Final Results

RNS Number : 1610M

Speedy Hire PLC

19 May 2010

 



19 May 2010

SPEEDY HIRE PLC

("Speedy" or "the Group")

Annual Results for the year ended 31 March 2010

Speedy is the UK's largest provider of tools and equipment for hire

Financial highlights

·	Revenue down £131.6m or 27.3% to £351.1m (2009 restated: £482.7m)
·	EBITA* was positive at £8.0m (2009 restated: £49.2m), down £41.2m or 83.8%
·	Operating loss of £8.6m - an improvement on prior year (2009 restated: loss £50.7m)
·	Adjusted loss before tax* of £6.2m (2009 restated: profit £33.4m), with H2 loss of £1.4m showing an improving trend on H1 loss of £4.8m
·	Loss before tax £22.8m (2009 restated: loss £71.1m)
·	Net debt reduced by over 50% to £119.3m (2009: £248.4m)
·	Net debt/EBITDA* improved to 1.75x (2009 restated: 1.99x) and net debt/net property, plant & equipment of 0.42x (2009: 0.77x) illustrates progress in strengthening the balance sheet
·	Strong operating cash flow of £52.4m (2009 restated: £78.1m) demonstrates successful focus on cash generation
·	Final dividend proposed of 0.2 pence per share (2009 restated: 1.7 pence per share, after adjusting for rights issue)

Trading and operational highlights 

·	Q4 revenues demonstrated a moderating sales decline, down 12.1% year on year despite adverse winter conditions in the quarter, with progressive improvement throughout the quarter and into the current year
·	Contract wins announced today with Spice plc and Wilmott Dixon Group, worth £6m p.a., on top of recent Galliford Try Plc renewal, contribute to increased penetration of industrial and other non-construction markets
·	The Group's secured contracts now forecast to deliver c.£280m of revenues over their remaining terms
·	Top 50 UK construction companies now account for 26.9% of revenue (2009: 24.4%), demonstrating success of ongoing focus on winning share of major contractor business
·	£80m+ of annualised cost savings in place following the cost saving initiatives implemented since July 2008, including successful establishment of a Group Shared Services Centre
·	Disposal of hire fleet generated proceeds of £22.6m and a profit of £2.7m
·	Positive EBITA* contribution from the start-up International & Advisory Services segment. Middle East turnover achieved an annualised run-rate of c.£10m in March 2010

*before amortisation and exceptional costs

Commenting on the results, David Wallis, Chairman, said:

"The more stable levels of recent trading are encouraging, which may indicate that economic activity in our markets is bottoming out, but we are under no illusions that there remain many difficult months ahead.  The short term focus will remain on cash generation, whilst running the business as efficiently as possible in a demanding market. I am confident that we have adopted a strategy which will serve our shareholders well in both the short and longer term.  As activity levels improve, your business is in good shape to capitalise on the recovery."

For further information:

Speedy Hire Plc	Hudson Sandler
Steve Corcoran, Chief Executive Justin Read, Group Finance Director Tel:  [phone] on Wednesday 19 May (thereafter Tel:  [phone])	Nick Lyon/Wendy Baker/Kate Hough Tel: [phone]

Website:  www.speedyhire.plc.uk

Results presentation:

There will be an analysts' meeting and conference call at 9.30am today.  The presentation slides to accompany the conference call will be available at www.speedyhire.plc.ukfrom 9.30am this morning.  For conference call and replay facility details please contact Sarah Hughes, Hudson Sandler on 020 7796 4133 or [e-mail].

Forward looking statements:

This release includes statements that are forward looking in nature. Forward looking statements involve known and unknown risks, assumptions, uncertainties and other factors which may cause the actual results, performance or achievements of the Group to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Except as required by the Listing Rules and applicable law, the Company undertakes no obligation to update, revise or change any forward looking statements to reflect events or developments occurring after the date of this release.

CHAIRMAN'S STATEMENT

Overview

It has been another difficult and challenging year for your company, as evidenced by the unsatisfactory financial result achieved. 

However, it is important to put this into context.  A year ago I set out our strategy for the coming 12 months: to maximise revenues, optimise costs, generate cash and reduce bank debt. I am pleased to report that each objective has successfully been achieved. Despite revenues declining in the year by 27%, market share has been maintained, albeit at a slight cost to margins.  Since July 2008, costs have been reduced by over £80 million, or 18%, and during the past year the business has generated £52 million of operating cash flow.  As a result of this strong cash generation and the successful rights issue in July 2009, together with tight control of capital expenditure, net bank debt reduced from £248.4 million to £119.3 million, leaving gearing as at 31 March 2010 at 48%, the lowest in the Group's history, which illustrates our progress in strengthening the balance sheet. 

We remain committed to paying a dividend when prudent to do so and the Board is therefore recommending a final dividend of 0.2 pence per share. If approved by shareholders at the forthcoming AGM, this will bring the total for the year to 0.4 pence per share. The final dividend will be paid on 18 August 2010 to all shareholders on the register on 18 June 2010.

Strategy

Although we have seen a more stable trading environment over the last six months, levels of activity in the construction and industrial markets remain subdued and uncertainty over the number and size of public sector projects will persist until the government is able to give clear guidance.  As a result, we will continue to run the business cautiously. Our short term focus will remain on cash and costs, whilst ensuring that we do not compromise our ability to service our hard won customer base.  Over the last year, our business with the UK's top 50 construction companies has continued to increase and now makes up 27% of revenues.  These companies operate extensively in both the public and private sectors.  As a result of the supply arrangements which we have with them, the future flow of work to Speedy mirrors their order books and improves the future visibility of our earnings.

We will focus on growing the existing business organically, with the immediate objective of improving margins in a move towards generating appropriate returns.  Additionally, we will nurture our fledgling business in the Middle East, which is already showing extremely positive signs of growth, as well as our Branded and Advisory business. 

As the business and its back office functions have been restructured over the last year, we are now beginning to see the benefits of those actions.  The setting up of a Shared Services Centre, replacing a network of regional offices, and the successful implementation of the "One Speedy" programme are producing benefits for both customers and the business.  There is now greater visibility of our assets, their location and utilisation, which will ultimately enhance returns and enable us to provide higher service levels.

Over the longer term, we are seeking to evolve Speedy's strategy to become a service provider to our clients, wherever they have operations, building on the relationships we have already established with them.  To achieve this we must offer the best quality fleet and operational network, as well as testing, repair, maintenance and training facilities, all provided by well trained, skilled and knowledgeable people.

Our People

It has been a year of tremendous upheaval and uncertainty for our people, who have responded magnificently to the challenges.  There will undoubtedly be many more in the year ahead, but it is at times like these that a strong culture and team spirit win the day.  I would like to extend the thanks of the Board and shareholders to all of them.

Looking Forward

The more stable levels of recent trading are encouraging, which may indicate that economic activity in our markets is bottoming out, but we are under no illusions that there remain many difficult months ahead.  Until there are clear indications that recovery is established, we will invest in new fleet behind the demand curve, rather than ahead of it, but equally will ensure that we maintain service levels to our existing clients.  We will also prudently invest behind our Middle East operation in support of our strategic services agreement with Al Futtaim Carillion.

The short term focus will remain on cash generation, whilst running the business as efficiently as possible in a demanding market. I am confident that we have adopted a strategy which will serve our shareholders well in both the short and longer term.  As activity levels improve, your business is in good shape to capitalise on the recovery.

CHIEF EXECUTIVE'S REVIEW

Overview

Throughout the past financial year we have consolidated our market leading position with clients in the UK (both construction and non-construction) whom we saw as being the principal beneficiaries of a polarising market in the short term and a consolidating one over the longer term. This has been accompanied with an unstinting focus on delivering the objectives we outlined last year, namely to maximise revenues, optimise costs, generate cash and reduce bank debt.

In the first half we concentrated on restructuring our business and whilst it has been a difficult year it is pleasing to report that we have delivered on our objectives. The cost base has been reduced from a £464m run rate at July 2008, when we first initiated our cost reduction programmes. It now stands at £348.6m and whilst some of this reduction can be explained by lower revenue, £80m+ has been achieved as a result of specific management actions. Net bank debt at the year end was less than £120m, down from a peak of £301.8m in August 2008 and £129.1m below the March 2009 figure, underpinned by a hire fleet with an net book value of £246.9m.  Additionally, we realised £2.7m of profits from asset sales which confirms the appropriateness of the Group's balance sheet valuations. Tight control was also maintained over capital expenditure, down 41.7% on the prior year. 

Having completed the closure of 37 depots and 14 workshops, the removal of 322 vehicles and a 317 reduction in employee headcount over a 12 month period, the business was able, in the second half, to concentrate on reinforcing its market leading position. In the year we have secured over 212 new or renewed awards, with a projected value of £170m; including recent contract wins with Costain Plc, Galliford Try Plc and Wilmott Dixon Ltd, together with secured agreements with Connaught Plc and Spice Plc in the UK and Al Futtaim Carillion in the UAE. These have been complemented with significant awards in non-construction activities, including a £7.5m award from ExxonMobil and a £4m award from Welsh Water Plc.  Revenues from non-construction activities now account for 35% of our turnover. 

We will continue to keep a tight rein on costs, diligently control capital expenditure and manage our cash prudently. Whilst sensitivity remains in respect of the future outlook for some of the markets that we serve, the early and determined action undertaken by management has ensured that the business is now very strongly placed to benefit from the eventual upturn. 

Our Strategy

In the short term whilst economic uncertainty prevails, we will continue to manage our business very conservatively, maintaining a tight control over costs and cash management.  In parallel we will continue to consolidate our market leading position with those best placed to support the regulated/privately financed markets in energy, transport, waste and water and also with the key operators involved in the supply of services to food retailing, the communications sector and essential repair and maintenance. Many of these activities require equity investment, generally through PFI/PPP or are undertaken through joint ventures or framework agreements which typically lend themselves to the larger construction and engineering groups where Speedy enjoys a market leading position, with the top 50 construction companies accounting for 27% of our turnover.

Over the longer term our strategy is to position Speedy as an international service provider. This will be achieved by building upon the trusted relationships established over 33 years serving construction and industry. Our clients hire to mitigate the risks that they associate with the financial liability, operational management and compliance risk of ownership. They choose Speedy because we have the fleet quality, the operational network and the product range, together with a commitment to health & safety, sustainability and quality, that best supports their objectives. However, in isolation hiring does not remove all risk. If hired equipment is given to someone inadequately trained in its use they could break it, fail in their task or cause injury to themselves or others; effectively exchanging one risk for another. Speedy has instigated the offer of training and consultancy services to complement the use of the hired asset.  We will also use our purchasing power to provide clients with consumable products, e.g. drill bits, saw blades and personal protection equipment or safety wear, to operate equipment safely, each of which is integral to the use of an asset but which are typically ordered separately, incurring additional cost and disruption to our client.

This more integrated solution will also be enhanced with the provision of test and inspection services to provide for the planned service and maintenance needs of both owned and hired equipment. Our goal is a full service based offering built around the provision of the hired asset and delivered by leveraging the strength of the Speedy brand whilst at the same time extending the size of the market in which Speedy operates.  This more integrated offering clearly differentiates Speedy from its peers.

Funding Plan

Our business is a strong generator of cash, with net operating cash flow of £52.4m for the year to 31 March 2010. Our financial model provides for the utilisation of operating cash flows to self finance new fleet requirements in a period of non growth. This has enabled new fleet investment during the year and yet still allowed us to reduce debt by £5m more than anticipated in November 2009. 

