Final Results

Speedy Hire PLC 23 May 2007 23 May 2007 SPEEDY HIRE Plc PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2007 Speedy Hire is the UK's No.1 provider of tools and equipment for hire. The Company operates from over 350 depots throughout the UK. The Group also operates in the Republic of Ireland. The Group's activities are the provision for hire of small tools, portable accommodation, compressed air, pumps, lifting, material handling, survey and measurement instrumentation and power generation equipment. FINANCIAL HIGHLIGHTS 2007 2006 % Change Revenue £335.5m £254.3m 31.9% Profit before tax £36.4m £30.7m 18.6% Profit before tax and amortisation £40.5m £32.2m 25.8% Basic earnings per share 58.74p 50.44p 16.5% Adjusted earnings per share1 65.00p 52.86p 23.0% Total dividend per share 17.0p 14.3p 18.9% Return on capital employed (before amortisation and exceptional items) 16.9% 17.5% Gearing 103.0% 72.9% 1 Before amortisation • Revenue growth in tools up 16.2%, like for like tool hire turnover up 7.3% • Revenue growth in equipment hire up 54.5% • Interest cover 4.8 times (2006: 6.2 times) • Market outlook remains buoyant Outlook 'We have seen strong performance in all our key metrics and momentum in the business remains strong. Health and Safety legislation together with customer requirements for supply chain improvements continue to provide an increased impetus towards the hiring of tools and equipment. Faced with favourable markets, a strong financial position and an outstanding team, and subject to no material change in the economic outlook, I am confident of reporting further progress in the year ahead.' David Wallis - Chairman For further information: Speedy Hire Plc Hudson Sandler Steve Corcoran, Chief Executive Nick Lyon/Wendy Baker/Kate Hough Neil O'Brien, Group Finance Director Tel: 020 7796 4133 Tel: 020 7796 4133 on Wednesday 23 May (thereafter Tel: 01942 720000) Website: www.speedyhire.plc.uk High resolution photographs are available to media free of charge at www.vismedia.co.uk SPEEDY HIRE Plc CHAIRMAN'S STATEMENT I am pleased to report another highly successful year for your company. We have seen strong performance in all our key metrics and I have summarised these in the table below. Your board is therefore proposing an increase in the final dividend to 11.5 pence making a total of 17.0 pence for the full year, 18.9% up on 2006. Our Performance 2007 2006 Revenues £335.5m £254.3m +31.9% EBITDA £100.3m £77.0m +30.3% Profit before Tax £36.4m £30.7 m +18.6% Group operating margin pre amortisation 14.9% 15.0% - Earnings per share 58.74 pence 50.44 pence +16.5% Earnings per share pre amortisation of intangibles 65.00 pence 52.86 pence +23.0% Return on Capital 16.9% 17.5% - Total Equity £171.1m £141.3m +21.1% These results are testimony to the success of every member of the Speedy Hire team, now over 3,800 strong and I would like to extend the thanks of both the board and shareholders to each of them. Speedy Hire operates two divisions, Tool Hire and Equipment Hire, through a national network of 361 depots. Both divisions experienced impressive increases in revenues and operating profit, achieved with strong and stable margins. Revenue expansion was a combination of organic growth, including 7.3% like for like in the tool hire depots, 20 new greenfield sites and two significant acquisitions. We invested £83m in new hire fleet enabling us to continue to provide our customers with the broadest range of tools and equipment and to maintain our industry leading position of owning the youngest tool fleet, with an average age of 2.2 years. Despite this record investment in new fleet and consideration of £69m on acquisitions, year end gearing was 103%, testimony to the powerful cash generating ability of your company. Delivering Our Strategy Our strategy is to grow, with the aim of being number one or two in the market segments which we operate in. Our primary customers are the larger construction and industrial companies which require tools and equipment for longer periods of time and which have more complex needs. These market segments are continuing to expand and our customer base has become broader as we service clients in industry, utilities, steel, oil and gas and petrochemicals. We are beginning to develop further added-value activities for our customers, beyond the initial hire of a product. These include Health and Safety training for their operators and fuel management services for equipment. One of our key challenges is to ensure that our own infrastructure can cope with the increasing demands placed upon it. We are currently working