1st Quarter Results
2 September 2008
ASHTEAD GROUP
Unaudited results for the first quarter ended 31 July 2008
First quarter
Financial summary 2008 2007 Growth
£m £m %
Revenue 259.5 246.2 +5%
Underlying operating profit(1) 51.7 47.4 +9%
Underlying profit before taxation(1) 35.9 28.4 +26%
Underlying earnings per share(1) 4.8p 3.6p +34%
Profit before taxation 35.2 27.8 +27%
Basic earnings per share 15.9p 3.2p +398%
(1) See explanatory notes below
Highlights
* Another strong performance with Group revenue up 5% and 9% growth in Group
operating profit
* Underlying pre-tax profits up 26%, reflecting good operational performance
and lower financing costs
* Underlying earnings per share growth of 34% to 4.8p
* Sale of Ashtead Technology completed on 26 June with the net proceeds of
£90m applied to pay down debt
* Net debt reduced by £111m in the quarter to £852m at 31 July - on track to
meet our year end debt reduction target
Ashtead's chief executive, Geoff Drabble, commented:
"I am pleased to report further good revenue and profit growth in the first
quarter of the year.
In the US we delivered revenue and profit growth as we benefited from
improvements in operational performance. We improved utilisation on a larger
fleet and continue to benefit from our broad geographic and market exposure. We
performed well in the UK underpinned by our exposure to the larger
non-residential projects.
Despite the current economic uncertainty, our operating businesses continue to
perform well and our financing costs continue to be lower than last year as we
reduce debt. The Board anticipates the Group continuing to trade in line with
its expectations for the remainder of the year."
Contacts:
Geoff Drabble Chief executive ) 020 7726 9700
Ian Robson Finance director )
Brian Hudspith Maitland 020 7379 5151
Explanatory notes
a. IFRS requires that, as a disposed business, Ashtead Technology's after tax
profits and total assets and liabilities are reported in the Group's
accounts as a single line item within our income statement with the result
that revenues, operating profit and pre-tax profits as reported in the
Group accounts exclude Ashtead Technology. Prior year figures have been
restated accordingly.
b. Underlying profit and earnings per share are stated before exceptional
items and amortisation of acquired intangibles. The definition of
exceptional items is set out in note 4 to the attached financial
information. The reconciliation of underlying earnings per share to basic
earnings per share is shown in note 7 to the attached financial
information.
Geoff Drabble and Ian Robson will hold a conference call for equity analysts at
9.00am on Tuesday 2 September. Dial in details for this call have already been
distributed but any analyst not having received them should contact Emma
Burdett at Maitland on 020 7379 5151. The call will be webcast live via the
Company's website at www.ashtead-group.com and there will also be a replay
available via the website from shortly after the call concludes. There will, as
usual, also be a separate call for bondholders at 3pm UK time (10am EST).
Results
Revenue EBITDA Operating
profit
2008 2007 2008 2007 2008 2007
Sunbelt in $m 403.4 388.5 158.6 150.7 92.0 84.8
=============================================
Sunbelt in £m 204.4 194.1 80.3 75.3 46.5 42.4
A-Plant 55.1 52.1 19.2 17.1 7.1 7.0
Group central costs - - (1.9) (2.0) (1.9) (2.0)
--------------------------------------------
259.5 246.2 97.6 90.4 51.7 47.4
================================
Net financing costs (15.8) (19.0)
-------------
Profit before tax, exceptionals and 35.9 28.4
amortisation
Amortisation (0.7) (0.6)
-------------
Profit before taxation from continuing 35.2 27.8
operations =============
Margins:
Sunbelt 39.3% 38.8% 22.8% 21.8%
A-Plant 34.8% 32.8% 12.9% 13.5%
=============================
Revenues at Sunbelt and A-Plant grew by 3.8% and 5.8% respectively as both
divisions focused on meeting the needs of their customers and driving market
share gains. Continued operating efficiencies generated a further 0.5%
improvement in Sunbelt's EBITDA margin to just under 40% whilst A-Plant's
EBITDA margin grew 2% to just under 35%.
Sunbelt's first quarter revenue growth reflected a fleet which was 8% larger
than the previous year, physical utilisation up 1% to an average 70% (2007:
69%) and a 5% lower yield. At A-Plant, reflecting principally last year's
capital investment, first quarter fleet growth was 16% whilst physical
utilisation was unchanged at 70% and yield was 8% lower.
On a Group basis, this performance generated 5.4% growth in revenue, 8.0%
growth in underlying EBITDA and 9.2% growth in underlying operating profit.
Lower interest rates and reduced debt levels combined to reduce net financing
costs by 17% and, as a result, the underlying profit before tax for the quarter
grew 26% to £35.9m.
The effective tax rate was stable at 36% of the pre-tax result (2007 full year:
35%). Reflecting the Group's capital intensive business and the utilisation of
brought forward tax benefits, cash tax represented just 3% of the 36% charge
(2007 full year: 5%) with the balance being deferred tax.
