Final Results

Speedy Hire PLC 31 May 2006 31 May 2006 SPEEDY HIRE Plc PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2006 Speedy Hire is the UK's No. 1 provider of tools and equipment for hire. The Company operates from over 300 depots throughout the UK. The Group has also recently commenced trading in the Republic of Ireland. The Group's activities are the provision for hire of small tools, portable accommodation, compressed air, pumps, lifting and material handling, survey and measurement instrumentation and power generation equipment. FINANCIAL HIGHLIGHTS 2006 2005 % Change Revenue £254.3m £206.5m +23 Profit before tax £30.7m £24.5m +25 Profit before tax, amortisation and exceptional items1 £32.2m £25.8m +25 Basic earnings per share 50.44p 42.78p +18 Adjusted earnings per share1 52.86p 45.15p +17 Total dividend per share 14.3p 12.3p +16 Return on capital employed (before amortisation and exceptional items) 17.5% 17.6% Gearing 72.9% 76.6% 1 Before amortisation and exceptional items. There were no exceptional items in 2006. Exceptional items of £0.7m in 2005 relate solely to the disposal of Toilet Hire UK. • Like for like tool hire turnover up 9% - market share increased • Utilisation in equipment hire up from 67% to 70% • Interest cover 6.2 times • Market outlook remains buoyant Outlook 'The markets in which our major customers operate remain buoyant and show good growth trends. New Health and Safety legislation provides additional impetus towards hiring rather than owning tools and equipment. With a favourable outlook in our main markets, ongoing investment in strengthening and improving the business, a strong financial position and a first class team to execute our plans, I look forward to reporting further progress in the year ahead.' David Wallis - Chairman For further information: Speedy Hire Plc Hudson Sandler Steve Corcoran, Chief Executive Nick Lyon/James Benjamin Neil O'Brien, Group Finance Director Tel: 020 7796 4133 Tel: 020 7796 4133 on Wednesday 31 May (thereafter tel: 01942 720000) Website: www.speedyhire.plc.uk High resolution photographs will be available to media from 12.00pm at www.vismedia.co.uk SPEEDY HIRE Plc CHAIRMAN'S STATEMENT It has been another very busy and successful year for Speedy Hire. We have delivered an excellent performance in all of our key business measures including turnover, profit, return on capital and earnings per share and our balance sheet remains in excellent shape. Your board is therefore proposing a final dividend of 9.4 pence per share, making a total of 14.3 pence for the year, an increase of 16% over 2005. Performance Revenue increased by 23% to £254.3 million (2005: £206.5 million). Profit before tax grew by 25% to £30.7 million (2005: £24.5 million). Group operating margins pre-amortisation and exceptional items increased from 14.8% to 15.0%. Earnings per share grew by 18% to 50.44 pence per share. Total equity increased from £108.5 million to £141.3 million. All of our businesses have contributed to these excellent results. Our Tool Hire Division offers the widest range of tools from an unrivalled national depot network. Turnover has increased by 17.0% to £151.0 million (2005: £129.1 million) with growth being driven from a like for like sales increase of 9.0%. Operating profits increased to £23.6 million (2005: £19.8 million) representing a margin of 15.6% (2005: 15.3%). Our equipment businesses provide a range of complementary lifting, power, survey and temporary accommodation products to a broad range of industry sectors. In addition, during the year we opened our first specialist pump operations. Turnover in the Equipment Division grew by 34% to £107.8 million (2005: £80.7 million). Operating profit has increased from £14.8 million to £19.8 million giving the division an operating margin of 18.4% (2005: 18.3%). Our investment of £78.5 million (2005: £60.5 million) in new hire fleet was targeted at enhancing our reputation for providing our clients with the widest and best range of tools and equipment. This has ensured that we retain our competitive advantage of having the youngest hire fleet in the industry with an average age of 2.1 years. Return on our invested capital has remained stable at 17.5%. To supplement our strong organic growth, during the financial year we acquired five businesses for a consideration of £35 million. These businesses have all been successfully integrated into the Speedy Hire network. Since the conclusion of the financial year we completed the acquisition of LCH, the UK's leading independent hirer of temporary power systems, for a total consideration of £59 million, thus giving us an increasingly strong position in that market. To facilitate these acquisitions, we completed a £15 million share placing and negotiated an enhanced £210 million bank facility. These have given the group a very