
Pension payment - - (17.1)
--- --- ----
Cash generated from operations 57.4 38.3 209.2
Financing costs paid (excluding exceptional
financing costs) (9.4) (11.2) (38.7)
Exceptional financing costs paid - - (13.3)
Tax paid (3.7) (0.1) (2.8)
--- --- ---
Net cash from operating activities 44.3 27.0 154.4
---- ---- -----
Cash flows from investing activities
Acquisition of businesses - (2.0) (57.0)
Disposal of businesses - - 12.8
Purchase of property, plant and equipment (70.3) (51.8) (229.3)
Proceeds on sale of property, plant and equipment 13.7 10.8 50.4
---- ---- ----
Net cash used in investing activities (56.6) (43.0) (223.1)
---- ---- -----
Cash flows from financing activities
Drawdown of loans 31.7 27.7 257.5
Redemption of loans (15.0) (9.6) (244.0)
Capital element of finance lease payments (2.4) (3.3) (12.1)
Purchase of own shares by the ESOT (2.5) - (2.8)
Dividends paid - - (2.0)
Proceeds from issue of ordinary shares 0.6 0.3 70.9
--- --- ----
Net cash from financing activities 12.4 15.1 67.5
---- ---- ----
Increase/(decrease) in cash and cash equivalents 0.1 (0.9) (1.2)
Opening cash and cash equivalents 1.0 2.1 2.1
Effect of exchange rate changes - - 0.1
--- --- ---
Closing cash and cash equivalents 1.1 1.2 1.0
--- --- ---
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
The financial statements for the three months ended 31 July 2006 were approved
by the directors on 4 September 2006.
They have been prepared in accordance with relevant International Financial
Reporting Standards (`IFRS') and the accounting policies set out Group's Annual
Report and Accounts for the year ended 30 April 2006. They are unaudited and do
not constitute statutory accounts within the meaning of Section 240 of the
Companies Act 1985.
The statutory accounts for the year ended 30 April 2006 were prepared in
accordance with relevant IFRS and have been mailed to shareholders and filed
with the Registrar of Companies. The auditors' report on those accounts was
unqualified and did not contain a statement under section 237 of the Companies
Act 1985.
The 2005 comparatives have been restated to include the fair value of embedded
derivatives included within our long term debt instruments in accordance with
IAS 39. This increased investment income by £1.3m and total assets by £11.1m in
the three months ended and as at 31 July 2005. In addition, the comparative
figures for operating profit for Sunbelt Rentals, A-Plant, Technology and
Corporate in note 2 have been restated to include share based remuneration
costs within the operating segment results. In 2005 these costs were included
within Corporate.
The exchange rates used in respect of the US dollar are:
2006 2005
---- ----
Average for the quarter ended 31 July 1.8522 1.8085
Period end rate 1.8671 1.7606
2. Segmental analysis
Operating
profit
before Exceptional Operating Capital
Three months to 31 July Revenue exceptionals items profit* expenditure
------- ------------ ----- ------- -----------
£m £m £m £m £m
2006
----
Sunbelt Rentals 126.3 30.8 (0.3) 30.5 73.3
A-Plant 43.9 4.5 - 4.5 34.0
Technology 5.5 1.3 - 1.3 3.2
Corporate - (1.6) - (1.6) -
--- --- --- --- ---
175.7 35.0 (0.3) 34.7 110.5
----- ---- --- ---- ----- 2005
----
Sunbelt Rentals 103.3 21.2 - 21.2 42.3
A-Plant 38.8 3.6 - 3.6 17.5
Technology 3.8 1.0 - 1.0 1.7
Corporate - (1.4) - (1.4) -
--- --- --- --- ---
145.9 24.4 - 24.4 61.5
----- ---- --- ---- ----
* 2005 comparatives have been restated as described in note 1.
