Final Results - Part 1

Ashtead Group PLC 17 July 2001 PART 1 Ashtead Group plc Preliminary results for the year ended 30 April 2001 Continued emphasis on the growth opportunities in America - Comparable adjusted profit before tax increased 21% to £58.9m - Strong US performance - Integration of BET USA completed on schedule resulting in improved operating margins - Action taken to reduce UK cost base and improve return on capital - Dividend increased by 11% - Early adoption of FRS 18 provides new accounting basis for future financial reporting - Peter Lewis announces his retirement; Henry Staunton appointed chairman The unaudited results for the year, expressed in accordance with accounting standards including FRS 3 and FRS 18 are as follows: 2001/00 1999/00 £m £m EBITDA 190.8 124.3 Operating profit 69.0 57.1 Profit before tax 11.9 46.2 The directors consider that underlying performance of the business is best described in the following adjusted figures that exclude non-recurring and non-cash items associated with the BET USA acquisition: Previous accounting basis New accounting basis under FRS 18 2000/01 1999/00 Increase 2000/01 1999/00 Increase £m £m % £m £m % Adjusted 210.9 127.3 66 205.6 124.3 65 EBITDA* Adjusted 99.7 59.4 68 91.1 57.5 58 operating profit* Adjusted 58.9 48.5 21 50.3 46.6 8 profit before tax* * Before exceptional BET USA integration & financing costs, non-recurring salary costs paid to redundant former BET USA staff and the non-cash items of goodwill and convertible loan interest amortisation. Ashtead's Chief Executive, George Burnett, commented: The integration within a matter of 3 months of the acquired BET USA business with our existing Sunbelt operations which more than doubled the size of our US business will enable us to pursue our objective of increasing our 2% market share and improving on our fourth place in this growing $23 billion US market. In the UK we need to recover from this year's setback with controlled investment and management in a difficult market. Adjusted Group profits are up for the ninth successive year and, to reflect the Board's confidence in the future prospects of the Group, the dividend for the year has been increased by 11%. Introduction This was arguably the most important 12 months in the Group's 17 year history. As a result of the acquisition in June 2000 of BET USA from Rentokil Initial, the Group practically doubled in size. By this transaction, Ashtead realised its long held strategic plan of a substantial presence in the growing, but still underdeveloped, US market to add to its established leadership in the UK. The prompt integration programme represented management's biggest test to date. The merger of BET USA with Sunbelt was successfully delivered and the devolved profit-orientated Ashtead business model put in place. In the light of the acquisition of BET USA and the subsequent increase in the scale of the business, the Board has chosen to adopt early the new Financial Reporting Standard (FRS 18) and as a result has conducted a full review of all of its accounting practices. Whilst this makes an already complex set of accounts more complicated it provides a consistent basis for future reporting. For the year just ended adjusted profits before tax on the previous accounting basis were £58.9m, on the revised FRS 18 basis £50.3m and on a pre- tax basis under FRS 3 and FRS 18 £11.9m. Further details of the effects of adopting FRS 18 are included in the accompanying financial review. The directors consider that underlying performance of the business is best described in the adjusted figures that exclude non-recurring and non-cash items associated with the BET USA acquisition. Subsequent references in this commentary are to the adjusted figures on the post FRS 18 basis. Group review Following the acquisition of BET USA revenue increased 83% to £552.0m (£302.4m). Adjusted EBITDA, arguably the most important result for a rental company, rose 65% to £205.6m (£124.3m) with adjusted operating profit up 58% to £91.1m (£57.5m). Adjusted earnings per share were 47% higher at 18.9p (12.9p). The Board is recommending an increased final dividend (the twelfth consecutive period it has been raised) of 2.88p making a total for the year of 3.5p - up 11% - reflecting its confidence in the future progress of the enlarged Group. There has been a significant change in the scale of the Group. This year's revenue was more than double that of two years ago; adjusted EBITDA was greater than revenue of three years ago and adjusted operating profit has more than doubled in the same period. Sunbelt The Group's activities in America began 11 years ago where it has steadily built a growing presence. It has been the strategic goal of management for more than three years to secure a larger share of the market by a quality acquisition to supplement organic growth. BET USA has proved to be the ideal vehicle to add to the largely home-grown Sunbelt business. The Group enjoys a significant advantage