The sale of Ashtead Technology in June for £96.0m generated net cash proceeds
of £89.8m which were applied to pay down debt and an exceptional profit of £
67.3m before tax. After a deferred tax charge of £9.6m, the after tax
exceptional profit was £57.7m whilst Ashtead Technology's after tax trading
profit for the period up to its disposal was £2.0m (2007: £1.6m for the whole
of the quarter).
During the quarter, the Group repurchased 19.6m shares at a total cost of £
13.1m, an average price per share of 67p.
Reflecting the beneficial impact of this and the repurchases last year,
underlying earnings per share for the quarter grew faster than pre-tax profits
at 34% to 4.8p whilst basic EPS, which includes the exceptional Technology
disposal gain and intangible amortisation, was 15.9p (2007: 3.2p).
Capital expenditure
Capital expenditure in the quarter totalled £108.5m (2007: £124.2m) including £
96.6m on the rental fleet. Disposal proceeds totalled £14.6m (2007: £23.8m)
giving net expenditure of £93.9m (2007: £100.4m). The average age of the
Group's rental fleet at 31 July 2008 was 31 months (2007: 29 months).
We continue to review capital expenditure levels based on the economic outlook
and our own experiences on the ground. Accordingly, we continue to expect gross
capital expenditure for this year of approximately £230m (2007/8: £331m) which
will be predominantly replacement expenditure. After disposal proceeds, net
capital expenditure of approximately £165m (2007/8: £253m) is expected for the
full year.
Net debt
Net debt at 31 July 2008 was £851.6m (30 April 2008: £963.2m), including £12.8m
spent on share buy-backs during the quarter. The ratio of net debt to LTM
underlying EBITDA (excluding Ashtead Technology) of £370.9m was 2.3 times at 31
July 2008 (30 April 2008: 2.5 times). Whilst the second quarter will see the
usual seasonal increase in debt levels, with £111m of debt reduction delivered
in the first quarter we are on track to achieve the full year debt reduction
target announced in June. We therefore continue to target net debt at 30 April
2009 of $1,555m (£785m at 30 April 2008 exchange rates).
Availability under the $1.75bn asset based loan facility (including suppressed
availability of $59m) was $861m at 31 July 2008 ($602m at 30 April 2008)
providing very substantial assurance that the debt package will remain covenant
free.
Return on investment
Return on investment (underlying operating profit divided by net assets
employed before debt, deferred tax and certain other non cash items), which is
measured on a rolling twelve month basis to eliminate seasonal effects was
14.1% for the year ended 31 July 2008 (14.0% for the year ended 30 April 2008).
RoI for Sunbelt was 14.7% whilst A-Plant's RoI was 10.5%.
Current trading and outlook
Utilisation of both Sunbelt and A-Plant's fleets remains high and one-third of
the way through our seasonally busiest second quarter, both businesses continue
to have substantially more fleet on rent than this time last year, albeit at a
lower yield.
Despite the current economic uncertainty, our operating businesses continue to
perform well and our financing costs continue to be lower than last year as we
reduce debt. The Board anticipates the Group continuing to trade in line with
its expectations for the remainder of the year.
CONSOLIDATED INCOME STATEMENT FOR THE THREE MONTHS ENDED 31 JULY 2008
2008 2007
Before Before
exceptional Exceptional exceptional Exceptional
items items items items
and and and and
amortisation amortisation Total amortisation amortisation Total
£m £m £m £m £m £m
Revenue 259.5 - 259.5 246.2 - 246.2
Staff costs (75.4) - (75.4) (76.7) - (76.7)
Other operating costs (89.0) - (89.0) (83.1) - (83.1)
Other income 2.5 - 2.5 4.0 - 4.0
-----------------------------------------------------------
EBITDA* 97.6 - 97.6 90.4 - 90.4
Depreciation (45.9) - (45.9) (43.0) - (43.0)
Amortisation of intangibles - (0.7) (0.7) - (0.6) (0.6)
-----------------------------------------------------------
Operating profit 51.7 (0.7) 51.0 47.4 (0.6) 46.8
Investment income 1.1 - 1.1 1.1 - 1.1
Interest expense (16.9) - (16.9) (20.1) - (20.1)
-----------------------------------------------------------
Net financing costs (15.8) - (15.8) (19.0) - (19.0)
-----------------------------------------------------------
Profit on ordinary
activities before taxation 35.9 (0.7) 35.2 28.4 (0.6) 27.8
Taxation:
- current (1.1) - (1.1) (3.7) - (3.7)
- deferred (11.8) 0.2 (11.6) (6.5) (1.6) (8.1)
-----------------------------------------------------------
(12.9) 0.2 (12.7) (10.2) (1.6) (11.8)
-----------------------------------------------------------
Profit after taxation
from continuing operations 23.0 (0.5) 22.5 18.2 (2.2) 16.0
Profit after taxation from
discontinued operations 2.0 57.7 59.7 1.6 - 1.6
-----------------------------------------------------------
Profit attributable
to equity shareholders 25.0 57.2 82.2 19.8 (2.2) 17.6
===========================================================
Basic earnings per share 4.8p 11.1p 15.9p 3.6p (0.4p) 3.2p
===========================================================
Diluted earnings per share 4.8p 11.1p 15.9p 3.6p (0.4p) 3.2p
===========================================================
* EBITDA is presented here as an additional performance measure as it is
commonly used by investors and lenders.
