IFRS
Speedy Hire PLC
03 October 2005
3 October 2005
Speedy Hire Plc
('Speedy Hire' or 'the Group')
Restatement of Financial Information
Under International Financial Reporting Standards
Speedy Hire Plc has historically prepared its consolidated statements under UK
Generally Accepted Accounting Practice (UK GAAP). As a listed company in the
European Union, the Group is now required to report under International
Financial Reporting Standards (IFRS) with effect from 01 April 2005.
Accordingly the Group will prepare its 2005/06 interim and annual financial
statements under IFRS.
The Group has completed its assessment of the adjustments required to restate
the financial statements from UK GAAP to IFRS. The impact of these adjustments
on the two years ended 31 March 2005 is summarised in the table below.
Year ending 31 March 2005 Year ending 31 March 2004
UK GAAP IFRS UK GAAP IFRS
PBT £m 23.8 24.5 21.2 21.1
Dividend cover times 3.3 3.9 4.0 4.3
ROC % 17.8 17.6 17.8 17.6
Gearing % 78.1 76.6 65.3 64.7
EPS:
Basic pps 41.15 42.78 42.34 40.20
Adjusted pps 44.57 44.63 38.66 38.99
Diluted pps 39.36 42.55 41.50 39.40
Key Impact Analysis
The most significant elements contributing to the changes in financial
information are:
• non-amortisation of goodwill
• dividends recognised only if they are approved before the balance sheet
date
• no discounting of deferred taxation is permitted
• changes in the valuation basis of share based payments
• the fair value of financial instruments being recognised on the balance
sheet
Non-amortisation of goodwill
Under UK GAAP, goodwill on acquisitions was capitalised and amortised. Under
IFRS 3, 'Business combinations', intangible assets identified on acquisition
must be capitalised and amortised annually, and goodwill is not systematically
amortised. Goodwill must be reviewed annually for impairment and intangibles on
a trigger event.
The Group has decided to apply the exception granted by IFRS 1 to goodwill on
business combinations acquired before the transition date of 01 April 2004.
This has the following impact:
• the value of goodwill relating to acquisitions prior to the transition
date is £4,988k and is frozen at that date;
• the acquisitions made in the financial year to 31 March 2005 have been
reviewed and restated for intangibles in accordance with IFRS 3. An
intangible asset of £116k has been identified only in relation to the four
year supply contract with Simons Construction, the goodwill has been
restated accordingly and will be amortised over the life of the contract.
The goodwill arising from other acquisitions is frozen on the balance sheet;
• the amortisation previously reported under UK GAAP for the year ended 31
March 2005 of £1,241k is reversed for the IFRS restatement;
• goodwill as at 31 March 2005 and 31 March 2004 has been reviewed for
impairment. The goodwill attached to the acquisitions of Chichester Plant
and St. Vincent Plant relates principally to supply contracts established as
part of those acquisitions which are now part way through; as such a
goodwill impairment charge of £621k in 2005 and £151k in 2004 has been
booked;
• there is no indication of impairment of any of the remaining goodwill;
• to date in 2005/06 significant intangibles have been identified on the
acquisitions of The Cabin Company and the internal hire division of MJ
Gleeson in the current year. In each case the intangible identified relates
to the sole supply contract established.
Dividends
IAS 10, 'Events after the Balance Sheet Date' requires that dividends declared
after the balance sheet date should not be recognised as a liability at that
balance sheet date because the liability does not represent an obligation as
defined by IAS 37, 'Provisions, Contingent Liabilities and Contingent Assets'.
The final dividend declared in June 2004 for the year ended 31 March 2004 of
£2,832k has been reversed in the opening balance sheet and charged to equity in
the year ended 31 March 2005. The final dividend accrued for the year ended 31
March 2005 of £3,401k has been reversed in the IFRS balance sheet and will be
charged in the year ending 31 March 2006.
Taxation
IAS 12, 'Income Taxes' requires that deferred tax assets and liabilities shall
not be discounted.