over its US competitors in that, prior to more than doubling the size of its US business with this purchase, it had already established a unique culture in the industry. The Group's approach of a highly devolved management style with emphasis on the local profit motive in which all staff participate in the monthly paid profit share programme is firmly rooted in Sunbelt. Thus, it was possible to extend quickly the 'personal responsibility/personal reward' ethos to BET USA despite its having been run as three separate businesses under successive previous owners. The successful integration of BET USA into Sunbelt in 70 days is a testimony to local management's strength in depth. There continues to be a fundamental and growing demand for the rental option which accounts for an estimated 20-25% of US product usage compared with 75- 80% in the more mature UK market. In a slowing US economy, rental may achieve yet greater prominence and Sunbelt's integrated business is set to increase its current 2% share of a US$23bn market. Good progress was made in raising BET USA margins towards the levels historically earned by Sunbelt. Sunbelt performed strongly, with operating profits rising to £62.4m, as the rate of growth in the US economy slowed. The core Sunbelt locations achieved strong like for like revenue growth of 20% in US dollars with the total core business (including recently opened locations) growing 51% overall. A-Plant The results of A-Plant this year were a setback. EBITDA was broadly unchanged year on year at £75.2m (£74.3m) but, due to the increased depreciation charge, operating profits declined 25% to £25.1m, the first reduction in A-Plant's operating profits since 1992. The UK market also continues to be competitive. The attempts of last October to achieve a much needed price rise met with some success. However business levels were held back by the rigours of exceptionally wet weather resulting in lower construction activity and the ripple effect from the prolonged foot and mouth epidemic. With hindsight it was a mistake to invest so heavily in the early part of the year in an attempt to pre-empt market positions. However, capital expenditure in the current year will be much less as a result of last year's expenditure. Looking forward the principal features of the UK market are likely for some time to be continued rationalisation among competitors but with sustained demand for the rental product. Whilst these structural changes in the market take place, management are resolved to restrict future cost growth and capital investment until conditions exist that allow a better return on capital. Ashtead Technology Ashtead Technology has continued its recovery from the impact of the low oil prices of two years ago. Operating profits rose 44% to £3.6m. After a period of difficult trading conditions, North Sea activity is greater in the UK sector but less buoyant in the Norwegian area. South East Asia is already showing increased demand and confidence has at last returned to the offshore market in America. With the acquisition of Response Rentals last October, Ashtead Technology became a major participant in the environmental products rental market in the United States. This new range offers attractive development opportunities in many of the other markets served. Financial Net cash inflow from operating activities before exceptional BET USA integration costs rose by 55% to a record £173.0m (£111.4m). Exceptional integration costs at £12.3m were marginally higher than the £10m estimate given when the BET USA acquisition was announced in April 2000. The majority of the expenditure was for rebranding the BET USA product range (£8.9m). The total also includes staff redundancy costs of £1.2m and other one-off costs of £2.2m. No further integration costs are anticipated. Consistent with previous years, the sale of retired assets generated a profit over book value of £6.8m (1999/00 - £6.0m). The tax credit of £10.9m comprises a credit of £1.2m in respect of current tax and a credit of £9.7m relating to deferred tax. The current tax credit arises because no tax is due in respect of the current year and due to a reduction in the level of the required provisions for previous years. The deferred tax credit arises partly in the US where unused tax losses carried forward eliminate any potential deferred tax liability and partly in the UK where the potential deferred tax liability is lower than in the previous year. The Group expects that it will continue to have only a minimal current tax liability in 2001/2. Peter Lewis Soon after Peter Lewis, 60, became non-executive chairman on 1 February 2001, following nearly 17 years as executive chairman, he indicated to the board that he would like to retire completely as soon as convenient to the Company. With completion of the integration of BET USA into Sunbelt, the strategy of becoming a major player in the important USA market, for which Peter was principally responsible, has been