TIDMAHT
RNS Number : 8269F
Ashtead Group PLC
21 June 2012
Audited results for the year and unaudited results
for the fourth quarter ended 30 April 2012
Capitalising on structural change
Fourth quarter Year
2012 2011 Growth(1) 2012 2011 Growth(1)
GBPm GBPm % GBPm GBPm %
Underlying results(2)
Revenue 287.8 242.8 +17% 1,134.6 948.5 +21%
EBITDA 88.7 63.3 +37% 381.1 283.8 +36%
Operating profit 38.0 18.2 +102% 181.3 98.8 +87%
Profit before taxation 25.6 2.7 +736% 130.6 31.0 +332%
Earnings per share 4.0p 0.4p +820% 17.3p 4.0p +344%
Statutory results
Profit/(loss) before taxation 31.9 (19.9) n/a 134.8 1.7 -
Earnings per share 4.7p (2.6p) n/a 17.8p 0.2p -
(1) at constant exchange rates (2) before exceptionals,
intangible amortisation and fair value remeasurements
Highlights
-- Record Group pre-tax profit(2) for the year of GBP131m (2011: GBP31m)
-- Group EBITDA margins of 34% (2011: 30%)
-- GBP476m of capital invested in the business
-- Group RoI, including goodwill, grew to 12% (2011: 7%)
-- Net debt to EBITDA leverage reduced to 2.2 times (2011: 2.7 times)
-- Proposed final dividend of 2.5p making 3.5p for the year (2011: 3.0p)
Ashtead's chief executive, Geoff Drabble, commented:
"We are delighted to report record Group profits, encouragingly
delivered against a backdrop of end construction markets remaining
at historically low levels.
This performance demonstrates the success of our largely organic
investment strategy and our ability to generate significant revenue
growth from market share gains and translate this into stronger
margins through improved operational efficiency.
The momentum we have established, and the flexibility provided
by our strong balance sheet, allows us to anticipate further growth
with or without end market recovery. As a result, it is likely that
our profits in the coming year will be ahead of our previous
expectations."
Contacts:
Geoff Drabble Chief executive +44 (0)20 7726 9700
Ian Robson Finance director
Brian Hudspith Maitland +44 (0)20 7379 5151
Geoff Drabble, Ian Robson and Suzanne Wood will host a meeting
for equity analysts to discuss the results at 9.30 am on Thursday
21 June at the offices of Jefferies Hoare Govett at Vintners
Place,
68 Upper Thames Street, London, EC4V 3BJ. This meeting will be
webcast live via the Company's website at www.ashtead-group.com and
a replay will be available from shortly after the call concludes. A
copy of this announcement and the slide presentation used for the
meeting will also be available for download on the Company's
website. The usual conference call for bondholders will begin at
3pm (10am EST).
Analysts and bondholders have already been invited to
participate in the meeting and conference call but anyone not
having received dial-in details should contact the Company's PR
advisers, Maitland (Astrid Wright) at +44 (0)20 7379 5151.
Trading results
Revenue EBITDA Operating profit
2012 2011 2012 2011 2012 2011
Sunbelt in $m 1,506.6 1,224.7 540.8 388.2 289.9 162.1
Sunbelt in GBPm 945.7 782.7 339.4 248.1 181.9 103.6
A-Plant 188.9 165.8 49.5 43.1 7.3 2.7
Group central costs - - (7.8) (7.4) (7.9) (7.5)
Continuing operations 1,134.6 948.5 381.1 283.8 181.3 98.8
Net financing costs (50.7) (67.8)
Profit before tax, exceptionals,
remeasurements and amortisation 130.6 31.0
Exceptional items - (21.9)
Fair value remeasurements 7.3 (5.7)
Amortisation (3.1) (1.7)
Profit before taxation 134.8 1.7
Taxation (46.3) (0.8)
Profit attributable to equity holders of
the Company 88.5 0.9
Margins
Sunbelt 35.9% 31.7% 19.2% 13.2%
A-Plant 26.2% 26.0% 3.8% 1.6%
Group 33.6% 29.9% 16.0% 10.4%
Group revenue improved by 20% to GBP1,135m (2011: GBP949m)
reflecting strong growth in fleet on rent and yield in the US. This
revenue growth, continued cost control, lower net financing costs
and the business improvement programmes initiated over the last
three years combined to generate record underlying pre-tax profits
of GBP131m (2011: GBP31m). Exchange rate fluctuations did not have
a significant effect on year on year comparisons.
