TIDMAHT
RNS Number : 6743Y
Ashtead Group PLC
07 March 2017
7 March 2017
Unaudited results for the nine months and
third quarter ended 31 January 2017
Third quarter Nine months
2017 2016 Growth(1) 2017 2016 Growth(1)
GBPm GBPm % GBPm GBPm %
Underlying
results(2)
Rental revenue 729.2 546.9 14% 2,173.8 1,675.5 13%
EBITDA 366.9 277.4 13% 1,124.3 869.2 13%
Operating
profit 206.6 160.6 9% 681.0 542.7 9%
Profit before
taxation 178.7 139.1 8% 604.6 481.8 9%
Earnings per
share 23.0p 18.0p 8% 79.0p 63.1p 9%
Statutory
results
Revenue 804.5 612.2 13% 2,356.2 1,879.7 10%
Profit before
taxation 171.2 133.5 8% 584.5 465.4 9%
Earnings per
share 22.0p 17.2p 7% 76.3p 60.9p 8%
Highlights
-- Group rental revenue up 13%(1)
-- Nine month underlying pre-tax profit(2) of GBP605m (2016: GBP482m)
-- GBP812m of capital invested in the business (2016: GBP932m)
-- Group RoI(3) of 18% (2016: 19%)
-- Net debt to EBITDA leverage(1) of 1.7 times (2016: 1.9 times)
1 Calculated at constant exchange rates applying
current period exchange rates.
2 Underlying results are stated before intangible
amortisation.
3 Last 12-month underlying operating profit divided
by the last 12-month average of the sum of net
tangible and intangible fixed assets, plus net
working capital but excluding net debt and deferred
tax.
Ashtead's chief executive, Geoff Drabble, commented:
"The Group continues to perform well and delivered a strong
quarter with reported rental revenue increasing 30% (13% at
constant exchange rates) for the nine months and underlying pre-tax
profit of GBP605m. In the nine months, the reported results were
positively impacted by weaker sterling (GBP82m). The underlying
performance of the business continues to benefit from a clear and
consistent strategy of organic growth supplemented by bolt-on
acquisitions.
We continue to grow responsibly, adhering to the capital
allocation priorities we have outlined. We invested GBP812m by way
of capital expenditure and a further GBP196m on bolt-on
acquisitions. With the continuing opportunity for profitable
growth, we expect capital expenditure this year to be towards the
upper end of our guidance (c. GBP1.2bn). As is customary, we have
given our early guidance to growth for 2017/18. This is consistent
with the strategic plan we recently outlined to the market which
anticipates circa double-digit growth in the US through to 2021.
Our end markets remain supportive and we continue to benefit from
ongoing structural change as our customers increasingly rely on the
flexibility of rental.
Both divisions continue to perform well. Accordingly, we expect
full year results to be in line with our expectations and the Board
continues to look to the medium term with confidence."
Contacts:
Geoff Drabble Chief executive
+44 (0)20 7726
Suzanne Wood Finance director 9700
Will Shaw Director of Investor
Relations
+44 (0)20 7379
Becky Mitchell Maitland 5151
Tom Eckersley Maitland
Geoff Drabble and Suzanne Wood will hold a conference call for
equity analysts to discuss the results and outlook at 8am on
Tuesday, 7 March 2017. The call will be webcast live via the
Company's website at www.ashtead-group.com and a replay will also
be available via the website from shortly after the call concludes.
A copy of this announcement and the slide presentation used for the
call will also be available for download on the Company's website.
The usual conference call for bondholders will begin at 3.30pm
(10.30am EST).
Analysts and bondholders have already been invited to
participate in the analyst call and conference call for bondholders
but any eligible person not having received dial-in details should
contact the Company's PR advisers, Maitland (Amy Fife) at +44 (0)20
7379 5151.
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.
Nine months' trading results
Revenue EBITDA Operating
profit
2017 2016 2017 2016 2017 2016
Sunbelt in $m 2,689.9 2,468.0 1,342.1 1,190.3 840.5 770.9
Sunbelt in GBPm 2,054.5 1,615.8 1,025.1 779.3 642.0 504.7
A-Plant 301.7 263.9 110.5 98.9 50.4 47.0
Group central costs - - (11.3) (9.0) (11.4) (9.0)
2,356.2 1,879.7 1,124.3 869.2 681.0 542.7
Net financing costs (76.4) (60.9)
Profit before amortisation
and tax 604.6 481.8
Amortisation (20.1) (16.4)
Profit before taxation 584.5 465.4
Taxation (203.7) (160.0)
Profit attributable to equity holders
of the Company 380.8 305.4
Margins
Sunbelt 49.9% 48.2% 31.2% 31.2%
A-Plant 36.6% 37.5% 16.7% 17.8%
Group 47.7% 46.2% 28.9% 28.9%
Group revenue increased 25% to GBP2,356m in the nine months
(2016: GBP1,880m) with strong growth in both Sunbelt and A-Plant.
Overall revenue growth reflects the benefit of weaker sterling,
partially offset as expected by a lower level of used equipment
sales due to lower replacement capital expenditure. This revenue
growth, combined with strong drop-through, generated underlying
profit before tax of GBP605m (2016: GBP482m).
The Group's strategy remains unchanged with growth being driven
by strong same-store growth supplemented by greenfield openings and
bolt-on acquisitions, with Sunbelt and A-Plant delivering 14% and
17% rental only revenue growth respectively. Sunbelt's revenue
growth continues to benefit from cyclical and structural trends and
can be explained as follows:
$m
2016 rental only revenue 1,745
Same-stores (in existence
at 1 May 2015) +7% 122
Bolt-ons and greenfields
since 1 May 2015 +7% 126
2017 rental only revenue +14% 1,993
Ancillary revenue +8% 497
2017 rental revenue +13% 2,490
Sales revenue -24% 200
2017 total revenue +9% 2,690
The mix of our revenue growth demonstrates the successful
execution of our long-term structural growth strategy. We continue
to capitalise on the opportunity presented by our markets with
same-store growth of 7% and bolt-ons and greenfields contributing
another 7% growth as we expand our geographic footprint and our
specialty businesses. As we embark on our US plan for 2021, we have
made good progress on new stores with 58 added in the nine months
through greenfields and
bolt-ons, almost half of which were specialty locations.
Rental only revenue growth was 14% in generally strong end
markets. This growth was driven by increased fleet on rent. Average
nine month physical utilisation was 72% (2016: 72%). Sunbelt's
total revenue, including new and used equipment, merchandise and
consumable sales, increased 9% to $2,690m (2016: $2,468m),
reflecting the lower level of used equipment sales as a result of
lower replacement capital expenditure.
A-Plant continues to perform well and delivered rental only
revenue of GBP227m, up 17% on the prior year (2016: GBP193m). This
reflects increased fleet on rent. A-Plant's total revenue increased
14% to GBP302m (2016: GBP264m), again reflecting lower used
equipment sales.