delivered. The board and Peter have agreed that now would, therefore, be an appropriate time for him to step down. His resignation as a director and non-executive chairman is effective at the end of July. Henry Staunton, a director since 1997, has agreed to take over the position of non-executive chairman. Peter Lewis, with George Burnett, bought into Ashtead in 1984 when it was a 5 branch business with a turnover of less than £2m. Over the 17 years since he has been fundamental to its growth, culminating in an enterprise with 443 profit centres on three continents and having an annual turnover of £552m. The board, on behalf of the shareholders in the Company, thank Peter for his leadership of the Company over nearly two decades and wish him well for the future. Current and future trading Overall the year has begun in line with expectations with Group revenues in May and June up 29%. In the same period, on a like for like basis, Sunbelt's same store revenues grew by 10%, A-Plant's grew by 2% and Ashtead Technology's by 28%. The Group's objectives for the current year are to continue to grow the Sunbelt Profit Centre network with around 30 new branch openings this year. A- Plant will concentrate on improving its operating efficiencies. Both companies will place focus on increasing returns on capital employed. Capital expenditure will reduce significantly year on year. Ashtead Technology is expected to continue its progress of the last twelve months. The Group cannot be immune from macro-economic conditions in the UK and USA. However, current trading levels and the long term opportunities for growth in the Group's US markets result in an expectation of a satisfactory outcome for the current year and optimism about the Group's future prospects. Contacts: George Burnett Chief Executive ) 01372 362300 Ian Robson Finance Director ) Andrew Grant ) Tulchan Communications 0207 353 4200 Nigel Fairbrass ) FINANCIAL REVIEW Adoption of FRS 18 The Group has adopted early the new Financial Reporting Standard number 18 (FRS 18) in its accounts for the year ended 30 April 2001. Adoption of FRS 18 required a full review of all the Group's accounting policies and estimation techniques (the latter being the methods by which accounting policies are implemented). This review was conducted in accordance with FRS 18 which requires that, where a choice of treatment is available, the 'most appropriate' accounting policies and estimation techniques shall be used. Implementation of FRS 18 had effect in the following three areas: Accounting policy changes Contributions received from equipment vendors to the Group's selling and marketing expenses were previously accounted for as a reduction in the costs to which they related (and thus as a credit to operating profit). Although the prices the Group pays for its rental equipment have generally not increased and in very many cases have decreased since these arrangements were first established some five years ago, it has now been decided instead to treat the amounts received as a reduction in the value of the rental equipment acquired in the period to which they relate. This change in treatment has been implemented retrospectively as required by FRS 18 with a prior year adjustment made to fixed assets and to reserves. Stationery used in the UK is now accounted for by writing off to operating costs the cost of stationery ordered and delivered in the period rather than the estimated amount of stationery consumed. This change in treatment has, as required by FRS 18, been implemented retrospectively with a prior year adjustment to eliminate the previous inventory balance of £0.5m. Revisions to estimation techniques Non-mechanical equipment (acrow props & equipment, aluminium access towers and steel scaffolding) has until now been held in fixed assets at cost with write offs booked against cost of sales in respect of both equipment sold in the period and equipment becoming damaged or broken or otherwise unusable in the period. To ensure that all such equipment physically exists, twice yearly stock checks are undertaken in September and March during which any damaged or broken equipment is identified for subsequent write off. Because these items mostly comprise steel or aluminium poles, the deterioration in their condition occurring annually is minimal. The Group's experience is also that, because it buys these items in bulk, the selling price for individual items exceeds their original cost. However, having regard to the FRS 18 requirement to apply the 'most appropriate' accounting policies and estimation techniques and in light of the increased materiality of these items following the acquisition of BET USA (which had a large fleet of steel scaffolding) it has been decided in future to depreciate these assets over 20 years to zero residual value. Under FRS 18, the introduction of a depreciation charge where none previously existed is a change to a more appropriate estimation technique to be implemented in line