Rental revenue grew 23% in Sunbelt to $1,335m (2011: $1,084m)
including a 13% increase in average fleet on rent and 7% growth in
yield. Combined with new and used equipment, merchandise and
consumable sales, Sunbelt's total revenue also grew 23% to $1,507m
(2011: $1,225m). A-Plant's rental revenue growth was 9% to GBP168m
(2011: GBP154m). Fleet on rent grew 1% with yield increasing by
6%.
The strong performance seen all year at Sunbelt continued in the
fourth quarter when Sunbelt's rental revenue grew 19% including 13%
growth in fleet on rent and 6% yield improvement. A-Plant's Q4
rental revenue growth was 5% reflecting 3% yield improvement and a
1% increase in fleet on rent.
Operational efficiency enabled Sunbelt to deliver high
'drop-through' with its EBITDA increasing by $153m or 69% of the
net $222m increase in rental revenue, as adjusted to exclude the
$29m first-time impact of Empire's largely pass-through erection
and dismantling labour recovery billings. This high 'drop-through'
shows our significant operational gearing and meant that Sunbelt's
operating profit rose to $290m (2011: $162m). In a tough market,
A-Plant also delivered an improved performance with operating
profit of GBP7m (2011: GBP3m).
The strong 'drop-through' meant that Sunbelt's EBITDA margin
grew 4% to 36% whilst A-Plant's EBITDA margin held steady at 26%
despite a near doubling in its inherently lower margin non-rental
revenue to GBP21m. For the Group as a whole, the full year EBITDA
margin was 34% (2011: 30%).
Reflecting these operating results, Group EBITDA grew 34% to
GBP381m (2011: GBP284m). Depreciation expense increased 8% to
GBP200m reflecting the larger average fleet size whilst Group
operating profit grew 84% to GBP181m (2011: GBP99m). Net financing
cost reduced by GBP17m to GBP51m (2011: GBP68m) due principally to
the benefits of the debt refinancing undertaken in Spring 2011.
As a result, the underlying profit before tax for the Group
increased to GBP131m (2011: GBP31m). The tax charge for the year
was broadly stable at 34% (2011: 35%) of the underlying pre-tax
profit with underlying earnings per share increasing more than
four-fold to 17.3p (2011: 4.0p). After a non-cash credit of GBP7m
relating to the remeasurement to fair value of the early prepayment
option in our long-term debt and amortisation of acquired
intangibles of GBP3m (2011: GBP2m), the reported profit before tax
for the year was GBP135m (2011: GBP2m) whilst basic earnings per
share was 17.8p (2011: 0.2p).
Capital expenditure
We invested heavily in the past year to support our growth and
prepare for the future. Capital expenditure for the year was
GBP476m (2011: GBP225m) of which GBP426m was rental fleet
replacement with the balance spent on delivery vehicles, property
improvements and computers. Disposal proceeds were GBP90m (2011:
GBP65m), giving net capital expenditure in the year of GBP386m
(2011: GBP160m). The average net book value weighted age of the
Group's rental fleet at 30 April 2012 was 37 months (2011: 44
months).
Gross expenditure exceeded the GBP425m guidance provided in
March because we elected to bring forward into April deliveries
originally scheduled for May. As a result, our capital expenditure
guidance for 2012/13 is now lowered to reflect those early
deliveries with our current plan being for gross additions of
around GBP450m. The early deliveries do not impact the timing of
when the expenditure will be paid for and accordingly we still
expect net payments for capex of approximately GBP400m after
disposal proceeds of approximately GBP100m. This level of
expenditure is consistent with our strategy at this stage in the
cycle of investing in organic growth, whilst both de-ageing our
fleet and continuing to reduce our leverage.
