1st Quarter Results

Unaudited results for the first quarter ended 31 July 2009 First quarter ------------- Financial summary 2009 2008 ----------------- ---- ---- £m £m % Underlying revenue(1) 221.6 273.4 -19% Underlying operating profit(1) 23.9 51.7 -54% Underlying profit before taxation(1) 8.8 35.9 -75% Underlying earnings per share(1) 1.2p 4.8p -76% Profit before taxation 8.2 35.2 -77% Basic earnings per share 1.1p 15.9p -93% (1) See explanatory note below Highlights ---------- * Performance in line with market expectations * Gaining market share in difficult construction markets * £57m net cash inflow from operations in the quarter (2008: £36m) * Net debt at 31 July of £873m (30 April 2009 - £1,036m) * Net debt to EBITDA leverage of 2.6 times, comfortably within our target range Ashtead's chief executive, Geoff Drabble, commented: "As anticipated market conditions remain difficult; however, the actions we have taken to cut costs and reduce fleet size have ensured that our margins have held up well. Our continuing focus on developing stronger customer relationships and maintaining an infrastructure to provide excellent customer service throughout the cycle has been rewarded with clear market share gains. We expect that market conditions and trading levels will remain largely unchanged for the second quarter. Visibility for Q3 and Q4, our seasonally more challenging periods, is less clear both in terms of demand and the pricing environment. However, the Board continues to believe that the actions taken will deliver full year results and cash generation in line with its expectations. We continue to believe that the fundamentals of our business model and the markets we serve remain attractive. Ashtead is well placed both in terms of its continuing operational momentum and its financial strength to benefit when markets recover." Contacts: --------- Geoff Drabble Chief executive 020 7726 9700 Ian Robson Finance director Brian Hudspith Maitland 020 7379 5151 Explanatory note ---------------- Underlying revenue, 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. The reconciliation of underlying earnings per share and underlying cash tax 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 8 September. Dial in details for this call have already been distributed but any analyst not having received them should contact Ashley Forget 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 3.30pm UK time (10.30am EST). Trading results --------------- Revenue EBITDA Operating profit ------- ------ ---------------- 2009 2008 2009 2008 2009 2008 ---- ---- ---- ---- ---- ---- Sunbelt in $m 287.7 422.0 98.9 158.6 38.9 92.0 ===== ===== ==== ===== ==== ==== Sunbelt in £m 179.0 213.8 61.6 80.3 24.3 46.5 A-Plant 42.6 59.6 11.4 19.2 1.1 7.1 Group central costs - - (1.4) (1.9) (1.5) (1.9) --- --- --- --- --- --- Continuing operations 221.6 273.4 71.6 97.6 23.9 51.7 ===== ===== ==== ==== Net financing costs (15.1) (15.8) Profit before tax, exceptionals and amortisation from continuing operations 8.8 35.9 Ashtead Technology - 2.8 Exceptional items (net) - 67.3 Amortisation (0.6) (0.7) --- --- Total Group profit before taxation 8.2 105.3 Taxation (2.8) (23.1) --- ---- Profit attributable to equity holders of the Company 5.4 82.2 === ==== Margins ------- Sunbelt 34.4% 37.6% 13.5% 21.8% A-Plant 26.7% 32.2% 2.6% 11.9% Group 32.3% 35.7% 10.8% 18.9% First quarter results reflected the prevailing market conditions with rental revenues declining in Sunbelt by 29% to $268.1m and in A-Plant by 26% to £ 39.9m. Total revenue reductions were 32% in Sunbelt and 28% in A-Plant due to the greater reduction in sales of equipment, merchandise and consumables. The volume of fleet on rent held up well as a result of market share gains. Average fleet on rent in the quarter reduced 12% year on year at Sunbelt and 17% at A-Plant. Pricing continued to be under pressure in both markets with yield declining 19% in Sunbelt and 10% in A-Plant compared to the same period in the prior year. Encouragingly, during the quarter we saw yield stabilising in both markets. Our prompt action on cost reduction measures is reflected in the quarter's results with operating costs down 28% in Sunbelt and 23% in A-Plant. As a result, Group EBITDA margins