3. Operating costs
Three months to Year to
31 July 30 April
2006 2005 2006
---- ---- ----
£m £m £m
Staff costs:
Salaries 48.4 43.0 182.4
Social security costs 3.9 3.6 15.5
Other pension costs 1.0 0.8 2.8
--- --- ---
53.3 47.4 200.7
---- ---- -----
Other operating costs:
Vehicle costs 13.9 11.4 51.7
Spares, consumables and external repairs 11.0 10.1 45.3
Facility costs 7.9 7.2 32.3
Other external charges 27.1 20.9 94.0
---- ---- ----
59.9 49.6 223.3
---- ---- -----
Other income:
Profit on disposal of fixed assets (2.2) (2.2) (12.8)
Other income - - (11.3)
--- --- ----
(2.2) (2.2) (24.1)
--- --- ----
Depreciation 30.0 26.7 113.6
---- ---- -----
141.0 121.5 513.5
----- ----- -----
Other operating costs in the three months to 31 July 2006 include £0.3m of
exceptional post acquisition integration costs (2005: nil).
4. Exceptional items and fair value remeasurements related to embedded derivatives
`Exceptional items' are those items of financial performance that are material
and non-recurring in nature. Non-cash fair value remeasurements relate to
embedded derivatives within long term debt instruments. The Group believes
these items should be disclosed separately within the consolidated income
statement to assist in the understanding of the financial performance of the
Group. Exceptional items and fair value remeasurements are excluded from
underlying profit and earnings per share. These are set out below:
Three months to Year to
31 July 30 April
2006 2005 2006
---- ---- ----
£m £m £m
(restated)
Fair value remeasurements of embedded derivatives (15.4) 1.3 5.6
Post acquisition integration costs (0.3) - (0.8)
Litigation proceeds - - 11.3
Capital reorganisation - - (4.8)
Profit on sale of scaffolding - - 2.9
--- --- ---
Net amount (charged)/credited to income statement (15.7) 1.3 14.2
---- --- ----
Fair value remeasurements relate to the changes in fair value of the embedded
prepayment options in our second priority senior secured notes. Integration
costs relate to costs incurred in integrating acquisitions during the period.
Exceptional items and fair value remeasurements are presented in the income
statement as follows:
Three months to Year to
31 July 30 April
2006 2005 2006
---- ---- ----
£m £m £m
(restated)
Staff costs - - (0.3)
Other operating costs (0.3) - (1.3)
Other income - - 15.0
--- --- ----
(Charged)/credited in arriving at operating profit (0.3) - 13.4
Net finance (costs)/income (15.4) 1.3 0.8
---- --- ---
(Charged)/credited in arriving at profit before tax (15.7) 1.3 14.2
---- --- ----
5. Net financing costs
Three months to Year to
31 July 30 April
2006 2005 2006
---- ---- ----
£m £m £m
(restated)
Investment income
-----------------
Interest and other financial income - 0.1 0.5
Expected return on assets of defined benefit
pension plan 1.0 0.6 2.2
--- --- ---
1.0 0.7 2.7
--- --- ---
Fair value remeasurements related to embedded
derivatives in long term debt - 1.3 7.8
--- --- ---
Total investment income 1.0 2.0 10.5
--- --- ----
Interest expense
----------------
Bank interest payable 4.7 3.7 16.3
Interest on second priority senior secured notes 5.3 3.6 19.7
Interest payable on finance leases 0.3 0.5 1.8
5.25% unsecured convertible loan note, due 2008:
- interest payable - 1.9 1.9
- non-cash unwind of discout - 1.0 1.0
Non-cash unwind of discount on defined pension
plan liabilities 0.7 0.7 2.2
Amortisation of deferred costs of debt raising 0.6 0.7 2.7
Non-cash unwind of discount on insurance provisions 0.1 - 0.4
Fair value losses on derivatives not accounted
for as hedges - 0.7 0.3
--- --- ---
11.7 12.8 46.3
---- ---- ----
Fair value remeasurements related to embedded
derivatives in long term debt 15.4 - 7.0
---- --- ---
Total interest expense 27.1 12.8 53.3
---- ---- ----
Net financing costs before fair value
remeasurements of embedded derivatives 10.7 12.1 43.6
Fair value remeasurements of embedded derivatives 15.4 (1.3) (0.8)
---- --- ---
Net financing costs 26.1 10.8 42.8
---- ---- ----
6. Taxation
The tax charge for the quarter has been calculated by applying the directors'
best estimate of the effective annual tax rate (estimated at 31%) to the
Group's underlying profit before tax for the quarter. The tax charge comprises
a credit of £0.4m related to the UK (2005: £nil) and a charge of £8.0m (2005:
£5.9m) related to the US.
