1st Quarter Results

RNS Number : 4062L
Ashtead Group PLC
04 September 2012
 



 

 

Unaudited results for the first quarter ended 31 July 2012

 




Change


2012

2011

Actual

At constant rates


£m

£m

%

%

Underlying results¹





Revenue

325.0

268.6

+21%

+18%

EBITDA

129.3

93.9

+38%

+34%

Operating profit

73.8

46.2

+60%

+55%

Profit before taxation

61.4

33.8

+82%

+76%

Earnings per share

7.7p

4.3p

+82%

+76%






Statutory results





Profit before taxation

34.9

33.1

+5%

+2%

Earnings per share

4.5p

4.2p

+8%

+4%

1  Before exceptional items, intangible amortisation and fair value remeasurements

 

Highlights

 

·     Record Q1 pre-tax profits1 of £61m, up 76% at constant exchange rates

·     Sunbelt's rental revenue increases17%

·     Group EBITDA margins rise to 40% (2011: 35%)

·     Long-term debt refinanced giving significantly lower cost and longer maturities

·     Board now anticipates a full year result materially ahead of its previous expectations

 

Ashtead's chief executive, Geoff Drabble, commented:

 

"We are delighted with this record performance as we continue to benefit from the trends established in the business over a number of quarters.

 

The markets in which we operate have performed as anticipated with gently improving conditions in the US and a more challenging outlook in the UK.  We do not anticipate any significant changes to this environment in the short term.

 

Against this back-drop our continued market share gains are again reflected in our strong growth in fleet on rent and improving margins demonstrate our operational efficiency.  Given the momentum established in the business, we now anticipate a full year result materially ahead of our previous expectations."

 

Contacts:

Geoff Drabble

Chief executive


+44 (0)20 7726 9700

Suzanne Wood

Finance director

Brian Hudspith

Maitland


+44 (0)20 7379 5151

 

 

Geoff Drabble and Suzanne Wood will hold a conference call for equity analysts at 9.30am on Tuesday 4 September.  Dial in details for this call have already been distributed but any analyst not having received them should contact the Company's PR advisors, Maitland (Astrid Wright) on 020 7379 5151.  The call will be webcast live via the Company's website at www.ashtead-group.com and there will also be a replay available via the website from shortly after the call concludes.  There will, as usual, also be a separate call for bondholders at 4.00pm UK time (11.00am EST).

 

Trading results


Revenue

EBITDA

Operating profit


2012

2011

2012

2011

2012

2011








Sunbelt in $m

432.1

361.1

183.6

134.6

114.4

73.9








Sunbelt in £m

275.3

222.5

116.9

82.9

72.9

45.6

A-Plant

49.7

46.1

14.4

12.6

3.0

2.3

Group central costs

   -

   -

(2.0)

(1.6)

(2.1)

(1.7)


325.0

268.6

129.3

93.9

73.8

46.2

Net financing costs





(12.4)

(12.4)

Profit before tax, exceptionals,




remeasurements and amortisation


61.4

33.8

Exceptional items





(18.0)

-

Fair value remeasurements





(7.4)

-

Amortisation





(1.1)

(0.7)

Profit before taxation




34.9

33.1

Taxation





(12.4)

(12.4)

Profit attributable to equity holders of the Company


22.5

20.7





Margins







Sunbelt



42.5%

37.3%

26.5%

20.5%

A-Plant



29.0%

27.3%

6.0%

5.0%

Group



39.8%

34.9%

22.7%

17.2%

 

Group revenue improved 21% in the quarter reflecting predominantly strong growth in fleet on rent and yield in the US.  Sunbelt's rental revenue grew 17% to $384m (2011: $328m), including a 13% increase in fleet on rent and a 4% improvement in yield.  In the UK, A-Plant's first quarter rental revenue grew by 6% to £45m (2011: £42m) including 7% growth in average fleet on rent offset by a small yield decline.

 

Total revenue growth for the Group included used equipment sales revenue of £22m (2011: £14m) as we increased capital expenditure and continued to reduce the fleet age.

 

Sunbelt delivered a strong EBITDA margin of 42.5% (2011: 37.3%) in the quarter resulting from the high 'drop through' of rental revenue to profit as we continue to benefit from improved operational efficiency.  As a result, EBITDA rose to $184m (2011: $135m) and operating profit rose to $114m (2011: $74m).  A-Plant's operating profit rose to £3m (2011: £2m).

 

Exceptional financing costs of £18m (including cash costs of £13m) in the quarter related to the redemption of our $550m 9.0% senior secured notes.  The refinancing of these notes with the $500m 6.5% senior secured notes maturing in 2022 will generate an annual saving to our finance cost of circa £8m per annum.

 

There is also a non-cash charge of £7m relating to the remeasurement to fair value of the early repayment options in our long term debt.  This charge follows the recognition of a £7m credit related to the $550m senior secured notes in Q4 last year which reflected our ability to issue similar debt at a lower interest rate as we did in June.