At our interim presentation in November 2009 we advised the market that to support our long term objective of establishing Speedy as an international service provider we would adopt a three stage approach to funding requirements.

·      In the short term, and until there is clear evidence that a sustainable recovery is underway in UK construction, we will continue to manage our cash conservatively, funding UK capex to support our service level requirements from the cash generated by operations. The balance will continue to be used to pay down debt or to fund our fledgling operation in the Middle East. In the last financial year the business invested £7.7m in this operation which generated £2.4m in revenues and achieved a turnover run rate of c.£10m p.a. at the period end.

·      Investment in the hire fleet for growth is not planned until we see a more sustainable recovery in UK construction activity, which we forecast will not occur until at least the 2011-12 financial year

·      Over the longer term (2015+), we would expect to have secured sufficient future contracts, with longer term visible revenues, that enjoy a transparency in earnings that will support additional funding.

In the meantime, we will continue to concentrate on generating strong cash flow and maintaining the strength of the balance sheet whilst we develop our long term plans to build the business into a fully recognised outsource service provider and establish appropriate long term finances to support such plans.

Corporate responsibility

The safety and well being of our employees, our clients, stakeholders and the communities in which we operate continues to be at the forefront of what we do. Our values, the Speedy Spirit, embody the way that we want to do business and be seen to do business.

We believe that good corporate responsibility can be measured by a company's commitment to its values even when economically pressed. We are pleased to be able to stand up to this test. In 2009 we set ourselves four primary objectives for the year; by design these were intended to be three year stretching targets; our performance to target is as follows:

·      customer retention: 100% achieved (100% retained)

·      emissions per vehicle: 100% achieved (reduced by 6%)

·      accident loss frequency rate: 4.3% achieved (reduced by 27%)

·      rehabilitation agenda: 100% achieved (training provided for 200 prisoners)

We acknowledge that work still remains to be done. Our 2010 Corporate Responsibility report will be available in July 2010 and will provide greater detail on these achievements and also outlines our objectives for the coming year. You will be able to view this report at www.speedyhire.plc.uk.

Speedy is also the acknowledged leader in its field for the provision of health and safety guidance and innovation in safety design, as evidenced by our award winning Safety from the Ground Up campaign.  An example of this is our initiative in response to site related hand arm vibration risks where Speedy sourced and assisted with the design of an innovative meter which records and registers vibration whilst machinery is in use, helping to protect the user from excessive exposure and the employer with improved safety management and risk control measures. We now have over 285 of these on hire and they are specified by clients such as Balfour Beatty, Bam Nuttall and Carillion.

Our own safety record continues to improve with our All Major Accident Frequency Rate reducing from 5.9 to 4.3, a reduction of 27% positioning Speedy at the forefront of our industry.

We remain resolute in our determination to provide solutions to support sustainability initiatives. In conjunction with ERM Ltd, the world leading environmental and sustainable development consulting service in the supply of data relating to carbon reduction and sustainability, we launched our new 'Go' initiative. This industry first provides our clients with a monthly carbon statement detailing the carbon usage of the equipment that they have hired and provides them with 'Go' credits which they can use to set targets for further reductions if they choose more energy efficient, less carbon emitting products.

We also continue to support the organisation 'Business In The Community' at a number of levels and continue to be members of the FTSE4Good index.

Looking Ahead

Having taken the early and aggressive action to reduce our cost base by over £80m from its high of £464m, something that we started to instigate as early as July 2008, we developed a cost base which has enabled us to trade through the substantial difficulties that befell our industry post the economic and financial turmoil in September 2008. As the benefits of the actions on costs fed through, we were able to concentrate on consolidating our clear market leading position. As a result, and despite trading off substantially lower volumes, the Group has been able to deliver a progressive improvement in trading throughout the second half of the year ended 31 March 2010 and built a much more stable platform from which to move into the current calendar year.

It is encouraging to note that this stability has continued into this financial year and that volumes on hire at the end of April 2010 were broadly in line with those of April 2009.  Whilst we expect to see a further slight reduction in overall construction volumes this year, we expect to see our trading position maintained.  This will be underpinned by private and regulated industry spending on infrastructure. Orders from this sector continue to show growth out to 2014 and, whilst there will be a significant reduction in public sector spending from current levels, we do not anticipate the impact of this action will be felt until 2011 as ongoing contracts will continue to provide solid levels of activity until then. At that point, all market forecasters predict that the private sector will have re-established its traditional position as the construction industry's principal client sector. As a sector agnostic business, Speedy will follow this transition as our clients move towards contracts in support of private clients. We expect this to manifest itself first in spending associated with the energy, water, waste and transport (especially rail) sectors, followed by the major food retailers.

Given our key relationships with those clients that continue to increase market share in their particular markets and given the progressive improvement in trading in H2 2010 which has continued into 2011, our current expectation is that the business will maintain this momentum in the current financial year, nothwithstanding uncertainty in respect of the short term economic outlook. As ever, we will continue to concentrate closely on keeping a tight control over costs and will retain a clear focus on generating cash.

As the year progresses and should the economic outlook continue to improve, we expect new opportunities to emerge from outsourcing. We will also maintain the development of our fledgling activities in Branded & Advisory Services and gradually progress our business in the Middle East, which is underpinned by the five year exclusive strategic services agreement with Al Futtaim Carillion. In summary, whilst the short term outlook is not without its challenges, we are confident that we will continue to develop our overall strategic objectives and position our business as a full outsourcing partner, building upon our UK market leading position for asset services in rental.

GROUP FINANCIAL REVIEW

Overview

Although the construction sector is not without challenge, the second half of the year ended 31 March, 2010 was notable for a steadily improving monthly trend in year on year revenue variances and for a generally more predictable forecasting environment. Adjusted PBT (before amortisation and exceptional costs) in the second half improved to a loss of £1.4m (compared to the loss of £4.8m reported in the first half of 2010), despite revenue falling 26.5% and the adverse weather conditions experienced in the final quarter of the financial year. Combined with better than anticipated performance with regard to year end net debt, this suggests a firmer base for the coming year.

A new reporting structure

During the year, Speedy's ten UK regional and product-based businesses were merged into one UK and Ireland business, UK and Ireland Asset Services. This is part of the Group's drive to make Speedy easier to trade with and also enhanced the efficiencies coming from the Group's new centralised shared service centre, which came into operation during the course of the year and is now fully functional.

In addition, two new divisions were established during the year to build upon the strength of Speedy's brand and customer relationships and to provide new growth opportunities. The objective of these initiatives is to create services which both complement and expand our existing business offerings, thereby facilitating the development of Speedy as the long term strategic partner of choice with its key customers.

The first of these two new businesses is International Asset Services. Building on a recently signed exclusive five year strategic services agreement with Al Futtaim Carillion (Carillion's joint venture in the UAE), the aim is, over time, to establish an industry-leading 'full outsource' model which will involve Speedy providing, in addition to its traditional hire offering, complementary services in areas such as asset management, site support services and logistics control. Once this fledgling operation has established a successful track record, this targeted, client driven approach can potentially be extended as a fuller outsourcing initiative to other selected customers across the Middle East and elsewhere.

The second new business is Branded & Advisory Services. This new division aims to leverage the Speedy brand by building broader and deeper relationships with the Group's customers. It will do so by providing consultancy and training services based on Speedy's core brand values of safety, skills, compliance and innovation, thereby better positioning Speedy within the asset management cycle of its major customers. The range of services are being initially offered to the UK construction market, but over time will be expanded to other sectors and geographies, thereby assisting in Speedy's goal of being recognised as an international services provider.

As a consequence of these moves, and following the introduction of IFRS 8, the Group's segmental reporting was changed with the publication of its interim results in November 2009. It now reports two segments: UK & Ireland Asset Services and International & Advisory Services (combining the new International Asset Services and Branded & Advisory Services businesses). As previously advised, the two component businesses of the International & Advisory segment will be reported as separate segments when their individual contribution to Group results becomes more significant.

Group financial performance

Turnover for the year to 31 March 2010 of £351.1m was 27.3% below the prior year period (2009 restated: £482.7m). Gross margin was 59.4% (2009 restated: 59.7%) and the Group reported EBITA (before exceptional costs) of £8.0m (2009 restated: £49.2m), after deducting depreciation charges of £60.2m (2009: £75.9m).

The Group's loss before taxation, amortisation and exceptional items was £6.2m (2009 restated: profit £33.4m). The loss after taxation, amortisation and exceptional items was £18.3m (2009 restated: loss £55.1m).

Revenue in the UK & Ireland Asset Services division totalled £347.4m (of which £5.8m relates to the Ireland operations), which was 28.0% down on the prior year period. Despite this £135.3m drop in turnover, the division remained profitable at the operating level, with EBITA (before exceptional costs) of £15.0m (2009 restated: £59.1m). However, notwithstanding significant cost reduction measures, operational leverage within the business meant that the operating profit margin (before amortisation and exceptional costs) fell to 4.2% from 12.0%.

The two businesses which are reported within the International & Advisory Services segment were both formed during the year. Of the segment's £3.7m turnover, £2.4m relates to the International Asset Services division and derives principally from activity with Al Futtaim Carillion in the UAE, where the Group has invested £7.7m in hire equipment during the year. The Branded & Advisory Services division reported turnover of £1.3m in the year, largely derived from servicing the training requirements of some of the Group's major customers. The operating profit of this segment, all derived from International Asset Services, amounted to £0.5m despite the start-up nature of the activities in the year.

The figures for the segments reported above are stated before corporate costs. These costs amounted to £7.5m (before exceptional costs) in the year, equivalent to 2.1% of revenue.  In the prior year period corporate costs were £9.9m (before exceptional costs), equivalent to 2.1% of revenue.

The Group's principal operating cost items are personnel, depreciation and vehicles/fuel. These totalled £201.2m in the year (2009 restated: £247.6m), representing 58.6% of total operating costs (2009 restated: 57.1%). Personnel costs totalled £111.9m, which was 15.8% down on the prior year. Depreciation totalled £60.2m (of which £2.7m is within corporate costs) and was 24.3% down on the prior year period. Vehicle costs amounted to £29.1m, including transport related fuel. These were 17.2% down on the prior year period.

Interest and hedging

Net interest expense (before exceptional costs) totalled £14.2m (2009: £15.8m), of which £5.7m was incurred in the second half of the year.

Borrowings under the Group's bank facility are priced on the basis of LIBOR plus a margin, while the unutilised commitment is charged at 50% of the applicable margin. During the year, the margin payable under the facility fell from 4% to 2.5% as a result of the Group bettering thresholds contained within the facility agreement's leverage covenant.

The Group hedges part of its exposure to fluctuations in interest rates. Typically, it aims to hedge between 40% and 70% of net debt. As a consequence of the rights issue proceeds being entirely used to pay down debt, it was over hedged, compared to Group policy, for much of the year. At the year end, hedges with a notional value of £110m (2009: £140m) were in place, equivalent to approximately 90% of net debt outstanding. The market value of these hedges was £(3.2)m at year end and they have varying maturity dates out to July 2011. The incremental interest cost arising from these hedges amounted to £3.7m during the year (2009: £0.3m).

Exceptional items

Exceptional items of £11.1m before taxation (2009: £95.3m) relate to restructuring and cost-saving initiatives that were undertaken during the year which resulted in a number of non-recurring items of expense. 