7. Earnings per share
Basic and diluted earnings per share for the three months ended 31 July 2006
have been calculated based on the profit for the relevant period and on the
weighted average number of ordinary shares in issue during that period which
excludes the shares held by the ESOT in respect of which dividends have been
waived. Diluted earnings per share is computed using the result for the
relevant period and the diluted number of shares (ignoring any potential issue
of ordinary shares which would be anti-dilutive). These are calculated as
follows:
Three months to Year to
31 July 30 April
2006 2005 2006
---- ---- ----
Profit for the financial period (£m) 1.0 7.7 55.6
--- --- ----
Weighted average number of shares (m) - basic 400.7 323.5 379.0
----- ----- -----
- diluted 408.3 327.4 387.4
----- ----- -----
Basic earnings per share (p) 0.2p 2.4p 14.7p
--- --- ----
Diluted earnings per share (p) 0.2p 2.4p 14.4p
--- --- ----
Underlying earnings per share (defined in any period as the earnings before
exceptional items and fair value remeasurements for that period divided by the
weighted average number of shares in issue in that period) and cash tax
earnings per share (defined in any period as underlying earnings before
deferred taxation divided by the weighted average number of shares in issue in
that period) may be reconciled to the basic earnings per share as follows:
Three months to Year to
31 July 30 April
2006 2005 2006
---- ---- ----
£m £m £m
Basic earnings per share 0.2p 2.4p 14.7p
Exceptional items and fair value remeasurements 3.9p (0.4)p (3.8)p
Tax on exceptional items and fair value
remeasurements - - 1.3p
--- --- ---
Underlying earnings per share 4.1p 2.0p 12.2p
Other deferred tax 0.6p 1.7p 5.6p
--- --- ---
Cash tax earnings per share 4.7p 3.7p 17.8p
--- --- ----
8. Property, plant and equipment
2006 2005
---- ----
Rental Rental
Net book value equipment Total equipment Total
-------------- --------- ----- --------- -----
£m £m £m £m
At 1 May 559.9 646.7 452.9 537.1
Exchange differences (10.5) (11.8) 25.8 29.4
Additions 100.4 110.5 55.4 61.5
Acquisitions - - 2.0 2.0
Assets held for sale - - (9.1) (9.5)
Disposals (8.6) (9.5) (8.1) (8.7)
Depreciation (26.0) (30.0) (22.7) (26.7)
---- ---- ---- ----
At 31 July 615.2 705.9 496.2 585.1
----- ----- ----- -----
9. Called up share capital
Ordinary shares of 10p each:
31 July 30 April 31 July 30 April
2006 2005 2006 2006 2005 2006
---- ---- ---- ---- ---- ----
Number Number Number £m £m £m
Authorised 900,000,000 900,000,000 900,000,000 90.0 90.0 90.0
----------- ----------- ----------- ---- ---- ----
Allotted, called up
and fully paid 405,776,875 326,770,616 404,334,066 40.6 32.7 40.4
----------- ----------- ----------- ---- ---- ----
During the period 1,442,809 shares were issued at an average price of 41.7p per
share under share option plans raising £0.6m.