strong financial position to continue with our business development and acquisition strategy. Strategy Our strategy remains one of growth with the aim to be number one or number two in all the markets in which we operate. This well proven strategy has resulted in several years of consistent growth, both organically and through acquisitions and we see no reason why this should not continue for the foreseeable future. We will continue to open greenfield depots wherever our research indicates there is a profitable opportunity to increase our geographic footprint and better serve our customers. During the last financial year, we opened 22 such depots across the range of our activities. In addition, we will continue to acquire complementary businesses which meet our strict investment criteria. Several of these acquisitions over the last two or three years have, as planned, enabled us to move into new markets and develop a wider customer base in industrial services, utilities, steel, oil and gas, naval dockyards and petrochemicals, as well as facilitating a better service for our traditional construction clients. To support this growth, we continue to invest strongly in business systems, supply chain and customer support. Our vision is to create 'One Speedy' whereby we co-ordinate the activities of the entire Group to cross sell and thereby provide a comprehensive and unparalleled level of service for our customers, who are at the heart of our business. I would like to take this opportunity to expand on our approach and thinking when considering acquisitions. When we first evaluate potential acquisitions, we begin with a few simple common sense questions such as 'will Speedy Hire be a good owner of this business? Does it fit with our skill set and our market position? Does the target business enable Speedy Hire to sustain growth and add value for our shareholders?' Only when we are satisfied we have positive answers to these questions do we move forward. Executive management then prepare a detailed business case and we only proceed where our target internal rate of return is exceeded when using conservative assumptions. Many potential acquisitions are rejected because the infill and expansion opportunities offered do not adequately answer our basic questions, do not meet our hurdle rates, or they do not fit within our overall vision. It is the view of your board that the hire industry will undergo significant consolidation over the next few years. However, research has shown that the tool and equipment hire market is becoming increasingly polarised between those businesses supplying the larger construction and industrial companies, which have wider and more complex needs requiring tools and equipment for longer periods of time and those servicing the smaller builders, DIY enthusiasts, maintenance trades and service industries which require equipment in lesser volumes and for shorter periods. Speedy Hire's current market position is clearly biased towards the larger, more regular hirer and our acquisition strategy reflects this. People As Speedy Hire has grown over the last year, an additional 395 people have joined the business and I would like to extend a warm welcome to each. We now employ over 3,400 people. I would also like to extend the thanks of the board and shareholders to all our people whether in management, operational or support functions who provide their skill, enthusiasm and commitment every single day to ensure we have satisfied customers. Our customer surveys run by external consultants continue to produce very high levels of satisfaction and as a result, repeat business. At board level, we are fortunate to have an extremely able team. Mike McGrath, having worked with us for 14 years as our corporate lawyer, joined us in March as Commercial Director to work alongside and provide valuable support to Steve and Neil. In addition to overseeing our continuing acquisition programme, Mike will take responsibility for driving forward two specific projects: firstly the further training and development of our people, and secondly property requirements in terms of the number and size of depots for the future shape of the business. As previously announced, Andrew Simpson left the business at the end of the financial year to take up a senior role within Peel Holdings. Andrew's input over the last three years in creating value for shareholders has been extremely valuable and we are greatly indebted to him. He leaves with our best wishes for success in the future. Outlook The markets in which our major customers operate remain buoyant. Investment in infrastructure, supported by government spending, often through PFI / PPP schemes and commercial and industrial projects, all show good growth trends. Added to this, new Health and Safety legislation, such as the Working at Height and Hand Arm