We continue to focus on operational efficiency and driving
improving margins. In Sunbelt, 61% of revenue growth dropped
through to EBITDA (62% US only). The strength of our mature stores'
incremental margin is reflected in the fact that this was achieved
despite the drag effect of greenfield openings and acquisitions.
Stores open for more than one year saw 67% of revenue growth
drop-through to EBITDA (68% US only). This strong drop-through
drove an improved EBITDA margin of 50% (2016: 48%) and contributed
to an operating profit of $841m (2016: $771m). Excluding the impact
of gains on used equipment sales, operating profit increased 12%
over the prior year.
A-Plant's drop-through of 37%, 45% on a same store basis,
contributed to an EBITDA margin of 37% (2016: 37%) and operating
profit rose to GBP50m (2016: GBP47m). Excluding the impact of gains
on used equipment sales, operating profit increased 19% over the
prior year.
Reflecting the strong performance of the divisions, and with the
benefit of weaker sterling, Group underlying operating profit
increased 25% to GBP681m (2016: GBP543m). Net financing costs
increased to GBP76m (2016: GBP61m), reflecting higher average debt
and weaker sterling.
Group profit before amortisation of intangibles and taxation was
GBP605m (2016: GBP482m). After a tax charge of 35% (2016: 34%) of
the underlying pre-tax profit, underlying earnings per share
increased 25% to 79.0p (2016: 63.1p).
With amortisation of GBP20m (2016: GBP16m), statutory profit
before tax was GBP585m (2016: GBP465m). After a tax charge of 35%
(2016: 34%), basic earnings per share were 76.3p (2016: 60.9p). The
cash tax charge was 5%.
Capital expenditure and acquisitions
Capital expenditure for the nine months was GBP812m gross and
GBP716m net of disposal proceeds (2016: GBP932m gross and GBP790m
net). This expenditure includes the Hewden assets acquired from the
administrator for GBP29m. Reflecting this investment, the Group's
rental fleet at 31 January 2017 at cost was GBP5.8bn. Our average
fleet age is now 28 months (2016: 25 months).
We invested GBP196m, including acquired debt, (2016: GBP60m) on
13 bolt-on acquisitions during the nine months as we continue to
both expand our footprint and diversify into specialty markets.
For the full year, we expect gross capital expenditure towards
the upper end of our previous guidance, around GBP1.2bn at current
exchange rates. We expect a similar level of capital expenditure
next year, consistent with the strategic plan we recently outlined
to the market, which anticipates circa double-digit growth through
to 2021.
Return on Investment
Sunbelt's pre-tax return on investment (excluding goodwill and
intangible assets) in the 12 months to 31 January 2017 was 22%
(2016: 24%). This remains well ahead of the Group's pre-tax
weighted average cost of capital although it has been affected in
the short term by our investment in greenfields and bolt-on
acquisitions and our young fleet age. In the UK, return on
investment (excluding goodwill and intangible assets) was 14%
(2016: 13%). For the Group as a whole, return on investment
(including goodwill and intangible assets) was 18% (2016: 19%).
Cash flow and net debt
As expected, debt increased during the nine months as we
invested in the fleet and made a number of bolt-on acquisitions. In
addition, weaker sterling increased reported debt by GBP304m.
During the nine months, we spent GBP48m on share buybacks.
Net debt at 31 January 2017 was GBP2,588m (2016: GBP2,169m)
while, reflecting our strong earnings growth, the ratio of net debt
to EBITDA reduced to 1.7 times (2016: 1.9 times) on a constant
currency basis. This is in the middle of the Group's target range
for net debt to EBITDA of 1.5 to 2 times, broadly where we expect
to remain.
In December the Group increased the size of its senior credit
facility ('ABL facility') to $3.1bn, while other terms and
conditions remained unchanged. This ensures the Group's debt
package continues to be well structured and flexible, enabling us
to optimise the opportunity presented by end market conditions. The
Group's debt facilities are committed for an average of five years.
At 31 January 2017, availability under the senior secured debt
facility was $1,334m, with an additional $1,454m of suppressed
availability - substantially above the $310m level at which the
Group's entire debt package is covenant free.
Current trading and outlook
Both divisions continue to perform well. Accordingly, we expect
full year results to be in line with our expectations and the Board
continues to look to the medium term with confidence.
CONSOLIDATED INCOME STATEMENT FOR THE THREE MONTHSED 31 JANUARY
2017
2017 2016
Before Before
amortisation Amortisation Total amortisation Amortisation Total
GBPm GBPm GBPm GBPm GBPm GBPm
Third quarter -
unaudited
Revenue
Rental revenue 729.2 - 729.2 546.9 - 546.9
Sale of new equipment,
merchandise and
consumables 32.7 - 32.7 23.2 - 23.2
Sale of used rental
equipment 42.6 - 42.6 42.1 - 42.1
804.5 - 804.5 612.2 - 612.2
Operating costs
Staff costs (190.8) - (190.8) (147.6) - (147.6)
Used rental equipment
sold (35.1) - (35.1) (31.6) - (31.6)
Other operating
costs (211.7) - (211.7) (155.6) - (155.6)
(437.6) - (437.6) (334.8) - (334.8)
EBITDA* 366.9 - 366.9 277.4 - 277.4
Depreciation (160.3) - (160.3) (116.8) - (116.8)
Amortisation of
intangibles - (7.5) (7.5) - (5.6) (5.6)
Operating profit 206.6 (7.5) 199.1 160.6 (5.6) 155.0
Investment income 0.1 - 0.1 - - -
Interest expense (28.0) - (28.0) (21.5) - (21.5)
Profit on ordinary
activities
before taxation 178.7 (7.5) 171.2 139.1 (5.6) 133.5
Taxation (64.3) 2.4 (61.9) (48.8) 1.8 (47.0)
Profit attributable
to equity
holders of the
Company 114.4 (5.1) 109.3 90.3 (3.8) 86.5
Basic earnings
per share 23.0p (1.0p) 22.0p 18.0p (0.8p) 17.2p
Diluted earnings
per share 22.9p (1.0p) 21.9p 18.0p (0.7p) 17.3p
* EBITDA is presented here as an additional performance measure
as it is commonly used by investors and lenders.
All revenue and profit for the period is generated from
continuing operations.
Details of principal risks and uncertainties are given in the
Review of Third Quarter, Balance Sheet and Cash Flow accompanying
these condensed consolidated interim financial statements.