The discount of £1,839k applied to the deferred tax provision included in the
opening balance sheet has been reversed and charged to equity for the year ended
31 March 2004. The reduction in the discount of £266k for the year ended 31
March 2005 has been credited to the income statement in the period.
In addition the tax effect of each of the adjustments listed has been
incorporated into the restatement.
Share Based Payments
IFRS 2, 'Share-based Payments' requires that a charge for equity instruments
granted is recognised in the financial statements based upon their fair value at
the date of grant. The charge made is recognised evenly over the performance
period.
IFRS 1 allows measurement of this expense to be applied only to options granted
after 07 November 2002. As such the Group is required to make a charge for the
Long Term Incentive Plan (LTIP) options granted in September 2004 and the all
employee SAYE Scheme introduced in December 2004. Under UK GAAP a charge was
made for the value of the LTIP options only.
The pre-tax credit arising from adoption of IFRS 2 on the Group's income
statement is £55k for the year ended 31 March 2005. This reflects the new
charge made for the SAYE scheme and a change in the valuation basis of the LTIP
options.
Financial Instruments
IAS 39, 'Financial Instruments: Recognition and Measurement' requires that all
derivative financial instruments are accounted for at fair market value and that
changes to the fair value are charged to the income statement.
The net fair value of financial instruments at the opening balance sheet date
was £37k, this was credited to equity in the year ended 31 March 2004. The
decrease in the fair value of £21k for the year ended 31 March 2005 was charged
to the income statement in the period.
Presentation of Financial Statements
The format of the primary statements contained in the appendices to this
statement has been presented in accordance with IAS 1, 'Presentation of
Financial Statements', which is different to the UK GAAP equivalents. This
format and presentation may require modification as practice develops and in the
event that further guidance is issued.
These presentation changes have no effect on the result for the financial period
or on the net assets.
A full set of primary statements for each of 2004 and 2005 are included in
Appendices 2 and 3.
Segmental Reporting
IAS 14, 'Segmental Reporting' requires that results for individual business and
geographical segments are reported separately.
The primary segments reported by Speedy are the business segments; these are
Tool Hire, Equipment Hire and Central. This reflects the internal management
structure and reporting.
The secondary segments reported by Speedy are the geographical segments. At the
moment Speedy operates solely within the United Kingdom and therefore no
additional disclosure is required.
Selected segmental results for the year ended 31 March 2005 and comparatives for
31 March 2004 are included within Appendix 5.
Enquiries:
Speedy Hire Plc Hudson Sandler
Steve Corcoran, Chief Executive Nick Lyon
Neil O'Brien, Finance Director James Benjamin
Tel: 01942 720000 Tel: 020 7796 4133
Notes to editors:
Speedy Hire is a leading provider of tool and equipment hire services to UK
contractors and builders, industry, utilities and the public sector, operating
from over 300 depots throughout the country.
Appendix 1
IFRS Accounting Policies
This section provides a summary of the Group's new accounting policies that have
changed under IFRS for the year ended 31 March 2005.
Basis of Accounting
This restated financial information has been prepared on the basis of all IFRS
and Standing Interpretations Committee (SIC) and International Financial
Reporting Interpretations Committee (IFRIC) interpretations issued by the
International Accounting Standards Board (IASB) that are either, endorsed by the
EU and effective (or available for early adoption) as at 31 March 2006 or, are
expected to be endorsed and effective (or available for early adoption) as at 31
March 2006. Based on these adopted and unadopted IFRS, the directors have made
assumptions about the accounting policies expected to be applied when the first
annual IFRS accounts are prepared for the year ending 31 March 2006 (the first
annual IFRS accounts).
In addition, the adopted IFRS that will be effective (or available for early
adoption) in the first annual IFRS accounts are still subject to additional
interpretations and therefore cannot be determined with certainty.
Consequently, the restated financial information as presented may be subject to
change.