The principal exceptional items were charges in respect of an onerous lease provision to cover the costs for up to three years of the 51 leasehold properties (37 depots and 14 workshops) that were closed during the year, redundancy costs relating to the 317 positions which were removed during the year and other costs relating to the closure of regional back offices and the set up of the Shared Services Centre. The cash cost before taxation of these exceptional items, excluding the onerous lease provision, was £6.1m, all of which was spent in the year.

Taxation

The Group's income statement shows a tax credit for the year of £4.5m (2009 credit: £16.0m). Of this amount, £1.8m relates to a pre-exceptional tax credit based on an effective tax rate of 15.4% (2009 charge: 28.9%). The balance represents a credit of £2.7m in respect of the exceptional items referred to above.

Cash tax in the year ending 31 March 2010 amounted to a net refund of £5.9m (2009: paid £9.8m).

Shares, earnings per share and dividends

During the year, the Group announced and completed a fund raising via a fully underwritten 9 for 1 rights issue which involved the issue of 458,658,900 new ordinary shares at 23 pence each raising gross proceeds of £105.5m (net £99.7m). As a consequence, the weighted average number of shares outstanding for the year ended 31 March 2010 was 419.1m. At the year end, 517.2m shares were outstanding, of which 10.4m were held in the Employee Benefits Trust. 

The basic loss per share before amortisation and exceptional items was 1.41 pence (2009 adjusted: earnings 13.00p). The basic loss per share after amortisation and exceptional costs was 4.37 pence (2009 adjusted: loss 29.57p).

The Board remains committed to the payment of dividends when prudent to do so. Subsequent to the year end, it has recommended a final dividend of 0.2 pence per share (2009: 1.7 pence adjusted for the rights issue) which represents a total cash cost of approximately £1m. This gives a total dividend for the year of 0.4 pence per share. If approved by shareholders, the final dividend will be paid on 18 August 2010 to all shareholders on the register on 18 June 2010.

Capital expenditure and disposals

Total capital expenditure during the year amounted to £43.8m, of which £33.5m related to equipment for hire (including £7.7m in the Middle East) and the balance principally to investments in IT, the new shared service centre and the Group's depot network.  This compares to £75.1m in 2009, a reduction of 41.7%. With disposal proceeds of £23.0m (2009: £39.4m), net capital expenditure totalled £20.8m (2009: £35.7m). The disposal of hire fleet during the year generated profit of £2.7m, underlining the appropriateness of the carrying value of the Group's fixed assets.

The 41.7% reduction in net capital expenditure was consistent with the Group's objective of investing only in assets necessary to maintain the operational integrity of its UK businesses and support the growth of its Middle East presence, whilst at the same time promoting the disposal of older and under-utilised assets.

A consequence of this strategy, in particular with gross capital expenditure representing only 72.8% of total depreciation (2009: 98.9%), there has been an increase in the average age of the Group's hire fleet. At 31 March 2010 the average age was estimated at 4.2 years (2009: 3.4 years). Based on net book value, approximately 50% of the fleet is less than three years old.

Cash flow and net debt

Cash generation has remained strong, with net cash flow generated from operating activities amounting to £52.4m in the year (2009: £78.1m), a year on year reduction of only £25.7m despite the £30.8m negative variance in the Group's year on year post-tax loss before amortisation and exceptional items. The principal drivers of this performance were a 42.7% reduction in net investment in hire equipment, £6.9m lower net interest expense, a £8.8m release of cash from working capital and a £5.9m receipt of cash from HMRC.

Free cash flow (i.e. before acquisitions, dividends and financing activities) amounted to £34.2m (2009 restated: £31.4m). There were no acquisitions during the year (2009: £14.6m) and dividend payments amounted to £4.3m (2009: £10.0m).

Net debt has fallen from £248.4m at the beginning of the year to £119.3m at 31 March 2010, a £129.1m decrease. £99.7m of this decrease was a consequence of the rights issue launched last summer, the proceeds of which were entirely used to pay down debt.

As a consequence of the significant debt reduction during the year, net debt to EBITDA (before exceptional items) was 1.75x at 31 March 2010, which was a stronger position than the 1.99x (restated) reported for 31 March 2009. Equally, the improvement in the net debt position and the share premium arising from the rights issue, means that gearing (net debt divided by shareholders' funds) has improved from 148.3% at 31 March 2009 to 48.4% at 31 March 2010.

Balance sheet

Net assets at 31 March 2010 totalled £246.6m, a £79.1m increase on the £167.5m reported at 31 March 2009. This is equivalent to a per share value of 48 pence. As a result of disposals and capex running below the rate of depreciation, net property, plant & equipment of £285.6m at 31 March 2010 is £37.6m lower than at the beginning of the year. Equipment for hire represents approximately 86% of net property, plant & equipment and net debt/net property, plant and equipment of 0.42x at 31 March 2010 (2009: 0.77x) underlines the strong asset backing within the business.

Gross trade debtors totalled £101.1m at 31 March 2010, down £11.6m from the start of the year. Bad debt and credit note provisions totalled £10.7m at 31 March 2010 (£13.9m at 31 March 2009), equivalent to 10.6% of the debtor book (12.3% at 31 March 2009). Debtor weeks (calculated on a count‐back basis) remained broadly in line with the position at the start of the year at 11.1 weeks (10.7 weeks at 31 March 2009).

Capital structure and treasury

Speedy's long-term funding is provided through a combination of shareholders' funds and bank debt.

For the  year ended 31 March 2010, shareholders' funds  increased by £79.1m, following a rights issue which generated net proceeds of £99.7m, and net debt was reduced by £129.1m as a consequence of both the rights issue and strong cash flow generation. The objective of the rights issue was to strengthen the Group's balance sheet and reduce the extent of its financial leverage.

Bank funding for the Group is via a committed bank facility provided by seven relationship banks. At 31 March 2010 the amount of the facility was £260m and headroom under the facility amounted to approximately £140.5m (including £12.5m of cash) (£51.0m at 31 March 2009, including £11.0m of cash). The facility combines a term loan facility and a revolving credit facility, both of which are subject to gradual amortisation prior to maturity of the facility in June 2012. The facility includes quarterly interest, fixed charge, leverage and cash flow cover tests. Speedy was compliant with these tests throughout the year.

The Group will continue to maintain a tight focus on cash generation, recognising however the need to invest in order to maintain the quality of its UK hire fleet. Additionally, investment will be provided to help support the Group's Middle East operations.

Return on capital

Return on capital (based on EBITA before exceptional items) totalled 2.0% in the year ended 31 March 2010. This compares to 10.9% in the prior year period. The principal reason for the decline was a 83.8% decline in EBITA (before exceptional items), only partially offset by a 14.2% decline in average capital employed.

STATEMENT OF DIRECTORS' RESPONSIBILITIES PURSUANT TO DISCLOSURE AND TRANSPARENCY RULES

Each of the Directors, whose names and functions are listed below, confirms that, to the best of his or her knowledge:

(i)            The financial statements, prepared in accordance with applicable set of accounting standards, give a true and fair view of the assets liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;
and

(ii)           the business review includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Name	Function
David Wallis	Chairman
Steve Corcoran	Chief Executive
Justin Read	Group Finance Director
Claudio Veritiero	Managing Director, UK & Ireland Asset Services
Mike McGrath	Managing Director, International Asset Services
Ishbel Macpherson	Senior Independent Non-Executive Director
Peter Atkinson	Non-Executive Director
Michael Averill	Non-Executive Director
James Morley	Non-Executive Director

PRINCIPAL RISKS AND UNCERTAINTIES

The Board is fully committed to a programme of continual improvement which includes identifying, evaluating and managing significant risks facing the business and has developed a set of processes to allow it to do so. Nine key risks areas have been identified, the successful management of which is seen as essential to the Group's ability to achieve its corporate goals. A revised risk KPI dashboard has been agreed and will be reviewed by the Board every quarter.  Additionally, the Internal Audit plan is aligned to the key risks.

The text below summarises the risks that were identified as key (in alphabetical order), together with a short description of monitoring/mitigation.

1. Attracting & maintaining key staff

Risk description

Lack of staff with appropriate skills hinders our ability to win, mobilise and deliver on contracts.

Mitigation

Speedy offers competitive benefits packages and provides training at all levels, including a training academy. Speedy also offers career development and succession plans.

2. Business continuity

Risk description

Any interruption to the Group's IT systems or infrastructure could have a material adverse effect on the Group's business, communication, capabilities, management of projects and overall financial performance.

Mitigation

Responsibility for the integrity of the Group's IT systems rests with the Director of Information Technology. Back-up and recovery procedures are in place for key systems and buildings. Changes to Group systems are considered as part of wider change management programmes and implemented in phases wherever possible.

3. Data and management information

Risk description

To achieve its strategic aims, the business needs to measure and analyse performance in every business area and across all products and services. Leveraging revenue-generating opportunities, exceeding customer expectations, effective decision-making and keeping costs down all require effective systems, MI and KPIs.

Mitigation

The Group has IT systems throughout all business areas, which are the responsibility of the Director of Information Technology. The 'One Speedy' project, which has been running since mid-2009, continues to deliver material data and information benefits and will continue to do so. Ongoing investment is planned to use technology further to improve asset management, data management and customer management information.

4. External Influences

Risk description

A downturn in construction/industrial activity, or a decline in the desirability of hiring tools and equipment to fulfil such activity, may reduce the prices that the Group can charge for its services.

Government expenditure is important across the wider construction industry in the UK. Any reduction in Government expenditure which is not offset by an increase in private sector expenditure could adversely affect the Group.

Mitigation

The Group continually monitors and assesses market capacity by reference to a number of external sources, together with internal data which reports customer, product and geographical demand. It operates a flexible model that can react to prevailing market conditions.

The Group assesses changes in Government spending as part of its wider market analysis. The impact on the Group of any such reduction in expenditure is assessed as part of the ongoing financial and operational budgeting and forecasting process.

Our strategy is to develop a broader spectrum of services across different markets and to ensure that we are well positioned with clients who are likely to benefit from those areas in which increased activity is forecast.

5. Failure/insolvency of major customer

Risk description

Whilst no single customer accounts for more that 7% of revenue or receivables, in the event of the loss of a major customer, the revenue generated by the Group could be reduced with a corresponding impact on the Group's market position.

Mitigation

Credit control processes are in place to monitor the potential for credit defaults and exposures. This is reported on a regular basis to the executive management team and, where necessary, issues are escalated to resolve payment issues as soon as practicable. Visibility of exposures to individual customer groups is improving through the implementation of the business information and credit management systems.

The Group does not maintain credit insurance since nearly all of its debt exposure is with UK-based customers, and management of the risk of debt default is managed as part of the day-to-day operations of the business.

6. Finance

Risk description

Should the Group be unable to obtain sufficient capital in the future, it may not be able to take advantage of strategic opportunities, or it may be required to reduce or delay capital expenditure, resulting in the ageing of the fleet and/or availability issues. This could disadvantage the Group relative to its competitors and may adversely impact its ability to command acceptable levels of pricing.

Mitigation

The Group's Treasury Policy sets out objectives regarding the nature, amount and maturity of committed funding facilities that should be in place to support the Group's activities. In line with the policy, the Group's capital requirements and potential sources of finance are reviewed at Board level on a regular basis in order that its requirements can be adequately planned for. Close relationships are maintained with the Group's bankers in order to ensure that the Group enjoys a broad degree of support. Short lead times for purchasing hire equipment are maintained in order to manage capital requirements.