CONSOLIDATED INCOME STATEMENT FOR THE NINE MONTHSED 31 JANUARY
2017
2017 2016
Before Before
amortisation Amortisation Total amortisation Amortisation Total
GBPm GBPm GBPm GBPm GBPm GBPm
Nine months -
unaudited
Revenue
Rental revenue 2,173.8 - 2,173.8 1,675.5 - 1,675.5
Sale of new equipment,
merchandise and
consumables 91.0 - 91.0 68.1 - 68.1
Sale of used rental
equipment 91.4 - 91.4 136.1 - 136.1
2,356.2 - 2,356.2 1,879.7 - 1,879.7
Operating costs
Staff costs (542.0) - (542.0) (432.3) - (432.3)
Used rental equipment
sold (77.1) - (77.1) (105.3) - (105.3)
Other operating
costs (612.8) - (612.8) (472.9) - (472.9)
(1,231.9) - (1,231.9) (1,010.5) - (1,010.5)
EBITDA* 1,124.3 - 1,124.3 869.2 - 869.2
Depreciation (443.3) - (443.3) (326.5) - (326.5)
Amortisation of
intangibles - (20.1) (20.1) - (16.4) (16.4)
Operating profit 681.0 (20.1) 660.9 542.7 (16.4) 526.3
Investment income 0.2 - 0.2 0.1 - 0.1
Interest expense (76.6) - (76.6) (61.0) - (61.0)
Profit on ordinary
activities
before taxation 604.6 (20.1) 584.5 481.8 (16.4) 465.4
Taxation (210.2) 6.5 (203.7) (165.3) 5.3 (160.0)
Profit attributable
to equity
holders of the
Company 394.4 (13.6) 380.8 316.5 (11.1) 305.4
Basic earnings
per share 79.0p (2.7p) 76.3p 63.1p (2.2p) 60.9p
Diluted earnings
per share 78.7p (2.7p) 76.0p 62.9p (2.2p) 60.7p
* EBITDA is presented here as an additional performance measure
as it is commonly used by investors and lenders.
All revenue and profit for the period is generated from
continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited
Three months Nine months
to to
31 January 31 January
2017 2016 2017 2016
GBPm GBPm GBPm GBPm
Profit attributable to equity
holders of the Company for the
period 109.3 86.5 380.8 305.4
Items that may be reclassified
subsequently to profit or loss:
Foreign currency translation
differences (47.8) 84.4 196.0 80.4
Total comprehensive income for
the period 61.5 170.9 576.8 385.8
CONSOLIDATED BALANCE SHEET AT 31 JANUARY 2017
Unaudited Audited
31 January 30 April
2017 2016 2016
GBPm GBPm GBPm
Current assets
Inventories 44.9 36.8 41.3
Trade and other receivables 584.8 458.2 455.7
Current tax asset 23.1 8.1 7.5
Cash and cash equivalents 8.0 10.0 13.0
660.8 513.1 517.5
Non-current assets
Property, plant and equipment
- rental equipment 4,062.2 3,157.3 3,246.9
- other assets 409.7 341.8 341.9
4,471.9 3,499.1 3,588.8
Goodwill 702.4 573.3 556.7
Other intangible assets 117.3 102.9 83.8
Net defined benefit pension
plan asset 2.1 3.0 2.2
5,293.7 4,178.3 4,231.5
Total assets 5,954.5 4,691.4 4,749.0
Current liabilities
Trade and other payables 358.9 324.5 480.5
Current tax liability 5.8 6.0 3.6
Debt due within one year 2.7 2.4 2.5
Provisions 28.9 32.5 28.9
396.3 365.4 515.5
Non-current liabilities
Debt due after more than one
year 2,593.7 2,176.4 2,012.2
Provisions 20.7 22.9 17.6
Deferred tax liabilities 1,023.0 698.3 723.3
3,637.4 2,897.6 2,753.1
Total liabilities 4,033.7 3,263.0 3,268.6
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
Own shares held by the Company (81.1) (33.1) (33.1)
Own shares held through the
ESOT (16.7) (16.4) (16.2)
Cumulative foreign exchange
translation differences 284.4 119.1 88.4
Retained reserves 1,674.4 1,299.0 1,381.5
Equity attributable to equity
holders of the Company 1,920.8 1,428.4 1,480.4
Total liabilities and equity 5,954.5 4,691.4 4,749.0
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE NINE
MONTHSED 31 JANUARY 2017
Own Cumulative
Own shares foreign
Share Capital Non- shares held exchange
Share premium redemption distributable held through translation Retained
by
the
capital account reserve reserve Company the differences reserves Total
ESOT
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Unaudited
At 1 May 2015 55.3 3.6 0.9 90.7 (33.1) (15.5) 38.7 970.9 1,111.5
Profit for
the period - - - - - - - 305.4 305.4
Other
comprehensive
income:
Foreign currency
translation
differences - - - - - - 80.4 - 80.4
Total
comprehensive
income
for the period - - - - - - 80.4 305.4 385.8
Dividends paid - - - - - - - (61.4) (61.4)
Own shares
purchased by
the ESOT - - - - - (11.8) - - (11.8)
Share-based
payments - - - - - 10.9 - (7.3) 3.6
Tax on share-based
payments - - - - - - - 0.7 0.7
Transfer of
non-distributable
reserve - - - (90.7) - - - 90.7 -
At 31 January
2016 55.3 3.6 0.9 - (33.1) (16.4) 119.1 1,299.0 1,428.4
Profit for
the period - - - - - - - 102.2 102.2
Other
comprehensive
income:
Foreign currency
translation
differences - - - - - - (30.7) - (30.7)
Remeasurement
of the defined
benefit pension
plan - - - - - - - (0.6) (0.6)
Tax on defined
benefit
pension plan - - - - - - - 0.1 0.1
Total
comprehensive
income
for the period - - - - - - (30.7) 101.7 71.0
Dividends paid - - - - - - - (20.1) (20.1)
Own shares
purchased by
the ESOT - - - - - (0.2) - - (0.2)
Share-based
payments - - - - - 0.4 - 0.7 1.1
Tax on share-based
payments - - - - - - - 0.2 0.2
At 30 April
2016 55.3 3.6 0.9 - (33.1) (16.2) 88.4 1,381.5 1,480.4
Profit for
the period - - - - - - - 380.8 380.8
Other
comprehensive
income:
Foreign currency
translation
differences - - - - - - 196.0 - 196.0
Total
comprehensive
income
for the period - - - - - - 196.0 380.8 576.8
Dividends paid - - - - - - - (92.4) (92.4)
Own shares
purchased by
the ESOT - - - - - (7.2) - - (7.2)
Own shares
purchased by
the Company - - - - (48.0) - - - (48.0)
Share-based
payments - - - - - 6.7 - (2.4) 4.3
Tax on share-based
payments - - - - - - - 6.9 6.9
At 31 January
2017 55.3 3.6 0.9 - (81.1) (16.7) 284.4 1,674.4 1,920.8
The non-distributable reserve related to the reserve created on
the cancellation of the then share premium account in August 2005.
This reserve became distributable in August 2015 and was
transferred to distributable reserves in the year ended 30 April
2016.