Accordingly, the accounting policies will be finally determined only when the
accounts are prepared for the year ending 31 March 2006.
Long Term Incentive Plan And Employee Share Scheme
In accordance with IFRS 2, a charge is recognised in respect of all share based
payments made to employees.
The charge for the Long Term Incentive Plan is based upon the fair value of
awards made and upon the expectation of the number of shares that will vest.
The charge for the Group's Inland Revenue approved share savings scheme is based
upon the fair value of the awards made at the date on which the options were
granted and upon managements best estimate of the vesting expectations. The
charge has been spread evenly over the performance period starting January 2005.
Taxation
Taxation is fully recognised in accordance with IAS 12.
The tax charge or credit included in the Income Statement comprises both current
and deferred tax. Current tax reflects the expected tax payable on the taxable
income for the year, using tax rates prevailing at the balance sheet date.
Deferred tax reflects the movement in temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for tax purposes, and is provided at the tax rates that are
expected to apply when the liability is settled or the asset is realised.
Deferred tax is provided using the balance sheet liability method, recognising
deferred tax liabilities in respect of all taxable temporary differences and
deferred tax assets to the extent that it is probable that taxable profits will
be available against which deductible temporary differences can be utilised.
Deferred tax assets and liabilities are offset against each other when they
relate to income taxes levied by the same tax jurisdiction.
Goodwill
The excess of the fair value of purchase consideration and associated costs over
the fair value of net assets including identifiable intangible assets (as
defined by IAS 38) at the date of acquisition of subsidiary undertakings and
businesses acquired after 31 March 2004 is capitalised in the year of
acquisition.
Goodwill is assumed to have an indefinite useful economic life and is not
amortised.
The carrying amount of the Group's goodwill is reviewed annually to determine
whether there is any indication of impairment. If any such indication exists,
the assets value is estimated and any impairment is charged in the year.
Intangible Assets
Intangible fixed assets are stated at cost or valuation less accumulated
amortisation.
Amortisation is provided so as to write off the cost or valuation of the assets
over their expected useful economic lives, after taking account of estimated
residual values.
The useful economic lives are assessed on an asset by asset basis.
Assets held for sale
Assets that meet the criteria to be classified as held for resale are measured
at the lower of carrying amount and fair value less costs to sell. Such assets
are not depreciated.
Derivatives and Other Financial Instruments
The principle derivative instruments used by the Group are interest rate swaps
and caps. Amounts payable or receivable in respect of interest rate swap or cap
transactions are recognised on an accruals basis until settlement date and are
treated as an adjustment to the interest expense over the period of the
contract.
All derivates are only held for hedging purposes.
The fair value of the Group's derivative financial instruments is recognised in
the balance sheet and changes in the fair value are included in the income
statement each period in accordance with IAS39.