 

As a result, statutory profit before tax was £35m (2011: £33m).  The effective tax rate on the underlying pre-tax profit was 37% (2011: 37%).  Underlying earnings per share grew 82% to 7.7p (2011: 4.3p), whilst basic earnings per share were 4.5p (2011: 4.2p).

 

Capital expenditure

 

Capital expenditure this year will, as usual, be concentrated in the first half of the year as we maximise expenditure for the seasonally stronger summer months.  Accordingly, Q1 expenditure was £223m gross and £199m net of disposal proceeds (2011: £156m gross and £140m net).  As a result of this investment, the Group's rental fleet at 31 July 2012 was 14% larger than a year ago and has a reduced age of 33 months (2011: 40 months).

 

Sunbelt's fleet size at 31 July of $2.7bn is 15% larger than it was a year ago which supported strong fleet on rent growth of 13% year on year.  Average first quarter physical utilisation was 70% (2011: 72%) as we put the new equipment out on rent gradually throughout the quarter.

 

For the year as a whole we continue to anticipate gross additions of £450m with net capex payments of £400m after £100m of disposal proceeds (reflecting additional equipment delivered in Q4 last year and paid for this year).  This rate of investment will hold the fleet size at around the size reached at the end of the quarter for the remainder of the year.

 

Return on Investment

 

Sunbelt's pre-tax return on investment1 in the 12 months to 31 July 2012 continued to improve to 15.3% (2011: 10.0%), well ahead of the Group's pre-tax weighted average cost of capital.  In the UK, return on investment remains weak at 3.2% (2011: 1.2%) reflecting continuing excess supply and weak end markets.  For the Group as a whole, returns are 13.2% (2011: 8.1%).

 

Cash flow and net debt

 

As expected, debt increased during the quarter.  This resulted from the capital expenditure to grow and renew the fleet and the usual seasonal increase in working capital that occurs as activity rises in the summer months.  We expect the working capital increase to largely reverse in the second half.  Net debt at 31 July 2012 was £988m (2011: £848m) whilst the ratio of net debt to EBITDA was 2.4 times (2011: 2.8 times).

 

The Group's debt package remains well structured to enable us to take advantage of prevailing end market conditions.  Following the issue of the new 6.5% $500m senior secured notes due in 2022, and the redemption of the 9.0% $550m senior secured notes, the Group's debt facilities are committed for an average of 5.7 years.  At 31 July 2012, ABL availability was $663m - substantially above the $216m level at which the Group's entire debt package is covenant free.

 

Current trading and outlook

 

The performance seen in the first quarter continued in August.  Given the momentum established in the business, we now anticipate a full year result materially ahead of our previous expectations.

 

Forward looking statements

 

This announcement contains forward looking statements.  These have been made by the directors in good faith using information available up to the date on which they approved this report.  The directors can give no assurance that these expectations will prove to be correct.  Due to the inherent uncertainties, including both business and economic risk factors underlying such forward looking statements, actual results may differ materially from those expressed or implied by these forward looking statements.  Except as required by law or regulation, the directors undertake no obligation to update any forward looking statements whether as a result of new information, future events or otherwise.

 

1 Operating profit divided by the sum of net tangible and intangible fixed assets, plus net working capital but excluding net debt, deferred tax and fair value remeasurements.

 

CONSOLIDATED INCOME STATEMENT FOR THE THREE MONTHS ENDED 31 JULY 2012

 


2012

2011









Before



Before



exceptional items

Exceptional items


exceptional



amortisation and

amortisation and


items and

Exceptional items


remeasurements

remeasurements

Total

amortisation

and amortisation

Total


£m

£m

£m

£m

£m

£m








Revenue







Rental revenue

289.4

-

289.4

243.9

-

243.9

Sale of new equipment,







merchandise and consumables

13.9

-

13.9

10.6

-

10.6

Sale of used rental equipment

21.7

   -

21.7

14.1

   -

14.1


325.0

   -

325.0

268.6

   -

268.6

Operating costs







Staff costs

(86.1)

-

(86.1)

(79.5)

-

(79.5)

Used rental equipment sold

(18.1)

-

(18.1)

(12.1)

-

(12.1)

Other operating costs

(91.5)

   -

(91.5)

(83.1)

   -

(83.1)


(195.7)

   -

(195.7)

(174.7)

   -

(174.7)








EBITDA*

129.3

-

129.3

93.9

-

93.9

Depreciation

(55.5)

-

(55.5)

(47.7)

-

(47.7)

Amortisation

   -

(1.1)

(1.1)

   -

(0.7)

(0.7)

Operating profit

73.8

(1.1)

72.7

46.2

(0.7)

45.5

Investment income

1.1

-

1.1

1.0

-

1.0

Interest expense

(13.5)

(25.4)

(38.9)

(13.4)

   -

(13.4)








Profit on ordinary activities







before taxation

61.4

(26.5)