Details of risks and uncertainties are given in the Review of Balance Sheet and
Cash Flow accompanying these interim financial statements.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
2008 2007
£m £m
Net profit for the period 82.2 17.6
Effect of the limit on net pension asset recognised (0.2) -
Foreign currency translation differences (0.2) (2.1)
---------------
Total recognised income and expense for the period 81.8 15.5
===============
CONSOLIDATED MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
2008 2007
£m £m
Total recognised income and expense for 81.8 15.5
the period
Credit in respect of share based payments 0.5 -
Re-issue of ordinary shares from treasury 0.1 -
Own shares purchased by the Company (13.1) -
Own shares purchased by ESOT - 0.2
Realisation of foreign exchange
translation differences on Technology disposal 1.3 -
---------------
Net increase in equity shareholders' funds 70.6 15.7
Opening equity shareholders' funds 436.1 396.7
---------------
Closing equity shareholders' funds 506.7 412.4
===============
CONSOLIDATED BALANCE SHEET AT 31 JULY 2008
31 July 30 April
2008 2007 2008
£m £m £m
Current assets
Inventories 23.7 23.7 22.6
Trade and other receivables 175.2 169.3 159.9
Current tax asset 2.2 - 2.2
Cash and cash equivalents 1.5 1.3 1.8
-------------------------
202.6 194.3 186.5
Assets held for sale - 5.5 26.8
-------------------------
202.6 199.8 213.3
-------------------------
Non-current assets
Property, plant and equipment
- rental equipment 1,039.1 966.4 994.0
- other assets 141.4 129.5 136.1
-------------------------
1,180.5 1,095.9 1,130.1
Intangible assets - brand names and other acquired 7.3 8.8 8.0
intangibles
- goodwill 291.9 285.2 291.9
Deferred tax asset 17.1 34.9 19.6
Defined benefit pension fund surplus - 5.4 -
-------------------------
1,496.8 1,430.2 1,449.6
-------------------------
Total assets 1,699.4 1,630.0 1,662.9
=========================
Current liabilities
Trade and other payables 193.9 205.5 129.1
Current tax liability 1.0 2.2 -
Debt due in less than one year 7.9 8.4 7.6
Provisions 8.5 13.7 9.1
-------------------------
211.3 229.8 145.8
Liabilities associates with assets classified as - - 6.5
held for sale
-------------------------
211.3 229.8 152.3
-------------------------
Non-current liabilities
Debt due in more than one year 845.2 887.3 957.4
Provisions 19.2 17.8 18.8
Deferred tax liability 117.0 82.7 98.3
-------------------------
981.4 987.8 1,074.5
-------------------------
Total liabilities 1,192.7 1,217.6 1,226.8
-------------------------
Equity shareholders' funds
Share capital 56.2 56.0 56.2
Share premium account 3.6 3.3 3.6
Non-distributable reserve 90.7 90.7 90.7
Own shares held in treasury by the Company (36.3) - (23.3)
Own shares held in treasury through the ESOT (7.0) (8.5) (7.0)
Cumulative foreign exchange translation differences (27.1) (32.3) (28.2)
Distributable reserves 426.6 303.2 344.1
-------------------------
Total equity shareholders' funds 506.7 412.4 436.1
-------------------------
Total liabilities and equity shareholders' funds 1,699.4 1,630.0 1,662.9
==========================
CONSOLIDATED CASH FLOW STATEMENT FOR THE THREE MONTHS ENDED 31 JULY 2008
2008 2007
£m £m
Cash flows from operating activities
Cash generated from operations before exceptional items 93.8 85.3
Exceptional items paid (0.6) (5.4)
--------------------
Cash generated from operations 93.2 79.9
Financing costs paid (4.2) (13.0)
Tax paid (0.1) (0.3)
--------------------
Net cash from operating activities 88.9 66.6
--------------------
Cash flows from investing activities
Disposal of business 89.8 -
Payments for property, plant and equipment (63.8) (88.6)
Proceeds on sale of property, plant and equipment 10.8 30.4
--------------------
Net cash from/(used in) investing activities 36.8 (58.2)
--------------------
Cash flows from financing activities
Drawdown of loans 10.1 14.3
Redemption of loans (121.8) (20.1)
Capital element of finance lease payments (1.6) (1.9)
Purchase of own shares by the Company (12.8) -
Purchase of own shares by the ESOT - (0.5)
Proceeds from re-issue of shares 0.1 -
--------------------
Net cash used in financing activities (126.0) (8.2)
--------------------
(Decrease)/increase in cash and cash equivalents (0.3) 0.2
Opening cash and cash equivalents 1.8 1.1
--------------------
Closing cash and cash equivalents 1.5 1.3
====================
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
The financial statements for the three months ended 31 July 2008 were approved
by the directors on 1 September 2008. They have been prepared in accordance
with relevant International Financial Reporting Standards (`IFRS') (including