with the principles set out in FRS 15: Tangible Fixed Assets. Consequently the impact of the new practice is being implemented prospectively by way of an increased depreciation charge with no adjustments made to opening reserves. The effect of these adjustments on the profit for the period and on asset values at both 30 April 2001 & 2000 is shown in the table below: Reduction in Reduction in profits net assets 2000/01 1999/00 2001 2000 £m £m £m £m Pre-tax profit/net assets under previous accounting policies & 20.8 48.1 269.0 246.4 estimation techniques Accounting policy changes Contributions to sales and marketing expenditure: - reduced EBITDA & hence lower (5.5) (3.0) (16.7) (11.0) fixed asset additions - reduced depreciation 1.7 1.1 4.0 2.1 charge/accumulated dep'n Stationery 0.2 - (0.5) (0.7) Total accounting policy changes accounted for retrospectively (3.6) (1.9) (13.2) (9.6) Estimation technique changes Non-mechanical equipment depreciation: - additional depreciation charge (5.0) - (5.0) - for the year Effect on goodwill amortisation (0.3) - (0.3) - Total impact of implementing FRS 18 (8.9) (1.9) (18.5) (9.6) Pre-tax profit/net assets under FRS 11.9 46.2 250.5 236.8 18 In the remainder of this financial review the figures quoted are taken from the financial statements, after implementation of the above accounting changes, except where otherwise stated. The figures quoted are also, except where noted, stated on an adjusted basis excluding exceptional BET USA integration & financing costs, non-recurring salary costs paid to redundant former BET USA staff and the non-cash items of goodwill and convertible loan interest amortisation. Profit & loss account Revenue Total revenue increased by 83% to £552.0m. Sunbelt Rentals revenue increased from £113.1m to £345.7m, an increase of 206%, with A-Plant rising from £181.5m to £194.5m, an increase of 7%, and Ashtead Technology increasing from £7.8m to £11.8m, an increase of 51%. Acquired BET locations contributed £175.2m to Sunbelt Rentals' revenue with core Sunbelt locations growing 51% overall. On a same store, like for like basis, Sunbelt Rentals revenue grew 20% measured in US dollars. Staff costs Staff costs, including salary costs paid to redundant BET employees, constitute the largest single expense of the business. Total staff costs have increased from £88.0m to £170.2m. The average number of employees has increased from 3,729 to 5,834 with 6,043 on the payroll at 30 April 2001. Staff costs include profit share paid of £13.2m (£5.9m). Depreciation and gain on sale of fixed assets The depreciation charge for each business for the year was: Rental Other Total equipment assets £m £m £m Sunbelt Rentals 55.8 4.6 60.4 A-Plant 42.9 7.2 50.1 Technology 3.9 0.1 4.0 102.6 11.9 114.5 The gain on sale of assets this year was £6.8m compared with £6.0m in the previous year. Earnings before interest, taxation, depreciation & amortisation (EBITDA) Adjusted EBITDA, which is perhaps the best measure of performance for a rental business as it eliminates the variations in depreciation rates resulting from the differing methods and lives applied by different businesses, rose by 66% from £124.3m to an adjusted £205.6m before non- recurring salary costs for redundant BET USA staff. Excluding these costs and after the exceptional BET USA integration costs, EBITDA was £190.8m. Operating margins Operating profit under FRS 3 was £69.0m representing an operating margin of 12.5%. Adjusted EBITDA and adjusted operating margins were: EBITDA margin Operating profit margin 2000/01 1999/00 2000/01 1999/00 % % % % Sunbelt Rentals 35.5 40.0 18.1 18.9 A-Plant 38.7 41.0 12.9 18.5 Technology 64.4 61.5 30.5 32.1 Overall Group 37.3 41.1 16.6 19.0 The reduced margin earned by Sunbelt Rentals resulted from the inclusion within its results of the lower margin BET USA business. Sunbelt's success in raising margins over those achieved in the previous year on a pro forma basis is discussed earlier in this preliminary announcement. A-Plant's margins fell 5% at the adjusted EBITDA level but declined more substantially at the operating profit level reflecting the increased investment in the rental fleet at the beginning of the calendar year. Technology's margins improved as its markets recovered from the low oil price effect of the late 1990's. Divisional reviews on an adjusted basis USA - Sunbelt Rentals Previous accounting New accounting basis basis under FRS 18 2000 1999 Increase 2000 1999 Increase /01 /00 /01 /00 £m £m % £m £m % Turnover: 170.5 113.1 51 170.5 113.1 51 excluding BET profit Centres BET Profit Centres 175.2 - 175.2 - - Total 345.7 113.1 206 345.7 113.1 206 EBITDA 126.3 46.6 172 122.8 45.2 172 EBITDA margin % 36.5 41.2 - 35.5 40.0 - Depreciation (58.2) (24.1) 141 (60.4) (23.8) 154 Operating profit 68.4 22.5 204 62.4 21.4 192 Operating profit 19.7 19.9 18.1 18.9 - margin % Rental equip'capex: 94.5 61.5 54 91.0 60.0 52 - expansion - replacement 55.3 14.2 289 55.3 14.2 289 149.8 75.7 98 146.3 74.2 97 