34.9

33.8

(0.7)

33.1

Taxation:







- current

(2.5)

-

(2.5)

(2.5)

-

(2.5)

- deferred

(20.3)

10.4

(9.9)

(10.1)

0.2

(9.9)


(22.8)

10.4

(12.4)

(12.6)

0.2

(12.4)

Profit attributable to equity







holders of the Company

38.6

(16.1)

22.5

21.2

(0.5)

20.7








Basic earnings per share

7.7p

(3.2p)

4.5p

4.3p

(0.1p)

4.2p

Diluted earnings per share

7.7p

(3.2p)

4.5p

4.2p

(0.1p)

4.1p


* EBITDA is presented here as an additional performance measure as it is commonly used by investors and lenders.

 

All revenue and profit is generated from continuing activities.

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED 31 JULY 2012

 


2012

2011


£m

£m




Profit attributable to equity holders of the Company for the period

22.5

20.7

Foreign currency translation differences

10.5

3.3

Total comprehensive income for the period

33.0

24.0

 

Details of principal risks and uncertainties are given in the Review of the Balance Sheet and Cashflow accompanying these interim financial statements.

 

CONSOLIDATED BALANCE SHEET AT 31 JULY 2012

 


Unaudited

Audited


31 July

30 April


2012

2011

2012


£m

£m

£m

Current assets




Inventories

14.8

11.9

13.4

Trade and other receivables

204.9

173.4

178.0

Current tax asset

2.5

2.1

2.6

Cash and cash equivalents

7.0

12.6

23.4


229.2

200.0

217.4

Non-current assets




Property, plant and equipment




-  rental equipment

1,292.6

1,009.1

1,118.4

-  other assets

156.8

135.5

145.0


1,449.4

1,144.6

1,263.4

Intangible assets - brand names and other acquired intangibles

21.1

11.8

21.7

Goodwill

384.3

360.4

371.0

Deferred tax asset

-

0.3

-

Defined benefit pension fund surplus

3.9

6.5

3.4

Other financial assets - derivatives

   -

   -

7.2


1,858.7

1,523.6

1,666.7





Total assets

2,087.9

1,723.6

1,884.1





Current liabilities




Trade and other payables

310.8

197.7

265.6

Current tax liability

3.6

3.2

2.8

Debt due within one year

2.2

1.6

2.1

Provisions

11.3

9.9

11.3


327.9

212.4

281.8

Non-current liabilities




Debt due after more than one year

992.7

858.7

875.6

Provisions

22.2

23.1

21.7

Deferred tax liabilities

167.3

124.5

150.3


1,182.2

1,006.3

1,047.6





Total liabilities

1,510.1

1,218.7

1,329.4





Equity




Share capital

55.3

55.3

55.3

Share premium account

3.6

3.6

3.6

Capital redemption reserve

0.9

0.9

0.9

Non-distributable reserve

90.7

90.7

90.7

Own shares held by the Company

(33.1)

(33.1)

(33.1)

Own shares held through the ESOT

(7.4)

(6.7)

(6.2)

Cumulative foreign exchange translation differences

17.6

5.9

7.1

Retained reserves

450.2

388.3

436.4

Equity attributable to equity holders of the Company

577.8

504.9

554.7





Total liabilities and equity

2,087.9

1,723.6

1,884.1

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE THREE MONTHS ENDED 31 JULY 2012

 





Own

Cumulative







shares

foreign





Share

Capital

held

exchange




Share

premium

redemption

by the

translation

Retained



capital

account

reserve

ESOT

differences

reserves

Total


£m

£m

£m

£m

£m

£m

£m









At 1 May 2011

55.3

3.6

0.9

(6.7)

2.6

368.1

481.4









Profit for the period

-

-

-

-

-

20.7

20.7

Other comprehensive income:








Foreign currency translation








differences

   -

   -

   -

   -

3.3

   -

3.3

Total comprehensive income








for the period

   -

   -

   -

   -

3.3

20.7

24.0









Share-based payments

-

-

-

-

-

0.5

0.5

Tax on share-based payments

   -

   -

   -

   -

   -

(1.0)

(1.0)

At 31 July 2011

55.3

3.6

0.9

(6.7)

5.9

388.3

504.9









Profit for the period

-

-

-

-

-

67.8

67.8

Other comprehensive income:








Foreign currency translation








differences

-

-

-

-

1.2

-

1.2

Actuarial loss on defined








benefit pension scheme

-

-

-

-

-

(6.2)

(6.2)

Tax on defined benefit








pension scheme

   -

   -

   -

   -

   -

1.5

1.5

Total comprehensive income








for the period

   -

   -

   -

   -

1.2

63.1

64.3









Dividends paid

-

-

-

-

-

(15.3)

(15.3)

Own shares purchased by








the ESOT

-

-

-

(3.5)

-

-

(3.5)

Share-based payments

-

-

-

4.0

-

(2.0)