International Accounting Standard - IAS 34 Interim Financial Reporting) and the
accounting policies set out in the Group's Annual Report and Accounts for the
year ended 30 April 2008. 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 2008 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 exchange rates used in respect of the US dollar are:
2008 2007
Average for the three months ended 31 July 1.97 2.00
At 31 July 1.98 2.03
2. Segmental analysis
Operating
profit
before
exceptionals Exceptional
and items and Operating
Revenue amortisation amortisation profit
£m £m £m £m
2008
Sunbelt 204.4 46.5 (0.5) 46.0
A-Plant 55.1 7.1 (0.2) 6.9
Corporate items - (1.9) - (1.9)
------------------------------------------------
Continuing operations 259.5 51.7 (0.7) 51.0
Ashtead Technology 4.7 2.8 67.0 69.8
------------------------------------------------
264.2 54.5 66.3 120.8
================================================
2007
Sunbelt 194.1 42.4 (0.5) 41.9
A-Plant 52.1 7.0 (0.1) 6.9
Corporate items - (2.0) - (2.0)
------------------------------------------------
Continuing operations 246.2 47.4 (0.6) 46.8
Ashtead Technology 6.3 2.3 - 2.3
------------------------------------------------
252.5 49.7 (0.6) 49.1
================================================
3. Operating costs
2008 2007
Before Before
exceptional Exceptional exceptional Exceptional
items and items and items and items and
amortisation amortisation Total amortisation amortisation Total
£m £m £m £m £m £m
Staff costs:
Salaries 68.8 - 68.8 69.5 - 69.5
Social security costs 5.2 - 5.2 5.8 - 5.8
Other pension costs 1.4 - 1.4 1.4 - 1.4
-------------------------------------------------------------
75.4 - 75.4 76.7 - 76.7
-------------------------------------------------------------
Other operating costs:
Vehicle costs 21.9 - 21.9 17.9 - 17.9
Spares, consumables & 14.8 - 14.8 14.4 - 14.4
external repairs
Facility costs 10.4 - 10.4 12.3 - 12.3
Other external charges 41.9 - 41.9 38.5 - 38.5
-------------------------------------------------------------
89.0 - 89.0 83.1 - 83.1
-------------------------------------------------------------
Other income:
Profit on disposal of (2.5) - (2.5) (4.0) - (4.0)
fixed assets
-------------------------------------------------------------
Depreciation and amortisation:
Depreciation 45.9 - 45.9 43.0 - 43.0
Amortisation of - 0.7 0.7 - 0.6 0.6
acquired intangibles
-------------------------------------------------------------
45.9 0.7 46.6 43.0 0.6 43.6
-------------------------------------------------------------
207.8 0.7 208.5 198.8 0.6 199.4
=============================================================
4. Exceptional items and amortisation
`Exceptional items' are those items of financial performance that are material
and non-recurring in nature. Amortisation relates to the periodic write off of
acquired intangible assets. 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
amortisation are excluded from underlying profit and earnings per share and are
set out below:
Three months to 31 July
2008 2007
£m £m
Gain on sale of Ashtead Technology 67.3 -
Taxation (9.6) (1.8)
---------------
Total exceptional items 57.7 (1.8)
Amortisation of acquired intangibles (net of £0.2m (0.5) (0.4)
tax credit)
---------------
57.2 (2.2)
===============
These items are presented in the income statement as follows:
Three months to 31 July
2008 2007
£m £m
Amortisation of acquired intangibles (0.7) (0.6)
-------------------
Charged in arriving at operating profit and profit (0.7) (0.6)
before tax
Taxation 0.2 (1.6)
-------------------
(0.5) (2.2)
Profit after taxation from discontinued operations 57.7 -
-------------------
57.2 (2.2)
===================
5. Financing costs
Three months to 31 July
2008 2007
£m £m
Investment income:
Expected return on assets of defined benefit pension plan 1.1 1.1
-------------------
Total investment income 1.1 1.1
===================
Interest expense:
Bank interest payable 6.0 9.3
Interest on second priority senior secured notes 9.0 8.9
Interest payable on finance leases 0.2 0.3
Non-cash unwind of discount on defined benefit pension 0.8 0.7
plan liabilities
Non-cash unwind of discount on self insurance provisions 0.3 0.3
Amortisation of deferred costs of debt raising 0.6 0.6
-------------------
Total interest expense 16.9 20.1
-------------------
Net financing costs 15.8 19.0
===================
6. Taxation
The tax charge for the period has been computed using an estimated effective
rate for the year of 40% in the US and 29% in the UK applied to the profit
before tax and amortisation of acquired intangibles. The blended effective rate
for the Group as a whole is 36%.