CONSOLIDATED CASH FLOW STATEMENT FOR THE NINE MONTHSED 31
JANUARY 2017
Unaudited
2017 2016
GBPm GBPm
Cash flows from operating activities
Cash generated from operations before
exceptional
items and changes in rental equipment 1,069.0 763.9
Payments for rental property, plant
and equipment (909.0) (942.7)
Proceeds from disposal of rental property,
plant and equipment 97.8 123.7
Cash generated from/(used in) operations 257.8 (55.1)
Financing costs paid (net) (80.4) (62.6)
Tax paid (net) (39.9) (0.1)
Net cash generated from/(used in)
operating activities 137.5 (117.8)
Cash flows from investing activities
Acquisition of businesses (180.1) (62.9)
Payments for non-rental property,
plant and equipment (70.9) (85.9)
Proceeds from disposal of non-rental
property, plant and equipment 11.0 6.1
Payments for purchase of intangible (9.1) -
assets
Net cash used in investing activities (249.1) (142.7)
Cash flows from financing activities
Drawdown of loans 567.7 449.1
Redemption of loans (312.6) (115.4)
Capital element of finance lease payments (1.5) (1.0)
Dividends paid (92.4) (61.4)
Purchase of own shares by the ESOT (7.2) (11.8)
Purchase of own shares by the Company (48.0) -
Net cash from financing activities 106.0 259.5
Decrease in cash and cash equivalents (5.6) (1.0)
Opening cash and cash equivalents 13.0 10.5
Effect of exchange rate difference 0.6 0.5
Closing cash and cash equivalents 8.0 10.0
Reconciliation of net cash flows to
net debt
Decrease in cash in the period 5.6 1.0
Increase in debt through cash flow 253.6 332.7
Change in net debt from cash flows 259.2 333.7
Debt acquired 21.3 0.3
Exchange differences 303.8 145.6
Non-cash movements:
* deferred costs of debt raising 1.6 1.3
* capital element of new finance leases 0.8 0.8
Increase in net debt in the period 586.7 481.7
Net debt at 1 May 2,001.7 1,687.1
Net debt at 31 January 2,588.4 2,168.8
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
1. General information
Ashtead Group plc ('the Company') is a company incorporated and
domiciled in England and Wales and listed on the London Stock
Exchange. The condensed consolidated interim financial statements
as at, and for the nine months ended, 31 January 2017 comprise the
Company and its subsidiaries ('the Group').
The condensed consolidated interim financial statements for the
nine months ended 31 January 2017 were approved by the directors on
6 March 2017.
The condensed consolidated interim financial statements do not
constitute statutory accounts as defined in Section 434 of the
Companies Act 2006. The statutory accounts for the year ended 30
April 2016 were approved by the directors on 13 June 2016 and have
been mailed to shareholders and filed with the Registrar of
Companies. The auditor's report on those accounts was unqualified,
did not include a reference to any matter by way of emphasis and
did not contain a statement under Section 498(2) or (3) of the
Companies Act 2006.
2. Basis of preparation
The condensed consolidated interim financial statements for the
nine months ended 31 January 2017 have been prepared in accordance
with the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority and relevant International Financial
Reporting Standards ('IFRS') as adopted by the European Union
(including IAS 34, Interim Financial Reporting).
The accounting policies applied in the condensed consolidated
interim financial statements should be read in conjunction with the
Group's Annual Report and Accounts for the year ended 30 April
2016. There are no new IFRS and IFRIC Interpretations that are
effective for the first time for this interim period which have a
material impact on the Group.
The Directors have adopted various alternative performance
measures to provide additional useful information on the underlying
trends, performance and position of the Group. The alternative
performance measures are not defined by IFRS and therefore may not
be directly comparable with other companies' alternative
performance measures, but are defined within these interim
financial statements.
The condensed consolidated interim financial statements have
been prepared on the going concern basis. The Group's internal
budgets and forecasts of future performance, available financing
facilities and facility headroom (see note 11), provide a
reasonable expectation that the Group has adequate resources to
continue in operation for the foreseeable future and consequently
the going concern basis continues to be appropriate in preparing
the condensed consolidated interim financial statements.
The exchange rates used in respect of the US dollar are:
2017 2016
Average for the three months
ended 31 January 1.24 1.49
Average for the nine months
ended 31 January 1.31 1.53
At 30 April 1.47 1.54
At 31 January 1.26 1.42
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
3. Segmental analysis
Operating
profit Operating
before
Revenue amortisation Amortisation profit
GBPm GBPm GBPm GBPm
Three months to
31 January
2017
Sunbelt 702.1 198.0 (5.0) 193.0
A-Plant 102.4 12.5 (2.5) 10.0
Corporate costs - (3.9) - (3.9)
804.5 206.6 (7.5) 199.1
2016
Sunbelt 526.6 150.9 (4.3) 146.6
A-Plant 85.6 12.0 (1.3) 10.7
Corporate costs - (2.3) - (2.3)
612.2 160.6 (5.6) 155.0
Nine months to 31
January
2017
Sunbelt 2,054.5 642.0 (14.4) 627.6
A-Plant 301.7 50.4 (5.7) 44.7
Corporate costs - (11.4) - (11.4)
2,356.2 681.0 (20.1) 660.9
2016
Sunbelt 1,615.8 504.7 (12.7) 492.0
A-Plant 263.9 47.0 (3.7) 43.3
Corporate costs - (9.0) - (9.0)
1,879.7 542.7 (16.4) 526.3
Segment Cash Taxation Total assets
assets assets
GBPm GBPm GBPm GBPm
At 31 January
2017
Sunbelt 5,156.7 - - 5,156.7
A-Plant 766.1 - - 766.1
Corporate items 0.6 8.0 23.1 31.7
5,923.4 8.0 23.1 5,954.5
At 30 April 2016
Sunbelt 4,117.9 - - 4,117.9
A-Plant 610.1 - - 610.1
Corporate items 0.5 13.0 7.5 21.0
4,728.5 13.0 7.5 4,749.0
Sunbelt includes Sunbelt Rentals of Canada Inc..