Net assets 579.5 176.6 228 571.0 173.7 229 employed Profit centres at 163 88 85 163 88 85 year end Sunbelt performed strongly in changing market conditions which were buoyant at the start of the year but which became more difficult as the US economy slowed. Nevertheless, the core Sunbelt locations achieved strong like for like revenue growth of 20% in US dollars with the total core business (including recently opened locations) growing 51% overall. UK - A-Plant Previous accounting basis New accounting basis under FRS 18 2000 1999 Increase 2000 1999 Increase /01 /00 /01 /00 £m £m % £m £m % Turnover 194.5 181.5 7 194.5 181.5 7 EBITDA 77.0 75.9 1 75.2 74.3 1 EBITDA margin % 39.6 41.8 - 38.7 40.9 - Depreciation (49.0) (41.5) 18 (50.1) (40.7) 23 Operating profit 28.0 34.4 (19) 25.1 33.6 (25) Operating profit 14.4 19.0 - 12.9 18.5 - margin % Rental equip' capex: 38.3 32.0 20 36.3 30.5 19 - expansion - replacement 30.7 34.4 (11) 30.7 34.4 (11) 69.0 66.4 4 67.0 64.9 3 Net assets 293.3 266.0 10 283.6 259.3 9 employed Profit centres at 273 261 5 273 261 5 year end A-Plant's operating profit decline reflected its failure, in difficult market conditions, to grow revenues as fast as the growth in its costs. This was particularly marked in the depreciation charge which grew 23% to £50.1m. In turn this resulted from the level of capital expenditure on rental equipment - totalling £57.7m in the first half. By contrast second half capital expenditure was restricted to only £9.3m, all of which was spent on replacing existing assets and not growing the fleet. Additionally costs other than depreciation totalled £58.7m in the second half, compared to £60.6m in the first half, a reduction of 3% reflecting the benefit of the cost reduction measures implemented in late Autumn. Offshore - Ashtead Technology Previous accounting New accounting basis basis under FRS 18 2000 1999 Increase 2000 1999 Increase /01 /00 /01 /00 £m £m % £m £m % Turnover 11.8 7.8 51 11.8 7.8 51 EBITDA 7.6 4.8 58 7.6 4.8 58 EBITDA margin % 64.4 61.5 - 64.4 61.5 - Depreciation (4.0) (2.3) 74 (4.0) (2.3) 74 Operating profit 3.6 2.5 44 3.6 2.5 44 Operating profit 30.5 32.1 - 30.5 32.1 - margin % Rental equip' capex: 3.3 1.5 120 3.3 1.5 120 - expansion - replacement 0.9 1.1 (18) 0.9 1.1 (18) 4.2 2.6 62 4.2 2.6 62 Net assets employed 12.2 8.2 49 12.2 8.2 49 Profit centres at 7 3 133 7 3 133 year end These results represented a significant recovery in Technology's performance following the declines in activity experienced last year in light of the low oil price in 1998/9. The results also include a maiden contribution (mostly in the second half) from the Response Rentals business acquired in the US on 1 October. Interest payable and similar charges 2000/01 1999/00 £m £m Bank interest payable (net) 40.8 10.9 Interest amortisation on convertible loan note 6.6 - Exceptional once off costs re new banking 9.7 - facilities 57.1 10.9 Bank interest payable relates primarily to the interest payable on the variable rate, secured bank facility. Interest is payable under this facility at an average premium of 250 basis points over three month LIBOR for the currency in which the loan is drawn. Interest on US$250m of this bank debt has been fixed at 6.825% by three year forward interest rate agreements entered into in August 2000. The impact of these swaps is recognised rateably over their life as part of bank interest payable as is the 0.75% commitment fee payable on the undrawn element of the facility which is committed at US$825m. The average borrowing rate experienced during the year on bank borrowings (including the premium) was approximately 9%. Although no cash interest is payable on the convertible loan until the first anniversary of its issue (i.e. from 1 June 2001), accounting standards require the loan, which has a par value of £134m, to be recorded at its fair market value at date of issue (assessed independently by Schroder Salomon Smith Barney at £121.3m). The difference between these amounts is then required to be amortised to bring the loan up to its £134m par value over its life. Effectively this results in a non-cash interest charge of £6.6m in 2000/1 and an interest charge in future years which will reflect not only the 5.25% fixed interest cost actually payable to the loan note holders (£7.0m per annum) but also a further non-cash charge of approximately £0.7m annually to give a total annual interest cost on this loan of approximately £7.7m in future years. Exceptional one-off costs re new banking facilities comprise £8.3m in respect of the underwriting fees paid to the banks which arranged the new loan facility and £1.4m in respect of the repayment premium payable on the early redemption of Sunbelt's private placement debts. The underwriting fees were payable to the banks which arranged the new secured bank loan facility to guarantee availability of the necessary loan finance through the period from announcement of the acquisition until its approval by shareholders at the