on major projects in several areas, but I would like to focus on two of these, I.T. and People. A new I.T. system is being installed and is now operational in three regions. The planning and execution of the changeover went smoothly and the system will be rolled out nationwide. Once fully applied, this will provide a much needed foundation for our vision of 'One Speedy' enabling a significant improvement in both service and administrative ease for our customers, as well as providing us with the means of better managing our assets. Speedy's ethos is to ensure that customers remain at the heart of the business and our people are dedicated to providing the best possible service. It is only by having the very best people at every level will we achieve our vision. To this end, we have developed a People Plan covering the whole business, with the goal of ensuring that through appropriate coaching, training and development everyone is offered the opportunity to fulfil their potential. I am pleased to report significant progress in both areas, but we are under no illusion that we are only just at the start of a long road and there remains much to do. In addition to growing the business organically, we continue to expand by making carefully targeted acquisitions. Over the past 5 years, Speedy Hire has acquired over 20 businesses as the industry consolidates. Speedy has been, and will continue to be at the forefront of this process. Inevitably the acquired companies increase in size and complexity. In May 2006, we acquired LCH Generators for £55m and in October 2006, Lifting Gear Hire, for £14m, both substantial businesses in their own right. I am delighted to report that both businesses have performed in line with our year one expectation, both in terms of financial performance and their smooth integration into the Speedy network. This has reinforced our confidence to continue with our strategy. Outlook The momentum in the business remains strong. We carefully monitor a series of indicators covering both the economy and construction activity, as well as the comments of our major customers. These all indicate a positive and progressive level of activity. Increased Health and Safety legislation, which in the past few years has seen new regulation introduced on Hand Arm Vibration and Working at Height, has been extended to include noise and dust emissions. When combining legislative requirements with customer demands for continued improvements in supply chain management and quality assurance programmes, there is increasing impetus towards the hiring of tools and equipment. To meet these demands, we see further consolidation of the hire sector as both desirable and necessary. Speedy Hire remains a well balanced business. No one customer accounts for more than 4% of income and the diversity of markets, source of revenues and range of activities coupled with a national footprint brings added strength to the business. Faced with favourable markets, a strong financial position and an outstanding team, and subject to no material change in the economic outlook, I am confident of reporting further progress in the year ahead. SPEEDY HIRE Plc CHIEF EXECUTIVE'S REVIEW The Business Speedy Hire is predominantly a business to business company providing a broad range of products for hire to the construction, building and specialist manufacturing industries across the UK and Republic of Ireland. From our traditional position in tool hire, we have expanded our market and complemented our brand by specialising in key areas of equipment rental. Speedy is a national business that can flex its resources and commitments to wherever its services are in most demand, responding to regional variations in building and economic activity. Our management structure is aimed at providing efficient support to the regions to ensure our customers receive consistently high standards of product quality and service delivery, whilst also ensuring that we are able to closely monitor our markets and respond quickly to changes in demand. Our approach to customer service differentiates us from our competitors. We always seek to build strong local relationships with our customers, town by town and region by region. Our customers both nationally and locally recognise the benefits of our reliable service, depot network and broad product range but perhaps more importantly they attribute value to the friendliness, knowledge and commitment of our employees, and consider us to be professional, trustworthy and flexible in our approach. As we expand our businesses across both our Tool Hire and Equipment divisions, we continue to identify new markets and opportunities, increasing our ability to harness cross-selling potential and deliver better value and service to our customers. Tool Hire division The Tool Hire division saw like-for-like revenue growth of 7.3% in 2006/07 and total revenue growth of 16.2%. This is significantly ahead of the general hire market growth of 6%. The division generated record levels of revenue and profit and further increased its market share. 