Appendix 2
Consolidated income statement
Year ended 31 March 2005
UK GAAP in IFRS IFRS IAS IAS IAS IFRS
IFRS format 2 3 10 12 39
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 206,476 206,476
Cost of Sales (58,232) (58,232)
Gross Profit 148,244 - - - - - 148,244
Other operating income 171 171
Distribution costs (21,974) (21,974)
Administrative expenses (97,112) 55 606 (96,451)
Profit from operations 29,329 55 606 - - - 29,990
Loss on disposal of operation (655) (655)
Financing costs (4,825) (21) (4,846)
Income from associates - -
Profit before taxation 23,849 55 606 - - (21) 24,489
Income tax expense (6,354) (170) (51) 266 6 (6,303)
Profit after tax 17,495 (115) 555 - 266 (15) 18,186
Minority interest - -
Net profit attributable to equity holders 17,495 (115) 555 - 266 (15) 18,186
of the parent
Dividends attributable to equity holders (5,229) - - 569 - - (4,660)
during the period
Consolidated balance sheet
As at 31 March 2005
UK GAAP
in IFRS format IFRS 2 IFRS 3 IAS 10 IAS 12 IAS 39 IFRS
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Assets
Property, Plant and Equipment 187,806 187,806
Intangible Assets 10,211 455 10,666
Investment Property 123 123
Total non-current assets 198,140 - 455 - - - 198,595
Inventories 4,762 4,762
Trade and other receivables 55,056 55,056
Financial assets - 65 65
Cash and cash equivalents 5,894 5,894
Total Current assets 65,712 - - - - 65 65,777
Non-current assets classified as held 1,664 1,664
for sale
Total assets 265,516 - 455 - - 65 266,036
Liabilities
Interest-bearing loans and borrowings (88,660) (88,660)
Deferred tax liabilities (16,929) (72) (1,573) (18,574)
Total non-current liabilities (105,589) - (72) - (1,573) - (107,234)
Interest bearing loans and borrowings (287) (287)
Trade and other payables (50,777) (13) 3,401 (47,389)
Current income tax (2,479) (170) 66 (5) (2,588)
Financial Liabilities - (49) (49)
Total current liabilities (53,543) (183) 66 3,401 - (54) (50,313)
Total liabilities (159,132) (183) (6) 3,401 (1,573) (54) (157,547)
Net assets 106,384 (183) 449 3,401 (1,573) 11 108,489
Equity
Issued capital 2,132 2,132
Share premium 32,692 32,692
Merger reserve 3,660 3,660
Revaluation reserve 50 50
Capital redemption reserve 26 26
Retained earnings 67,824 (183) 449 3,401 (1,573) 11 69,929
Total equity 106,384 (183) 449 3,401 (1,573) 11 108,489
Cash flow statement
Year ending 31 March 2005
Cash flows from operating activities:
£'000 £'000
Profit before taxation 24,489
Depreciation 31,192
Profit on the sale of property, plant and equipment (3,842)
Loss on disposal of business 655
Amortisation 635
Share based payment expenses 571
Finance expenses 4,846
Movement in inventory (834)
Movement in debtors (8,816)
Movement in creditors 7,750
Interest paid (4,758)
Income tax paid (2,694)
Net cash inflow from operating activities 49,194
Cash flows from investing activities:
Acquisition of businesses (18,746)
Purchase of property plant and equipment (60,512)
Proceeds from sale of equipment 12,223
Proceeds form sale of business 500
Net cash outflow from investing activities (66,535)
Cash flows from financing activities:
New Bank loans 21,660
Capital element of HP payments (686)
Dividends paid (4,660)
Net cash inflow from financing activities 16,314
Net decrease in cash and cash equivalents (1,027)
Cash and cash equivalents at the start of the year 6,921
Cash and cash equivalents at the end of the year 5,894
Appendix 3
Consolidated income statement
As at 31 March 2004
UK GAAP
in IFRS format IFRS 3 IAS 12 IAS 10 IAS 39 IFRS
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 170,231 170,231
Cost of Sales (48,182) (48,182)
Gross Profit 122,049 - - - - 122,049
Other operating income 615 615
Distribution costs (18,494) (18,494)
Administrative expenses (79,488) (151) (79,639)
Profit from operations 24,682 (151) - - - 24,531
Financing costs (3,471) 37 (3,434)
Income from associates
Profit before taxation 21,211 (151) - - 37 21,097
Income tax expense (3,601) 45 (810) (11) (4,377)
Profit after tax 17,610 (106) (810) - 26 16,720