The £12.9m tax charge on the underlying pre-tax profit of £35.9m from
continuing operations consists of current tax of £1.0m relating to the UK
(2007: £nil), current tax of £0.1m relating to the US (2007: £3.7m), deferred
tax of £2.5m relating to the UK (2007: £3.7m) and deferred tax of £9.3m
relating to the US (2007: £2.8m).
7. Earnings per share
Basic and diluted earnings per share for the three months ended 31 July 2008
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
(excluding shares held in treasury and by the ESOT over which dividends have
been waived). Diluted earnings per share are 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 31 July
2008 2007
Profit for the financial period (£m)
From continuing operations 22.5 16.0
From discontinued operations 59.7 1.6
-------------------
From continuing and discontinued operations 82.2 17.6
===================
Weighted average number of shares (m)
- basic 515.4 551.7
===================
- diluted 516.1 557.6
===================
Basic earnings per share
From continuing operations 4.3p 2.9p
From discontinued operations 11.6p 0.3p
-------------------
From continuing and discontinued operations 15.9p 3.2p
===================
Diluted earnings per share
From continuing operations 4.3p 2.9p
From discontinued operations 11.6p 0.3p
-------------------
From continuing and discontinued operations 15.9p 3.2p
===================
Underlying earnings per share (defined in any period as the earnings before
exceptional items, amortisation of acquired intangibles 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 other deferred taxes 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 31 July
2008 2007
Basic earnings per share 15.9p 3.2p
Exceptional items and intangible amortisation (12.9)p 0.1p
Exceptional deferred tax and tax on exceptional items and 1.8p 0.3p
amortisation -------------------
Underlying earnings per share 4.8p 3.6p
Other deferred tax 2.5p 1.3p
-------------------
Cash tax earnings per share 7.3p 4.9p
===================
8. Property, plant and equipment
2008 2007
Rental Rental
equipment Total equipment Total
£m £m £m £m
Net book value
At 1 May 994.0 1,130.1 920.6 1,048.0
Exchange difference (0.1) (0.1) (11.1) (12.4)
Additions 96.6 108.5 113.8 124.2
Disposals (11.5) (12.1) (18.6) (19.6)
Depreciation (39.9) (45.9) (38.3) (44.3)
---------------------------------------
At 31 July 1,039.1 1,180.5 966.4 1,095.9
=======================================
9. Called up share capital
Ordinary shares of 10p each
2008 2007 2008 2007
Number Number £m £m
Authorised 900,000,000 900,000,000 90.0 90.0
==========================================
Allotted, called up and fully paid 561,572,726 559,973,028 56.2 56.0
==========================================
Since 30 April 2008, 655,821 ordinary shares of 10p each were re-issued out of
treasury at an average price of 22.8p per share under share option plans
raising £0.1m. In addition, during the period the Company purchased 19,644,038
shares at a total cost of £13.1m, which are held in treasury.
10. Statement of changes in shareholders' equity
Cumulative
Own foreign
Non shares exchange
Share Share distributable Treasury held by translation Distributable 31 July
capital premium reserves stock ESOT differences reserves Total 2007
£m £m £m £m £m £m £m £m
Total recognised
income and expense - - - - - (0.2) 82.0 81.8 15.5
Shares re-issued - - - 0.1 - - - 0.1 -
Treasury shares - - - (13.1) - - - (13.1) -
purchased
Share based payments - - - - - - 0.5 0.5 -
Vesting of share - - - - - - - - 0.7
awards
Own shares purchased - - - - - - - - (0.5)
Realisation of
foreign exchange
translation - - - - - 1.3 - 1.3 -
differences
---------------------------------------------------------------------------------------
Net changes in - - - (13.0) - 1.1 82.5 70.6 15.7
shareholders' equity
Opening shareholders' 56.2 3.6 90.7 (23.3) (7.0) (28.2) 344.1 436.1 396.7
equity
---------------------------------------------------------------------------------------
Closing shareholders' 56.2 3.6 90.7 (36.3) (7.0) (27.1) 426.6 506.7 412.4
equity
=======================================================================================
11. Notes to the cash flow statement
Three months to 31 July
2008 2007
£m £m
a) Cash flow from operating activities
Operating profit before exceptional items and amortisation:
- continuing operations 51.7 47.4
- discontinued operations 2.8 2.3
---------------
54.5 49.7
---------------
Depreciation:
- continuing operations 45.9 43.0
- discontinued operations - 1.3
---------------
45.9 44.3
---------------
EBITDA before exceptional items 100.4 94.0
Profit on disposal of property, plant and equipment (2.5) (4.2)
(Increase)/decrease in inventories (1.1) 0.1
Increase in trade and other receivables (11.3) (9.1)
Increase in trade and other payables 7.7 3.6
Exchange differences 0.1 0.2
Other non-cash movements 0.5 0.7
---------------
Cash generated from operations before exceptional items 93.8 85.3
===============
b) Reconciliation to net debt
Decrease/(increase) in cash in the period 0.3 (0.2)
Decrease in debt through cash flow (113.3) (7.7)
---------------
Change in net debt from cash flows (113.0) (7.9)
Exchange difference 0.1 (14.2)
Non-cash movements:
- deferred costs of debt raising 0.6 0.5
- capital element of new finance leases 0.7 0.1
---------------
Movement in net debt in the period (111.6) (21.5)
Opening net debt 963.2 915.9
---------------
Closing net debt 851.6 894.4
===============
c) Analysis of net debt
1 May Exchange Cash Non-cash 31 July
2008 movement flow movements 2008
£m £m £m £m £m
Cash (1.8) - 0.3 - (1.5)
Debt due within 1 year 7.6 - (12.0) - (4.4)
Debt due after 1 year 957.4 0.1 (101.3) 1.3 857.5
----------------------------------------------------
Total net debt 963.2 0.1 (113.0) 1.3 851.6
====================================================
Details of the changes in the Group's debt are given in the Review of Balance
Sheet and Cashflow accompanying these interim financial statements.