10 greenfield depots were added to our national network providing greater coverage and improved customer service. Our new operations in Dublin and Belfast are providing a solid platform from which to drive further growth in Northern Ireland and in the Irish Republic. This will be driven through a mix of additional greenfield depots and via acquisitions. We continue to target growth through new product areas and by identifying growth opportunities from within our existing product range - such as Concreting, Access and Engineering. We have also developed our overall service offering by expanding into non-hire related activities, e.g. training, health and safety ' tool box talks' and improved safety products. Some of the highlights of our Tool Hire division: • The opening of 10 new greenfield depots. • An additional 14 on-site depots with major construction companies. • Establishing new 'Centres of Excellence' to increase specialisation, customer focus and operational efficiencies in Access, Concreting and Light Plant products. • The launch of our 'Let's clear the air' dust campaign to instruct employees and customers about the dangers associated with dust inhalation. • The provision of a new range of consumable safety products, e.g. site safety glasses, gloves and boots. Equipment Hire division Our Equipment division grew rapidly in 2006/07, both organically and through the addition of two major acquisitions. The £55m acquisition of LCH Generators Limited in May 2006 was our largest ever, while the acquisition of Lifting Gear Hire Limited in October 2006 has made Speedy the leading national lifting business, enabling us to provide additional services in the testing, servicing and inspection of customers' own fleets whilst broadening our customer base. The operational integration of LCH is now complete. The integration of LGH is proceeding in accordance with plan. The strong focus on employee retention and customer management have ensured an orderly brand migration. In the year, we have further expanded our presence beyond our traditional construction market into new areas such as events, petrochemicals and telecommunications. February 2007 saw the launch of the first Speedy depot dedicated to safety products. As part of Speedy Survey the depot based in East London will support construction and infrastructure projects such as the 2012 Olympic Games. The depot provides a full range of safety equipment including noise and dust monitors, breathing apparatus, gas monitors and safety harnesses and is one of the first in the country to hire marine safety equipment to support waterside infrastructure projects. Some of the highlights for our Equipment division: • The successful completion and managed integration of the LCH and Lifting Gear Hire acquisitions. • Revenue growth of 54.5%. • The opening of 10 new greenfield depots. • All four Equipment businesses achieved Investor in People status. • The successful expansion of the Pumps business to five dedicated stand-alone depots. • The extension of our Speedy Space business into modular accommodation and welfare facilities providing our clients with improved services. The Market The U.K hire market has a total market size of at least £4.5bn giving us a market share of c.7.6% and making us the market leader in what is still a very fragmented industry. Latest market research projects that the UK hire market will grow by 19% between now and 2010, driven by continued high levels of activity in the construction market, increased legislation to encourage safer working practices and the maintained drive towards outsourcing of non-core activities. These initiatives, when added to the increasing emphasis on quality assurance, supply chain and health and safety standards, determine that customers that operate nationally require consistency in their services. This has continued the momentum towards hire and away from ownership. Our national network, modern fleet, range of product and commitment to safety standards differentiate us from many of our competitors - especially those that service the more opportunistic or localised hire markets. A large proportion of Speedy