remain above 30% and underlying operating profit margins above 10%. In sterling, including the translation benefit from the stronger dollar, this meant that a first quarter revenue reduction of £52m was held to declines of only about half that amount at the EBITDA, operating profit and pre-tax levels. Accordingly the underlying pre-tax profit for the quarter was £8.8m (2008: £35.9m). Whilst we continue to take appropriate actions on cost control, we are balancing this with the ongoing needs of the business. We remain confident as to the fundamentals of our markets and therefore continue to focus on developing long-term relationships across a wide range of market sectors. Our success in market share gains is demonstrated by our relatively strong volumes of fleet on rent and rental revenues. These successes will provide the springboard for improving margins and revenues as markets recover. The effective tax rate for the quarter was broadly stable at 35% (2008: 36%). Underlying earnings per share for the quarter decreased to 1.2p (2008: 4.8p) whilst basic earnings per share for the quarter were 1.1p (2008: 15.9p, including the 11.6p impact of June 2008's exceptional gain on disposal of Ashtead Technology). Capital expenditure ------------------- Capital expenditure in the quarter was £15.2m (2008: £108.5m) including £12.2m on rental fleet replacement. Disposal proceeds were £6.0m, including £1.2m from the disposal of most of the remaining assets held for sale at year end, giving net capital expenditure in the first quarter of £9.2m (2008: £93.9m). We retain a significant ability to age our fleet and sustain our free cash flow at a time of lower earnings. This is a result of the relatively low average age of the Group's rental fleet which, at 31 July 2009, was 37 months (2008: 31 months). This year's capital expenditure is again expected to be entirely for replacement rather than growth. We currently anticipate spending this year around £100m gross and £75m net of disposal proceeds. With short lead times and no forward commitments, we have the flexibility to adjust this as required to reflect market conditions. Cash flow and net debt ---------------------- £56.5m of net cash inflow was generated from operations in the quarter, up 58% on last year's £35.9m, all of which was applied to reduce outstanding debt. As a result, including the benefit of a translation gain of £108m, closing net debt at 31 July 2009 reduced to £873m (30 April 2009: £1,036m). The ratio of net debt to EBITDA was 2.6 times at 31 July 2009 well within our 2-3 times target range. Our debt package remains well structured for the challenges of current market conditions. We retain substantial headroom on facilities which are committed for the long term, an average of 4.6 years at 31 July 2009, with the first maturity on our asset-based senior bank facility not being due until August 2011. Availability under the $1.7bn asset-based loan facility was $635m at 31 July 2009 ($550m at 30 April 2009) well above the $125m level at which the entire debt package is covenant free. Current trading and outlook --------------------------- We expect that market conditions and trading levels will remain largely unchanged for the second quarter. Visibility for Q3 and Q4, our seasonally more challenging periods, is less clear both in terms of demand and the pricing environment. However, the Board continues to believe that the actions taken will deliver full year results and cash generation in line with its expectations. We continue to believe that the fundamentals of our business model and the markets we serve remain attractive. Ashtead is well placed both in terms of its continuing operational momentum and its financial strength to benefit when markets recover. CONSOLIDATED INCOME STATEMENT FOR THE THREE MONTHS ENDED 31 JULY 2009 2009 2008 ---- ---- Before Before exceptional items Exceptional items exceptional items Exceptional items and amortisation and amortisation Total and amortisation and amortisation Total ---------------- ---------------- ----- ---------------- ---------------- ----- (restated) (restated) £m £m £m £m £m £m Continuing operations Revenue Rental revenue 206.8 - 206.8 244.1 - 244.1 Sale of new equipment merchandise and consumables 