10. Reconciliation of changes in shareholders' funds
Own Cumulative
shares foreign
Non held in exchange
Share Share distributable treasury translation Distributable 31 July 30 April
capital premium reserves (ESOT) differences reserves Total 2005 2006
------- ------- -------- ---- ----------- -------- ----- ---- ----
£m £m £m £m £m £m £m £m £m
Total recognised
income and
expense - - - - (4.1) 1.0 (3.1) 28.8 71.2
Shares issued 0.2 0.4 - - - - 0.6 0.3 70.9
Dividends - - - - - - - - (2.0)
Share based
payments - - - - - 0.3 0.3 0.1 1.3
Own shares
purchased - - - (2.5) - - (2.5) - (2.8)
--- --- --- --- --- --- --- --- ---
Net changes in
shareholders'
equity 0.2 0.4 - (2.5) (4.1) 1.3 (4.7) 29.2 138.6
Opening
shareholders'
equity 40.4 3.2 90.7 (4.2) (17.2) 145.4 258.3 119.7 119.7
---- --- ---- --- ---- ----- ----- ----- -----
Closing
shareholders'
equity 40.6 3.6 90.7 (6.7) (21.3) 146.7 253.6 148.9 258.3
---- --- ---- --- ---- ----- ----- ----- -----
11. Notes to cash flow statement
Three months to Year to
31 July 30 April
2006 2005 2006
---- ---- ----
£m £m £m
a) Cash flow from operating activities
--------------------------------------
Operating profit 34.7 24.4 124.5
Depreciation 30.0 26.7 113.6
Exceptional items 0.3 - (13.4)
--- --- ----
EBITDA before exceptional items 65.0 51.1 224.7
Profit on disposal of property, plant
and equipment (2.2) (2.2) (9.1)
(Increase)/decrease in inventories (1.6) (0.1) 2.2
(Increase)in trade and other receivables (9.9) (6.0) (11.2)
Increase/(decrease) in trade and other payables 6.0 (4.4) 7.5
Exchange differences 0.1 (0.3) (0.3)
Other non-cash movements 0.3 0.2 1.4
--- --- ---
Cash generated from operations before
exceptional items 57.7 38.3 215.2
---- ---- -----
b) Reconciliation to net debt
-----------------------------
(Increase)/decrease in cash in the period (0.1) 0.9 1.2
Increase in debt through cash flow 14.3 14.8 1.4
---- ---- ---
Change in net debt from cash flows 14.2 15.7 2.6
Exchange difference (10.1) 16.9 3.7
Non cash movements:
- deferred costs of debt raising 0.6 0.7 4.0
- convertible loan note - 1.1 (1.0)
- capital element of new finance leases 1.0 1.8 2.0
--- --- ---
Movement in net debt in the period 5.7 36.2 11.3
Opening net debt 493.6 482.3 482.3
----- ----- -----
Closing net debt 499.3 518.5 493.6
----- ----- -----
c) Analysis of net debt 1 May Exchange Cash Non-cash 31 July
-------------------- 2006 movement flow movements 2006
---- -------- ---- --------- ----
£m £m £m £m £m
Cash (1.0) - (0.1) - (1.1)
Debt due within 1 year 10.6 (0.1) (2.4) 2.0 10.1
Debt due after 1 year 484.0 (10.0) 16.7 (0.4) 490.3
----- ---- ---- --- -----
Total net debt 493.6 (10.1) 14.2 1.6 499.3
----- ---- ---- --- -----
12. Contingent liabilities and contingent assets
There have been no significant changes in contingent liabilities from those
reported at 30 April 2006. 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 is subject to periodic legal claims in the ordinary course
of its business. However, the claims outstanding at 31 July 2006 are not
expected to have a significant impact on the Group's financial position.
BUSINESS AND FINANCIAL REVIEW
First quarter (to 31 July) results compared with prior year
Overview
--------
Quarter to 31 July 2006 Quarter to 31 July 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
(restated)(restated)
Revenue 175.7 - 175.7 145.9 - 145.9
Staff costs (53.3) - (53.3) (47.4) - (47.4)
Other operating costs (59.6) (0.3) (59.9) (49.6) - (49.6)
Other income 2.2 - 2.2 2.2 - 2.2
--- --- --- --- --- ---
EBITDA* 65.0 (0.3) 64.7 51.1 - 51.1
Depreciation (30.0) - (30.0) (26.7) - (26.7)
---- --- ---- ---- --- ----
Operating profit 35.0 (0.3) 34.7 24.4 - 24.4
Investment income 1.0 - 1.0 0.7 1.3 2.0
Interest expense (11.7) (15.4) (27.1) (12.8) - (12.8)
---- ---- ---- ---- --- ----
Profit before taxation 24.3 (15.7) 8.6 12.3 1.3 13.6
Taxation:
- current (5.5) 0.1 (5.4) (0.4) - (0.4)
- deferred (2.2) - (2.2) (5.5) - (5.5)
--- --- --- --- --- --- (7.7) 0.1 (7.6) (5.9) - (5.9)
--- --- --- --- --- ---
Profit for the quarter 16.6 (15.6) 1.0 6.4 1.3 7.7
---- ---- --- --- --- ---
* EBITDA is presented here as an additional performance measure as it is commonly used by investors and lenders.