7. Increase in competition

Risk description

The equipment rental industry is extremely competitive and highly fragmented. Many of the markets in which the Group operates are served by numerous competitors, ranging from national equipment rental companies to regional independents.

Some of the Group's principal competition may have greater financial resources, be more geographically diversified, have greater brand recognition in certain market sectors and may be better able to withstand adverse market conditions within the industry.

Mitigation

The Group monitors its competitive position closely, with a view to ensuring that it is able to offer its customers the best solution to their requirements. Capital expenditure requirements are assessed as part of the budgeting process, and throughout the year via regular forecasts. Day-to-day capital expenditure requirements are assessed on a needs basis, with limited long-term future ordering commitments.

The Group monitors the performance of its major accounts against market forecasts and individual expectations with a view to ensuring that the opportunities for the Group are maximised. Market share is regularly measured and our competitors' activities are reported on and reacted to where appropriate.

8. Planning & Change Management

Risk description

To address the material reduction in the size of the hire market since 2008, the Group is executing a strategy that delivers growth and profit though leveraging core competencies better than our competitors, developing new and better ways of operating and entering new markets, for example, the Middle East, where different risks to those faced in the UK and Ireland will emerge. If the strategy is wrong or not executed effectively, or the changes undermine our ability to plan and forecast, the Group may not achieve its objectives.

Mitigation

In-depth and ongoing reviews of business strategy have been undertaken by the Board and its advisors in determining strategy. The change programme has been communicated to all employees to explain the Group's strategy, and plans to deliver the strategy are compared to actual performance. Significant projects are subject to careful evaluation and monitoring at Board level, with risks being subject to ongoing reporting around appropriate mitigation strategies.

9. Safety

Risk description

The Group operates in an industry where safety is a critical consideration. Failure to meet customers' safety expectations or regulatory requirements increases the risk of legal, financial and brand damage. This requires an uncompromising attitude to safety.

Mitigation

The Group is recognised for its industry-leading position promoting enhanced health and safety compliance, together with a commitment to product innovation. The Group's systems and health & safety and environment team measure and promote employee understanding of and compliance with procedures that affect safety. Also key customer account managers address any service and safety issues arising in respect of those customers.

Consolidated income statement

For the year ended 31 March 2010

		Before exceptional  items	Exceptional items	Total	Before exceptional  items	Exceptional	Total
	Note	2010	2010	2010	2009	Items	2009
					Restated	2009	Restated
		£m	£m	£m	£m	£m	£m
Revenue	2	351.1	-	351.1	482.7	-	482.7
Cost of sales		(142.7)	-	(142.7)	(194.7)	-	(194.7)
Gross profit		208.4	-	208.4	288.0	-	288.0
Distribution costs		(37.8)	-	(37.8)	(50.5)	-	(50.5)
Administrative expenses		(168.1)	(11.1)	(179.2)	(197.5)	(90.7)	(288.2)
Analysis of operating (loss)/profit
Operating profit before amortisation and exceptional items		8.0	-	8.0	49.2	-	49.2
Amortisation		(5.5)	-	(5.5)	(9.2)	-	(9.2)
Impairment of intangible assets	3	-	-	-	-	(60.9)	(60.9)
Impairment of property, plant and equipment	3	-	-	-	-	(8.8)	(8.8)
Exceptional restructuring costs	3	-	(11.1)	(11.1)	-	(21.0)	(21.0)
Operating (loss)/profit		2.5	(11.1)	(8.6)	40.0	(90.7)	(50.7)
Financial income	4	-	-	-	0.2	-	0.2
Financial expense	4	(14.2)	-	(14.2)	(16.0)	(4.6)	(20.6)
(Loss)/profit before taxation		(11.7)	(11.1)	(22.8)	24.2	(95.3)	(71.1)
Taxation	3,5	1.8	2.7	4.5	(7.0)	23.0	16.0
(Loss)/profit for the financial year		(9.9)	(8.4)	(18.3)	17.2	(72.3)	(55.1)
Attributable to:
Equity holders of the parent				(18.3)			(55.1)
				Pence			Pence
Earnings per share
- Basic	6			(4.37)			(29.57)
- Diluted	6			(4.37)			(29.57)

Consolidated statement of comprehensive income

For the year ended 31 March 2010

			2010	2009
				Restated
			£m	£m
Loss for the financial year			(18.3)	(55.1)
Other comprehensive income :
Effective portion of change in fair value of cash flow hedges			2.6	(5.3)
Exchange difference on retranslation of foreign operations			(0.5)	-
Other comprehensive income, net of tax			2.1	(5.3)
Total comprehensive income for the financial year			(16.2)	(60.4)
Attributable to equity holders of the parent			(16.2)	(60.4)

Consolidated balance sheet

At 31 March 2010

	Note			2010	2009
				£m	£m
ASSETS
Non-current assets
Intangible assets	8			65.7	71.2
Property, plant & equipment	9			285.6	323.2
				351.3	394.4
Current assets
Inventories				11.3	12.2
Trade and other receivables	10			103.4	104.4
Income tax				-	6.9
Cash and cash equivalents				12.5	11.0
				127.2	134.5
Total  assets				478.5	528.9
LIABILITIES
Current liabilities
Borrowings	13			(0.2)	(0.2)
Other financial liabilities	12			(3.2)	(5.7)
Trade and other payables	11			(70.9)	(64.1)
Provisions	14			(4.8)	(4.1)
Income tax				(1.7)	-
				(80.8)	(74.1)
Non-current liabilities
Borrowings	13			(131.6)	(259.2)
Provisions	14			(2.5)	(3.8)
Deferred tax liabilities	15			(17.0)	(24.3)
				(151.1)	(287.3)
Total liabilities				(231.9)	(361.4)
Net assets				246.6	167.5
EQUITY
Share capital	16			25.9	2.5
Share premium account				190.2	111.0
Merger reserve				3.7	3.7
Hedging reserve				(3.4)	(6.0)
Translation reserve				(0.5)	-
Retained earnings				30.7	56.3
Total equity attributable to equity holders of the parent				246.6	167.5

Consolidated cash flow statement

For the year ended 31 March 2010

		2010	2009
			Restated
		£m	£m
Cash flow from operating activities
Loss before tax		(22.8)	(71.1)
Adjustments for:
Financial income		-	(0.2)
Financial expense		14.2	20.6
Exceptional impairment of intangible assets		-	60.9
Exceptional impairment of property, plant and equipment		-	8.8
Amortisation		5.5	9.2
Depreciation		60.2	75.9
(Profit)/loss on disposal of hire equipment		(2.7)	1.1
Loss on disposal of other property, plant and equipment (including £0.7m impairment in respect of closed depots (2009: £0.5m)		0.9	0.5
Purchase of hire equipment		(33.6)	(58.6)
Disposal of hire equipment		22.6	38.6
Equity-settled share-based payments		(0.1)	(0.7)
		44.2	85.0
Decrease in inventories		0.9	4.0
Decrease in trade and other receivables		1.0	39.2
Increase / (decrease) in trade and other payables		6.9	(55.8)
Movement in provisions		(0.6)	5.7
Cash generated from operations		52.4	78.1
Interest received		-	0.2
Interest paid		(14.3)	(21.4)
Tax received/(paid)		5.9	(9.8)
Net cash flow from operating activities		44.0	47.1
Cash flow from investing activities
Acquisition of businesses		-	(14.6)
Purchase of other property, plant & equipment		(10.2)	(16.5)
Disposal of other property, plant & equipment		0.4	0.8
Net cash flow from investing activities		(9.8)	(30.3)
Net cash flow before financing activities		34.2	16.8
Cash flow from financing activities
Finance lease payments		(0.1)	(0.2)
Repayment of bank loans		(127.5)	-
Proceeds from rights issue		105.5	-
Rights issue costs		(5.8)	-
Dividends paid		(4.3)	(10.0)
Net cash flow from financing activities		(32.2)	(10.2)
Increase in cash		2.0	6.6
Effect of exchange rate fluctuations		(0.5)	-
Cash at the start of the financial year		11.0	4.4
Cash at the end of the financial year		12.5	11.0

Consolidated statement of changes in equity

For the year ended 31 March 2010

	Share  capital	Share premium	Merger  reserve	Hedging  reserve	Translation reserve	Retained earnings	Sub-total	Minority interest	Total  equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 April 2008	2.5	111.0	3.7	(0.7)	-	122.3	238.8	1.3	240.1
Loss for the financial year	-	-	-	-	-	(55.1)	(55.1)	-	(55.1)
Losses on cash flow hedges	-	-	-	(5.3)	-	-	(5.3)	-	(5.3)
Total comprehensive income	-	-	-	(5.3)	-	(55.1)	(60.4)	-	(60.4)
Dividends	-	-	-	-	-	(10.0)	(10.0)	-	(10.0)
Equity settled share-based payments	-	-	-	-	-	(0.7)	(0.7)	-	(0.7)
Tax on items taken directly to equity	-	-	-	-	-	(0.2)	(0.2)	-	(0.2)
Purchase of minority	-	-	-	-	-	-	-	(1.3)	(1.3)
At 31 March 2009	2.5	111.0	3.7	(6.0)	-	56.3	167.5	-	167.5
Loss for the financial year	-	-	-	-	-	(18.3)	(18.3)	-	(18.3)
Gains on cash flow hedges	-	-	-	2.6	-	-	2.6	-	2.6
Translation reserve	-	-	-	-	(0.5)	-	(0.5)	-	(0.5)
Total comprehensive income	-	-	-	2.6	(0.5)	(18.3)	(16.2)	-	(16.2)
Dividends	-	-	-	-	-	(4.3)	(4.3)	-	(4.3)
Equity settled share-based payments	-	-	-	-	-	(0.1)	(0.1)	-	(0.1)
Issue of ordinary shares	22.9	76.8	-	-	-	-	99.7	-	99.7
Employee Benefits Trust allotment	0.5	2.4	-	-	-	(2.9)	-	-	-
At 31 March 2010	25.9	190.2	3.7	(3.4)	(0.5)	30.7	246.6	-	246.6

Notes to the financial statements

1              Accounting policies

Speedy Hire Plc is a Company incorporated in the United Kingdom. The consolidated financial statements of the Company for the year ended 31 March 2010 comprise the Company and its subsidiaries (together referred to as the "Group"). The consolidated and Parent Company financial statements were approved by the Board of Directors on 18 May 2010.

Statement of compliance

In accordance with EU law (IAS Regulation EC 1606/2002), the annual results have been prepared in accordance with International Financial Reporting Standards ("IFRS") adopted for use in the EU as at 31 March 2010 ("adopted IFRS"), International Financial Reporting Interpretations Committee ("IFRIC") interpretations and those parts of the Companies Act  2006 applicable to companies reporting under IFRS.

Basis of preparation

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 March 2010 or 2009. Statutory accounts for 31 March 2009 have been delivered to the registrar of companies, and those for 31 March 2010 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 237 (2) or (3) of the Companies Act 1985 in respect of the accounts for 31 March 2009 nor a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 31 March 2010.

The financial statements are prepared on the historical cost basis except that derivative financial instruments are held at fair value.   The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.

As highlighted in note 13 to the financial statements, the Group meets its day to day working capital requirements through operating cash flows, supplemented as necessary by borrowings.