2.0

Tax on share-based payments

   -

   -

   -

   -

   -

   2.3

 2.3

At 30 April 2012

55.3

3.6

0.9

(6.2)

7.1

436.4

554.7









Profit for the period

-

-

-

-

-

22.5

22.5

Other comprehensive income:








Foreign currency translation








differences

   -

   -

   -

   -

10.5

   -

10.5

Total comprehensive income








for the period

   -

   -

   -

   -

10.5

22.5

33.0









Own shares purchased by the








ESOT

-

-

-

(9.2)

-

-

(9.2)

Share-based payments

-

-

-

8.0

-

(7.4)

0.6

Tax on share-based payments

   -

   -

   -

   -

   -

(1.3)

(1.3)

At 31 July 2012

55.3

3.6

0.9

(7.4)

17.6

450.2

577.8

 

CONSOLIDATED CASH FLOW STATEMENT FOR THE THREE MONTHS ENDED 31 JULY 2012

 


2012

2011


£m

£m

Cash flows from operating activities



Cash generated from operations before exceptional



items and changes in rental equipment

100.1

58.2

Exceptional operating costs paid

(0.7)

(0.9)

Payments for rental property, plant and equipment

(162.2)

(108.9)

Proceeds from disposal of rental property, plant and equipment

19.2

15.8

Cash used in operations

(43.6)

(35.8)

Financing costs paid (net)

(16.3)

(4.0)

Exceptional financing costs paid

(13.4)

-

Tax paid (net)

(1.6)

(1.5)

Net cash used in operating activities

(74.9)

(41.3)




Cash flows from investing activities



Payments for non-rental property, plant and equipment

(16.0)

(19.5)

Proceeds on disposal of non-rental property, plant and equipment

2.1

2.0

Net cash used in investing activities

(13.9)

(17.5)




Cash flows from financing activities



Drawdown of loans

490.2

60.3

Redemption of loans

(409.9)

(7.3)

Capital element of finance lease payments

(0.3)

(0.4)

Purchase of own shares by the ESOT

(7.6)

   -

Net cash from financing activities

72.4

52.6




Decrease in cash and cash equivalents

(16.4)

(6.2)

Opening cash and cash equivalents

23.4

18.8

Closing cash and cash equivalents

7.0

12.6

 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

1.      Basis of preparation

 

The consolidated interim financial statements for the three months ended 31 July 2012 were approved by the directors on 3 September 2012.  They have been prepared in accordance with relevant International Financial Reporting Standards ('IFRS') (including International Accounting Standard - 'IAS 34 Interim Financial Reporting') and the accounting policies set out in the Group's Annual Report and Accounts for the year ended 30 April 2012.

The financial statements have been prepared on the going concern basis as described in the corporate governance report included in the 2012 Annual Report and Accounts.  They are unaudited and do not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006.

The statutory accounts for the year ended 30 April 2012 were prepared in accordance with relevant IFRS and have been mailed to shareholders and filed with the Registrar of Companies.  The auditor's report on those accounts was unqualified and did not include a reference to any matter by way of emphasis without qualifying the report and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

 

The exchange rates used in respect of the US dollar are:


2012

2011




Average for the quarter ended 31 July

1.57

1.62

At 31 July

1.57

1.64

 

2.      Segmental analysis



Operating





profit before


Operating


Revenue

amortisation

Amortisation

profit


£m

£m

£m

£m

Three months to 31 July





2012





Sunbelt

275.3

72.9

(0.7)

72.2

A-Plant

49.7

3.0

(0.4)

2.6

Corporate costs

   -

(2.1)

   -

(2.1)


325.0

73.8

(1.1)

72.7






2011





Sunbelt

222.5

45.6

(0.3)

45.3

A-Plant

46.1

2.3

(0.4)

1.9

Corporate costs

   -

(1.7)

   -

(1.7)


268.6

46.2

(0.7)

45.5

 





Other






financial



Segment


Taxation

assets -

Total


assets

Cash

assets

derivatives

assets

At 31 July 2012






Sunbelt

1,755.9

-

-

-

1,755.9

A-Plant

322.3

-

-

-

322.3

Central items

0.2

7.0

2.5

   -

9.7


2,078.4

7.0

2.5

   -

2,087.9

At 30 April 2012






Sunbelt

1,549.4

-

-

-

1,549.4

A-Plant

301.4

-

-

-

301.4

Central items

0.1

23.4

2.6

7.2

33.3


1,850.9

23.4

2.6

7.2

1,884.1

 

3.      Operating costs


2012

2011


Before



Before




amortisation

Amortisation

Total

amortisation

Amortisation

Total


£m

£m

£m

£m

£m

£m

Three months to 31 July







Staff costs:







Salaries

78.3

-

78.3

73.0

-

73.0

Social security costs

6.2

-

6.2

5.1

-

5.1

Other pension costs

1.6

   -

1.6

1.4

   -

1.4


86.1

   -

86.1

79.5

   -

79.5








Used rental equipment sold

18.1

   -

18.1

12.1

   -

12.1








Other operating costs:







Vehicle costs

21.6

-

21.6

20.7

-

20.7

Spares, consumables & external repairs

16.2

-

16.2

14.8

-

14.8

Facility costs

11.3

-

11.3

10.6

-

10.6

Other external charges

42.4

   -

42.4

37.0

   -

37.0


91.5

   -

91.5

83.1

   -

83.1








Depreciation and amortisation:







Depreciation

55.5

-

55.5

47.7

-

47.7

Amortisation of acquired intangibles

   -

1.1

1.1

   -

0.7

0.7


55.5

1.1

56.6

47.7

0.7

48.4









251.2

1.1

252.3

222.4

0.7

223.1

 

4.      Exceptional items, amortisation and fair value remeasurements

 

Exceptional items are those items of financial performance that are material and non-recurring in nature.  Amortisation relates to the periodic write off of acquired intangible assets.  Fair value remeasurements relate to embedded call options in the Group's senior secured note issues.  The Group believes these items should be disclosed separately within the consolidated income statement to assist in the understanding of the financial performance of the Group.  Underlying revenue, profit and earnings per share are stated before exceptional items, amortisation of acquired intangibles and fair value remeasurements.

 


Three months to 31 July


2012

2011


£m

£m




Write off of deferred financing costs

4.6

-

Early redemption fee

10.6

-

Call period interest

2.8

-

Amortisation of acquired intangibles

1.1

0.7

Fair value remeasurements

7.4

   -


26.5

0.7

Taxation

(10.4)

(0.2)


16.1

0.5

 

The write off of deferred financing costs consists of the unamortised balance of the costs relating to the $550m 9.0% senior secured notes redeemed in July 2012.  In addition, an early redemption fee of £11m was paid to redeem the notes prior to their scheduled maturity.  The call period interest represents the interest charge on the $550m notes for the period from the issue of the new $500m notes to the date the $550m notes were redeemed.  Fair value remeasurements relate to the change in fair value of the embedded call options in the senior secured notes.

 

The items detailed in the table above are presented in the income statement as follows:

 


Three months to 31 July


2012

2011


£m

£m




Amortisation of acquired intangibles

1.1

0.7

Charged in arriving at operating profit

1.1

0.7

Net financing costs

25.4

   -

Charged in arriving at profit before tax

26.5

0.7

Taxation thereon

(10.4)

(0.2)


16.1

0.5

 

5.      Financing costs


Three months to 31 July


2012

2011


£m

£m

Investment income:



Expected return on assets of defined benefit pension plan

(1.1)

(1.0)




Interest expense:



Bank interest payable

4.3

4.1

Interest payable on second priority senior secured notes

7.4

7.6

Interest payable on finance leases

0.1

0.1

Non-cash unwind of discount on defined benefit pension plan liabilities

0.8

0.7

Non-cash unwind of discount on self-insurance provisions

0.3

0.3

Amortisation of deferred costs of debt raising

0.6

0.6

Total interest expense

13.5

13.4




Net financing costs before remeasurements

12.4

12.4

Exceptional items

18.0

-

Fair value remeasurements

7.4

   -

Net financing costs

37.8

12.4

 

6.      Taxation

 

The tax charge for the period has been computed using an estimated effective rate of 39% in the US (2011: 40%) and 25% in the UK (2011: 28%).  The blended effective rate for the Group as a whole is 37% of the profit before tax, exceptional items, amortisation of acquired intangibles and fair value remeasurements.

 

The tax charge of £22.8m (2011: £12.6m) on the underlying pre-tax profit of £61.4m (2011: £33.8m) is as follows:

 


Three months to 31 July


2012

2011


£m

£m




Current tax on income for the year

2.5

2.5




Deferred tax



- origination and reversal of temporary differences

20.1

9.9

- adjustments to prior year

0.2

0.2


20.3

10.1




Tax on underlying activities

22.8

12.6




Comprising:



- UK tax

2.6

2.7

- US tax

20.2

9.9


22.8

12.6

 

In addition, the tax credit of £10.4m (2011: credit of £0.2m) on exceptional items (including amortisation and fair value remeasurements) of £26.4m (2011: £0.7m) consists of a deferred tax credit of £0.1m relating to the UK (2011: credit of £0.1m) and a deferred tax credit of £10.3m (2011: credit of £0.1m) relating to the US.