11.1 - 11.1 15.4 - 15.4 Sale of used rental equipment 3.7 1.2 4.9 13.9 - 13.9 --- --- --- ---- --- ---- 221.6 1.2 222.8 273.4 - 273.4 ----- --- ----- ----- --- ----- Operating costs Staff costs (70.0) - (70.0) (75.4) - (75.4) Used rental equipment sold (4.4) (1.2) (5.6) (11.6) - (11.6) Other operating costs (75.7) - (75.7) (89.0) - (89.0) Other income 0.1 - 0.1 0.2 - 0.2 --- --- --- --- --- --- (150.0) (1.2) (151.2) (175.8) - (175.8) ----- --- ----- ----- --- ----- EBITDA* 71.6 - 71.6 97.6 - 97.6 Depreciation (47.7) - (47.7) (45.9) - (45.9) Amortisation of intangibles - (0.6) (0.6) - (0.7) (0.7) --- --- --- --- --- --- Operating profit 23.9 (0.6) 23.3 51.7 (0.7) 51.0 Net financing costs (15.1) - (15.1) (15.8) - (15.8) ---- --- ---- ---- --- ---- Profit on ordinary activities before taxation 8.8 (0.6) 8.2 35.9 (0.7) 35.2 Taxation: - current (0.9) - (0.9) (1.1) - (1.1) - deferred (2.1) 0.2 (1.9) (11.8) 0.2 (11.6) --- --- --- ---- --- ---- (3.0) 0.2 (2.8) (12.9) 0.2 (12.7) --- --- --- ---- --- ---- Profit from continuing operations 5.8 (0.4) 5.4 23.0 (0.5) 22.5 Profit from discontinued operations - - - 2.0 57.7 59.7 --- --- --- --- ---- ---- Profit attributable to equity holders of the Company 5.8 (0.4) 5.4 25.0 57.2 82.2 === === === ==== ==== ==== Continuing operations Basic earnings per share 1.2p (0.1p) 1.1p 4.4p (0.1p) 4.3p === === === === === === Diluted earnings per share 1.2p (0.1p) 1.1p 4.4p (0.1p) 4.3p === === === === === === Total continuing and discontinued operations Basic earnings per share 1.2p (0.1p) 1.1p 4.8p 11.1p 15.9p === === === === ==== ==== Diluted earnings per share 1.2p (0.1p) 1.1p 4.8p 11.1p 15.9p === === === === ==== ==== * EBITDA is presented here as an additional performance measure as it is commonly used by investors and lenders. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED 31 JULY 2009 2009 2008 ---- ---- (restated) £m £m Profit attributable to equity holders of the Company for the period 5.4 82.2 Foreign currency translation differences (24.4) (0.2) ---- --- Total comprehensive income for the period (19.0) 82.0 ==== ==== Details of principal risks and uncertainties are given in the Review of the Balance Sheet and Cashflow accompanying these interim financial statements. CONSOLIDATED BALANCE SHEET AT 31 JULY 2009 31 July 30 April 2009 2008 2009 ---- ---- ---- (restated) £m £m £m Current assets Inventories 9.5 23.7 10.4 Trade and other receivables 137.6 175.2 148.3 Current tax asset 1.0 2.2 1.5 Cash and cash equivalents 2.4 1.5 1.7 --- --- --- 150.5 202.6 161.9 Assets held for sale 0.3 - 1.6 --- --- --- 150.8 202.6 163.5 ----- ----- ----- Non-current assets Property, plant and equipment - rental equipment 1,011.8 1,039.1 1,140.5 - other assets 137.2 141.4 153.5 ----- ----- ----- 1,149.0 1,180.5 1,294.0 Intangible assets - brand names and other acquired intangibles 5.0 7.3 5.9 Goodwill 346.0 291.9 385.4 Deferred tax asset 10.6 17.1 12.3 Defined benefit pension fund surplus 0.4 6.0 0.3 --- --- --- 1,511.0 1,502.8 1,697.9 ------- ------- ------- Total assets 1,661.8 1,705.4 1,861.4 ======= ======= ======= Current liabilities Trade and other payables 108.5 193.9 106.7 Current tax liability - 1.0 - Debt due within one year 5.9 7.9 6.9 Provisions 14.3 8.5 17.4 ---- --- ---- 128.7 211.3 131.0 ----- ----- ----- Non-current liabilities Debt due after more than one year 869.0 845.2 1,030.7 Provisions 34.3 19.2 36.8 Deferred tax liabilities 122.6 118.6 136.9 ----- ----- ----- 1,025.9 983.0 1,204.4 ------- ----- ------- Total liabilities 1,154.6 1,194.3 1,335.4 ------- ------- ------- Equity Share capital 55.3 56.2 55.3 Share premium account 3.6 3.6 3.6 Capital redemption reserve 0.9 - 0.9 Non-distributable reserve 90.7 90.7 90.7 Own shares held by the Company (33.1) (36.3) (33.1) Own shares held through the ESOT (6.3) (7.0) (6.3) Cumulative foreign exchange translation differences 4.7 (27.1) 29.1 Retained reserves 391.4 431.0 385.8 ----- ----- ----- Equity attributable to equity holders of the Company 507.2 511.1 526.0 ----- ----- ----- Total liabilities and equity 1,661.8 1,705.4 1,861.4 ======= ======= ======= CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE THREE MONTHS ENDED 31 JULY 2009 Cumulative Own foreign Share Capital Non- shares exchange Share