The Directors have prepared cash flow projections for the period to September 2011 which show that the Group is capable of continuing to operate within its existing loan facilities and can meet the covenant tests set out within its bank facility agreement. The key assumptions on which the projections are based include an assessment of the impact of future market conditions on projected revenues and an assessment of the net capital investment required to support the expected level of revenues.

Further information on the Group's business activities, together with the factors likely to affect its future development, performance and position is set out in the Chief Executive's Review above. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Group Financial Review above. In addition, note 12 to the financial statements includes the Group's objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities and its exposure to credit risk and liquidity risk.

Whilst the Directors consider that there is a degree of subjectivity involved in their assumptions, on the basis of the above the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis of accounting in preparing the Annual Report and financial statements.

Basis of consolidation

Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Intra-Group balances, and any unrealised gains and losses or income and expenses arising from intra-Group transactions, are eliminated in preparing the consolidated financial statements.

1              Accounting policies (continued)

Adoption of new accounting standards

During the year the Group has adopted IFRS 8 Operating Segments, as explained in note 2.  In addition the following amendments to existing standards and IFRICs have also been adopted, details of which can be found in note 17:

IAS 1: Presentation of financial statements: A revised presentation

IFRS 7: Improving disclosures on financial instruments

IFRS 2: Share based payment: Vesting conditions and cancellations

IAS 16: Property, plant and equipment (and consequential amendment to IAS 7 Statement of cash flows)

Accounting standards not yet effective

A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 March 2010, and have not been applied in preparing these consolidated financial statements. None of these will have an effect on the consolidated financial statements of the Group, except for Eligible Hedged Items − Amendment to IAS 39 Financial Instruments: Recognition and Measurement, which clarifies the existing principles that determine whether specific risks or portions of cash flows are eligible for designation in a hedging relationship. The amendment, which becomes mandatory for the Group's 2011 consolidated financial statements, is not expected to have a significant impact on the consolidated financial statements.

2              Segmental analysis

The Group adopted IFRS 8 'Operating Segments' during the period. This accounting standard requires the segmental disclosure presented in the financial statements to reflect the format of reports reviewed by the Chief Operating Decision-Maker to make strategic decisions.

The Group has undertaken a significant restructure of the operational and statutory structure during the year.

UK statutory entities reported under 'Tools' and 'Equipment' historically have been incorporated into one statutory entity (Speedy Asset Services Limited). Strategic decisions are now made on a consolidated 'One Speedy' level reflecting the Group's strategy of becoming closer to customers, cross selling and reducing the cost base by having one operational overhead base.

The Group's chief operating decision body is the Group Board. The Group Board reviews the Group's internal reporting which is structured "UK and Ireland Asset Services" and "International and Advisory Services" in order to monitor and assess performance for the purpose of making operating decisions.

UK and Ireland Asset Services are managed separately but have been aggregated into one operating segment as they have similar economic characteristics including the nature of the products and services, the type or class of customer for their products and services and the methods used to distribute their products or provide their services.

The International and Advisory Services segment contains the new "International Asset Services" and "Branded and Advisory" divisions which commenced trading in April 2009 but are not currently material to the Group's operations.

2              Segmental analysis (continued)

For the year ended 31 March 2010

	UK & Ireland  Asset Services	International &  Advisory  Services	Total
	£m	£m	£m
Analysis of segmental result
Segmental revenue	353.4	3.7	357.1
Intra-group revenue	(6.0)	-	(6.0)
Revenue	347.4	3.7	351.1
Operating result before depreciation, amortisation and exceptional costs	72.0	1.0	73.0
Amortisation	(5.5)	-	(5.5)
Depreciation	(57.0)	(0.5)	(57.5)
Exceptional restructuring costs	(7.3)	-	(7.3)
Reportable segment result	2.2	0.5	2.7
Corporate costs (including exceptional costs of £3.8m)			(11.3)
Operating loss			(8.6)
Net financial expense			(14.2)
Loss before tax			(22.8)
Taxation			4.5
Loss for the financial year			(18.3)

2                              Segmental analysis (continued)

For the year ended 31 March 2009 (Restated)

	UK & Ireland  Asset Services	International &  Advisory  Services	Total
	£m	£m	£m
Analysis of segmental result
Segmental revenue	494.4	-	494.4
Intra-group revenue	(11.7)	-	(11.7)
Revenue	482.7	-	482.7
Operating result before depreciation, amortisation and exceptional costs	132.2	-	132.2
Amortisation	(9.2)	-	(9.2)
Depreciation	(73.1)	-	(73.1)
Impairment of intangible assets	(60.9)	-	(60.9)
Impairment of property, plant and equipment	(8.8)	-	(8.8)
Exceptional restructuring costs	(17.6)	-	(17.6)
Reportable segment result	(37.4)	-	(37.4)
Corporate costs (including exceptional costs of £3.4m)			(13.3)
Operating loss			(50.7)
Net financial expense			(20.4)
Loss before tax			(71.1)
Taxation			16.0
Loss for the financial year			(55.1)

2              Segmental analysis (continued)

For the year ended 31 March 2010

	UK & Ireland Asset Services	International & Advisory Services	Total
	£m	£m	£m
Analysis of segmental assets and liabilities
Segmental non-current assets
Intangible assets	65.7	-	65.7
Property, plant and equipment	276.1	9.5	285.6
	341.8	9.5	351.3
Segmental current assets	106.0	1.8	107.8
Segmental total assets	447.8	11.3	459.1
Cash			12.5
Unallocated assets			6.9
Total assets			478.5
Segmental liabilities	(84.1)	(1.0)	(85.1)
Borrowings			(131.1)
Unallocated liabilities			(15.7)
Total liabilities			(231.9)
Net assets			246.6
Analysis of capital expenditure
Property, plant & equipment	26.4	7.8	34.2
Segmental capital expenditure	26.4	7.8	34.2
Unallocated capital expenditure			9.6
Total capital expenditure			43.8

2              Segmental analysis (continued)

For the year ended 31 March 2009 (Restated)

	UK & Ireland Asset Services	International & Advisory Services	Total
	£m	£m	£m
Analysis of segmental assets and liabilities
Segmental non-current assets
Intangible assets	71.2	-	71.2
Property, plant and equipment	322.8	-	322.8
	394.0	-	394.0
Segmental current assets	111.6	-	111.6
Segmental total assets	505.6	-	505.6
Cash			11.0
Unallocated assets			12.3
Total assets			528.9
Segmental liabilities	(88.0)	-	(88.0)
Borrowings			(258.6)
Unallocated liabilities			(14.8)
Total liabilities			(361.4)
Net assets			167.5
Analysis of capital expenditure
Intangible assets	12.4	-	12.4
Property, plant & equipment	62.1	-	62.1
Segmental capital expenditure	74.5	-	74.5
Unallocated capital expenditure			13.9
Total capital expenditure			88.4

Intra-group transactions are undertaken on an arm's length basis. Corporate costs comprise the costs of operating the head office of Speedy Hire Plc and also certain central activities. These are not directly related to the activities of the operating segments.

The financing of the Group's activities is undertaken at head office level and consequently net financing costs cannot be analysed segmentally.  The unallocated net assets comprise principally computer and information systems, working capital balances held by the Support Services function and liabilities relating to dividends and taxation and are not directly attributable to the activities of the operating segments.

2              Segmental analysis (continued)

Geographical information

In presenting geographical information revenue is based on the geographical location of customers. Assets are based on the geographical location of the assets.

For the year ended 31 March 2010

		Revenues	Non- current assets
		£m	£m
UK		342.9	335.3
Ireland		5.8	6.5
Other countries		2.4	9.5
		351.1	351.3

For the year ended 31 March 2009

		Revenues	Non- current  assets
		£m	£m
UK		473.6	386.0
Ireland		9.1	8.4
Other countries		-	-
		482.7	394.4

Major customer

No one customer represents more than 10% of revenue, reported profit or combined assets of all reporting segments.

3              Exceptional items

For the year ended 31 March 2010

During the period the Group has undertaken further restructuring and cost-saving initiatives resulting in a number of non-recurring items of expense.  Items include costs related to the creation of a new Shared Services Centre (£0.6m), provisions in respect of further property closures including provision for vacant property (£3.9m) and writing off related fixtures & fittings (£0.7m), redundancy and related costs (£3.9m) and re-organisation costs associated with depot and back office restructuring (£2.0m).

The resulting tax credit in relation to exceptional items amounts to £2.7m, of which £2.5m relates to current tax and £0.2m relates to deferred tax.

For the year ended 31 March 2009

Impairment of non-current assets

A provision of £60.9m was made against the Group's goodwill and intangible assets following a review of their carrying values as part of the annual impairment testing process. Deterioration in the markets in which the Group operates, notably the construction markets, resulted in the Group revising its assumptions regarding future activity levels. This resulted in revised forecasts of cash flows arising in cash-generating units. An impairment loss was calculated on a value in use basis and consisted of a £48.0m write-down in goodwill and £12.9m writedown of other acquired intangibles. In addition, an impairment loss was identified in respect of the carrying value of tangible assets in respect of the former Accommodation business, and accordingly £8.8m was written off the carrying value in the year.

Exceptional restructuring costs

As part of the Group's cost reduction programme, a number of initiatives were undertaken to reduce the Group's operating structure to a more appropriate level in light of the changes in market conditions. The main elements of cost incurred as part of these processes include provisions for onerous lease obligations on depot closures (£5.3m) together with provisions against the carrying value of related fixtures & fittings and leasehold improvements (£0.5m), redundancy costs (£4.0m), losses incurred on the one-off disposal of surplus hire fleet assets (£7.1m), re-organisation of back-office structures and the ongoing creation of a central shared-service facility (£0.8m). In addition, costs of £1.9m were incurred arising from the acquisition and integration of the Amec LSS and Carillion Asset Management businesses (relating primarily to redundancy, relocation and asset reorganisation costs).

Other exceptional items

The Group negotiated amendments to its bank facility to establish more appropriate financial covenants and £1.4m of costs were incurred in respect of various advisers working for either the Group or the bank syndicate (included within operating expenses), and fees amounting to £4.6m (included within financing costs) were paid to the bank syndicate.

The resulting tax credit arising in relation to exceptional items amounts to £23.0m, of which £16.8m related to current tax and £6.2m related to deferred tax.

4              Financial income and expense

	2010	2009
	£m	£m
Financial income
Bank interest receivable	-	0.2
Financial expense
Interest on bank loans and overdrafts	(9.9)	(15.0)
Hedge interest payable	(3.7)	(0.3)
Exceptional amortisation of bank fee	-	(4.6)
Other finance costs	(0.6)	(0.7)
	(14.2)	(20.6)
Net financial expense	(14.2)	(20.4)

5              Taxation

	2010	2009
	£m	£m
Current tax
UK corporation tax on profits for the period at 28% (2009: 28%)	-	(5.1)
Adjustment in respect of prior years	2.8	2.3
Total current tax	2.8	(2.8)
Deferred tax
UK deferred tax at 28% (2009: 28%)	(4.9)	(9.2)
Adjustment in respect of prior years	(2.4)	(4.0)
Total deferred tax	(7.3)	(13.2)
Total tax credit	(4.5)	(16.0)

The tax credit for the year is lower than the standard rate of corporation tax in the UK and is explained as follows:

	2010	2009 Restated
	£m	£m
Loss before tax	(22.8)	(71.1)
Tax credit at 28% (2009: 28%)	(6.4)	(19.9)
Expenses not deductable for tax purposes	1.9	2.5
Non-taxable income	(0.7)	(0.6)
Share-based payments	0.1	0.5
Impairment of goodwill arising on consolidation	-	3.2
Deferred tax not provided on losses	0.2	-
Adjustment to tax in respect of prior years	0.4	(1.7)
Tax credit for the year	(4.5)	(16.0)
Tax recognised directly in equity (note 15)
Deferred tax charge	-	0.2

There are no unrecognised deferred tax liabilities (2009: £nil).