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
4. Operating costs and other income
2017 2016
Before Before
amortisation Amortisation Total amortisation Amortisation Total
GBPm GBPm GBPm GBPm GBPm GBPm
Three months to
31 January
Staff costs:
Salaries 173.8 - 173.8 134.2 - 134.2
Social security
costs 13.9 - 13.9 10.8 - 10.8
Other pension costs 3.1 - 3.1 2.6 - 2.6
190.8 - 190.8 147.6 - 147.6
Used rental equipment
sold 35.1 - 35.1 31.6 - 31.6
Other operating
costs:
Vehicle costs 42.9 - 42.9 31.0 - 31.0
Spares, consumables
& external repairs 38.0 - 38.0 30.5 - 30.5
Facility costs 24.9 - 24.9 18.6 - 18.6
Other external charges 105.9 - 105.9 75.5 - 75.5
211.7 - 211.7 155.6 - 155.6
Depreciation and amortisation:
Depreciation 160.3 - 160.3 116.8 - 116.8
Amortisation of intangibles - 7.5 7.5 - 5.6 5.6
160.3 7.5 167.8 116.8 5.6 122.4
597.9 7.5 605.4 451.6 5.6 457.2
Nine months to 31 January
Staff costs:
Salaries 494.8 - 494.8 394.4 - 394.4
Social security costs 37.9 - 37.9 30.5 - 30.5
Other pension costs 9.3 - 9.3 7.4 - 7.4
542.0 - 542.0 432.3 - 432.3
Used rental equipment
sold 77.1 - 77.1 105.3 - 105.3
Other operating costs:
Vehicle costs 126.0 - 126.0 100.2 - 100.2
Spares, consumables
& external repairs 113.3 - 113.3 90.5 - 90.5
Facility costs 68.6 - 68.6 53.9 - 53.9
Other external charges 304.9 - 304.9 228.3 - 228.3
612.8 - 612.8 472.9 - 472.9
Depreciation and amortisation:
Depreciation 443.3 - 443.3 326.5 - 326.5
Amortisation of intangibles - 20.1 20.1 - 16.4 16.4
443.3 20.1 463.4 326.5 16.4 342.9
1,675.2 20.1 1,695.3 1,337.0 16.4 1,353.4
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
5. Amortisation
Amortisation relates to the periodic write-off of intangible
assets. The Group believes this item should be disclosed separately
within the consolidated income statement to assist in the
understanding of the financial performance of the Group. Underlying
profit and earnings per share are stated before amortisation of
intangibles.
Three months Nine months
to to
31 January 31 January
2017 2016 2017 2016
GBPm GBPm GBPm GBPm
Amortisation of intangibles 7.5 5.6 20.1 16.4
Taxation (2.4) (1.8) (6.5) (5.3)
5.1 3.8 13.6 11.1
6. Net financing costs
Three months Nine months
to to
31 January 31 January
2017 2016 2017 2016
GBPm GBPm GBPm GBPm
Investment income:
Net interest on the net defined
benefit asset (0.1) - (0.2) (0.1)
Interest expense:
Bank interest payable 9.7 6.1 24.5 16.1
Interest payable on second
priority senior secured notes 17.3 14.5 49.6 42.5
Interest payable on finance
leases 0.1 0.1 0.2 0.3
Non-cash unwind of discount
on provisions 0.3 0.3 0.7 0.8
Amortisation of deferred debt
raising costs 0.6 0.5 1.6 1.3
Total interest expense 28.0 21.5 76.6 61.0
Net financing costs 27.9 21.5 76.4 60.9
7. Taxation
The tax charge for the period has been computed using a tax rate
of 39% in North America (2016: 39%) and 20% in the UK (2016: 20%).
The blended rate for the Group as a whole is 35% (2016: 34%).
The tax charge of GBP210.2m (2016: GBP165.3m) on the underlying
profit before taxation of GBP604.6m (2016: GBP481.8m) can be
explained as follows:
Nine months to
31 January
2017 2016
GBPm GBPm
Current tax
- current tax on income for the
period 29.2 18.8
- adjustments to prior year (0.8) 0.5
28.4 19.3
Deferred tax
- origination and reversal of
temporary differences 181.5 145.9
- adjustments to prior year 0.3 0.1
181.8 146.0
Tax on underlying activities 210.2 165.3
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
7. Taxation (continued)
Nine months to
31 January
2017 2016
GBPm GBPm
Comprising:
- UK 12.1 11.6
- North America 198.1 153.7
210.2 165.3
In addition, the tax credit of GBP6.5m (2016: GBP5.3m) on
amortisation of GBP20.1m (2016: GBP16.4m) consists of a deferred
tax credit of GBP1.1m relating to the UK (2016: GBP0.5m) and
GBP5.4m (2016: GBP4.8m) relating to North America.
8. Earnings per share
Basic and diluted earnings per share for the three and nine
months ended 31 January 2017 have been calculated based on the
profit for the relevant period and the weighted average number of
ordinary shares in issue during that period (excluding shares held
by the Company and 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 Nine months
to to
31 January 31 January
2017 2016 2017 2016
Profit for the financial
period (GBPm) 109.3 86.5 380.8 305.4
Weighted average number of
shares (m) - basic 497.5 501.5 499.1 501.5
- diluted 499.6 503.0 501.2 503.5
Basic earnings per share 22.0p 17.2p 76.3p 60.9p
Diluted earnings per share 21.9p 17.3p 76.0p 60.7p
Underlying earnings per share (defined in any period as the
earnings before amortisation of intangibles for that period 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 Nine months
to to
31 January 31 January
2017 2016 2017 2016
Basic earnings per share 22.0p 17.2p 76.3p 60.9p
Amortisation of intangibles 1.5p 1.2p 4.0p 3.3p
Tax on amortisation (0.5p) (0.4p) (1.3p) (1.1p)
Underlying earnings per share 23.0p 18.0p 79.0p 63.1p
9. Dividends
During the period, a final dividend in respect of the year ended
30 April 2016 of 18.5p (2015: 12.25p) per share was paid to
shareholders costing GBP92.4m (2015: GBP61.4m). The interim
dividend in respect of the year ending 30 April 2017 of 4.75p per
share (2016: 4.0p) announced on 6 December 2016 was paid on 8
February 2017.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
10. Property, plant and equipment
2017 2016
Rental Rental
equipment Total equipment Total
Net book value GBPm GBPm GBPm GBPm
At 1 May 3,246.9 3,588.8 2,534.2 2,811.1
Exchange difference 453.7 497.0 162.4 178.2
Reclassifications (2.0) - (1.2) -
Additions 738.3 812.2 840.2 932.0
Acquisitions 97.7 104.1 18.2 19.9
Disposals (81.8) (86.9) (110.8) (115.6)
Depreciation (390.6) (443.3) (285.7) (326.5)
At 31 January 4,062.2 4,471.9 3,157.3 3,499.1
11. Borrowings
31 January 30 April
2017 2016
GBPm GBPm
Current
Finance lease obligations 2.7 2.5
Non-current
First priority senior secured bank
debt 1,481.5 1,055.2
Finance lease obligations 1.9 2.9
6.5% second priority senior secured
notes, due 2022 718.9 618.2
5.625% second priority senior secured
notes, due 2024 391.4 335.9
2,593.7 2,012.2
The senior secured bank debt and the senior secured notes are
secured by way of, respectively, first and second priority fixed
and floating charges over substantially all the Group's property,
plant and equipment, inventory and trade receivables.