EGM held for this purpose. Expensing these costs under FRS4 rather than capitalising them as part of the acquisition resulted in credits being available for them in the Group's tax computations. The premium on early redemption of the Sunbelt private placement debt was incurred because these fixed rate borrowings were redeemed early at a time when lower interest rates prevailed than those current when the debt was first raised. Profit before tax measured in accordance with FRS 3 As a result of the significant one-off exceptional items incurred following the BET USA acquisition, profits before tax measured under FRS3 after goodwill amortisation, exceptional items and convertible loan interest reduced by 74% to £11.9m (£46.2m). Adjusted profits before taxation Adjusted profits before taxation rose by 8% to £50.3m (£46.6m) on the FRS 18 basis. Adjusted profits before tax are stated excluding exceptional BET USA integration & financing costs, non-recurring salary costs paid to redundant former BET USA staff and the non-cash items of goodwill and convertible loan interest amortisation. The reconciliation of adjusted profits before tax to pre-tax profits under FRS 3 is as follows: Previous New accounting accounting basis basis under FRS 18 2000/01 1999/00 2000/01 1999/00 £m £m £m £m Adjusted pre tax profit for the 58.9 48.5 50.3 46.6 year Exceptional BET USA integration (12.3) - (12.3) - costs Exceptional costs re new bank (9.7) - (9.7) - facility Non recurring BET USA salary (2.5) - (2.5) - costs Non cash interest convertible (6.6) - (6.6) - loan interest Goodwill amortisation (7.0) (0.4) (7.3) (0.4) Pre-tax profits under FRS 3 20.8 48.1 11.9 46.2 Exceptional BET USA integration costs: £m Rebranding costs relating to the acquired premises 8.9 and rental equipment Redundant staff 1.2 Other one-off costs 2.2 12.3 The fleet repainting programme - to brand the acquired premises and fleet into Sunbelt's corporate colours - was largely complete as of 30 April 2001 and was undertaken by a combination of external contractors and specially retained paintshop staff. Rebranding costs also include paint and other materials used in the rebranding programme. Redundant staff costs related to a combination of office staff made redundant from the former head offices of BET USA and to staff reductions in the profit centres completed following the introduction of our computer systems into these locations. A total of 224 positions were made redundant. Other one-off costs include new signage at all the acquired locations and writing off prepaid advertising expenditure in BET USA's name as well as previously capitalised property improvements at closed locations. Taxation The tax credit of £10.9m comprises a credit of £1.2m in respect of current tax and a credit of £9.7m relating to deferred tax. The current (cash) tax credit reflects the fact that no tax is estimated to be payable in the current year in either the UK or the US due to the impact of the accelerated capital allowances (or tax depreciation) in the US and the financing structure adopted for the acquisition and a credit arising in respect of the previous year based on the latest computations submitted to the tax authorities. In achieving this result, minimal capital allowances were claimed in the UK tax calculations for the year. Furthermore tax allowances claimed in the year in the US have resulted in significant unused losses. Taken together these benefits are anticipated to be sufficient to ensure that the Group has no material current tax liability for the foreseeable future. The deferred tax credit arises partly in the US where the unused tax losses carried forward are now sufficient to eliminate any potential deferred tax liability and partly in the UK as a result of the disclaiming of capital allowances discussed above. Earnings per share Basic earnings per share computed by reference to the FRS 3 pre-tax profit reduced by 45% to 7.0p per share whilst adjusted earnings per share computed on the adjusted pre-tax profit rose 47% to 18.9p. The reconciliation between the two is shown below. 2000/01 1999/00 p p Adjusted earnings per share 18.9 12.9 Exceptional BET USA integration costs (3.8) - Exceptional costs re new bank facility (3.0) - Non recurring salary costs paid to redundant (0.8) - former BET USA staff Accrued non cash interest amortisation on (2.0) - convertible loan Goodwill amortisation (2.3) (0.1) Basic earnings per share 7.0 12.8 Dividend The dividend per share has been increased 11% to 3.5p per share for the year as a whole. The final dividend of 2.88p per ordinary share will be paid on 10 October 2001. Balance sheet Fixed Assets Total additions to fixed assets in the year were £237.7m of which £217.5m was spent on rental equipment. Expenditure on rental equipment was as follows: Expansion Replacement Total £m £m £m Sunbelt 91.0 55.3 146.3 A-Plant 36.3 30.7 67.0 Technology 3.3 0.9 4.2 130.6 86.9 217.5 Expenditure on replacement was unusually high in Sunbelt in the year