12. Disposal of Ashtead Technology
The Group announced the disposal of its Ashtead Technology division on 23 June
2008 for a cash consideration of £96.0m which has been applied to reduce
outstanding debt. Ashtead Technology has been accounted for as a discontinued
operation and accordingly the after tax profit for the period from its
operations and the gain on the sale of its assets and liabilities has been
shown as a single line item within the Group's income statement. The profit
after taxation from operations of the business sold comprises:
2008 2007
£m £m
Revenue 4.7 6.3
Operating costs (1.9) (2.7)
------------------
EBITDA 2.8 3.6
Depreciation - (1.3)
------------------
Operating profit 2.8 2.3
Net financing costs - -
------------------
Profit before taxation from operations 2.8 2.3
Taxation (0.8) (0.7)
------------------
Profit after taxation from operations 2.0 1.6
Gain on sale of Ashtead Technology, after taxation 57.7 -
------------------
Profit after taxation from discontinued operations 59.7 1.6
==================
The £0.8m tax charge consists of a deferred tax charge of £0.4m (2007: £0.3m)
relating to the UK, a deferred tax charge of £0.3m relating to the US (2007: £
0.3m) and a current tax charge of £0.1m (2007: £0.1m) relating to Singapore.
The assets and liabilities of Ashtead Technology as at the date of disposal
were:
2008
£m
Assets
Cash and cash equivalents 2.8
Inventories 0.1
Trade and other receivables 5.4
Taxation assets 1.1
Property, plant and equipment - rental equipment 18.8
- other assets 0.3
------
19.1
Goodwill 2.0
------
Total assets of the disposal group 30.5
------
Liabilities
Trade and other payables 4.9
Taxation liabilities 2.8
------
Total liabilities of the disposal group 7.7
------
Net assets 22.8
======
The proceeds from the sale of Ashtead Technology which have been included in
the profit after tax from discontinued operations are as follows:
Sale of Ashtead Technology 2008
£m
Consideration received 96.0
Less: Costs of disposal (4.6)
------
Net disposal consideration 91.4
Less: Carrying amounts of net assets disposed of (22.8)
Less: Recycling of cumulative foreign exchange translation (1.3)
differences
------
Gain on sale before taxation 67.3
Taxation (9.6)
------
57.7
======
The results of the discontinued operations which have been included in the
consolidated cash flow statement are as follows:
2008 2007
£m £m
Cash flows attributable to discontinued operations
Cash flows from operating activities 3.7 2.9
Cash flows from investing activities (0.9) (1.1)
Cash flows from financing activities (0.3) (1.4)
---------------------
2.5 0.4
=====================
Net cash inflow on disposal 2008
£m
Consideration received in cash 96.0
Less: Cash and cash equivalents balance sold (2.8)
Less: Costs of disposal paid (3.4)
------
Net consideration reported on cash flow statement 89.8
======
13. Contingent liabilities and contingent assets
There have been no significant changes in contingent liabilities from those
reported at 30 April 2008. The Group remains subject to periodic legal claims
in the ordinary course of its business. However, the claims outstanding at 31
July 2008 are not expected to have a significant impact on the Group's
financial position.