+ Fair value remeasurements related to embedded derivatives in long term debt.
First quarter revenue increased 22.5% at constant 2006 exchange rates to £
175.7m and by 20.5% at actual rates. EBITDA before exceptional items grew by
29.5% at constant exchange rates to £65.0m and by 27.2% at actual rates.
Operating profit before exceptional items of £35.0m in the quarter increased
46.5% at constant 2006 exchange rates and 43.5% from £24.4m in 2005 at actual
rates. Before exceptional items, EBITDA margins grew from 35.0% to 37.0% and
operating margins rose from 16.7% to 19.9%.
Seasonality
-----------
Our business is subject to significant fluctuations in performance from quarter
to quarter as a result of seasonal effects. Commercial construction activity
tends to increase in the summer and during extended periods of mild weather and
to decrease in the winter and during extended periods of inclement weather.
Furthermore, due to the incidence of public holidays in the US and the UK,
there are more billing days in the first half of our financial year than the
second half leading to our revenues normally being higher in the first half. On
a quarterly basis, the second quarter is typically our strongest quarter,
followed by the first and then the third and fourth quarters.
Divisional performance
----------------------
Divisional results before exceptional items are summarised below:
Revenue EBITDA Operating profit
------ ----------------
2006 2005 2006 2005 2006 2005
---- ---- ---- ---- ---- ----
Sunbelt in $m 234.0 186.8 93.2 68.9 57.1 38.4
----- ----- ---- ---- ---- ----
Sunbelt in £m 126.3 103.3 50.3 38.1 30.8 21.2
A-Plant 43.9 38.8 13.9 12.5 4.5 3.6
Ashtead Technology 5.5 3.8 2.4 1.9 1.3 1.0
Corporate - - (1.6) (1.4) (1.6) (1.4)
--- --- --- --- --- ---
175.7 145.9 65.0 51.1 35.0 24.4
----- ----- ---- ---- ---- ----
Sunbelt
Revenue increased 25.3% to $234.0m reflecting strong growth of approximately 7%
in rental rates and a 17% increase in the average fleet size. Utilisation
increased slightly from approximately 70% to 71%. Revenue growth was broadly
based with all regions and all major product areas trading ahead of last year.
Sunbelt's revenue improvement reflected market share gains and growth in
non-residential construction activity as well as the continued shift from
ownership to rental.
Costs (excluding depreciation) rose 19.5% to $140.9m in 2006. This reflected
principally increased headcount, higher commissions and profit share payments
to staff as a result of the increased activity levels and increased fuel costs
for Sunbelt's delivery fleet. As a result, EBITDA grew 35.2% to $93.2m and the
EBITDA margin for the quarter improved to 39.8% from 36.9% in 2005. Sunbelt's
operating profit increased 48.6% to $57.1m representing a margin of 24.4% (2005
- 20.6%). Sunbelt's results in sterling reflected the factors discussed above
and the slightly weaker US dollar.
A-Plant
First quarter revenue increased 13.3% to £43.9m, reflecting a fleet size which
was approximately 4% larger than in the equivalent period a year ago,
utilisation increased from approximately 64% to 69% whilst rental rates
declined by approximately 3%. Costs (excluding depreciation) rose by 14.5% year
over year reflecting mainly increased headcount following the salesforce
re-organisation and increased fuel costs. As a result EBITDA increased 10.8% to
£13.9m and the EBITDA margin decreased slightly from 32.4% to 31.7% in 2006.
A-Plant's operating profit increased 25.7% to £4.5m representing a margin of
10.2% (2005 - 9.2%).