Hire's business services contractors are engaged in public sector-based projects such as schools, hospitals and other infrastructure projects. According to the latest DTI information, 34% of construction output in the UK came from the public sector. The government's commitment to improving UK infrastructure is expected to continue into 2007 and beyond. These dynamics will increase demand for more modern, compliant fleet and we are confident that these changes will continue to provide clear opportunities for our Company. Our customers play a central role in our product development. Many of our new products and service initiatives have been driven by the market. Working in conjunction with our suppliers, we identify solutions to their challenges and devise effective marketing campaigns to help communicate these developments. A prime example of this approach led to the implementation of our groundbreaking, hugely successful and award winning 'Safety from the ground up' campaign. While our prime market is the construction sector in its widest sense, Speedy is increasingly offering its services to a broader range of clients with other areas of speciality. Our strategy of continually broadening our business activities and geographical presence means our customer base is also highly diverse, with no single customer accounting for more than 4% of our revenues. Our Equipment businesses have enabled us to provide a more diverse offering for specific areas of the market. We are now increasingly active in industrial markets, where we provide site-based service support at large-scale facilities such as steel works and petrochemical plants. Our recent acquisitions have also extended further our reach into the events and industrial sectors with not only a wider product range but also additional services in testing, servicing and inspection of the customers' own fleet. In Speedy Power we have increased our association with the mobile telecommunications industry, while in Speedy Space we have moved into modular accommodation to give our customers solutions that are better suited to their specific requirements. Geographically, our market is expanding beyond the UK. In March 2006, Speedy Hire began operating in Dublin. We believe the Irish market holds enormous potential for Speedy. Investment in the Irish infrastructure is estimated to reach some £67bn over the next six years, with a resulting increase in construction activity. We continue to closely monitor market activity, looking ahead, market circumstances may well present further consolidation opportunities and we are well placed to take advantage of these as they may arise. Capital structure and treasury We continued our high level of investment in new hire assets in the year. This commitment significantly contributed to the growth in Group turnover. Net assets increased by 21.1% to £171.1m (2006: £141.3m), as we grew our business and our market share. Gross capital expenditure was £93.6m (2006: £78.5m) with a further £69m of consideration on the acquisitions of LCH Limited and Lifting Gear Hire Limited. Shares to a value of £6.8m were issued as part payment for the acquisitions of LCH Limited and Lifting Gear Hire Limited, to help maintain a balance between debt and equity and ensure we have finance available to continue to grow the business. This equated to 755,000 new shares issued. Debt increased to £176.2m in the year (2006: £103m), while gearing was reduced, as planned from the interim period to remain at a comfortable 103% (2006: 73%). There were no changes made to our depreciation policies and the year end charge stood at £50.3m (2006: £38.9m). The Board is comfortable with the increase in the debt used to fund the acquisitions. We remain a strongly cash generative company and are confident in our ability to invest for future growth. Our cash flows are strong and stable and highly predictable as shown by the ratio of EBITDA to revenues. These have been consistently around 30% for each of the last five years. Gross capital expenditure in the current year included £28.2m of a 'growth capex' directed at start-up companies, greenfield depots and in fuelling like-for-like growth. Operating cash flow grew by 10.7% to £84.8m (2006: £76.6m). During the year the Group increased available bank facilities to £210m. Bank accounts are pooled Group-wide for interest rate calculation and authority limits are set across the Group. One of the key indicators of financial performance is Return on Capital. This remained strong at 16.9% (2006: 17.5%). This return is amongst the best in the industry and is substantially ahead of