Return on Investment
Sunbelt's pre-tax return on investment (operating profit to the
sum of net tangible assets, goodwill and other intangibles) rose to
14.0% (2011: 8.6%). In the UK, return on investment remained weak
at 2.9% (2011: 1.1%). For the Group as a whole, pre-tax return on
investment of 12.0% (2011: 7.0%) is already significantly ahead of
our pre-tax cost of capital.
Cash flow and net debt
Despite investing more than twice depreciation in our fleet, we
were pleased to have achieved our objective of largely funding our
organic growth from cash flow with only a net GBP13m free cash
outflow (cash from operations less net capex, interest and tax) in
the year (2011: GBP54m inflow). In addition GBP22m was spent on
acquisitions (Topp - GBP21m & Empire deferred consideration -
GBP1m) whilst dividends paid totalled GBP15m.
Reflecting our strong earnings growth, net debt to EBITDA
leverage reduced to 2.2 times (2011: 2.7 times) whilst, including a
GBP21m translation increase, year-end net debt was GBP854m (2011:
GBP776m).
The Group's two debt facilities remain committed until 2016
(March 2016 for the senior bank facility and August 2016 for the
$550m senior secured notes). In light of the Group's strong growth,
the committed senior bank facility was recently increased in size
from $1.4bn to $1.8bn with no changes to its pricing or other
terms. At 30 April 2012, ABL availability under the enlarged
facility was $735m - substantially above the level at which the
Group's entire debt package is covenant free.
Dividends
In accordance with our progressive dividend policy, with
consideration to both profitability and cash generation at a level
that is sustainable across the cycle, the Board is recommending a
final dividend of 2.5p per share (2011: 2.07p) making 3.5p for the
year (2011: 3.0p).
Payment of the 2011/12 dividend will cost GBP17.5m in total and
is covered five times by underlying earnings. If approved at the
forthcoming Annual General Meeting, the final dividend will be paid
on 7 September 2012 to shareholders on the register on 17 August
2012.
Current trading and outlook
The good growth of the past year has carried forward into May
with encouraging levels of fleet on rent and yield improvement. For
the month, rental revenue grew by 15% in Sunbelt and by 5% in
A-Plant.
The momentum we have established, and the flexibility provided
by our strong balance sheet, allows us to anticipate further growth
with or without end market recovery. As a result, it is likely that
our profits in the coming year will be 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.
Directors' responsibility statement on the annual report
The responsibility statement below has been prepared in
connection with the Company's Annual Report & Accounts for the
year ended 30 April 2012. Certain parts thereof are not included in
this announcement.
"The Board confirms to the best of its knowledge (a) the
consolidated financial statements, prepared in accordance with IFRS
as issued by the International Accounting Standards Board and IFRS
as adopted by the EU, give a true and fair view of the assets,
liabilities, financial position and profit of the Group; and (b)
the Directors' Report includes a fair review of the development and
performance of the business and the position of the Group, together
with a description of the principal risks and uncertainties that it
faces.