Ashtead Technology
Ashtead Technology's performance continued the trend established in the second
half of last year with first quarter revenues up 43.5% to £5.5m. Ashtead
Technology's operating profit of £1.3m increased from £1.0m in 2005 at both
actual and constant exchange rates. These results reflected recent increases in
investment by the oil majors which is delivering higher offshore exploration
and construction activity as well as continued growth in our on-shore
environmental business. These trends are expected to continue.
Net financing costs
-------------------
Net financing costs, before fair value remeasurements related to embedded
derivatives in long term debt, decreased to £10.7m from £12.1m in 2005
reflecting similar average debt levels but slightly lower average interest
rates following the redemption of the convertible loan notes and part repayment
of the 12% second priority secured notes and a weaker dollar.
Net financing costs also included a charge of £15.4m for fair value
remeasurements related to embedded derivatives in long term debt which arose
principally because, following the decision to repay the 12% sterling notes as
part of the NationsRent acquisition, the embedded prepayment options for these
notes no longer have value.
Taxation
--------
The tax charge for the quarter of £7.6m (2005 - £5.9m) comprised a charge for
current tax of £5.4m and a charge for deferred tax of £2.2m. Overall, the
effective accounting tax rate on the profit before exceptional items is 31%
whilst the cash tax rate is 22%.
Balance sheet
Property, plant and equipment
-----------------------------
31 July 2006 31 July 2005
------------ ------------
Rental Rental
Net book value equipment Total equipment Total
-------------- --------- ----- --------- -----
£m £m £m £m
At 1 May 559.9 646.7 452.9 537.1
Exchange differences (10.5) (11.8) 25.8 29.4
Additions 100.4 110.5 55.4 61.5
Acquisitions - - 2.0 2.0
Assets held for sale - - (9.1) (9.5)
Disposals (8.6) (9.5) (8.1) (8.7)
Depreciation (26.0) (30.0) (22.7) (26.7)
---- ---- ---- ----
At 31 July 615.2 705.9 496.2 585.1
----- ----- ----- -----
Capital expenditure in the first quarter was £110.5m of which £100.4m was on
the rental fleet (2005 - £61.5m in total). Expenditure on rental equipment was
90.9% of total capital expenditure. Capital expenditure by division was as
follows:
31 July 2006 2005
------------ ----
Growth Maintenance Total Total
------ ----------- ----- -----
Sunbelt in $m 98.4 25.3 123.7 64.8
---- ---- ----- ----
Sunbelt in £m 52.7 13.5 66.2 36.8
A-Plant 14.5 16.5 31.0 16.9
Ashtead Technology 2.9 0.3 3.2 1.7
--- --- --- ---
Total rental equipment 70.1 30.3 100.4 55.4
---- ---- ----- ----
Other fixed assets 10.1 6.1
---- ---
Total additions 110.5 61.5
----- ----
With the improvement in market conditions in the US, the Group spent £70.1m of
its rental equipment capital expenditure on growth with £30.3m spent on
replacing existing fleet. The growth proportion is estimated on the basis of
the assumption that maintenance capital expenditure in any period is equal to
the original cost of equipment sold in that period.
The average age of the Group's serialised rental equipment, which constitutes
the substantial majority of our fleet, at 31 July 2006 was 33 months (2005 - 43
months) on a net book value basis. At 31 July, Sunbelt's fleet had an average
age of 35 months (2005 - 44 months) comprising 45 months for aerial work
platforms which have a longer life and 24 months for the remainder of its
fleet. At the same date A-Plant's fleet had an average age of 31 months (2005 -
42 months).
As previously announced, we expect that gross capital expenditure for the
existing group (not including NationsRent) for the current financial year will
be in the region of £250m.
Trade receivables
Receivable days improved to 48 days (2005 - 51 days). The bad debt charge as a
percentage of total turnover was 0.5% in 2006 compared with 0.7% in 2005.
Trade and other payables
Group payable days were 59 days in 2006 (2005 - 67 days). Capital expenditure
related payables at 31 July 2006 totalled £69.1m (2005 - £44.8m). Payment
periods for purchases other than rental equipment vary between 7 and 60 days
and for rental equipment between 30 and 90 days.