because, following the acquisition of BET USA, Sunbelt has rationalised the number of manufacturer's aerial work platform assets held to eliminate, generally on a one for one basis, equipment from peripheral manufacturers previously used by BET USA. This programme was undertaken both to reduce exposure to the potential decline in the acceptability in the US market of certain manufacturers' product and to reduce the need to carry spare parts inventory and to train staff in the use and maintenance of such a large number of manufacturers' product. The depreciation charge for the year, as detailed above, was £114.5m in total, of which £102.6m was for rental equipment. Current assets Stocks increased by 53% to £15.3m and trade debtors by 58% to £125.7m compared with last year. Both these increases reflect, predominantly, the acquisition of BET USA. Debtor days for the Group have reduced from 71 days last year to 64 days at 30 April 2001. The bad debt charge as a percentage of turnover fell from 2.0% to 1.2%. Trade and other creditors Group creditor days have reduced from 174 to 132 days. Suppliers continue to be paid in accordance with the individual payment terms agreed with each of them. The total amount payable within trade creditors, bills payable and accruals directly attributable to the purchase of rental equipment is £150.2m (£115.7m). Despite the significant increase in the size of the Group following the BET USA acquisition bills payable increased from £81.7m to only £90.7m. This reflects the fact that increasingly major manufacturers are prepared to work with the Group without requiring the use of bills giving added flexibility to the Group's financing plans. The Group expects that in future, whilst remaining a continuing feature of its financing plans, bills will no longer be a substantial element in its overall financial structure. Bank borrowings Completion of the BET USA transaction required a complete restructuring of the Group's finances. On 1 June 2000 or shortly thereafter all of the Group's existing debts were repaid and replaced with drawings under the new $825m committed secured loan facility which was also utilised to finance the cash element of the consideration. This facility is multi currency and can be drawn in combinations of US dollars, Sterling and Euros. Interest is payable at variable rates linked to underlying market rates traded in the London interbank market. The facility was led and underwritten by Citibank NA, LloydsTSB Bank plc and Bank of America Inc. Subsequently it was syndicated by these banks to a wider banking group and there are now approximately 35 lenders involved in the provision of finance to the Group. At 30 April 2001 £483.0m was drawn under the facility with the remainder of the commitment (US$133.5m or £93.3m) available to meet future expansion and working capital requirements. £261.1m ($375m) is drawn under a seven year medium term loan with the remainder (£221.9m) drawn under a 364 day revolving credit agreement which is committed until 31 May 2005. Both are presented in the balance sheet under creditors due in more than one year because the year end drawings under the revolving credit facility were replaced by new drawings under the same committed facility when they matured in June 2001. The facility is repayable at maturity except that there is a notional 1% amortisation of the term loan each year on the anniversary of its issue and the revolving facility reduces in two tranches of $50m each on 31 May 2003 & 2004 before becoming repayable in full at 31 May 2005. The Group can prepay all or part of the facility without penalty save for a 2% fee on the term loan for prepayment prior to 31 May 2001 and 1% thereafter until 31 May 2002. Other borrowings Part of the consideration for the BET USA acquisition was satisfied by the issue of the £134m nominal value 5.25% unsecured convertible loan note, due 2008 which is currently held by the vendor, Rentokil Initial PLC. No interest was payable on this loan note in its first year of issue and from 1 June 2001 it bears interest at a fixed discounted rate of 5.25% per annum. It is convertible into 89.3m ordinary shares at any time after 1 June 2001 at the holder's option and is repayable at par in June 2008 if not previously converted. Rentokil are unable to transfer the convertible without Ashtead's consent and certain orderly marketing restrictions also apply to ordinary shares issued through conversion. As discussed under interest above, accounting standards required the loan note to be included in the accounts at its fair market value, when issued on 1 June 2000 as part consideration for the acquisition, of £121.3m and for this amount to then be amortised up to par value over its 8 year life. These calculations generate the £6.6m interest amortisation charge this year resulting in a net carrying value of £127.9m at 30 April 2001. Although not in immediate prospect (based on the share price of 95.5p ruling on 12 July 