As part of the NationsRent acquisition, the Group has agreed to pay deferred
contingent consideration of up to $89m. The amount of the deferred contingent
consideration is linked to the Company's share price performance over the three
years from 1 September 2006 to 31 August 2009. In the event that the Company's
share price (measured on a five day average basis) rises by more than 22.2%
above the reference price of 204p (as adjusted for the bonus element of the
rights issue), contingent consideration becomes payable at the rate of $5m for
every additional 1% rise in the share price up to a maximum of 40% above the
reference price. Accordingly, deferred contingent consideration starts to
become payable when the Company's share price reaches 250p with the maximum
$89m being payable at 286p. The contingent consideration is payable on a
quarterly basis in cash. It is not practicable to estimate reliably the amount
of contingent consideration which will become payable and accordingly no
provision has been made.
REVIEW OF BALANCE SHEET AND CASH FLOW
Balance sheet
Fixed assets
Capital expenditure in the quarter was £108.5m of which £96.6m was invested in
the rental fleet (2007: £124.2m in total). Expenditure on rental equipment was
89% of total capital expenditure with the balance relating to our delivery
vehicle fleet, property improvements and to computer equipment. Capital
expenditure by division was as follows:
31 July 2008 2007
Growth Maintenance Total Total
Sunbelt in $m 58.0 51.8 109.8 155.2
==================================
Sunbelt in £m 29.2 26.2 55.4 76.4
A-Plant 24.8 16.4 41.2 35.0
----------------------------------
Continuing operations 54.0 42.6 96.6 111.4
Ashtead Technology - - - 2.4
----------------------------------
Total rental equipment 54.0 42.6 96.6 113.8
==================================
Delivery vehicles, property improvements & 11.9 10.4
computers ---------------
Total additions 108.5 124.2
===============
The average age of the Group's serialised rental equipment, which constitutes
the substantial majority of our fleet, at 31 July 2008 was 31 months (2007: 29
months) on a net book value basis. Sunbelt's fleet had an average age of 34
months (2007: 30 months) comprising 37 months for aerial work platforms which
have a longer life and 31 months for the remainder of its fleet and A-Plant's
fleet had an average age of 22 months (2007: 24 months).
The original cost of the Group's rental fleet and the dollar and physical
utilisation for the twelve months ended 31 July 2008 are shown below:
Rental fleet at original cost LTM rental
and
rental LTM LTM
31 July 30 April LTM related dollar physical
2008 2008 average revenues utilisation utilisation
Sunbelt in $m 2,371 2,314 2,323 1,436 62% 68%
==========================================
Sunbelt in £m 1,197 1,168 1,173 728 62% 68%
A-Plant 385 360 360 212 59% 71%
------------------------------------------ =========
1,582 1,528 1,533 940 61%
======================================================
Dollar utilisation is defined as rental and rental related revenues divided by
average fleet at original (or "first") cost. Dollar utilisation at Sunbelt was
62% in the twelve months ended 31 July 2008 and 59% at A-Plant. Physical
utilisation is time based utilisation which is calculated as the daily average
of the original cost of equipment on rent as a percentage of the total value of
equipment in the fleet at the measurement date.
Trade receivables
Receivable days at 31 July 2008 were 48 days (2007: 49 days). The bad debt
charge for the three months ended 31 July 2008 as a percentage of total
turnover was 0.9% (2007: 0.5%).
Trade and other payables
Group payable days were 70 days in 2008 (2007: 70 days). Capital expenditure
related payables at 31 July 2008 totalled £74.6m (2007: £87.5m). Payment
periods for purchases other than rental equipment vary between 7 and 45 days
and for rental equipment between 30 and 120 days.
Cash flow
Free cash flow (defined as the net cash inflow from operations less net
maintenance capital expenditure, financing costs paid and tax paid) is
summarised below:
Three months to LTM to Year to
31 July 31 July 30 April
2008 2007 2008 2008
£m £m £m £m
EBITDA before exceptional items 100.4 94.0 386.4 380.0
=====================================
Cash inflow from operations
before exceptional items 93.8 85.3 364.9 356.4
Cash efficiency ratio* 93.4% 90.7% 94.4% 93.8%
Maintenance rental capital expenditure (30.7) (57.3) (168.7) (195.3)
Non-rental capital expenditure (11.2) (10.5) (36.5) (35.8)
Proceeds from sale of used rental 10.8 30.4 73.1 92.7
equipment
Tax paid (0.1) (0.3) (6.2) (6.4)
-------------------------------------
Free cash flow before interest 62.6 47.6 226.6 211.6
Financing costs paid (4.2) (13.0) (67.6) (76.4)
-------------------------------------
Free cash flow after interest 58.4 34.6 159.0 135.2
Growth capital expenditure (21.9) (20.8) (121.5) (120.4)
Dividends paid - - (10.5) (10.5)
-------------------------------------
Cash flow available for acquisitions,
buy-backs and disposals 36.5 13.8 27.0 4.3
Acquisitions and disposals 89.8 - 83.9 (5.9)
Purchase of own shares by the Company (12.8) - (35.7) (22.9)
Purchase of own shares by the ESOT - ( 0.5) (1.1) (1.6)
Proceeds from share issues 0.1 - 0.6 0.5
Exceptional costs paid (net) (0.6) (5.4) (4.7) (9.5)
-------------------------------------
Reduction/(increase) in total debt 113.0 7.9 70.0 (35.1)
=====================================
* Cash inflow from operations before exceptional items as a percentage of
EBITDA before exceptional items.