Vibration directives, together with the new legislation on noise emissions is providing additional impetus towards hiring, rather than owning tools and equipment. It is worth re-stating that one of Speedy Hire's great strengths is the diversity of its markets, its customers, its range of activities and its national spread, which brings a good balance to the business. With a favourable outlook in our main markets, ongoing investment in strengthening and improving the business, a strong financial position and a first class team to execute our plans, I look forward to reporting further progress in the year ahead. SPEEDY HIRE Plc CHIEF EXECUTIVE'S REVIEW The business Speedy Hire operates a broad range of products for hire available throughout the UK, and as of February 2006, the Republic of Ireland. From our traditional position in tool hire, we have expanded our market and complemented our brand by specialising in key areas of equipment rental. The equipment division offers a range of portable accommodation, lifting and material handling equipment, surveying and measurement instruments, compressed air and power generating equipment and pumps. Our expansion into these product areas of the hire market has led to a significant increase in complementary purchases by our customers, and created unique cross-selling opportunities. We have always concentrated on understanding the local market and offering maximum flexibility to our local customers. Because tool and equipment hire is typically a local business, we have sought to build strong local relationships, town by town and region by region. Our local approach to customer service differentiates us from our competitors. Our success has consistently delivered record results from the business over the years. Our approach to business is simple: we aim to make the widest range of products from the best manufacturers rapidly available to our customers through our depot network. Tool Hire division This division saw 9% like-for-like turnover growth in 2005/06, which once more considerably outpaces the overall market growth level of 4%, driving a further increase in our market share. This year we added 22 new depots, 17 of which were greenfield developments. The Tool Hire division operates in a growing market and the drive towards outsourcing continues. The division generated record turnover and profit and our continued confidence led us to opening our first depots in the Republic of Ireland and Northern Ireland. Building on the tremendous success of our Safety-From-the-Ground-Up campaign, in 2005/06 we began anticipating our customers' training needs resulting from new hand/arm vibration legislation, by working together with our suppliers and independent researchers. Some of the highlights of our Tool Hire division - A cluster of four depots was acquired in North Wales - New depots opened in Dublin and Belfast - Our first distribution centre was opened in Heathrow servicing the West London region - The successful roll out of specialist access centres - Extension of the product range to include mini plant Equipment Hire division We have continued to innovate, develop and push the boundaries of our business into adjacent product areas that are complementary to our traditional tool hire operations. These separate, specialised businesses grew profitably in 2005/06 both organically and through the successful integration of five major acquisitions. Turnover for the division was £107.8 million and grew by £27.1 million, whilst maintaining utilisation at 70% (2005: 67%). We expect the fast-growing businesses of this division to continue fuelling the group's growth strategy in the coming years. Our equipment rental businesses form part of the plant hire market which is valued in excess of £4 billion. - Speedy Space specialises in the hire of accommodation and storage units. It operates from 21 depots and has 22,500 units for hire. In 2005/06, four acquisitions were made in the Space business. Our concentration has been on the growth area of steel anti-vandal units. - Speedy Power provides portable generation, compressed air and lighting equipment from 15 separate locations. This business has established us as the UK's leading hirer of compressed air and portable lighting. Last year this business continued to grow sales and profits rapidly and added 4 new greenfield depots. - Speedy Lifting rents lightweight lifting and material handling equipment. The business has performed strongly since it was established in 2003. Speedy Lifting operates from 33 locations. - Speedy Survey focuses on the supply of specialist surveying and measurement instruments. The business now operates from 16 locations. - Speedy Pumps. While pumps have been part of our core hire catalogue for several years, this year the product line was given a separate and specialist focus in response