 

7.      Earnings per share

 

Basic and diluted earnings per share for the three months ended 31 July 2012 have been calculated based on the profit for the relevant period and on the weighted average number of ordinary shares in issue during that period (excluding shares held in treasury and by the ESOT over which dividends have been waived).  Diluted earnings per share is computed using the result for the relevant period and the diluted number of shares (ignoring any potential issue of ordinary shares which would be anti-dilutive).  These are calculated as follows:

 


Three months to 31 July


2012

2011




Profit for the financial period (£m)

22.5

20.7




Weighted average number of shares (m)  - basic

498.9

497.7

- diluted

504.0

505.1




Basic earnings per share

4.5p

4.2p

Diluted earnings per share

4.5p

4.1p

 

Underlying earnings per share (defined in any period as the earnings before amortisation of acquired intangibles and fair value remeasurements for that period divided by the weighted average number of shares in issue in that period) and cash tax earnings per share (defined in any period as underlying earnings before other deferred taxes divided by the weighted average number of shares in issue in that period) may be reconciled to the basic earnings per share as follows:

 


Three months to 31 July


2012

2011




Basic earnings per share

4.5p

4.2p

Exceptional items, amortisation of acquired



intangibles and fair value remeasurements

5.3p

0.1p

Tax on amortisation and remeasurements

(2.1p)

   -

Underlying earnings per share

7.7p

4.3p

Other deferred tax

4.1p

2.0p

Cash tax earnings per share

11.8p

6.3p

 

8.      Property, plant and equipment

 


2012

2011


Rental


Rental



equipment

Total

equipment

Total

Net book value

£m

£m

£m

£m






At 1 May

1,118.4

1,263.4

914.5

Exchange difference

33.6

37.4

12.1

Reclassifications

(0.1)

-

(0.1)

Additions

207.1

223.2

136.2

Acquisitions

-

-

(0.1)

Disposals

(17.4)

(19.1)

(11.7)

Depreciation

(49.0)

(55.5)

(41.8)

At 31 July

1,292.6

1,449.4

1,009.1

 

9.      Share capital

 

Ordinary shares of 10p each:


2012

2011

2012

2011


Number

Number

£m

£m





Authorised

900,000,000

900,000,000

90.0

90.0





Allotted, called up and fully paid

553,325,554

553,325,554

55.3

55.3

 

At 31 July 2012, 50m shares were held by the Company and a further 2.8m shares were held by the Company's Employee Share Ownership Trust.

 

10.    Notes to the cash flow statement


Three months to 31 July


2012

2011

£m

£m

a)    Cash flow from operating activities






Operating profit before exceptional items and amortisation

73.8

46.2

Depreciation

55.5

47.7

EBITDA before exceptional items

129.3

93.9

Profit on disposal of rental equipment

(3.6)

(2.0)

Profit on disposal of other property, plant and equipment

(0.5)

(0.4)

Increase in inventories

(1.0)

(0.2)

Increase in trade and other receivables

(20.0)

(18.4)

Decrease in trade and other payables

(5.0)

(15.1)

Exchange differences

0.3

-

Other non-cash movements

0.6

0.4

Cash generated from operations before exceptional items



and changes in rental equipment

100.1

58.2

 


Three months to 31 July


2012

2011


£m

£m

b)    Reconciliation to net debt






Decrease in cash in the period

16.4

6.2

Increase in debt through cash flow

80.0

52.6

Change in net debt from cash flows

96.4

58.8

Exchange differences

32.0

12.2

Non-cash movements:



- deferred costs of debt raising

5.2

0.6

- capital element of new finance leases

   -

0.4

Increase in net debt in the period

133.6

72.0

Opening net debt

854.3

775.7

Closing net debt

987.9

847.7

 




c)    Analysis of net debt




1 May

Exchange

Cash

Non-cash

31 July


2012

movement

flow

movements

2012


£m

£m

£m

£m

£m







Cash

(23.4)

-

16.4

-

(7.0)

Debt due within 1 year

2.1

-

(0.3)

0.4

2.2

Debt due after 1 year

875.6

32.0

80.3

4.8

992.7

Total net debt

854.3

32.0

96.4

5.2

987.9

 

Details of the Group's debt are given in the Review of Balance Sheet and Cashflow accompanying these interim financial statements.

 

11.    Contingent liabilities

 

There have been no significant changes in contingent liabilities from those reported in the financial statements for the year ended 30 April 2012.

 

REVIEW OF BALANCE SHEET AND CASH FLOW

 

Balance sheet

 

Fixed assets

 

Capital expenditure in the quarter was £223m (2011: £156m) with £207m invested in the rental fleet (2011: £136m).  Expenditure on rental equipment was 93% of total capital expenditure with the balance relating to the delivery vehicle fleet, property improvements and to computer equipment.  Capital expenditure by division was as follows:

 



2012


2011


Growth

Maintenance

Total

Total






Sunbelt in $m

203.0

72.1

275.1

209.4






Sunbelt in £m

129.6

46.0

175.6

127.6

A-Plant

19.8

11.7

31.5

8.6

Total rental equipment

149.4

57.7

207.1

136.2

Delivery vehicles, property improvements & computers



16.1

20.0

Total additions



223.2

156.2

 

With good demand in the US, £149m of rental equipment capital expenditure was spent on growth while £58m was invested in replacement of existing fleet.  The growth proportion is estimated on the basis of the assumption that maintenance capital expenditure in any period is equal to the original cost of equipment sold.