premium redemption distributable Treasury held by translation Distributable capital account reserve reserve stock ESOT differences reserves Total ------- ------- ------- ------- ----- ---- ----------- -------- ----- £m £m £m £m £m £m £m £m £m At 1 May 2008 as restated 56.2 3.6 - 90.7 (23.3) (7.0) (28.2) 348.3 440.3 Total comprehensive income for the period - - - - - - (0.2) 82.2 82.0 Shares issued - - - - 0.1 - - - 0.1 Share-based payments - - - - - - - 0.5 0.5 Own shares purchased - - - - (13.1) - - - (13.1) Realisation of foreign exchange translation differences - - - - - - 1.3 - 1.3 --- --- --- --- --- --- --- --- --- At 31 July 2008 56.2 3.6 - 90.7 (36.3) (7.0) (27.1) 431.0 511.1 Total comprehensive income for the period - - - - - - 56.3 (24.2) 32.1 Shares issued/re-issued - - - - 0.4 - - (0.3) 0.1 Dividends paid - - - - - - - (12.9)(12.9) Share-based payments - - - - - - - (1.3) (1.3) Vesting of share awards - - - - - 1.1 - (1.1) - Own shares purchased - - - - (2.6) (0.4) - - (3.0) Cancellation of shares held in treasury by the Company 0.9 - 0.9 - 5.4 - - (5.4) - Realisation of foreign exchange translation differences - - - - - - (0.1) - (0.1) --- --- --- --- --- --- --- --- --- At 30 April 2009 55.3 3.6 0.9 90.7 (33.1) (6.3) 29.1 385.8 526.0 Total comprehensive income for the period - - - - - - (24.4) 5.4 (19.0) Share-based payments - - - - - - - 0.2 0.2 --- --- --- --- --- --- --- --- --- At 31 July 2009 55.3 3.6 0.9 90.7 (33.1) (6.3) 4.7 391.4 507.2 ==== === === ==== ==== === === ===== ===== CONSOLIDATED CASH FLOW STATEMENT FOR THE THREE MONTHS ENDED 31 JULY 2009 2009 2008 ---- ---- (restated) £m £m Cash flows from operating activities Cash generated from operations before exceptional items and changes in rental fleet 74.7 93.8 Exceptional costs paid (2.7) (0.6) Payments for rental property, plant and equipment (16.4) (52.6) Proceeds from disposal of rental property, plant and equipment before exceptional disposals 4.7 9.7 Exceptional proceeds from disposal of rental property, plant and equipment 1.2 - --- --- Cash generated from operations 61.5 50.3 Financing costs paid (2.6) (4.2) Tax paid (0.5) (0.1) --- --- Net cash from operating activities 58.4 46.0 ---- ---- Cash flows from investing activities Disposal of businesses - 89.8 Payments for non-rental property, plant and equipment (2.7) (11.2) Proceeds on sale of non-rental property, plant and equipment 0.8 1.1 --- --- Net cash (used in)/from investing activities (1.9) 79.7 Cash flows from financing activities --- ---- Drawdown of loans 9.3 10.1 Redemption of loans (63.6) (121.8) Capital element of finance lease payments (1.4) (1.6) Purchase of own shares by the Company - (12.8) Proceeds from issue of ordinary shares - 0.1 --- --- Net cash used in financing activities (55.7) (126.0) ---- ----- Increase/(decrease) in cash and cash equivalents 0.8 (0.3) Opening cash and cash equivalents 1.7 1.8 Effect of exchange rate differences (0.1) - --- --- Closing cash and cash equivalents 2.4 1.5 === === NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 1. Basis of preparation The financial statements for the three months ended 31 July 2009 were approved by the directors on 7 September 2009. 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 2009 except for the adoption of `IAS 1 (revised) - Presentation of financial statements'. The adoption of IAS 1 (revised) has resulted in the `Consolidated statement of changes in equity' being presented as a primary statement (previously disclosed as a note titled `Reconciliation of changes in equity'). In addition, the Group has continued to present a separate `Income statement' and `Statement of comprehensive income' (previously titled `Statement of recognised income and expense'). The adoption of IAS 1 (revised) has had no impact on the consolidated results or financial position of the Group. The financial statements are unaudited and do not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. The statutory accounts for the year ended 30 April 2009 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 include a reference to any matter by way of emphasis without qualifying the report and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The figures for the first quarter are unaudited. The