to our customers' needs. The market Our core customers are optimistic in their business outlook and continue to report strong order books for significant periods of time into the future, while construction output data also remains positive not withstanding some consumer caution. Our market place is supplied by a range of competitors from small local independents, all the way to national 'one-stop' rental equipment providers. Our operations remain attentive to customer needs and we deliver this by ensuring each Speedy business is focused on its geographical region and product expertise. We market ourselves most actively to the regular, high-volume customers who appreciate our range of product offering, fleet availability and the customer service ethic of our teams. We therefore occupy a virtually unrivalled position in the market with the 'heavy' end users who depend on Speedy to provide good kit and good service while maintaining value for money. Our strong local relationships in the towns and regions in which we operate means we are able to monitor market activity closely and be prepared to respond quickly to changes in demand. Contractors look to Speedy for industry-leading health and safety guidance and the very best product expertise. These factors give us a unique selling proposition and differentiate us from those who primarily supply the fragmented 'light' end of the market that is being addressed by independents, merchants and regional chains. A large proportion of Speedy Hire's business is servicing public sector-based projects such as schools and hospitals which continue to be planned and developed. Our strategy of continually broadening our business activities and geographical presence means our customer base is also highly diverse, and no single customer account represents more than 4% of our revenues. Speedy Hire is one of the main consolidators of the hire market and we will continue to pursue this same successful strategy as new opportunities arise. Last year we successfully completed five key acquisitions, including four in our portable accommodation business. Following the year end, in May 2006 we announced the acquisition of LCH Generators Limited, further strengthening our presence in the hire of temporary power generation. Our strategy of expanding products and services through acquisitions has been highly successful. We believe significant opportunities still exist both within our current product portfolio and in new areas identified for continued expansion and development. This will enable us to leverage the Speedy Hire brand further to ensure future growth by expanding our existing operations, increasing our cross-selling opportunities and developing new business services. Capital Structure and Investment Net assets at the year end were £141.3 million (2005: £108.5 million), an increase of 30%. We have continued to invest in hire assets to achieve the 23% increase in turnover. Gross capital expenditure was £78.5 million (2005: £60.5 million) with a further £35.2 million (2005: £18.7 million) of expenditure on acquisitions as Speedy continues to lead the consolidation of the sector. Last year saw a record level of investment that has led debt to increase to £103 million (2005: £83.1 million) but gearing remains at a comfortable level of 72.9% (2005: 76.6%). We received the positive support of shareholders for a 5% placing in September 2005 which raised £15 million and has helped contribute to our strong balance sheet position. The shares were issued at a nil discount to the prevailing market price. The depreciation charge increased by 25% to £38.9 million (2005: £31.2 million) assisting an operating cash flow of £76.6 million (2005: £56.6 million). This strong performance gives us confidence in investing for future growth. Free cash flow was £6.5 million (2005: £0.9 million). This positive free cash flow was achieved in a year of record investment, funding a 23% increase in turnover. Return on capital, a key indicator of financial performance, has remained strong at 17.5% (2005: 17.6%). This return is industry leading and is substantially ahead of our average cost of capital. We aim to retain a high degree of flexibility in our funding options. Commercially we are gaining market share and are happy to invest to fund this growth. With high growth in turnover we expect to see debt and gearing levels rise. We invest with the confidence of knowing that if the rate of growth should fall then our investment level would be reduced and the business would generate substantial free cash flow to invest in other areas. Looking ahead Speedy Hire will continue to expand organically whilst also seeking new and profitable consolidation opportunities. Customer service will remain central to our strategy, and as we consolidate our brand under the 'One Speedy' initiative, our ability