 

The average age of the Group's serialised rental equipment, which constitutes the substantial majority of the fleet, at 31 July 2012 was 33 months (2011: 40 months) on a net book value basis.  Sunbelt's fleet had an average age of 32 months (2011: 39 months) while A-Plant's fleet had an average age of 37 months (2011: 43 months).

 


Rental fleet at original cost


LTM

LTM




LTM

LTM rental

dollar

physical


31 July 2012

30 April 2012

average

revenue

utilisation

utilisation








Sunbelt in $m

2,656

2,453

2,404

1,391

58%

70%








Sunbelt in £m

1,695

1,511

1,534

886

58%

70%

A-Plant

378

358

359

171

48%

65%


2,073

1,869

1,893

1,057



 

Dollar utilisation is defined as rental revenue divided by average fleet at original (or "first") cost and, measured over the last twelve months to 31 July 2012, was 58% at Sunbelt and 48% at A-Plant.  Physical utilisation is time-based utilisation, which is calculated as the daily average of the original cost of equipment on rent as a percentage of the total value of equipment in the fleet at the measurement date.  Measured over the last twelve months to 31 July 2012, average physical utilisation was 70% at Sunbelt (2011: 68%) and 65% at A-Plant (2011: 68%).  At Sunbelt, physical utilisation is measured consistently for equipment with an original cost in excess of $7,500 which comprised 93% of its fleet at 31 July 2012.

 

Trade receivables

 

Receivable days at 31 July were 45 days (2011: 47 days).  The bad debt charge for the quarter ended 31 July 2012 as a percentage of total turnover was 0.7% (2011: 0.9%).  Trade receivables at
31 July 2012 of £173m (2011: £147m) are stated net of allowances for bad debts and credit notes of £16m (2011: £15m) with the allowance representing 8.4% (2011: 9.2%) of gross receivables.

 

Trade and other payables

 

Group payable days were 75 days in 2012 (2011: 63 days) with capital expenditure-related payables, which have longer payment terms, totalling £184m (2011: £86m).  Payment periods for purchases other than rental equipment vary between 7 and 45 days and for rental equipment between 30 and 120 days.

 

Cash flow and net debt


Three months to

LTM to

Year to


31 July

31 July

30 April


2012

2011

2012

2012


£m

£m

£m

£m






EBITDA before exceptional items

129.3

93.9

416.6

381.1






Cash inflow from operations before exceptional





items and changes in rental equipment

100.1

58.2

406.5

364.6

Cash conversion ratio*

77.4%

62.1%

97.6%

95.7%






Maintenance rental capital expenditure paid

(80.3)

(69.0)

(233.7)

(222.4)

Payments for non-rental capital expenditure

(16.0)

(19.5)

(46.4)

(49.9)

Rental equipment disposal proceeds

19.2

15.8

86.8

83.4

Other property, plant and equipment disposal proceeds

2.1

2.0

6.9

6.8

Tax paid (net)

(1.6)

(1.5)

(7.5)

(7.4)

Financing costs paid

(16.3)

(4.0)

(61.4)

(49.1)

Cash flow before growth capex and





payment of exceptional costs

7.2

(18.0)

151.2

126.0

Growth rental capital expenditure paid

(81.9)

(39.9)

(177.4)

(135.4)

Exceptional costs paid

(14.1)

(0.9)

(16.5)

(3.3)

Total cash used in operations

(88.8)

(58.8)

(42.7)

(12.7)

Business acquisitions

   -

   -

(21.9)

(21.9)

Total cash absorbed

(88.8)

(58.8)

(64.6)

(34.6)

Dividends paid

-

-

(15.3)

(15.3)

Purchase of own shares by the ESOT

(7.6)

   -

(11.1)

(3.5)

Increase in net debt

(96.4)

(58.8)

(91.0)

(53.4)

* Cash inflow from operations before exceptional items and changes in rental equipment as a percentage of EBITDA before exceptional items.

 

Cash inflow from operations before payment of exceptional costs and the net investment in the rental fleet increased by 71% to £100m.  Reflecting a seasonal increase in working capital (particularly trade receivables), the first quarter cash conversion ratio was 77.4% (2011: 62.1%).  As the year progresses we anticipate that these seasonal impacts on working capital will substantially reverse.

 

Total payments for capital expenditure (rental equipment and other PPE) in the first quarter were £178m, lower than the £223m of capital expenditure due to the impact of supplier payment terms.  Disposal proceeds received totalled £21m, giving net payments for capital expenditure of £157m in the quarter (2011: £110m).

 

Financing costs paid totalled £16m and were higher than the £4m paid in 2011 due to the early settlement of interest due on the $550m senior secured notes which were satisfied and discharged in July.