6              (Loss) / earnings per share

The calculation of basic (loss) / earnings per share is based on the loss attributable to equity holders of the Parent of £18.3m (2009: loss £55.1m) and the weighted average number of 5 pence ordinary shares in issue during the year ended 31 March 2010 calculated as follows:

	31 March 2010	31 March 2009 Restated
Loss (£m)
Loss for the year after tax - basic earnings	(18.3)	(55.1)
Intangible amortisation charge (after tax)	4.0	7.1
Exceptional items (after tax)	8.4	72.2
Adjusted (loss) / earnings (after tax)	(5.9)	24.2
Weighted average number of shares in issue (million)
At the beginning of the year	186.5	179.6
Issue of ordinary shares	232.4	-
Exercise of share options	0.2	6.5
At the end of the year - basic number of shares	419.1	186.1
Share options	-	2.1
Employee share scheme	-	-
At the end of the year - diluted number of shares	419.1	188.2
(Loss) / earnings per share (pence)
Basic (loss)/earnings per share	(4.37)	(29.57)
Amortisation	0.96	3.76
Exceptional costs	2.00	38.81
Adjusted (loss) / earnings per share	(1.41)	13.00
Basic (loss) / earnings per share	(4.37)	(29.57)
Share options	-	-
Employee share scheme	-	-
Diluted loss per share	(4.37)	(29.57)
Adjusted (loss)/earnings per share	(1.41)	13.00
Share options	-	(0.12)
Employee share schemes	-	-
Adjusted diluted (loss)/earnings per share	(1.41)	12.88

Comparative figures for the year ended 31 March 2009 have been restated to take account of the bonus element of the rights issue in July 2009. The restatement has been calculated by applying the theoretical ex-rights price of 32.775 pence.  Total number of shares outstanding at 31 March 2010 amounted to 517,215,666.

7              Dividends

The aggregate amount of dividend comprises:

	2010	2009
	£m	£m
2008 final dividend (13.4 pence on 50.7m shares)	-	6.8
2009 interim dividend (6.4 pence on 50.7m shares)	-	3.2
2009 final dividend (6.4 pence on 50.7m shares)	3.2	-
2010 interim dividend (0.2 pence on 517.2m shares)	1.1	-
	4.3	10.0

Subsequent to the end of the year and not included in the results for the year, the Directors recommended a final dividend of 0.2 pence (2009: 6.4 pence) per share, bringing the total amount payable in respect of the 2010 year to 0.4 pence (2009: 12.8 pence), to be paid on 18 August 2010 to shareholders on the register on 18 June 2010.  The total amount payable in respect of the 2009 year, after adjustment for the rights issue, was 1.7 pence per share for both interim and final dividends.

The Employee Benefit Trust established to hold shares for the Performance Plan and Co-Investment Plan has waived its right to the interim and final proposed dividends.  At 31 March 2010, the trust held 10,410,896 5p ordinary shares (including 7,594,666 jointly owned shares) (2009: 281,673 shares).

8              Intangible fixed assets

	Goodwill	Customer  lists	Non-compete agreements	Brand	Supply agreements	Total
	£m	£m	£m	£m	£m	£m
Cost
At 1 April 2008	89.3	31.5	4.6	4.1	14.7	144.2
Additions through business combinations	4.2	4.7	0.3	-	3.2	12.4
At 31 March 2009	93.5	36.2	4.9	4.1	17.9	156.6
Additions through business combinations	-	-	-	-	-	-
At 31 March 2010	93.5	36.2	4.9	4.1	17.9	156.6
Amortisation
At 1 April 2008	1.2	4.3	0.8	2.9	6.1	15.3
Charged in year	-	4.0	1.2	0.6	3.4	9.2
Impairment (note 3)	48.0	7.1	1.0	-	4.8	60.9
At 31 March 2009	49.2	15.4	3.0	3.5	14.3	85.4
Charged in year	-	3.0	0.8	0.6	1.1	5.5
At 31 March 2010	49.2	18.4	3.8	4.1	15.4	90.9
Net book value
At 31 March 2010	44.3	17.8	1.1	-	2.5	65.7
At 31 March 2009	44.3	20.8	1.9	0.6	3.6	71.2
At 31 March 2008	88.1	27.2	3.8	1.2	8.6	128.9

8          Intangible fixed assets (continued)

All goodwill has arisen from business combinations. On transition to IFRS, the balance of goodwill as measured under UK GAAP was allocated to cash-generating units (CGUs). These are independent sources of income streams, and represent the lowest level within the Group at which the associated goodwill is monitored for management purposes. As explained in note 2, the Group's reportable business segments comprise UK & Ireland Asset Services and International & Advisory Services.  All intangible assets are held in the UK & Ireland Asset Services segment, and it is this CGU which is assessed for impairment testing.  In the prior year there were two CGUs, being Tools and Equipment.

Goodwill arising on business combinations after 1 April 2004 has been allocated to the CGUs that are expected to benefit from that business combination.

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.

The recoverable amounts of the goodwill and intangible assets allocated to CGUs are determined by value in use calculations.  The value in use calculations use cash flow projections based on five-year financial forecasts approved by management. The key assumptions for these forecasts are those regarding revenue growth, net margin and the level of capital expenditure required to support trading, which management estimates based on past experience adjusted for current market trends and expectations of future changes in the market. To prepare value in use calculations, the Group uses cash flow projections for a fifteen year period.  The projections are made up of the 2010-2011 budget, a subsequent four year period using the Group's business plan, and a further ten years income.  The final ten years income is extrapolated at an estimated average long-term nominal growth rate, estimated at 2.5% (2009: 2.5%) being an estimate of inflation.  The resulting forecast cash flows are discounted back to present value, using the Group's pre-tax discount rate. The discount rate assumptions use an estimate of the Group's weighted average cost of capital. The pre-tax discount rate has been adjusted for Company and market specific risks.  The pre-tax discount rate used to discount cash flow forecasts is 12.6% (2009: 13.9% for both Tools & Equipment CGUs).

In the year to 31 March 2009 deterioration in the markets in which the Group operates, notably the construction markets, resulted in the Group revising its expectations about the level of activity sustainable in the long term. An impairment loss was calculated on a value in use basis, consisting of a £48.0 million write-down in goodwill and £12.9 million write-down of other acquired intangibles. The total impairment loss was attributed to the UK and Ireland Asset Services segment. Following this there was no difference between the carrying amount and the recoverable amount of the goodwill and intangibles balances at the balance sheet date.  

At 31 March 2010, the recoverable amount calculated using the discounted forecast cash flows results in a surplus over carrying value of £51.9m.  Impairment calculations are sensitive to changes in key assumptions of revenue growth and discount rate. An increase of 1% in the pre-tax discount rate, with all other assumptions held constant, would reduce discounted cash flows by £17.3m, leaving headroom against carrying value at £34.6m.  A decrease of 1% in the forecast revenue growth, with all the other assumptions held constant, would reduce discounted cash flows by £19.8m.  At 31 March 2009, an increase of 1% in the discount rate, with other assumptions held constant, would have given rise to an additional impairment charge of £5.4m in the Tools CGU and £4.0m in the Equipment CGU.  A 1% decrease in the forecast revenue growth, with other assumptions held constant, would have given rise to an additional impairment charge of £5.3m in the Tools CGU and £2.4m in the Equipment CGU.

9              Property, plant & equipment

	Land &  buildings	Hire equipment	Other	Total
	£m	£m	£m	£m
Cost
At 1 April 2008	24.8	569.8	49.8	644.4
Additions	5.2	59.7	10.2	75.1
Arising on acquisition of businesses	-	0.9	-	0.9
Disposals	(2.0)	(23.8)	(1.7)	(27.5)
Transfers to inventory	-	(92.3)	-	(92.3)
At 31 March 2009	28.0	514.3	58.3	600.6
Additions	2.6	33.5	7.7	43.8
Disposals	(3.9)	(49.1)	(9.6)	(62.6)
Transfers to inventory	-	(27.5)	-	(27.5)
At 31 March 2010	26.7	471.2	56.4	554.3
Depreciation
At 1 April 2008	12.6	235.6	23.3	271.5
Charged in year	2.8	63.5	9.6	75.9
Impairment (note 3)	-	8.8	-	8.8
Disposals	(0.4)	(15.8)	(1.4)	(17.6)
Transfers to inventory	-	(61.2)	-	(61.2)
At 31 March 2009	15.0	230.9	31.5	277.4
Charged in year	2.8	50.0	7.4	60.2
Disposals	(3.9)	(42.5)	(9.1)	(55.5)
Impairment	0.7	-	-	0.7
Transfers to inventory	-	(14.1)	-	(14.1)
	14.6	224.3	29.8	268.7
Net book value
At 31 March 2010	12.1	246.9	26.6	285.6
At 31 March 2009	13.0	283.4	26.8	323.2
At 31 March 2008	12.2	334.2	26.5	372.9

An impairment review has been completed during the year using the basis set out in note 8.

10           Trade and other receivables

			2010	2009
			£m	£m
Trade receivables			90.4	98.8
Amounts owed by Group undertakings			-	-
Other receivables			5.8	0.7
Prepayments and accrued income			7.2	4.9
			103.4	104.4

 

11           Trade and other payables

			2010	2009
			£m	£m
Trade payables			43.3	36.8
Amounts owed to Group undertakings			-	-
Other payables			5.2	8.0
Accruals			22.4	19.3
			70.9	64.1

12           Financial instruments

The Group holds and uses financial instruments to finance its operations and to manage its interest rate and liquidity risks. The Group primarily finances its operations using share capital, retained profits and borrowings. The main risks arising from the Group's financial instruments are credit, interest rate, foreign currency and liquidity risk.  The Board reviews and agrees the policies for managing each of these risks on an annual basis. A full description of the Group's approach to managing these risks is set out below.

The Group does not engage in trading or speculative activities using derivative financial instruments.  A Group offset arrangement exists for cash balances to take advantage of the most rewarding short term investment opportunities.

Fair value of financial assets and liabilities

The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:

	2010	2010	2009	2009
	Carrying amount	Fair value	Carrying amount	Fair value
	£m	£m	£m	£m
Trade and other receivables	101.1	101.1	99.5	99.5
Cash	12.5	12.5	11.0	11.0
Secured bank borrowings	(131.1)	(131.1)	(258.6)	(258.6)
Finance lease liabilities	(0.7)	(0.7)	(0.8)	(0.8)
Interest rate swaps, caps and collars, used for hedging	(3.2)	(3.2)	(5.7)	(5.7)
Trade and other payables	(48.5)	(48.5)	(44.8)	(44.8)
	(69.9)	(69.9)	(199.4)	(199.4)
Unrecognised gain/(loss)		-		-

12           Financial instruments (continued)

Basis for determining fair values

The following summarises the principal methods and assumptions used in estimating the fair value of financial instruments reflected in the table above:

(a) Derivatives

Broker quotes are used for all interest rate swaps, caps and collars.