exchange rates used in respect of the US dollar are: 2009 2008 ---- ---- Average for the quarter ended 31 July 1.61 1.97 At 31 July 1.66 1.98 2. Segmental analysis Operating Revenue profit before Exceptional before exceptionals items and Operating exceptionals and amortisation amortisation profit ------------ ---------------- ------------ ------ Three months to 31 July £m £m £m £m 2009 ---- Sunbelt 179.0 24.3 (0.5) 23.8 A-Plant 42.6 1.1 (0.1) 1.0 Corporate costs - (1.5) - (1.5) --- --- --- --- 221.6 23.9 (0.6) 23.3 ===== ==== === ==== 2008 ---- Sunbelt 213.8 46.5 (0.5) 46.0 A-Plant 59.6 7.1 (0.2) 6.9 Corporate costs - (1.9) - (1.9) --- --- --- --- 273.4 51.7 (0.7) 51.0 ===== ==== === ==== Segment assets Cash Taxation assets Total assets -------------- ---- --------------- ------------ At 31 July 2009 Sunbelt 1,327.8 - - 1,327.9 A-Plant 319.8 - - 319.7 Central items 0.2 2.4 11.6 14.2 --- --- ---- ---- 1,647.8 2.4 11.6 1,661.8 ======= === ==== ======= At 30 April 2009 Sunbelt 1,514.7 - - 1,514.7 A-Plant 331.0 - - 331.0 Central items 0.2 1.7 13.8 15.7 --- --- ---- ---- 1,845.9 1.7 13.8 1,861.4 ======= === ==== =======3. Operating costs 2009 2008 ---- ---- 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 Three months to July 31 Staff costs: Salaries 64.4 - 64.4 68.8 - 68.8 Social secutiry costs 5.1 - 5.1 5.2 - 5.2 Other pension costs 0.5 - 0.5 1.4 - 1.4 --- --- --- --- --- --- 70.0 - 70.0 75.4 - 75.4 ---- --- ---- ---- --- ---- Used rental equipment sold 4.4 1.2 5.6 11.6 - 11.6 --- --- --- ---- --- ---- Other operating costs: Vehicle costs 16.2 - 16.2 21.9 - 21.9 Spares, consumables & external repairs 13.4 - 13.4 14.8 - 14.8 Facility costs 11.4 - 11.4 10.4 - 10.4 Other external charges 34.7 - 34.7 41.9 - 41.9 ---- --- ---- ---- --- ---- 75.7 - 75.7 89.0 - 89.0 ---- --- ---- ---- --- ---- Other income: Profit on disposal of non-rental property,plant and equipment (0.1) - (0.1) (0.2) - (0.2) --- --- --- --- --- --- Depreciation and amortisation: Depreciation 47.7 - 47.7 45.9 - 45.9 Amortisation of acquired intangibles - 0.6 0.6 - 0.7 0.7 --- --- --- --- --- --- 47.7 0.6 48.3 45.9 0.7 46.6 ---- --- ---- ---- --- ---- 197.7 1.8 199.5 221.7 0.7 222.4 ===== === ===== ===== === ===== 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 2009 2008 ---- ---- £m £m Profit on sale of Ashtead Technology - 67.3 Taxation on exceptional items - (9.6) --- --- Total exceptional items - 57.7 Amortisation of acquired intangibles (net of tax credit) (0.4) (0.5) --- --- (0.4) 57.2 === ==== The items detailed in the table above are presented in the income statement as follows: Three months to 31 July 2009 2008 ---- ---- £m £m Sale of used rental equipment 1.2 - Used rental equipment sold (1.2) - Amortisation of acquired intangibles (0.6) (0.7) --- --- Charged on arriving at operating profit and profit before tax (0.6) (0.7) Taxation 0.2 0.2 --- --- (0.4) (0.5) Profit after taxation from discontinued operations - 57.7 --- ---- (0.4) 57.2 === ==== 5. Financing costs Three months to 31 July 2009 2008 ---- ---- £m £m Investment income: Expected return on assets of defined benefit pension plan 0.8 1.1 --- --- Interest expense: Bank interest payable 2.9 6.0 Interest payable on second priority senior secured notes 11.1 9.0 Interest payable on finance leases 0.1 0.2 Non-cash unwind of discount on defined benefit pension plan liabilities 0.8 0.8 Non-cash unwind of discount on self insurance provisions 0.3 0.3 Amortisation of deferred costs of debt raising 0.7 0.6 --- --- Total interest expense 15.9 16.9 ---- ---- Net financing costs 15.1 15.8 ==== ==== 6. Taxation The tax charge for the period has been computed using an estimated effective rate for the quarter of 36% in the US (2008: 40%) and 29% in the UK (2008: 29%) applied to the profit before tax, exceptional items and amortisation of acquired intangibles. The blended effective rate for the Group as a whole is 35%. The tax charge of £3.0m (2008: £12.9m) on the underlying pre-tax profit of £ 8.8m (2008: £35.9m) from continuing operations consists of current tax of £0.9m relating to the UK (2008: £1.0m), current tax of £nil relating to the US (2008: charge of £0.1m), deferred tax of £1.7m relating to the UK (2008: £2.5m) and deferred tax of £0.4m relating to the US (2008: charge of £9.3m). In addition, the tax credit of £0.2m (2008: £0.2m) on the amortisation charge of £0.6m (2008: £0.7m) relating to continuing operations is deferred tax and relates to the US. 7. Earnings per share Basic and diluted earnings per share for the three months ended 31 July 2009 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 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 31 July 2009 2008 ---- ---- Profit for the financial period (£m) From continuing operations 5.4 22.5 From discontinued operations - 59.7 --- ---- From continuing and discontinued operations 5.4 82.2 === ==== Weighted average number of shares (m) - basic 497.6 515.4 ===== ===== - diluted 497.7 516.1 ===== ===== Basic earnings per share From continuing operations 1.1p 4.3p From discontinued operations - 11.6p --- ---- From continuing and discontinued operations 1.1p 15.9p === ==== Diluted earnings per share From continuing operations 1.1p 4.3p From discontinued operations - 11.6p --- ---- From continuing and discontinued operations 1.1p 15.9p === ==== Underlying earnings per share (defined in any period as the earnings before exceptional items and amortisation of acquired intangibles 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 2009 2008 ---- ---- Basic earnings per share 1.1p 15.9p Exceptional items and amortisation of acquired intangibles 0.1p (12.9p) Tax on exceptional items and amortisation - 1.8p --- --- Underlying earnings per share 1.2p 4.8p Other deferred tax 0.4p 2.5p --- --- Cash tax earnings per share 1.6p 7.3p === === 8. Property, plant and equipment 2009 2008 ---- ---- Rental Rental equipment Total equipment Total --------- ----- --------- ----- Net book value £m £m £m £m -------------- At 1 May 1,140.5 1,294.0 994.0 1,130.1 Exchange difference (95.5) (107.1) (0.1) (0.1) Reclassifications 0.3 - - - Additions 12.2 15.2 96.6 108.5 Disposals (4.3) (5.4) (11.5) (12.1) Depreciation (41.4) (47.7) (39.9) (45.9) ---- ---- ---- ---- At 31 July 1,011.8 1,149.0 1,039.1 1,180.5 ======= ======= ======= ======= 9. Called up share capital Ordinary shares of 10p each: 2009 2008 2009 2008 ---- ---- ---- ---- Number Number £m £m Authorised 900,000,000 900,000,000 90.0 90.0 =========== =========== ==== ==== Allotted, called up and fully paid 553,325,554 561,572,726 55.3 56.2 =========== =========== ==== ==== There were no movements in shares authorised or allotted during the period. At 31 July 2009, 50m shares were held by the Company and a further 5.8m shares were held by the Company's Employee Share Ownership Trust. 10. Notes to the cash flow statement Three months to 31 July 2009 2008 ---- ---- £m £m a. Cash flow from operating activities ----------------------------------- Operating profit before exceptional items and amortisation: - continuing operations 23.9 51.7 - discontinued operations - 2.8 --- --- 23.9 54.5 Depreciation 47.7 45.9 ---- ---- EBITDA before exceptional items 71.6 100.4 Loss/(profit)on disposal of rental equipment 0.7 (2.3) Profit on disposal of other property,plant and equipment (0.1) (0.2) Increase in inventories (0.1) (1.1) Increase in trade and other receivables (2.2) (11.3) Increase in trade and other payables 4.4 7.7 Exchange differences 0.2 0.1 Other non-cash movements 0.2 0.5 Cash generated from operations before exceptional items --- --- and changes in rental equipment 74.7 93.8 ==== ==== Three months to 31 July 2009 2008 ---- ---- £m £m b. Reconciliation to net debt -------------------------- (Increase)/decrease in cash in the period (0.8) 0.3 Decrease in debt through cash flow (55.7) (113.3) ---- ----- Change in net debt from cash flows (56.5) (113.0) Exchange differences (107.6) 0.1 Non-cash movements: - deferred costs of debt raising 0.7 0.6 - capital element of new finance leases - 0.7 --- --- Reduction in net debt in the period (163.4) (111.6) Opening net debt 1,035.9 963.2 ------- ----- Closing net debt 872.5 851.6 ===== ===== c. Analysis of net debt -------------------- 1 May Exchange Cash Non-cash 31 July 2009 movement flow movements 2009 ---- -------- ---- --------- ---- £m £m £m £m £m Cash (1.7) 0.1 (0.8) - (2.4) Debt due within 1 year 6.9 (0.5) (0.9) 0.4 5.9 Debt due after 1 year 1,030.7 (107.2) (54.8) 0.3 869.0 ------- ----- ---- --- ----- Total net debt 1,035.9 (107.6) (56.5) 0.7 872.5 ======= ===== ==== === ===== Details of the Group's debt are given in the Review of Balance Sheet and Cashflow accompanying these interim financial statements. 