Minority interest - -
Net profit attributable to equity holders 17,610 (106) (810) - 26 16,720
of the parent
Dividends attributable to equity holders (4,371) - - 461 - (3,910)
during the period
Consolidated balance sheet
As at 31 March 2004
UK GAAP
in IFRS format IFRS 3 IAS 10 IAS 12 IAS 39 IFRS
£'000 £'000 £'000 £'000 £'000 £'000
Assets
Property, Plant and Equipment 156,394 156,394
Intangible Assets 4,988 (151) 4,837
Investment Property 291 291
Total non-current assets 161,673 (151) - - - 161,522
Inventories 3,637 3,637
Trade and other receivables 45,627 45,627
Financial assets - 113 113
Cash and cash equivalents 6,921 6,921
Total Current assets 56,185 - - - 113 56,298
Non-current assets classified as held 1,664 1,664
for sale
Total assets 219,522 (151) - - 113 219,484
Liabilities
Interest-bearing loans and borrowings (67,295) (67,295)
Deferred tax liabilities (13,313) (1,839) (15,152)
Total non-current liabilities (80,608) - - (1,839) - (82,447)
Interest bearing loans and borrowings (678) (678)
Trade and other payables (42,309) 2,832 (39,477)
Current income tax (2,435) 45 (11) (2,401)
Financial liabilities - (76) (76)
Total current liabilities (45,422) 45 2,832 - (87) (42,632)
Total liabilities (126,030) 45 2,832 (1,839) (87) (125,079)
Net assets 93,492 (106) 2,832 (1,839) 26 94,405
Equity
Issued capital 2,132 2,132
Share premium 32,692 32,692
Merger reserve 3,660 3,660
Revaluation property reserve 50 50
Capital redemption reserve 26 26
Retained earnings 54,932 (106) 2,832 (1,839) 26 55,845
Total equity 93,492 (106) 2,832 (1,839) 26 94,405
Cash flow statement
Year ending 31 March 2004
Cash flows from operating activities:
£'000 £'000
Profit before taxation 21,097
Depreciation 24,540
Profit on the sale of property plant and equipment (4,200)
Amortisation 969
Share based payment expenses 701
Finance expenses 3,434
Increase in inventory (173)
Increase in debtors (1,536)
Increase in creditors 5,041
Interest paid (3,384)
Income tax paid (824)
Net cash inflow from operating activities 45,665
Cash flows from investing activities:
Acquisition of businesses (8,964)
Purchase of property plant and equipment (51,999)
Proceeds from sale of plant 15,408
Net cash outflow from investing activities (45,555)
Cash flows from financing activities:
New Bank loans 67,000
Proceeds from issue of share capital 157
Capital element of HP payments (52,396)
Dividends paid (3,910)
Net cash inflow from financing activities 10,851
Net increase in cash and cash equivalents 10,961
Cash and cash equivalents at the start of the year (4,040)
Cash and cash equivalents at the end of the year 6,921
Appendix 4
Consolidated statement of recognised gains and losses
2005 2004
£'000 £'000
Credit in respect of share based awards 558 702
Net income recognised directly in equity 558 702
Profit for the period 18,186 16,720
Total recognised income and expense for the period 18,744 17,422
Appendix 5
Segmental Disclosure
2005
Tools Equipment Central Elimination Consolidation
£000 £000 £000 £000 £000
Revenue
External sales 128,666 77,802 8 - -
Inter-segment sales 412 2,946 - (3,358) -
Total revenue 129,078 80,748 8 (3,358) 206,476
Operating profit on ordinary activities 20,457 14,765 (4,597) 30,625
before goodwill amortisation
Goodwill amortisation (621) (14) - (635)
Operating profit 19,836 14,751 (4,597) 29,990
Loss on disposal of operation (655)
Profit before interest 29,335
Net interest payable (4,846)
Profit before taxation 24,489
2004
Tools Equipment Central Elimination Consolidation
£000 £000 £000 £000 £000
Revenue
External sales 111,049 58,997 185 - -
Inter-segment sales 347 2,404 - (2,751) -
Total revenue 111,396 61,401 185 (2,751) 170,231
Operating profit on ordinary activities 17,274 11,273 (3,047) 25,500
before goodwill amortisation
Goodwill amortisation (914) (55) - (969)
Operating profit 16,360 11,218 (3,047) 24,531
Loss on disposal of operation -
Profit before interest 24,531
Net interest payable (3,434)
Profit before taxation 21,097
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