to service high-volume customers who value our extensive product and service offering, will continue to grow. Our post year end acquisition of LCH Generators on May 12, 2006 is accelerating the development of a specialist power generation business through Speedy's existing generator fleet within Speedy Power. The rapid growth of our customer base and product offering brings Speedy into new markets and creates excellent cross-selling opportunities. We believe that our proactive approach to health and safety practices in the construction industry will remain a competitive driver for the business going forward. By helping customers identify their needs at an early stage, and forging long-term partnerships with suppliers, we are helping to secure our market leading position and grow our future market share. We are confident that our growth strategy will deliver further value to our customers and our shareholders going forward. Looking ahead to a new financial year, we are confident of reporting further progress. Consolidated Income Statement For the year ended 31 March 2006 2006 2005 Note £m £m Revenue 1 254.3 206.5 Cost of sales (81.8) (58.2) Gross profit 172.5 148.3 Other operating income 0.1 0.2 Distribution costs (23.5) (22.0) Administrative expenses (112.5) (96.5) Analysis of profit from operations Operating profit before amortisation 38.1 30.6 Intangible amortisation (1.5) (0.6) Profit from operations 1 36.6 30.0 Loss on disposal of operation 1 - (0.7) Profit before financing costs 36.6 29.3 Financial income 0.2 0.1 Financial expense (6.1) (4.9) Profit before taxation 30.7 24.5 Taxation 5 (8.4) (6.3) Profit for the year 22.3 18.2 Attributable to: Equity holders of the parent 22.1 18.2 Minority interests 0.2 - 22.3 18.2 Pence Pence Earnings per share - Basic 2 50.44 42.78 - Diluted 2 50.03 42.55 Consolidated Statement of Changes in Equity For the Year Ended 31 March 2006 2006 2005 Note £m £m Profit for the year 22.3 18.2 Dividends (5.6) (4.7) Net proceeds on issues of ordinary shares 14.8 - Movement relating to share-based payments 0.9 0.6 Deferred tax effect of share based payments 0.4 - 32.8 14.1 Equity at the start of the year 108.5 94.4 Equity at the end of the year 141.3 108.5 Consolidated Balance Sheet As at 31 March 2006 2006 2005 Note £m £m ASSETS Non-current assets Intangible assets 22.7 10.7 Property, plant and equipment 241.4 187.9 Total non-current assets 264.1 198.6 Current assets Inventories 6.9 4.8 Trade and other receivables 72.6 55.1 Assets classified as held for sale - 1.7 Cash and cash equivalents 6.4 5.9 Total current assets 85.9 67.5 Total assets 350.0 266.1 LIABILITIES Current liabilities Borrowings 3 - (0.3) Trade and other payables (69.5) (47.4) Current income tax (6.7) (2.6) Total current liabilities (76.2) (50.3) Non-current liabilities Financial liabilities - Borrowings 3 (109.4) (88.7) Deferred tax liabilities (23.1) (18.6) Total non-current liabilities (132.5) (107.3) Total liabilities (208.7) (157.6) Net Assets 141.3 108.5 EQUITY Issued share capital 2.2 2.1 Share premium account 47.4 32.7 Merger reserve 3.7 3.7 Retained earnings 87.8 70.0 Total equity attributable to equity holders of the parent 141.1 108.5 Minority interests 0.2 - Total equity 141.3 108.5 Consolidated Cash Flow Statement For the year ended 31 March 2006 2006 2005 Note £m £m Cash flow from operating activities Profit before income tax 30.7 24.5 Financial income (0.2) (0.1) Financial expense 6.1 4.9 Intangible amortisation 1.5 0.6 Depreciation 38.9 31.2 Profit on disposal of property plant and equipment (5.8) (3.8) Loss on disposal of operation - 0.7 Equity-settled share-based payments 0.9 0.6 72.1 58.6 Increase in inventories (2.1) (0.9) Increase in trade and other receivables (15.8) (8.8) Increase in trade and other payables 22.4 7.7 Cash generated from operations 76.6 56.6 Interest received 0.2 0.1 Interest paid (5.6) (4.8) Income tax paid (1.4) (2.7) Net cash flow from operating activities 69.8 49.2 Cash flow from investing activities Acquisition of businesses (35.2) (18.7) Purchase of property, plant and equipment (78.5) (60.5) Disposal of businesses - 0.5 Disposal of property, plant and equipment 15.2 12.2 Net cash flow from investing activities (98.5) (66.5) Net cash flow before financing activities (28.7) (17.3) Cash flow from financing activities Proceeds from shares issued 14.8 - Proceeds from new loans 20.3 21.7 Capital element of Hire Purchase agreements (0.3) (0.7) Dividends paid (5.6) (4.7) Net cash flow from financing activities 29.2 16.3 Increase / (decrease) in cash and cash equivalents 3 0.5 (1.0) Cash and cash equivalents at the beginning of the year 5.9 6.9 Cash and cash equivalents at the end of the year 6.4 5.9 Notes to the Financial Statements For the year ended 31 March 2006 Preparation of preliminary results The preliminary results have been prepared on the