11. Contingent liabilities and contingent assets There have been no significant changes in contingent liabilities from those reported at 30 April 2009. REVIEW OF BALANCE SHEET AND CASH FLOW Balance sheet Fixed assets ------------ Capital expenditure in the quarter was £15.2m (2008: £108.5m) with £12.2m invested in the rental fleet (2008: £96.6m). Capital expenditure by division was as follows: 2009 2008 ---- ---- Sunbelt in $m 17.0 109.8 ==== ===== Sunbelt in £m 10.3 55.4 A-Plant 1.9 41.2 --- ---- Total rental equipment 12.2 96.6 Delivery vehicles, property improvements & computers 3.0 11.9 --- ---- Total additions 15.2 108.5 ==== ===== As a result of the decision to actively reduce fleet size in the second half of last year both Sunbelt's and A-Plant's fleets were smaller at 31 July 2009 than at 31 July 2008. Accordingly, all 2009 capital expenditure was for replacement. In 2008, £54.0m was spent on growth and £42.6m on replacement. The average age of the Group's serialised rental equipment, which constitutes the substantial majority of our fleet, at 31 July 2009 was 37 months (2008: 31 months) on a net book value basis. Sunbelt's fleet had an average age of 40 months (2008: 34 months) comprising 41 months for aerial work platforms which have a longer life and 38 months for the remainder of its fleet and A-Plant's fleet had an average age of 29 months (2008: 22 months). Rental fleet at original cost LTM LTM ----------------------------- LTM LTM rental dollar physical 31 July 2009 31 July 2008 average revenues utilisation utilisation ------------ ------------ ------- -------- ----------- ----------- Sunbelt in $m 2,144 2,371 2,238 1,204 54% 66% ===== ===== ===== ===== === === Sunbelt in £m 1,293 1,197 1,350 749 54% 66% A-Plant 318 385 352 178 50% 67% --- --- --- --- --- --- 1,611 1,582 1,702 927 ===== ===== ===== === Dollar utilisation is defined as rental revenues divided by average fleet at original (or "first") cost and, measured over the last twelve months to 31 July 2009, was 54% at Sunbelt (2008: 62%) and 50% at A-Plant (2008: 59%). 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 and, measured over the last twelve months to 31 July 2009 was 66% in Sunbelt (2008: 68%) and 67% at A-Plant (2008: 71%). Trade receivables ----------------- Receivable days at 31 July were 48 days (2008: 52 days). The bad debt charge for the quarter ended 31 July 2009 as a percentage of total turnover was 1.1% (2008: 0.9%). Trade receivables at 31 July 2009 of £117.1m (2008: £151.5m) are stated net of provisions for bad debts and credit notes of £16.6m (2008: £ 13.8m) with the provision representing 12.4% (2008: 8.4%) of gross receivables. Trade and other payables ------------------------ Group payable days were 47 days in 2009 (2008: 70 days). The reduction is due, primarily, to lower capital expenditure related payables at 31 July 2009 of £ 4.9m (2008: £74.6m) which have longer payment terms. 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 and net debt Three months to LTM Year to 31 July 31 July 30 April 2009 2008 2009 2009 ---- ---- ---- ---- £m £m £m £m EBITDA before exceptional items 71.6 100.4 330.1 358.9 ==== ===== ===== ===== Cash inflow from operations before exceptionsl items and changes in rental equipment 74.7 93.8 354.5 373.6 Cash efficiency ratio* 104.4% 93.4% 107.4% 104.1% Maintenance rental capital expenditure (16.4) (30.7) (172.3) (208.5) Non-rental capital expenditure (2.7) (11.2) (18.6) (27.1) Rental equipment disposal proceeds 5.9 9.7 81.5 85.3 Other property, plant and equipment disposal proceeds 0.8 1.1 6.3 6.6 Tax (paid)/received (0.5) (0.1) 0.4 0.8 Financing costs paid (2.6) (4.2) (63.1) (64.7) --- --- ---- ---- Cash flow before growth capex and exceptionals 59.2 58.4 188.7 166.0 Growth rental capital expenditure - (21.9) - - Exceptional costs paid (2.7) (0.6) (11.5) (9.4) --- --- ---- --- Total cash generated from operations 56.5 35.9 177.2 156.6 Business disposals/(acquisitions) - 89.8 (0.8) 89.0 --- ---- --- ---- Total cash generated 56.5 125.7 176.4 245.6 Dividends paid - - (12.9) (12.9) Share