Our asset-based senior bank facility was increased to $3.1bn in
December 2016 and remains committed until July 2020. Other terms
and conditions remained unchanged. The $900m 6.5% senior secured
notes mature in July 2022, whilst the $500m 5.625% senior secured
notes mature in October 2024. Our debt facilities therefore remain
committed for the long term, with an average of five years
remaining. The weighted average interest cost of these facilities
(including non-cash amortisation of deferred debt raising costs) is
approximately 4%. The terms of the $900m and $500m senior secured
notes are such that financial performance covenants are only
measured at the time new debt is raised.
There is one financial performance covenant under the first
priority senior bank facility. That is, the 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
1.0. This covenant does not apply when availability exceeds $310m.
As a matter of good practice, we calculate the covenant ratio each
quarter. At 31 January 2017, the fixed charge ratio exceeded the
covenant requirement.
At 31 January 2017, availability under the senior secured bank
facility was $1,334m ($1,126m at 30 April 2016), with an additional
$1,454m of suppressed availability, meaning that the covenant was
not measured at 31 January 2017 and is unlikely to be measured in
forthcoming quarters.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
11. Borrowings (continued)
Fair value of financial instruments
At 31 January 2017, the Group had no derivative financial
instruments.
With the exception of the Group's second priority senior secured
notes, the carrying value of non-derivative financial assets and
liabilities is considered to materially equate to their fair
value.
The carrying value of the second priority senior secured notes
due 2022, excluding deferred debt-raising costs, was GBP728m at 31
January 2017 (GBP627m at 30 April 2016), while the fair value was
GBP761m (GBP661m at 30 April 2016). The carrying value of the
second priority senior secured notes due 2024, excluding deferred
debt raising costs, was GBP397m at 31 January 2017 (GBP341m at 30
April 2016) while the fair value was GBP418m (GBP353m at 30 April
2016). The fair value of the second priority senior secured notes
has been calculated using quoted market prices at 31 January
2017.
12. Share capital
Ordinary shares of 10p each:
31 January 30 April 31 January 30 April
2017 2016 2017 2016
Number Number GBPm GBPm
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
During the period, the Company purchased 4.1m ordinary shares at
a total cost of GBP48m under the share buyback programme announced
in June 2016, which are held in treasury. At 31 January 2017, 54m
shares (April 2016: 50m) were held by the Company and a further
1.7m shares (April 2016: 1.8m) were held by the Company's Employee
Share Ownership Trust.
13. Notes to the cash flow statement
Nine months to
31 January
2017 2016
GBPm GBPm
a) Cash flow from operating activities
Operating profit before amortisation 681.0 542.7
Depreciation 443.3 326.5
EBITDA before exceptional items 1,124.3 869.2
Profit on disposal of rental equipment (14.3) (30.8)
Loss/(profit) on disposal of other
property, plant and equipment 0.1 (0.9)
Decrease/(increase) in inventories 6.0 (9.6)
Increase in trade and other receivables (60.8) (34.6)
Increase/(decrease) in trade and
other payables 9.4 (33.0)
Other non-cash movements 4.3 3.6
Cash generated from operations before
exceptional items
and changes in rental equipment 1,069.0 763.9
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
13. Notes to the cash flow statement (continued)
b) Analysis of net debt
Net debt consists of total borrowings less cash and cash
equivalents. Borrowings exclude accrued interest. Foreign currency
denominated balances are retranslated to pounds sterling at rates
of exchange ruling at the balance sheet date.
1 May Exchange Debt Cash Non-cash 31 January
2016 movement acquired flow movements 2017
GBPm GBPm GBPm GBPm GBPm GBPm
Cash (13.0) (0.6) - 5.6 - (8.0)
Debt due within
one year 2.5 - 7.2 (8.7) 1.7 2.7
Debt due after
one year 2,012.2 304.4 14.1 262.3 0.7 2,593.7
Total net debt 2,001.7 303.8 21.3 259.2 2.4 2,588.4
Details of the Group's cash and debt are given in the Review of
Third Quarter, Balance Sheet and Cash Flow accompanying these
condensed consolidated interim financial statements.
c) Acquisitions
Nine months to 31
January
2017 2016
GBPm GBPm
Cash consideration paid:
- acquisitions in the period 173.0 59.5
- contingent consideration 7.1 3.4
180.1 62.9
During the period, 13 acquisitions were made with cash paid of
GBP173m (2016: GBP59m), after taking account of net cash acquired
of GBP1.9m. Further details are provided in note 14.
Contingent consideration of GBP7m (2016: GBP3m) was paid related
to prior year acquisitions.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
14. Acquisitions
During the period, the following acquisitions were
completed:
(i) On 2 May 2016 Sunbelt acquired the business and assets of I
& L Rentals, LLC ('I & L') for a cash consideration of
GBP46m ($67m). I & L is a general equipment rental business in
Hawaii.
(ii) On 20 May 2016 Sunbelt acquired the business and assets of
LoadBanks of America ('LBA'), a division of Austin Welder &
Generator Services, Inc. for a cash consideration of GBP4m ($6m).
LBA provides testing solutions for power systems.
(iii) On 20 May 2016 A-Plant acquired the entire issued share
capital of Mather & Stuart Limited ('Mather & Stuart') for
a cash consideration of GBP11m and acquired debt of GBP3m. Mather
& Stuart is a temporary power rental business.
(iv) On 6 June 2016 Sunbelt acquired the business and assets of
Portable Rental Solutions, Inc. and One Source Cooling, LLC
(collectively 'PRS') for a cash consideration of GBP7m ($11m). PRS
is a temporary heating and cooling business in Texas.
(v) On 12 August 2016 Sunbelt acquired certain business and
assets of CanSource Direct Inc. and CSL Safety Training Ltd.
(together 'CSD') for an aggregate cash consideration of GBP5m
(C$9m). CSD is an aerial work platform rental business in Alberta,
Canada.
(vi) On 24 August 2016 Sunbelt acquired the rental business and
assets of Tower Tech, Inc. ('Tower Tech') for a cash consideration
of GBP10m ($13m). Tower Tech provides cooling solutions.
(vii) On 27 September 2016 A-Plant acquired the entire issued
share capital of Tool and Engineering Services Limited ('TES') for
a cash consideration of GBP1m. TES is a welding equipment rental
business.
(viii) On 6 October 2016 Sunbelt acquired certain business and
assets of the Post Falls branch of BlueLine Rental, LLC ('Post
Falls') for a cash consideration of GBP3m ($4m). Post Falls is a
general equipment rental business in Idaho.
(ix) On 12 October 2016 A-Plant acquired the entire issued share
capital of Lion Trackhire Limited ('Lion') for a cash consideration
of GBP22m. Including acquired debt, the total consideration was
GBP38m. Lion provides temporary access solutions to the events and
industrial sectors.
(x) On 12 October 2016 Sunbelt acquired the business and assets
of Rick's Action Rental, LLC ('RAR') for a cash consideration of
GBP0.3m ($0.4m). RAR is a general equipment rental business in
Michigan.