2001), conversion of the convertible loan note would significantly reduce the Group's balance sheet gearing position from its current 240% at year end (77% at 30 April 2000, prior to the acquisition) to a pro forma 127% (calculated assuming conversion had taken place at 30 April 2001). Furthermore such a strengthening of the Group's balance sheet would enable the current bank debt to be refinanced at a substantially reduced borrowing premium from the current 250 basis points. The resulting interest saving together with the interest on the convertible which would no longer be payable after conversion mean that the act of conversion (involving the issue of 89.3m new ordinary shares) has a broadly neutral impact on earnings per share once the existing bank facility has been refinanced. Acquisitions The acquisition of BET USA on 1 June 2000 was the largest single acquisition the Group has ever made, effectively doubling revenues in the US in a single stride. Two other acquisitions were also made in the year: Response Rentals, an onshore environmental equipment rental business was acquired by Ashtead Technology and Sunbelt Rentals made an early small infill acquisition of a single profit centre business in Seattle on the West Coast of the United States. The impact of these acquisitions, which generated total goodwill of £148.1m, is shown in note 10 to the attached preliminary accounts. The goodwill arising on these acquisitions is being amortised over 20 years. CONSOLIDATED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 30 APRIL (unaudited) 2001 2000 £m £m (restated) Turnover: - continuing activities 376.8 302.4 - acquisitions 175.2 - 552.0 302.4 Cost of sales (430.8) (220.4) Gross profit 121.2 82.0 Administrative expenses (52.2) (24.9) Operating profit 69.0 57.1 Net interest payable and similar charges: (57.1) (10.9) Profit on ordinary activities before 11.9 46.2 taxation Taxation on profit on ordinary activities: - current 1.2 0.8 - deferred 9.7 (5.7) 10.9 (4.9) Profit for the financial year 22.8 41.3 Equity dividends (11.3) (10.2) Retained profits transferred to reserves 11.5 31.1 Basic earnings per share 7.0p 12.8p Diluted earnings per share 6.7p 12.6p All acquisitions made this year were immediately integrated into the Group's ongoing operations. No segregated operating profit information is therefore available. CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES (unaudited) 2001 2000 £m £m (restated) Profit for the financial year 22.8 41.3 Foreign currency translation differences 1.7 (0.8) Total recognised gains and losses relating to 24.5 40.5 the year Prior period adjustments (9.6) Total gains and losses recognised since the 14.9 last annual report CONSOLIDATED BALANCE SHEET AT 30 APRIL (unaudited) 2001 2000 £m £m Fixed assets (restated) Intangible assets - goodwill 150.7 9.9 Tangible fixed assets: -rental equipment 725.6 450.1 -other fixed assets 76.9 62.5 953.2 522.5 Current assets Stock 15.3 10.0 Debtors 125.7 79.4 Short term investments - 15.0 Cash at bank and in hand 1.1 0.1 142.1 104.5 Creditors - amounts falling due within one year Bank loans and overdrafts (2.2) (96.7) Trade and other creditors (222.7) (169.6) (224.9) (266.3) Net current liabilities (82.8) (161.8) Total assets less current liabilities 870.4 360.7 Creditors - amounts falling due after more than one year Bank and other loans (483.3) (109.7) 5.25% unsecured convertible loan note, (127.9) - due 2008 (611.2) (109.7) Provisions for liabilities and charges Deferred taxation (4.0) (13.1) Other provisions (4.7) (1.1) (8.7) (14.2) Net assets 250.5 236.8 Capital and reserves Called up share capital 32.4 32.3 Share premium account 100.1 99.7 Revaluation reserve 0.5 0.5 Profit and loss account 117.5 104.3 Total capital and reserves (equity 250.5 236.8 interests) CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 APRIL (unaudited) 2001 2000 £m £m £m £m (restated) Net cash inflow from operating activities Cash inflow before integration 173.0 111.4 costs Exceptional BET USA integration (10.3) - costs 162.7 111.4 Returns on investments and servicing of finance Interest received 0.6 1.0 Interest paid (37.3) (11.3) Exceptional costs re new bank (9.7) - facility (46.4) (10.3) Taxation 1.7 (3.2) Capital expenditure Purchase of tangible fixed assets (202.6) (163.4) Sale of tangible fixed assets 38.3 25.0 (164.3) (138.4) Acquisitions & disposals (214.1) (11.3) Equity dividends paid (10.4) (8.9) Net cash outflow before management of liquid resources (270.8) (60.7) and financing Management of liquid resources Decrease in short term 15.6 0.3 investments Financing Issue of ordinary share capital 0.5 - Net drawdown of loans 296.3 20.0 Principal payment under hire - (2.3) purchase agreements 296.8 17.7 Increase/(decrease) in cash 41.6 (42.7) All acquisitions made this year were immediately integrated into the Group's ongoing operations. No segregated cash flow information is therefore available. MORE TO FOLLOW

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