By order of the Board 20 June 2012"
CONSOLIDATED INCOME STATEMENT FOR THE THREE MONTHS ENDED 30
APRIL 2012
2012 2011
Before
Before exceptional Exceptional
amortisation Amortisation items items
and and and and
remeasurements remeasurements Total amortisation amortisation Total
GBPm GBPm GBPm GBPm GBPm GBPm
Fourth quarter - unaudited
Revenue
Rental revenue 246.4 - 246.4 208.7 - 208.7
Sale of new equipment,
merchandise and consumables 11.6 - 11.6 10.5 - 10.5
Sale of used rental equipment 29.8 - 29.8 23.6 - 23.6
287.8 - 287.8 242.8 - 242.8
Operating costs
Staff costs (84.8) - (84.8) (77.4) - (77.4)
Used rental equipment sold (28.0) - (28.0) (20.2) - (20.2)
Other operating costs (86.3) - (86.3) (81.9) - (81.9)
(199.1) - (199.1) (179.5) - (179.5)
EBITDA* 88.7 - 88.7 63.3 - 63.3
Depreciation (50.7) - (50.7) (45.1) - (45.1)
Amortisation of intangibles - (1.0) (1.0) - (0.7) (0.7)
Operating profit 38.0 (1.0) 37.0 18.2 (0.7) 17.5
Investment income 1.1 7.3 8.4 0.9 - 0.9
Interest expense (13.5) - (13.5) (16.4) (21.9) (38.3)
Profit/(loss) on ordinary
activities before taxation 25.6 6.3 31.9 2.7 (22.6) (19.9)
Taxation:
- current (2.0) - (2.0) (1.5) 2.5 1.0
- deferred (3.8) (2.6) (6.4) 0.6 5.2 5.8
(5.8) (2.6) (8.4) (0.9) 7.7 6.8
Profit/(loss) attributable to
equity holders of the Company 19.8 3.7 23.5 1.8 (14.9) (13.1)
Basic earnings per share 4.0p 0.7p 4.7p 0.4p (3.0p) (2.6p)
Diluted earnings per share 3.9p 0.7p 4.6p 0.4p (3.0p) (2.6p)
* 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 activities.
Details of principal risks and uncertainties are given in the
Review of Fourth Quarter, Balance Sheet and Cash Flow accompanying
these financial statements.
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 APRIL
2012
2012 2011
Before
Before exceptionals, Exceptionals,
amortisation Amortisation amortisation amortisation
and and and and
remeasurements remeasurements Total remeasurements remeasurements Total
GBPm GBPm GBPm GBPm GBPm GBPm
Year to 30 April 2012 - audited
Revenue
Rental revenue 1,005.9 - 1,005.9 846.5 - 846.5
Sale of new equipment,
merchandise and consumables 44.7 - 44.7 41.4 - 41.4
Sale of used rental
equipment 84.0 - 84.0 60.6 - 60.6
1,134.6 - 1,134.6 948.5 - 948.5
Operating costs
Staff costs (334.0) - (334.0) (291.0) - (291.0)
Used rental equipment
sold (74.6) - (74.6) (55.0) - (55.0)
Other operating costs (344.9) - (344.9) (318.7) - (318.7)
(753.5) - (753.5) (664.7) - (664.7)
EBITDA* 381.1 - 381.1 283.8 - 283.8
Depreciation (199.8) - (199.8) (185.0) - (185.0)
Amortisation of intangibles - (3.1) (3.1) - (1.7) (1.7)
Operating profit 181.3 (3.1) 178.2 98.8 (1.7) 97.1
Investment income 4.2 7.3 11.5 3.7 - 3.7
Interest expense (54.9) - (54.9) (71.5) (27.6) (99.1)
Profit on ordinary
activities before taxation 130.6 4.2 134.8 31.0 (29.3) 1.7
Taxation:
- current (7.7) - (7.7) (6.0) 2.9 (3.1)
- deferred (36.7) (1.9) (38.6) (4.9) 7.2 2.3
(44.4) (1.9) (46.3) (10.9) 10.1 (0.8)
Profit attributable
to
equity holders of the
Company 86.2 2.3 88.5 20.1 (19.2) 0.9
Basic earnings per share 17.3p 0.5p 17.8p 4.0p (3.8p) 0.2p
Diluted earnings per
share 16.9p 0.4p 17.3p 4.0p (3.8p) 0.2p
* 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 activities.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Audited
Three months Year to
to
30 April 30 April
2012 2011 2012 2011
GBPm GBPm GBPm GBPm
Profit/(loss) attributable to equity holders
of the Company for the period 23.5 (13.1) 88.5 0.9
Foreign currency translation differences (8.4) (9.0) 4.5 (17.5)
Actuarial (loss)/gain on defined benefit pension