(xi) On 31 October 2016 A-Plant acquired the entire issued share
capital of Opti-cal Survey Equipment Limited ('Opti-cal') for an
initial cash consideration of GBP11m, with contingent consideration
of up to GBP3m payable over the next two years. Opti-cal is a
survey equipment business.
(xii) On 18 November 2016 Sunbelt acquired the business and
assets of four branches of BlueLine Rental, LLC in New Mexico and
El Paso, Texas for a cash consideration of GBP22m ($27m). These are
general equipment rental businesses.
(xiii) On 17 January 2017 Sunbelt acquired the business and
assets of Arsenal Equipment Rentals, LLC ('Arsenal') for a cash
consideration of GBP31m ($39m). Arsenal is a general equipment
rental business in California.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
14. Acquisitions (continued)
The following table sets out the fair value of the identifiable
assets and liabilities acquired by the Group. The fair values have
been determined provisionally at the balance sheet date.
Fair value
to Group
GBPm
Net assets acquired
Trade and other receivables 16.4
Inventory 3.2
Property, plant and equipment
- rental equipment 97.7
- other assets 6.4
Creditors (10.5)
Debt (21.3)
Current tax (0.9)
Deferred tax (4.9)
Intangible assets (non-compete
agreements and customer relationships) 32.4
118.5
Consideration:
- cash paid and due to be paid (net
of cash acquired) 174.9
- contingent consideration payable
in cash 2.8
177.7
Goodwill 59.2
The goodwill arising can be attributed to the key management
personnel and workforce of the acquired businesses and to the
synergies and other benefits the Group expects to derive from the
acquisitions. The synergies and other benefits include elimination
of duplicate costs, improving utilisation of the acquired rental
fleet, using the Group's financial strength to invest in the
acquired business and drive improved returns through a semi-fixed
cost base and the application of the Group's proprietary software
to optimise revenue opportunities. GBP39m of the goodwill is
expected to be deductible for income tax purposes.
The gross value and fair value of trade receivables at
acquisition was GBP16m.
Due to the operational integration of acquired businesses with
Sunbelt and A-Plant post acquisition, in particular due to the
merger of some stores, the movement of rental equipment between
stores and investment in the rental fleet, it is not practical to
report the revenue and profit of the acquired businesses post
acquisition.
The revenue and operating profit of these acquisitions from 1
May 2016 to their date of acquisition was not material.
15. Contingent liabilities
There have been no significant changes in contingent liabilities
from those reported in the financial statements for the year ended
30 April 2016.
REVIEW OF THIRD QUARTER, BALANCE SHEET AND CASH FLOW
Third quarter
Revenue EBITDA Operating
profit
2017 2016 2017 2016 2017 2016
Sunbelt in $m 875.5 782.9 418.3 371.0 244.8 223.5
Sunbelt in GBPm 702.1 526.6 336.5 249.7 198.0 150.9
A-Plant 102.4 85.6 34.3 30.0 12.5 12.0
Group central costs - - (3.9) (2.3) (3.9) (2.3)
804.5 612.2 366.9 277.4 206.6 160.6
Net financing costs (27.9) (21.5)
Profit before amortisation and
tax 178.7 139.1
Amortisation (7.5) (5.6)
Profit before taxation 171.2 133.5
Margins
Sunbelt 47.8% 47.4% 28.0% 28.5%
A-Plant 33.4% 35.1% 12.2% 14.0%
Group 45.6% 45.3% 25.7% 26.2%
Group revenue increased 31% to GBP804m in the third quarter
(2016: GBP612m) with strong growth in both businesses, and the
benefit of weaker sterling. This revenue growth, combined with
continued focus on operational efficiency, generated underlying
profit before tax of GBP179m (2016: GBP139m).
As for the nine months, the Group's growth was driven by strong
same-store growth supplemented by greenfield openings and bolt-on
acquisitions. Sunbelt's revenue growth for the quarter can be
analysed as follows:
$m
2016 rental only revenue 558
Same-stores (in existence
at 1 November 2015) +8% 42
Bolt-ons and greenfields
since 1 November 2015 +7% 40
2017 rental only revenue +15% 640
Ancillary revenue +9% 156
2017 rental revenue +13% 796
Sales revenue -3% 80
2017 total revenue +12% 876
Our same-store growth of 8% is double that of the rental market
as we continue to take market share. In addition, bolt-ons and
greenfields have contributed a further 7% growth as we execute our
long-term structural growth strategy of expanding our geographic
footprint and our specialty businesses. Total rental only revenue
growth of 15% was driven by an increase in fleet on rent.
A-Plant continues to perform well and delivered rental only
revenue up 20% at GBP75m (2016: GBP63m) in the quarter. This
reflected increased fleet on rent.
Group operating profit increased 29% to GBP207m (2016: GBP161m).
Net financing costs increased to GBP28m (2016: GBP21m) reflecting
the higher level of debt in the period and the impact of weaker
sterling. As a result, Group profit before amortisation and
taxation was GBP179m (2016: GBP139m). After amortisation of GBP8m,
the statutory profit before taxation was GBP171m (2016:
GBP133m).
Balance sheet
Fixed assets
Capital expenditure in the nine months totalled GBP812m (2016:
GBP932m) with GBP738m invested in the rental fleet (2016: GBP840m).
Expenditure on rental equipment was 91% of total capital
expenditure with the balance relating to the delivery vehicle
fleet, property improvements and IT equipment. Capital expenditure
by division was:
2017 2016
Replacement Growth Total Total
Sunbelt in $m 246.2 524.1 770.3 1,032.4
Sunbelt in GBPm 195.6 416.2 611.8 727.7
A-Plant 19.1 107.4 126.5 112.5
Total rental equipment 214.7 523.6 738.3 840.2
Delivery vehicles, property
improvements & IT equipment 73.9 91.8
Total additions 812.2 932.0
In a strong North American rental market, $524m of rental
equipment capital expenditure was spent on growth while, with a
lower replacement need, only $246m was invested in replacement of
existing fleet. The growth proportion is estimated on the basis of
the assumption that replacement 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 our fleet, at 31
January 2017 was 28 months (2016: 25 months) on a net book value
basis. Sunbelt's fleet had an average age of 28 months (2016: 25
months) while A-Plant's fleet had an average age of 29 months
(2016: 27 months).
LTM LTM
Rental fleet at original cost LTM rental dollar physical
31 Jan 30 April LTM average revenue utilisation utilisation
2017 2016
Sunbelt
in $m 6,309 5,663 5,940 3,209 54% 70%
Sunbelt
in GBPm 5,012 3,866 4,719 2,396 54% 70%
A-Plant 772 615 676 354 52% 69%
5,784 4,481 5,395 2,750
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 January 2017, was 54% at Sunbelt (2016:
57%) and 52% at A-Plant (2016: 52%). The reduction in Sunbelt
reflects the drag effect of greenfield openings and acquisitions
and the increased cost of fleet. 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 January 2017, average physical
utilisation at Sunbelt was 70% (2016: 70%) and 69% at A-Plant
(2016: 68%). At Sunbelt, physical utilisation is measured for
equipment with an original cost in excess of $7,500 which comprised
approximately 86% of its fleet at 31 January 2017.