basis of the accounting policies which are to be set out in Speedy Hire Plc's annual report and accounts for the year ended 31 March 2006. EU Law (IAS Regulation EC1606/2002) requires that the consolidated accounts of the group for the year ended 31 March 2006 be prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted for use in the EU ('adopted IFRS'). The comparative figures for the year ended 31 March 2005 are not the statutory accounts for that financial year. Those accounts, which were prepared under UK GAAP, have been reported on by the auditors and delivered to the registrar of companies. The report of the auditors was unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. Details of how the group's results and financial position are impacted by the change to IFRS are set out in the group's IFRS restatement report which was issued on 3 October 2005. The preliminary results were approved by the board of directors on 30 May 2006. The financial information contained in this announcement does not comprise full accounts within the meaning of Section 240 of the Companies Act 1985. The financial information contained in this announcement in respect of the year ended 31 March 2005 has been extracted from the financial statements which have been audited and reported upon without qualification by KPMG Audit Plc and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985. 1. Turnover and profit on ordinary activities before taxation The group's primary reporting format is class of business, as the group's management and internal reporting are structured in this manner. The groups activity is conducted solely within the United Kingdom and Republic of Ireland. Tools Equipment Total 2006 2005 2006 2005 2006 2005 Class of Business £m £m £m £m £m £m Analysis of segmental result Total revenue 151.0 129.1 107.8 80.7 258.8 209.8 Internal revenue (0.5) (0.4) (4.0) (2.9) (4.5) (3.3) Revenue 150.5 128.7 103.8 77.8 254.3 206.5 Segment result before dep'n & 45.1 38.7 37.0 27.2 82.1 65.9 amortisation Depreciation (20.9) (18.3) (16.3) (12.4) (37.2) (30.7) Amortisation (0.6) (0.6) (0.9) - (1.5) (0.6) Result before corporate costs 23.6 19.8 19.8 14.8 43.4 34.6 Corporate costs (6.8) (4.6) Loss on disposal - (0.7) Profit before net financing costs 36.6 29.3 Net financing costs (5.9) (4.8) Income tax (8.4) (6.3) Profit for the year 22.3 18.2 Central overheads net of property income includes £ nil (2005: £0.2 million) of profit on disposal of properties. Results include turnover of £ nil (2005: £4.1 million) and an operating (loss)/ profit of £ nil (2005: £0.1 million) relating to the disposed business of Toilet Hire UK. 2. Earnings per Share Basic earnings per share is based on the profit after taxation of £22.1 million (2005: £18.2 million) and the weighted average number of 5p ordinary shares in issue during the year of 43,659,084 (2005: 42,510,914). The weighted average number of ordinary shares used for the diluted earnings per share is calculated as follows: 2006 2005 Weighted Weighted Average Average Shares Earnings Shares Earnings Earnings Number per share Earnings Number per share £m million pence £m million pence Basic earnings 22.1 43.7 50.44 18.2 42.5 42.78 Share options - 0.2 (0.26) - 0.1 (0.12) All - Employee share scheme - 0.1 (0.15) - 0.1 (0.11) Diluted earnings 22.1 44.0 50.03 18.2 42.7 42.55 The table below reconciles basic earnings per share to earnings per share pre-amortisation and loss on disposal of operation. 2006 2005 Pence Pence Basic earnings per share 50.44 42.78 Amortisation charge after tax per share 2.42 1.22 Loss on disposal of operation after tax per share - 1.15 Basic earnings per share pre amortisation and loss on disposal of operation 52.86 45.15 3. Analysis of net debt At At 1 Apr Cash 31 Mar 2005 flow 2006 £m £m £m Cash at bank and in hand (per the cash flow statement) 5.9 0.5 6.4 Current debt - hire purchase and finance lease obligations (0.3) 0.3 - Non-current debt (88.7) (20.7) (109.4) Net debt (83.1) (19.9) (103.0) 4. Year end gearing (calculated as net debt as a percentage of shareholders funds) stands at 72.9% (2005: 76.6%). 5. The charge for taxation for the year represents an effective tax rate of 27.5% (2005: 25.7%). The effective tax rate excluding adjustments in respect of prior years is 30% (2005: 25.3%). 6. The board has proposed a final dividend of 9.4 pence per share to be paid on 29 August 2006 to shareholders on the register at 30 June 2006. This, together with an interim dividend of 4.9 pence per share paid on 27 January 2006, makes a total dividend for the year of 14.3 pence per share. 7. The Annual Report and Accounts for the year ended 31 March 2006 will be posted to shareholders on or about 15 June 2006. This information is provided by RNS The company news service from the London Stock Exchange

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