our average cost of capital. Looking ahead Through our proven, successful strategy Speedy is well positioned to grow its share of the UK hire market. Our customers have expressed confidence in their order books and the mid-term outlook of their businesses is positive. In the UK, some £26bn of PFI work across 200 projects is in the pipeline to close by 2010, according to HM Treasury. There is also further growth linked to the 2012 Olympic Games in London. Industry information providers Emap Glenigan have suggested that the capital cost of installing and developing the Olympic venues will be in excess of the estimated £10bn across 250 projects. Speedy has achieved its success by staying close to its customers and understanding their needs. Today our customers regard our brand and our proactive approach to Health & Safety practices as the gold standard in the tool and equipment hire business. We are confident there are further opportunities to expand our business, both geographically and in the range of products and services we offer. As the leading consolidator of the UK market, we will continue to be mindful of new and profitable market opportunities whenever these emerge. With this in mind, at the end of April 2007, we acquired the business and assets of Network Plant. As part of that agreement we have entered into a 4 year supply agreement with Mansell, a subsidiary of Balfour Beatty. We look forward to developing more long-term relationships with our customers and our suppliers and to investing more in our business, our products and our people. We are confident that our business strategy will continue to deliver success, growth and sustainable profitability. Consolidated Income Statement For the year ended 31 March 2007 2007 2006 Note £m £m Revenue 1 335.5 254.3 Cost of sales (118.7) (81.8) Gross profit 216.8 172.5 Other operating income - 0.1 Distribution costs (43.2) (23.5) Administrative expenses (127.7) (112.5) Analysis of operating profit Operating profit before amortisation 50.0 38.1 Intangible amortisation (4.1) (1.5) Operating profit 1 45.9 36.6 Financial income 0.4 0.2 Financial expense (9.9) (6.1) Profit before taxation 36.4 30.7 Taxation 5 (9.8) (8.4) Profit for the year 26.6 22.3 Attributable to: Equity holders of the parent 26.6 22.1 Minority interests - 0.2 26.6 22.3 Pence Pence Earnings per share - Basic 2 58.74 50.44 - Diluted 2 57.78 50.03 Consolidated Statement of recognised income and expense For the Year Ended 31 March 2007 2007 2006 Note £m £m Cash flow hedges: gains taken to equity 0.5 - Net income recognised directly in equity 0.5 - Profit for the period 26.6 22.3 Total recognised income and expense for the period 27.1 22.3 Attributable to: Equity holders of the parent 27.1 22.1 Minority interests - 0.2 27.1 22.3 Consolidated Balance Sheet As at 31 March 2007 2007 2006 Note £m £m ASSETS Non-current assets Intangible assets 71.3 23.9 Property, plant and equipment 295.7 241.4 Total non-current assets 367.0 265.3 Current assets Inventories 10.9 6.9 Trade and other receivables 101.2 72.6 Other financial assets 0.7 - Cash and cash equivalents 3 10.3 6.4 Total current assets 123.1 85.9 Total assets 490.1 351.2 LIABILITIES Current liabilities Trade and other payables (91.8) (69.5) Current income tax (6.0) (6.7) Total current liabilities (97.8) (76.2) Non-current liabilities Financial liabilities - Borrowings 3 (186.5) (109.4) Deferred tax liabilities (34.7) (24.3) Total non-current liabilities (221.2) (133.7) Total liabilities (319.0) (209.9) Net Assets 171.1 141.3 EQUITY Issued share capital 2.3 2.3 Share premium account 57.8 51.0 Merger reserve 3.7 3.7 Hedging reserve 0.5 - Retained earnings 106.6 84.1 Total equity attributable to equity holders of the parent 170.9 141.1 Minority interests 0.2 0.2 Total equity 171.1 141.3 Consolidated Cash Flow Statement For the year ended 31 March 2007 2007 2006 Note £m £m Cash flow from operating activities Profit before income tax 36.4 30.7 Financial income (0.4) (0.2) Financial expense 9.9 6.1 Intangible amortisation 4.1 1.5 Depreciation 50.3 38.9 Profit on disposal of property plant and equipment (7.0) (5.8) Equity-settled share-based payments 1.7 0.9 95.0 72.1 Increase in inventories (0.7) (2.1) Increase in trade and other receivables (19.2) (15.8) Increase in trade and other payables 9.7 22.4 Cash generated from operations 84.8 76.6 Interest received 0.5 0.2 Interest paid (9.8) (5.6) Income tax paid (6.1) (1.4) Net cash flow from operating activities 69.4 69.8 Cash flow from investing activities Acquisition of businesses (62.0) (35.2) Purchase of property, plant and equipment (93.6) (78.5) Disposal