Trade receivables
Receivable days at 31 January 2017 were 54 days (2016: 53 days).
The bad debt charge for the last twelve months ended 31 January
2017 as a percentage of total turnover was 0.8% (2016: 0.7%). Trade
receivables at 31 January 2017 of GBP495m (2016: GBP394m) are
stated net of allowances for bad debts and credit notes of GBP37m
(2016: GBP29m) with the allowance representing 7.0% (2016: 6.8%) of
gross receivables.
Trade and other payables
Group payable days were 58 days in 2017 (2016: 62 days) with
capital expenditure related payables, which have longer payment
terms, totalling GBP79m (2016: GBP115m). Payment periods for
purchases other than rental equipment vary between seven and 60
days and for rental equipment between 30 and 120 days.
Cash flow and net debt
Nine months LTM to Year
to to
31 January 31 January 30
April
2017 2016 2017 2016
GBPm GBPm GBPm GBPm
EBITDA before exceptional items 1,124.3 869.2 1,432.7 1,177.6
Cash inflow from operations
before exceptional
items and changes in rental
equipment 1,069.0 763.9 1,375.7 1,070.6
Cash conversion ratio* 95.1% 87.9% 96.0% 90.9%
Replacement rental capital
expenditure (316.1) (381.2) (387.5) (452.6)
Payments for non-rental capital
expenditure (80.0) (85.9) (103.6) (109.5)
Rental equipment disposal proceeds 97.8 123.7 146.2 172.1
Other property, plant and equipment
disposal proceeds 11.0 6.1 13.1 8.2
Tax (net) (39.9) (0.1) (45.1) (5.3)
Financing costs (80.4) (62.6) (97.2) (79.4)
Cash inflow before growth capex
and
payment of exceptional costs 661.4 363.9 901.6 604.1
Growth rental capital expenditure (592.9) (561.5) (703.5) (672.1)
Total cash generated from/(used
in) operations 68.5 (197.6) 198.1 (68.0)
Business acquisitions (180.1) (62.9) (185.6) (68.4)
Total cash (absorbed)/generated (111.6) (260.5) 12.5 (136.4)
Dividends (92.4) (61.4) (112.5) (81.5)
Purchase of own shares by the
Company (48.0) - (48.0) -
Purchase of own shares by the
ESOT (7.2) (11.8) (7.4) (12.0)
Increase in net debt due to
cash flow (259.2) (333.7) (155.4) (229.9)
* 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 40% to
GBP1,069m. The nine month cash conversion ratio improved to 95%
(2016: 88%) reflecting a slightly lower increase in working capital
and lower gains on disposal of rental equipment than in the prior
year.
Total payments for capital expenditure (rental equipment, other
PPE and purchased intangibles) in the nine months were GBP989m
(2016: GBP1,029m). Disposal proceeds received totalled GBP109m
(2016: GBP130m), giving net payments for capital expenditure of
GBP880m in the period (2016: GBP899m). Financing costs paid
totalled GBP80m (2016: GBP63m) while tax payments were GBP40m
(2016: GBPnil). Financing costs paid typically differ from the
charge in the income statement due to the timing of interest
payments in the year and non-cash interest charges.
Accordingly, in the nine months the Group generated GBP661m
(2016: GBP364m) of net cash before discretionary investments made
to enlarge the size and hence earning capacity of its rental fleet
and on acquisitions. After growth investment, there was a free cash
inflow of GBP68m (2016: outflow of GBP198m).
Net debt
31 January 30 April
2017 2016 2016
GBPm GBPm GBPm
First priority senior secured
bank debt 1,481.5 1,188.1 1,055.2
Finance lease obligations 4.6 5.4 5.4
6.5% second priority senior
secured notes, due 2022 718.9 638.5 618.2
5.625% second priority senior
secured notes, due 2024 391.4 346.8 335.9
2,596.4 2,178.8 2,014.7
Cash and cash equivalents (8.0) (10.0) (13.0)
Total net debt 2,588.4 2,168.8 2,001.7
Net debt at 31 January 2017 was GBP2,588m with the increase
since 30 April 2016 reflecting the net cash outflow set out above
and the significant impact of weaker sterling (GBP304m). The
Group's EBITDA for the twelve months ended 31 January 2017 was
GBP1,433m and the ratio of net debt to EBITDA was 1.7 times at 31
January 2017 (2016: 1.9 times) on a constant currency basis and 1.8
times (2016: 2.0 times) on a reported 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 broadly unchanged from those
detailed in the 2016 Annual Report and Accounts on pages 30 to 32
and page 39 respectively.
The principal risks and uncertainties facing the Group are:
-- economic conditions;
-- competition;
-- financing;
-- business continuity;
-- people;
-- health and safety;
-- environmental; and
-- laws and regulations.
Further details, including actions taken to mitigate these
risks, are provided within the 2016 Annual Report and Accounts.
We are cognisant of the result of the referendum in favour of
the UK leaving the European Union. Whilst we do not believe the
impact of the UK leaving the European Union will have a material
impact on the Group, we continue to monitor developments in this
area and the impact on our UK business, which contributed 14% of
Group revenue and 10% of Group underlying profit before taxation in
2015/16. The risk of the macro-economic effects of the UK leaving
the EU is addressed through the Group's existing 'economic
conditions' risk. In the period since the referendum, the principal
impact on the Group has been due to weaker sterling which has
increased the sterling value of our US dollar denominated revenue,
profits and net assets. Our borrowing facilities are US dollar
denominated, with the majority of our debt drawn in US dollars,
weaker sterling has had minimal impact on our availability.
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. The Group has
arranged its financing such that, at 31 January 2017, 84% of its
debt was denominated in US (and Canadian) dollars so that there is
a natural partial offset between its dollar-denominated net assets
and earnings and its dollar-denominated debt and interest expense.
At 31 January 2017, dollar-denominated debt represented
approximately 57% of the value of dollar denominated net assets
(other than debt). Based on the current currency mix of our profits
and on dollar debt levels, interest and exchange rates at 31
January 2017, a 1% change in the US dollar exchange rate would
impact underlying pre-tax profit by approximately GBP7m.
OPERATING STATISTICS
Number of rental Staff numbers
stores
31 January 30 April 31 January 30 April
2017 2016 2016 2017 2016 2016
Sunbelt 614 556 559 10,152 10,021 10,125
A-Plant 173 153 156 3,602 3,009 2,968
Corporate
office - - - 13 12 13
Group 787 709 715 13,767 13,042 13,106
Sunbelt's rental store number includes 21 Sunbelt at Lowes
stores at 31 January 2017 (2016: 29).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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