 

Accordingly, in the quarter the Group experienced a cash outflow both before and after discretionary investments made to enlarge the size and hence earnings capacity of its rental fleet.  On a last twelve months basis, to eliminate these seasonal effects, free cash flow (which we define to be before growth investment and exceptionals) was £151m positive after payment of tax and interest.  After discretionary growth investment, payment of exceptional costs (closed property costs and financing costs) and acquisitions there was a net outflow of £65m (2011/12: £35m).

 

Net debt


31 July

30 April


2012

2011

2012


£m

£m

£m





First priority senior secured bank debt

679.1

527.4

539.9

Finance lease obligations

3.5

3.1

3.8

9% second priority senior secured notes, due 2016

-

329.8

334.0

6.5% second priority senior secured notes, due 2022

312.3

   -

   -


994.9

860.3

877.7

Cash and cash equivalents

(7.0)

(12.6)

(23.4)

Total net debt

987.9

847.7

854.3

 

Net debt at 31 July 2012 was £988m with the increase since 30 April 2012 reflecting an adverse exchange impact of £32m and the net cash outflow set out above.  The Group's EBITDA for the twelve months ended 31 July 2012 was £417m and the ratio of net debt to EBITDA was therefore 2.4 times at 31 July 2012 (2011: 2.8 times).

 

Under the terms of our asset-based senior bank facility, $1.8bn is committed until March 2016, whilst the new $500m senior secured notes mature in July 2022.  Our debt facilities therefore remain committed for the long term, with an average of 5.7 years remaining at 31 July 2012.  The weighted average interest cost of these facilities (including non-cash amortisation of deferred debt raising costs) is approximately 4.3%.  The terms of the new $500m senior secured notes are similar to the redeemed $550m notes with financial performance covenants only measured at the time new debt is raised.

 

There are two financial performance covenants under the asset-based first priority senior bank facility:

 

·     funded debt to LTM EBITDA before exceptional items not to exceed 4.0 times; and

·     a fixed charge ratio (comprising LTM EBITDA before exceptional items less LTM net capital expenditure paid in cash over the sum of scheduled debt repayments plus cash interest, cash tax payments and dividends paid in the last twelve months) which must be equal to or greater than 1.1 times.

 

These covenants do not, however, apply when excess availability (the difference between the borrowing base and net facility utilisation) exceeds $216m.  At 31 July 2012 availability under the bank facility was $663m ($735m at 30 April 2012) meaning that covenants were not measured at 31 July 2012 and are unlikely to be measured in forthcoming quarters.  However, as a matter of good practice, we still calculate the covenant ratios each quarter.  At 31 July 2012, as a result of the significant investment in our rental fleet, the fixed charge ratio, as expected, did not meet the covenant requirement whilst the leverage ratio did so comfortably.  The fact the fixed charge ratio is currently below 1.1 times does not cause concern given the strong availability and management's ability to flex capital expenditure downwards at short notice.  Accordingly, the accounts are prepared on a going concern basis.

 

Principal risks and uncertainties

 

Risks and uncertainties in achieving the Group's objectives for the remainder of the financial year, together with assumptions, estimates, judgements and critical accounting policies used in preparing financial information remain unchanged from those detailed in the 2012 Annual Report and Accounts on pages 18 to 25.  Our business is subject to significant fluctuations in performance from quarter to quarter as a result of seasonal effects.  Commercial construction activity tends to increase in the summer and during extended periods of mild weather and to decrease in the winter and during extended periods of inclement weather.  Furthermore, due to the incidence of public holidays in the US and the UK, there are more billing days in the first half of our financial year than the second half leading to our revenue normally being higher in the first half.  On a quarterly basis, the second quarter is typically our strongest quarter, followed by the first and then the third and fourth quarters.

 

In addition, the current trading and outlook section of the interim statement provides commentary on market and economic conditions for the remainder of the year.

 

Fluctuations in the value of the US dollar with respect to the pound sterling have had, and may continue to have, a significant impact on our financial condition and results of operations as reported in pounds due to the majority of our assets, liabilities, revenues and costs being denominated in US dollars.  All our debt was denominated in US dollars at 31 July 2012 and represented approximately 75% of the value of dollar-denominated net assets (other than debt) providing a partial, but substantial, hedge against currency fluctuations.  The dollar interest payable on this debt also limits the impact of changes in the dollar exchange rate on our pre-tax profits and earnings.  Based on the current currency mix of our profits and on dollar debt levels, interest and exchange rates at 31 July 2012, a 1% change in the US dollar exchange rate would impact pre-tax profit by £1.6m.

 

OPERATING STATISTICS


Profit centre numbers

Staff numbers


31 July

30 April

31 July

30 April


2012

2011

2012

2012

2011

2012

Sunbelt

381

358

376

6,467

6,421

6,605

A-Plant

108

107

109

1,896

1,902

1,939

Corporate office

-

   -

   -

10

11

11

Group

489

465

485

8,373

8,334

8,555

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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