(b) Interest-bearing loans and borrowings

Fair value is calculated based on discounted expected future principal and interest cash flows.

(c) Trade and other receivables / payables

For receivables/payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value. All other receivables/payables are discounted to determine the fair value.

The main risks arising from the Group's financial instruments are credit, interest rate, foreign currency, and liquidity risk.  The Board reviews and agrees the policies for managing each of these risks on an annual basis.

Interest rates used for determining fair value

The interest rate used to discount estimated cash flows, where applicable, has been estimated at 12.6% (2009: 13.9%).

Fair value hierarchy

The Group and Company's financial instruments relate to cash flow hedges which are carried at fair value in both the current and prior year.  The valuation is based on inputs other than quoted prices but which are directly observable (ie; as prices) (classified as Level 2 in accordance with IFRS 7).

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's receivables from customers.

The exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount.

At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, in the balance sheet. No individual customer accounts for more than 10% of the Group's sales transactions, and the Group's exposure to outstanding indebtedness follows this profile. No collateral is held as security in respect of amounts outstanding; however, in a number of instances, deposits are held against the value of hire equipment provided. The extent of deposit taken is assessed on a case-by-case basis, and is not considered significant in comparison to the overall amounts receivable from customers.

Transactions involving derivative financial instruments are undertaken with counterparties within the syndicate of banks which provide the Group's term loan revolving credit facility. Given their high credit ratings, management does not expect any counterparty to fail to meet its obligations.

The Group establishes an allowance for impairment that is based on historical experience of dealing with customers within the same risk profile.

12           Financial instruments (continued)

There are £45.6m (2009: £52.2m) of trade receivables that are past due at the balance sheet date that have not been provided against. There is no indication as at 31 March 2010 that debtors will not meet their payment obligations in respect of trade receivables recognised in the balance sheet that are past due and un-provided. The ageing of trade receivables (net of impairment provision) at the year end was as follows:

	2010	2009
	£m	£m
Not past due	44.8	46.6
Past due 0-30 days	21.0	23.4
Past due 31-120 days	17.5	18.5
More than 120 days past due	7.1	10.3
	90.4	98.8

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

	2010	2009
	£m	£m
At 1 April	9.4	10.0
Impairment loss charged to the income statement	2.9	9.4
Written off in the year	(5.6)	(10.0)
At 31 March	6.7	9.4

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.

The Group uses both short and long-term cash forecasts to assist in monitoring cash flow requirements. Typically, the Group uses short-term forecasting to ensure that it has sufficient cash on demand to meet operational expenses and to service financing obligations for a period of 12 weeks. Longer-term forecasts are performed on a regular basis to assess compliance with bank covenants on existing facilities, ensuring that activities can be managed within reason to ensure covenant breaches are avoided.

At 31 March 2010, the Group had available loan facilities amounting to £260m (2009: £300m), as detailed in note 13. Of these facilities £128m remained unutilised at 31 March 2010.

The Group monitors available facilities against forward requirements on a regular basis and where necessary, obtains additional sources of financing to provide the Group with the appropriate level of headroom against the required borrowing. The Group has obtained additional bank and equity funding in recent years as the business has grown, and maintains close contact with its syndicate of banks.

12           Financial instruments (continued)

This analysis is based on the undiscounted contractual maturities on the Group's financial liabilities including estimated interest that will accrue, except where repayment is entitled and before its contractual maturity.

At 31 March 2010

			Undiscounted cash flows - 31 March 2010
		2011		2012	2013	Total
		£m		£m	£m	£m
Term loan		39.7		29.8	-	69.5
Revolving credit		-		-	61.6	61.6
Finance leases		0.3		0.3	0.1	0.7
		40.0		30.1	61.7	131.8
Interest payments		8.1		4.5	1.1	13.7
		48.1		34.6	62.8	145.5

At 31 March 2009

	Undiscounted cash flows - 31 March 2009
	2010	2011	2012	2013	Total
	£m	£m	£m	£m	£m
Term loan	19.9	39.6	30.0	-	89.5
Revolving credit	-	-	-	169.1	169.1
Finance leases	0.2	0.2	0.2	0.2	0.8
	20.1	39.8	30.2	169.3	259.4
Interest payments	20.5	17.1	13.2	3.0	53.8
	40.6	56.9	43.4	172.3	313.2

 Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group's income or the value of its holdings of financial instruments.  Generally, the Group seeks to apply hedge accounting in order to manage volatility in profit.

·    Currency risk

The Group is exposed to currency risk on the translation of the results of its subsidiaries which are resident in the Republic of Ireland, Speedy Hire (Ireland) Limited and Waterford Hire Services Limited, and the in the United Arab Emirates, Speedy International Asset Services Equipment Rental LLC.  It is the Group's policy to review the net investment in all companies on a regular basis, and to hedge against potential exposures to movements in foreign currency where considered appropriate.  At 31 March 2010, Speedy Hire (Ireland) Limited had net liabilities of £4.3m (2009: £3.6m), Waterford Hire Services Limited had net assets of £1.5m (2009: £1.5m), and Speedy International Asset Services Equipment Rental LLC had net assets of £0.5m (2009: £nil), and no hedging instruments are in place to cover potential movements in foreign currency.

·    Interest rate risk

The Group is exposed to a risk of a change in cash flows due to changes in interest rates as a result of its use of variable rate borrowings. The Group's policy is to review regularly the terms of its borrowing facilities, and to assess and manage the long-term borrowing commitment accordingly, and to put in place interest rate hedges to reduce the Group's exposure to significant fluctuations in interest rates. The Group adopts a policy of ensuring that between 40% and 70% of its borrowings are covered by some sort of interest rate hedge.  As a consequence of the rights issue proceeds being used to pay down debt the Group had approximately 90% of its net debt covered by interest rate hedges.

12           Financial instruments (continued)

The principal derivative financial instruments used by the Group are interest rate swaps, caps and collars. The notional contract amount and the related fair value of the Group's financial instruments can be analysed as follows:

	2010	2010	2009	2009
	Fair Value	Notional Amount	Fair Value	Notional Amount
	£m	£m	£m	£m
Designated as cash flow hedges
Fixed interest rate swaps	(1.9)	50.0	(2.6)	50.0
Interest rate collars	(1.0)	40.0	(2.5)	70.0
Interest rate caps	(0.3)	20.0	(0.6)	20.0
	(3.2)	110.0	(5.7)	140.0

Future cash flows associated with the above instruments are dependent upon movements in LIBOR over the contractual period. Interest is paid or received under the instruments on a quarterly or monthly basis, depending on the individual instrument, referenced to the relevant prevailing UK LIBOR rates.

Of the total £110m notional amount, £50m expires in the six months to September 2010, a further £40m in the six months to March 2011, and the remaining £20m expires between one and two years.  The instruments are estimated to incur undiscounted cash outflows of £2.5m within one year, and £0.2m after 1-2 years.

The weighted average interest rate of the fixed interest rate swaps is 5.026% (2009: 5.026%) and the instruments are for a weighted average period of 11 months (2009: 23 months). The maximum contractual period is 15 months.

Collar instruments bear interest rates between 4.300% and 6.500% (2009: between 4.300% and 6.500%), for a weighted average period of 7 months (2009: 13 months). The maximum contractual period is 10 months.

Capped rate instruments bear a weighted average maximum interest rate of 5.790% (2009: 5.790%) for a weighted average period of 10 months (2009: 22 months). The maximum contractual period is 15 months.

 Sensitivity analysis

In managing interest rate and currency risk the Group aims to reduce the impact of short-term fluctuation on the Group's earnings. Over the longer term, however, permanent changes in foreign exchange and interest rates would have an impact on consolidated earnings.

At 31 March 2010 it is estimated that a general increase of one percentage point in interest rates would decrease the Group's profit before tax by approximately £0.5 million.  Interest rate swaps, caps and collars have been included in this calculation.

Capital management

The Group requires capital for, amongst other things, purchasing hire equipment to replace the existing asset base that has reached the end of its useful life, and for growth, including growth by establishing new rental locations, completing acquisitions and refinancing existing debts in the longer term. The Group defines Gross Capital as net debt (cash less borrowings) plus shareholders' funds, and seeks to ensure an acceptable return on Gross Capital. The Group has obtained additional bank borrowings and equity in recent years as the business has grown. The Board seeks to maintain a balance between debt and equity funding such that it maintains a sound capital position relevant for the prevailing economic environment.

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors both the demographic spread of shareholders in order to ensure that the most attractive mix of capital growth and income return is made available to investors.

12           Financial instruments (continued)

The Group encourages participation in ownership of Speedy Hire Plc shares by employees at all levels within the Group, and has developed this objective through the introduction of Long Term Incentive Plans and Save As You Earn Schemes.

There were no changes in the Group's approach to Capital Management during the year. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.

13           Borrowings

			2010	2009
			£m	£m
Current borrowings
Bank overdraft			-	-
Term loan			-	-
Finance leases			0.2	0.2
			0.2	0.2
Non-current borrowings
Maturing between two and five years
Term loan			69.5	89.5
Revolving credit facility			61.6	169.1
Finance leases			0.5	0.6
Total non-current borrowings			131.6	259.2
Total borrowings			131.8	259.4
Less: cash at bank and in hand			(12.5)	(11.0)
Net debt			119.3	248.4

The term loan is considered to expire after more than one year as the scheduled amortisation of the term loan facility can be offset by a corresponding increase in the revolving credit facility.

Both the overdraft and syndicated loan facility are secured by a fixed and floating charge over all the assets of the Group and are rated pari passu.

The term and revolving loan facility was originally entered into in June 2007, and was amended and restated in June 2008 and March 2009. At 31 March 2010, the current facility is sub-divided into:

(i)            A secured overdraft facility, provided by Barclays Bank Plc which secures by cross guarantees and debentures the bank deposits and overdrafts of the Parent and certain subsidiary companies up to a maximum of £5m.

(ii)           A syndicated multi-currency term and revolving facility, which is sub divided into:

(i)            A term loan 'A facility' of £70m (2009: £90m); and

(ii)           A revolving credit 'B facility' (including overdraft) of £190m (2009: £210m) repayable on the fifth anniversary of the issue date

The total B facility is for £190m, but is reduced to the extent that ancillary facilities are provided.

The term loan 'A facility' reduces by £40 million in the year to March 2011, and £30 million in the year to March 2012. The revolving credit 'B facility' reduces by £20 million in the year to March 2012.  Reductions in term loan can be offset by additional drawing from headroom on the revolving credit facility.

13           Borrowings (continued)

The revolving credit facility can be drawn for various periods specified by the Company, up to the maturity date, with interest being calculated for the drawn period by reference to the London Inter Bank Offer Rate applicable to the period drawn, plus a margin which during the year ranged from 250 to 400 basis points (2009: 67.5 to 400) basis points. At 31 March 2010, the margin was 250 basis points.

The effective interest rate applicable to cash deposits during the year was 0.2% (2009: 3.50%). The effective interest rates on bank overdraft and term loans & revolving credit facilities were 3.00% and 4.07% (2009: 3.79% and 5.04%) respectively.

The Group's bank overdrafts are secured by cross guarantees and debentures given by Group companies in favour of Barclays Bank PLC. The bank loans are secured by a fixed and floating charge over all the assets of the Group.