buy-backs and other equity - (12.7) (3.2) (15.9) transactions (net) --- ---- --- ---- Decrease in net debt 56.5 113.0 160.3 216.8 ==== ===== ===== ===== *Cash inflow from operations before exceptional items and changes in rental equipment as a percentage of EBITDA before exceptional items. Cash inflow from operations before exceptional items and changes in rental equipment decreased 20.4% to £74.7m reflecting the lower EBITDA in 2009 whilst the cash efficiency ratio was 104.4% (2008: 93.4%) reflecting lower working capital in the recession and reduced fleet disposal profits. Payments for capital expenditure were broadly in line with capital expenditure delivered into the fleet whilst disposal proceeds received totalled £6.7m. Net cash capital expenditure was therefore £12.4m in the quarter (2008: £53.0m). Financing costs paid differ from the accounting charge in the income statement due to the timing of interest payments in the quarter and non-cash interest charges. They reduced compared to last year due to the impact of both lower interest rates and lower average debt levels. After exceptional costs paid of £2.7m, representing mostly the settlement of staff severance and vacant property costs all of which were provided for at 30 April 2009, the Group generated £56.5m of net cash inflow in the quarter which was applied to reduce outstanding debt. Net debt -------- 31 July 30 April 2009 2008 2009 ---- ---- ---- £m £m £m First priority senior secured bank debt 396.5 445.1 501.1 Finance lease obligations 6.1 14.2 7.9 8.625% second priority senior secured notes, due 2015 147.3 122.3 165.1 9% second priority senior secured notes, due 2016 325.0 271.5 363.5 ----- ----- ----- 874.9 853.1 1,037.6 Cash and cash equivalents (2.4) (1.5) (1.7) --- --- --- Total net debt 872.5 851.6 1,035.9 ===== ===== ======= Net debt at 31 July 2009 was £872.5m (30 April 2009: £1,035.9m) which includes a translation reduction since year end of £107.6m reflecting the recent strengthening of the pound against the dollar. The Group's underlying EBITDA for the twelve months ended 31 July 2009 was £330.1m and the ratio of net debt to underlying EBITDA was therefore 2.6 times at 31 July 2009 (2008: 2.3 times). The Group's debt facilities are now committed for a weighted average period of approximately 4.6 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%, most of which is tax deductible in the US where the tax rate is 39%. Financial performance covenants under the two senior secured notes issues are only measured at the time new debt is raised. There are two financial performance covenants under the asset based first priority senior bank facility: * funded debt to EBITDA before exceptional items not to exceed 4.0 times; 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 do not, however, apply when availability (the difference between the borrowing base and facility utilisation) exceeds $125m. At 31 July 2009 availability under the bank facility was $635m ($550m at 30 April 2009). Accordingly, the Board continues to believe that it is appropriate to prepare the accounts on a going concern basis. Additionally, although the senior debt covenants were not required to be measured at 31 July 2009, 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 2009 Annual Report and Accounts on pages 26 to 33. 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. 100% of our debt was denominated in US dollars at 31 July 2009. 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 current currency mix of our profits and on dollar debt levels, interest and exchange rates at 31 July 2009, a 1% change in the US dollar exchange rate would impact pre-tax profit by 1.5%. 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 Number of rental stores Staff numbers ----------------------- ------------- 31 July 30 April 31 July 30 April 2009 2008 2009 2009 2008 2009 ---- ---- ---- ---- ---- ---- Sunbelt Rentals 398 432 398 5,818 7,025 6,072 A-Plant 115 188 122 1,933 2,396 2,077 Corporate office - - - 12 13 13 --- --- --- -- -- -- Group 513 620 520 7,763 9,434 8,162 === === === ===== ===== ===== Sunbelt's store numbers include 90 Sunbelt at Lowes stores at 31 July 2009 (2008: 90).

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