Cash flow and net debt
Free cash flow in the three months ended 31 July 2006 (which is defined as our
net cash inflow from operations less net maintenance capital expenditure,
financing costs paid and tax paid) is summarised below:
Three months Year to LTM to
to 31 July 30 April 31 July
2006 2005 2006 2006
---- ---- ---- ----
£m £m £m £m
EBITDA before exceptional items 65.0 51.1 224.7 238.6
---- ---- ----- -----
Cash inflow from operations before
exceptional items 57.7 38.3 215.2 234.6
Cash efficiency ratio* 88.8% 75.0% 95.8% 98.3%
Maintenance rental capital expenditure (28.2) (34.0) (149.9) (144.1)
Non-rental capital expenditure (9.3) (4.l) (16.8) (22.0)
Proceeds from sale of used rental equipment 13.7 10.8 50.4 53.3
Tax paid (3.7) (0.1) (2.8) (6.4)
--- --- --- ---
Free cash flow before interest 30.2 10.9 96.1 115.4
Financing costs paid (9.4) (11.2) (38.7) (36.9)
--- ---- ---- ----
Free cash flow after interest 20.8 (0.3) 57.4 78.5
Growth capital expenditure (32.8) (13.7) (62.6) (81.7)
Acquisitions and disposals - (2.0) (44.2) (42.2)
Issue of ordinary share capital 0.6 0.3 70.9 71.2
Purchase of own shares by ESOT (2.5) - (2.8) (5.3)
Dividends paid - - (2.0) (2.0)
Pension plan funding - - (17.1) (17.1)
Exceptional costs paid (0.3) - (2.2) (2.5)
--- --- --- ---
Increase in total debt (14.2) (15.7) (2.6) (1.1)
* Cash inflow from operations before exceptional items as a percentage of EBITDA
before exceptional items.
Cash inflow from operations increased 51% to £57.7m and the cash efficiency
ratio was 88.8% (2005 - 75.0%) reflecting seasonal increases in working
capital. After net maintenance capital expenditure of £23.8m (2005 - £27.3m)
and tax, free cash flow before interest was £30.2m (2005 - £10.9m). Financing
costs paid this year were £9.4m (2005 - £11.2m). After interest payments, there
was a free cash inflow of £20.8m (2005 - outflow of £0.3m).
Including payments of £32.8m in respect of growth capital expenditure, £2.5m
for the purchase of shares by the ESOT in connection with employee share plans
and £0.3m in respect of exceptional items, and taking into account the proceeds
received from share issues of £0.6m, there was an increase of £14.2m in the
quarter in drawings under our debt facilities.
Net debt
-------- 31 July 30 April
------- --------
2006 2005 2006
---- ---- ----
£m £m £m
First priority senior secured bank debt 274.3 249.8 263.2
Finance lease obligations 21.4 32.5 23.2
12% second priority senior secured notes, due 2014 75.5 115.9 75.5
8.625% second priority senior secured notes,
due 2015 129.1 - 132.7
5.25% unsecured convertible loan note, due 2008 - 121.5 -
--- ----- ---
500.4 519.7 494.6
Cash at bank and in hand (1.1) (1.2) (1.0)
--- --- ---
Total net debt 499.3 518.5 493.6
----- ----- -----
Measured at constant (31 July 2006) exchange rates, the decrease in total net
debt since 31 July last year was £8.0m whilst debt has increased £11.4m in the
three months since year end. Availability at 31 July 2006 under the asset based
senior secured bank facility was $261m.
OPERATING STATISTICS
Profit centre numbers Staff numbers
--------------------- -------------
31 July 30 April 31 July 30 April
------- -------- ------- --------
2006 2005 2006 2006 2005 2006
---- ---- ---- ---- ---- ----
Sunbelt Rentals 210 208 209 4,330 4,034 4,266
A-Plant 193 201 193 2,091 1,977 2,081
Ashtead Technology 11 10 11 103 80 104
Corporate office - - - 14 14 14
--- --- --- --- --- ---
Group 414 419 413 6,538 6,105 6,465
--- --- --- ----- ----- -----
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