of property, plant and equipment 19.7 15.2 Net cash flow from investing activities (135.9) (98.5) Net cash flow before financing activities (66.5) (28.7) Cash flow from financing activities Proceeds from shares issued - 14.8 Proceeds from new loans 77.1 20.3 Capital element of Hire Purchase agreements - (0.3) Dividends paid (6.7) (5.6) Net cash flow from financing activities 70.4 29.2 Increase in cash and cash equivalents 3 3.9 0.5 Cash and cash equivalents at the beginning of the year 6.4 5.9 Cash and cash equivalents at the end of the year 10.3 6.4 Notes to the Financial Statements For the year ended 31 March 2007 Preparation of preliminary results The preliminary results have been prepared on the basis of the accounting policies which are to be set out in Speedy Hire Plc's annual report and accounts for the year ended 31 March 2007. EU Law (IAS Regulation EC1606/2002) requires that the consolidated accounts of the group for the year ended 31 March 2007 be prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted for use in the EU ('adopted IFRS'). The financial information set out above does not constitute the company's statutory accounts for the years ended 31 March 2007 or 2006 but is derived from those accounts. Statutory accounts for 2006 have been delivered to the registrar of companies, and those for 2007 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports, and (iii) did not contain statements under section 237(2) or (3) of the Companies Act 1985. The preliminary results were approved by the board of directors on 21 May 2007. 1. Turnover and profit on ordinary activities before taxation The group's primary reporting format is class of business, as the group's management and internal reporting are structured in this manner. The group's activity is conducted solely within the United Kingdom and Republic of Ireland. Tools Equipment Total 2007 2006 2007 2006 2007 2006 Class of Business £m £m £m £m £m £m Analysis of segmental result Total revenue 175.5 151.0 166.6 107.8 342.1 258.8 Internal revenue (0.8) (0.5) (5.8) (4.0) (6.6) (4.5) Revenue 174.7 150.5 160.8 103.8 335.5 254.3 Segment result before dep'n & amortisation 50.5 45.1 56.3 37.0 106.8 82.1 Depreciation (22.8) (20.9) (25.0) (16.3) (47.8) (37.2) Amortisation (0.4) (0.6) (3.7) (0.9) (4.1) (1.5) Result before corporate costs 27.3 23.6 27.6 19.8 54.9 43.4 Corporate costs (9.0) (6.8) Profit before net financing costs 45.9 36.6 Net financing costs (9.5) (5.9) Income tax (9.8) (8.4) Profit for the year 26.6 22.3 Central overheads net of property income includes £0.3m (2006: nil) of profit on disposal of properties. 2. Earnings per Share Basic earnings per share is based on the profit after taxation of £26.6 million (2006: £22.1 million) and the weighted average number of 5p ordinary shares in issue during the year of 45,194,250 (2006: 43,659,084). The weighted average number of ordinary shares used for the diluted earnings per share is calculated as follows: 2007 2006 Weighted Weighted Average Average Shares Earnings Shares Earnings Earnings Number per share Earnings Number per share £m million pence £m million pence Basic earnings 26.6 45.2 58.74 22.1 43.7 50.44 Share options - 0.4 (0.55) - 0.2 (0.26) All - Employee share scheme - 0.3 (0.41) - 0.1 (0.15) Diluted earnings 26.6 45.9 57.78 22.1 44.0 50.03 The table below reconciles basic earnings per share to earnings per share pre-amortisation and loss on disposal of operation. 2007 2006 Pence Pence Basic earnings per share 58.74 50.44 Amortisation charge after tax per share 6.26 2.42 Basic earnings per share pre amortisation and loss on disposal of operation 65.00 52.86 3. Analysis of net debt At Non- At 31 Mar Cash Cash 31 Mar 2006 Movement flow 2007 £m £m £m £m Cash 6.4 - 3.9 10.3 Non-current debt (109.4) (0.1) (77.0) (186.5) Net debt (103.0) (0.1) (73.1) (176.2) 4. Year end gearing (calculated as net debt as a percentage of shareholders funds) stands at 103.0% (2006: 72.9%). 5. The charge for taxation for the year represents an effective tax rate of 26.9% (2006: 27.5%). 6. The board has proposed a final dividend of 11.5 pence per share to be paid on 21st August 2007 to shareholders on the register at 22nd June 2007. This, together with an interim dividend of 5.5 pence per share paid on 26th January 2007, makes a total dividend for the year of 17.0 pence per share. 7. The Annual Report and Accounts for the year ended 31 March 2007 will be posted to shareholders on or about 14th June 2007. This information is provided by RNS The company news service from the London Stock Exchange

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