First quarter cash inflow from operations increased by 10.0% to £93.8m and the
cash efficiency ratio was 93.4% (2007: 90.7%). Net cash capital expenditure in
the three months ended 31 July 2008 decreased to £53.0m (2007: £58.2m). Tax
payments remain low reflecting tax depreciation in excess of book and
utilisation of tax losses. Financing costs paid are lower than the accounting
charge in the income statement due to the timing of interest payments in the
year, with accrued unpaid interest at 31 July 2008 totalling £20.9m (2007: £
18.7m).
The Group continues to generate strong free cash flow after interest, with £
58.4m (2007: £34.6m) generated in the period. On a last twelve months basis,
free cash flow before one time and discretionary items increased to £159.0m (£
135.2m in the year ended 30 April 2008).
Net debt
31 July 30 April
2008 2007 2008
£m £m £m
First priority senior secured bank debt 445.1 493.0 556.2
Finance lease obligations 14.2 19.9 15.2
8.625% second priority senior secured notes, due 2015 122.3 118.7 122.2
9% second priority senior secured notes, due 2016 271.5 264.1 271.4
--------------------------
853.1 895.7 965.0
Cash and cash equivalents (1.5) (1.3) (1.8)
--------------------------
Total net debt 851.6 894.4 963.2
==========================
Group net debt reduced from £963.2m at 30 April 2008 to £851.6m at 31 July 2008
reflecting the Technology disposal and cash generated by the business offset by
the £13m spent in the quarter on share buy-backs. The ratio of net debt to LTM
EBITDA was 2.3 times at 31 July 2008.
The Group's debt facilities are now committed for a weighted average period of
approximately 5 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 6.5%.
Financial performance covenants under the two senior secured notes issues are
measured only at the time new debt is raised. There are two financial
performance covenants under the asset based first priority senior bank facility
as follows:
- funded debt to EBITDA before exceptional items not to exceed 4.25 times
(4.0 times from April 2009); and
- a fixed charge ratio comparing EBITDA before exceptional items less net
capital expenditure paid in cash to the sum of scheduled debt repayments
plus cash interest, cash tax payments and dividends paid which is required
to be equal or greater to 1.1 times.
These covenants are not, however, required to be adhered to when availability
(the difference between the borrowing base and facility utilisation) exceeds
$125m. At 31 July 2008 availability under the bank facility, including
suppressed availability of $59m, was $861m ($602m at 30 April 2008). Although
the covenants were therefore not required to be measured at 31 July 2008, the
Group was in compliance with both of them at that date.
Principal risks and uncertainties
Risks and uncertainties in achieving the Group's objectives for the remainder
of the financial year, together with assumptions, estimates, judgements and
critical accounting policies used in preparing financial information remain
unchanged from those detailed in the 2008 Annual Report and Accounts on pages
25 to 27. 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.
Fluctuations in the value of the US dollar with respect to the pound sterling
have had, and may continue to have, a significant impact on our financial
condition and results of operations as reported in pounds due to the majority
of our assets, liabilities, revenues and costs being denominated in US dollars.
Approximately 99% of our debt was denominated in US dollars at 31 July 2008. At
that date dollar denominated debt represented approximately 80% of the value of
dollar denominated net assets (other than debt) providing a partial, but
substantial, hedge against the translation effects of changes in the dollar
exchange rate. The dollar interest payable on this debt also limits the impact
of changes in the dollar exchange rate on our pre-tax profits and earnings.
Based on the currency mix of our profits currently prevailing and on dollar
debt levels and interest and exchange rates at 31 July 2008, a 1% change in the
US dollar exchange rate would impact pre-tax profit by 0.7%.
In addition, the current trading and outlook section of this interim statement
provides a commentary on market and economic conditions for the remainder of
the financial year.
OPERATING STATISTICS
Profit centre numbers Staff numbers
31 July 30 April 31 July 30 April
2008 2007 2008 2008 2007 2008
Sunbelt 432 451 430 7,025 7,531 7,039
A-Plant 188 201 192 2,396 2,385 2,422
Ashtead Technology - 13 13 - 119 120
Corporate office - - - 13 14 13
------------------------------------------------
Group 620 665 635 9,434 10,049 9,594
================================================
Sunbelt's profit centre numbers include 90 Sunbelt at Lowes stores at 31 July
and 30 April 2008 (99 at 31 July 2007).
Latest directors dealings
- 1 day ago Premier Miton Group
- 1 day ago YouGov
- 1 day ago K3 Business Technology Group
- 1 day ago Foresight Group Holdings Limited NPV
- 1 day ago Investec