The Group's borrowings are presented as non-current as the unamortised facility at 31 March 2011 is greater than the outstanding borrowings at 31 March 2010, and repayments can therefore be made from undrawn facility rather than by direct payment.

Analysis of consolidated net debt

	At         1 April 2009	Non-cash movement	Cash flow	At      31 March 2010
	£m	£m	£m	£m
Cash at bank and in hand	11.0	(0.5)	2.0	12.5
Borrowings	(259.4)	-	127.6	(131.8)
	(248.4)	(0.5)	129.6	(119.3)

14           Provisions

				Onerous property contracts
				£m
At 1 April 2008				2.2
Created in the year				7.6
Provision utilised in the year				(1.7)
Unwinding of discount				(0.2)
At 31 March 2009				7.9
Created in the year				3.9
Provision utilised in the year				(4.8)
Unwinding of discount				0.3
At 31 March 2010				7.3

Of the £7.3m, £4.8m (2009: £4.1m) is due within one year and £2.5m (2009: £3.8m) is due after one year. The key assumption underlying the calculation of the provision relates to the assumed sublet period. The provision is calculated based on a gross liability to the earlier of three years and the sublet, or break clause, and includes estimated dilapidations at current market rates. The total liability is discounted at 12.6% (2009: 13.9%). If leases on properties which are forecast to be exited in 2012 are not exited until 2013, the increase required in the discounted provision would amount to £0.4 million, after taking account of leases that expire during the additional year.

15           Deferred tax

	Property,  plant & equipment	Intangible  assets	Share-based payments	Other items	Total
	£m	£m	£m	£m	£m
1 April 2008	33.7	5.5	(0.7)	(1.2)	37.3
Recognised in income	(11.2)	(2.1)	0.5	(0.4)	(13.2)
Recognised in equity	-	-	0.2	-	0.2
At 31 March 2009	22.5	3.4	-	(1.6)	24.3
Recognised in income	(5.4)	(1.5)	-	(0.4)	(7.3)
Recognised in equity	-	-	-	-	-
At 31 March 2010	17.1	1.9	-	(2.0)	17.0

The Group has trading losses carried forward at 31 March 2010 amounting to approximately £3.7m (2009: £3.2m). A deferred tax asset of £0.2m (2009: £0.1m) has been recognised in respect of those losses.

The Group also has capital losses carried forward at 31 March 2010 amounting to approximately £7.5m (2009: £4.3m).  No deferred tax asset has been recognised in respect of these losses.

16           Share capital

		2010	2009
		£m	£m
Allotted, called up and fully paid
517.2 million (2009: 50.9 million) ordinary shares of 5p each		25.9	2.5

During the year, 458,658,900 ordinary shares of 5p were issued on exercise of the rights issue for a cash consideration of £99.7m, net of £5.8m issue costs.

An Employee Benefits Trust was established in 2004 (the 'Trust'). The Trust holds shares issued by the Company in connection with the Performance Plan and Co-investment Plan.  During the year the Company allotted 7,594,666 (2009: nil)shares to the Trust held jointly with the participating employees as part of the ExSOP award arrangements.  No shares were transferred to employees during the year (2009: 106,693).  At 31 March 2010, the Trust held 10,410,896 (including 7,594,666 jointly owned shares, (2009: 281,673) shares.

The movement in issued share capital was as follows:

	Number
	million	£m
As at 1 April 2008	50.8	2.5
Employee Benefits Trust allotments	0.1	-
At 31 March 2009	50.9	2.5
Employee Benefits Trust allotments	7.6	0.5
Placing of ordinary shares	458.7	22.9
At 31 March 2010	517.2	25.9

 

17           Adjustment arising from amendments to accounting standards

The Group has adopted the following changes in accounting standards for the year ending 31 March 2010:

IAS 1: Presentation of financial statements: A revised presentation

The Group's financial statements now include a statement of comprehensive income and statement of movements in equity as primary statements. These have replaced the statement of recognised gains and losses and the reconciliation of equity, which was previously included in the notes to the accounts. There have also been minor changes to the descriptions of some items.

IFRS 7: Improving disclosures on financial instruments

The IASB issued amendments to enhance disclosures about fair value measurements of financial instruments and over liquidity risk.

 IFRS 2: Share based payment: Vesting conditions and cancellations

The principal effect of this amendment to IFRS 2 is that when an award to an employee under a share option scheme lapses due to cancellation of the scheme then the full cost of the award will be expensed in the period in which the option lapses.  The amendment also stipulates that an individual ceasing to pay contributions is classed as a cancellation.  Under the previous interpretation the lapsing of the award through employee cancellation would have resulted in the fair value of the option charged to date being reversed in the income statement. This interpretation is required to be applied fully retrospectively.

As a result of the amendment, the profit after tax for the year ended 31 March 2009 was £0.5m lower than previously reported.  There is no impact on reported net assets.

IAS 16: Property, plant and equipment (and consequential amendment to IAS 7 Statement of cash flows)

In accordance with revisions to IAS 16, assets that have previously been hired are transferred to inventory at estimated realisable value when a decision has been taken to dispose of them. Proceeds on disposal are then recognised as revenue.  Previously, the proceeds were accounted for as a component of profit or loss on the disposal of assets.  A consequential amendment to IAS 7 states that cash flow arising from purchase, rental and sale of those assets should be classified as cash flows from operating activities.  Proceeds from the sale of other assets continue to be included in profit/ (loss) on disposal, in accordance with the previous accounting treatment.

The adoption of the revised standard has resulted in revenue and cost of sales for the year ended 31 March 2009 increasing by £6.6m, with no impact on reported profit after taxation or net assets.  In addition, cash flows relating to the sale and purchase of hire assets have been included in operating cash flows, having previously been disclosed as investing cash flows.

18           Share incentives

At 31 March 2010, options and awards over 19,036,681 shares (2009: 1,610,332 shares, unadjusted for rights issue) were outstanding under employee share schemes. The Group operates three share incentive schemes.  During the year no options were exercised by employees (2009: 145,865 options, unadjusted for rights issue). 

In 2009, the options exercised comprised 93,013 nil cost options in respect of the Co-Investment and Performance Share Plans and 52,852 at 383 pence in respect of the Sharesave schemes. At the date of exercise of the Co-investment and Performance Share Plans awards, the share price was 551 pence.  The Sharesave awards were exercised between April and July 2008 when the Group's share price ranged between 818.5 pence and 401.25 pence. The weighted average share price for the exercise period was 594 pence.

Following the rights issue, adjustments were made to reflect the dilutive effect of the issue on outstanding awards. The calculations were made in accordance with HM Revenue and Customs recommendations ("HMRC").  The adjustment was made using the theoretical ex-rights price calculation ("TERP") as agreed with HMRC. All outstanding awards made under the Company's share plans were multiplied by a TERP factor of 3.68421 and the respective option prices and market prices at allocation were multiplied by a factor of 0.27143.

As at 31 March 2010 options to acquire 5,014,731 (2009: 328,755) Speedy Hire Plc shares were outstanding under the Speedy Hire Sharesave Scheme.  These options are exercisable by employees of the Group at prices between 29 and 255 pence (2009: 624 and 940 pence) at dates between February 2010 and April 2013 (2009: February 2009 and July 2011).  At 31 March 2010, options to acquire 6,427,284 (2009: 1,281,577), and awards over 7,594,666 shares were outstanding under the Performance and Co-Investment Plans. These options were exercisable at effectively nil cost between June 2010 and December 2012.  Awards granted under the Performance Plan as ExSOP awards involve the acquisition of shares jointly by the participant and the trustee of the Company's employee trust on terms that, to the extent certain performance conditions are satisfied, the participant can benefit from any growth of the shares in excess of a hurdle. Initial Value Awards entitle the holder to a value (in shares or cash) equal to the number of ExSOP shares (if any) in respect of which the performance condition is met multiplied by the share value on the award date or, if lower, the share value when the ExSOP award crystallises.

The number and weighted average exercise price ("WAEP") of share options and awards under all the share incentive schemes are as follows:

	2010 WAEP	2010	2009 WAEP	2009
	pence	Number	pence	Number
Outstanding at 1 April	624	1,610,332	378	1,457,100
Rights adjustment	-	4,322,131	-	-
	39	5,932,463	378	1,457,100
Granted	9	15,645,660	-	842,901
Exercised	-	-	139	(145,865)
Lapsed	74	(2,541,442)	547	(543,804)
Outstanding at 31 March	10	19,036,681	145	1,610,332
Exercisable at 31 March	255	75,583	624	97,339

Options and awards outstanding at 31 March 2010 have weighted average remaining contractual lives as follows:

	2010	2009
	years	years
Exercisable at nil pence	2.2	1.8
Exercisable at 29 pence	2.5	-
Exercisable at 183 pence	0.8	1.8
Exercisable at 233 pence	-	0.8
Exercisable at 255 pence	0.4	1.4

18           Share incentives (continued)

The fair value of services received in return for share options granted and shares awarded is measured by reference to the fair value of those instruments.  The pricing models and inputs used for the outstanding options (on a weighted average basis where appropriate) are as follows:

			Speedy Hire Share Save Plan
		September 2009		December 2007	September 2007	December  2006	December 2005
Pricing model used		Stochastic		Stochastic	Stochastic	Stochastic	Stochastic
Exercise price		29p		183p	255p	233p	169p
Share price volatility		85.7%		25.5%	22.9%	22.9%	25.0%
Option life		3.25 years		3.25 years	3.25 years	3 years	3 years
Expected dividend yield		3.1%		2.1%	1.5%	1.3%	1.6%
Risk free interest rate		2.1%		4.5%	5.3%	5.1%	4.2%

			Co-investment Plan
					July 2008	July  2007	July 2006
Pricing model used					Stochastic	Stochastic	Stochastic
Exercise price					Nil	Nil	Nil
Share price volatility					-	-	-
Option life					3 years	3 years	3 years
Expected dividend yield					3.7%	1.4%	1.6%
Risk-free interest rate					5.2%	5.8%	4.2%

			Performance Plan
				September 2009	July 2008	July  2007	July 2006
Pricing model used				Stochastic	Stochastic	Stochastic	Stochastic
Exercise price				Nil	Nil	Nil	Nil
Share price volatility				88.0%	29.3%	23.6%	22.4%
Option life				3 years	3 years	3 years	3 years
Expected dividend yield				3.1%	3.7%	1.4%	1.6%
Risk-free interest rate				2.1%	5.2%	5.8%	4.2%

19           Commitments

The Group had contracted capital commitments amounting to £2.7m (2009: £0.3m) at the end of the financial year for which no provision has been made.

The totals of future minimum lease payments under non-cancellable operating leases are as follows:

	Land & buildings		Other
	2010	2009	2010	2009
	£m	£m	£m	£m
Total future minimum lease payments
- not later than one year	16.2	19.1	11.2	12.6
- later than one year and  not later than five years	50.8	54.2	12.0	12.5
- later than five years	39.2	49.0	0.1	0.1
	106.2	122.3	23.3	25.2

20           Post balance sheet events

The Directors have proposed a dividend of 0.2 pence per share as a final dividend in respect of the year ended 31 March 2010.  No charge in respect of the proposed dividend has been made in the income statement for the year, and there were no tax consequences.  The total amount payable if the dividend is approved at the AGM is as follows:

	2010	2009
	£m	£m
0.2 pence (2009: 6.4 pps) on 517.2m (2009: 50.9m) ordinary shares	1.0	3.2

 

END

 

 

FR GGUACAUPUPUR