scheme (6.2) 0.8 (6.2) 12.9
Tax on defined benefit pension scheme 1.5 0.5 1.5 (3.4)
Total comprehensive income for the period 10.4 (20.8) 88.3 (7.1)
CONSOLIDATED BALANCE SHEET AT 30 APRIL 2012
Audited
2012 2011
GBPm GBPm
Current assets
Inventories 13.4 11.5
Trade and other receivables 178.0 155.3
Current tax asset 2.6 2.3
Cash and cash equivalents 23.4 18.8
217.4 187.9
Non-current assets
Property, plant and equipment
- rental equipment 1,118.4 914.5
- other assets 145.0 121.7
1,263.4 1,036.2
Intangible assets - brand names and other acquired
intangibles 21.7 12.3
Goodwill 371.0 354.9
Deferred tax asset - 1.1
Defined benefit pension fund surplus 3.4 6.1
Other financial assets - derivatives 7.2 -
1,666.7 1,410.6
Total assets 1,884.1 1,598.5
Current liabilities
Trade and other payables 265.6 174.6
Current tax liability 2.8 2.4
Debt due within one year 2.1 1.7
Provisions 11.3 9.6
281.8 188.3
Non-current liabilities
Debt due after more than one year 875.6 792.8
Provisions 21.7 23.3
Deferred tax liabilities 150.3 112.7
1,047.6 928.8
Total liabilities 1,329.4 1,117.1
Equity
Share capital 55.3 55.3
Share premium account 3.6 3.6
Capital redemption reserve 0.9 0.9
Non-distributable reserve 90.7 90.7
Own shares held by the Company (33.1) (33.1)
Own shares held through the ESOT (6.2) (6.7)
Cumulative foreign exchange translation differences 7.1 2.6
Retained reserves 436.4 368.1
Equity attributable to equity holders of the
Company 554.7 481.4
Total liabilities and equity 1,884.1 1,598.5
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 APRIL 2012
Own Own Cumulative
Audited shares shares foreign
Share Capital Non- held held exchange
by
Share premium redemption distributable the through translation Retained
capital account reserve reserve Company the differences reserves Total
ESOT
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 May 2010 55.3 3.6 0.9 90.7 (33.1) (6.3) 20.1 369.1 500.3
Profit for the
period - - - - - - - 0.9 0.9
Other
comprehensive
income:
Foreign
currency
translation
differences - - - - - - (17.5) - (17.5)
Actuarial gain
on
defined
benefit
pension scheme - - - - - - - 12.9 12.9
Tax on defined
benefit
pension
scheme - - - - - - - (3.4) (3.4)
Total
comprehensive
income
for the period - - - - - - (17.5) 10.4 (7.1)
Dividends paid - - - - - - - (14.6) (14.6)
Own shares
purchased
by
the ESOT - - - - - (0.4) - - (0.4)
Share-based
payments - - - - - - - 1.6 1.6
Tax on
share-based
payments - - - - - - - 1.6 1.6
At 30 April
2011 55.3 3.6 0.9 90.7 (33.1) (6.7) 2.6 368.1 481.4
Profit for the
period - - - - - - - 88.5 88.5
Other
comprehensive
income:
Foreign
currency
translation
differences - - - - - - 4.5 - 4.5
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 - - - - - - 4.5 83.8 88.3
Dividends paid - - - - - - - (15.3) (15.3)
Own shares
purchased
by
the ESOT - - - - - (3.5) - - (3.5)
Share-based
payments - - - - - 4.0 - (1.5) 2.5
Tax on
share-based
payments - - - - - - - 1.3 1.3
At 30 April
2012 55.3 3.6 0.9 90.7 (33.1) (6.2) 7.1 436.4 554.7
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 APRIL
2012
Audited
2012 2011
GBPm GBPm
Cash flows from operating activities
Cash generated from operations before exceptional
items and changes in rental equipment 364.6 279.7
Exceptional operating costs paid (3.3) (5.5)
Payments for rental property, plant and equipment (357.8) (182.2)
Proceeds from disposal of rental property, plant
and equipment 83.4 55.0
Cash generated from operations 86.9 147.0
Financing costs paid (net) (49.1) (66.7)
Exceptional financing costs paid - (6.5)
Tax paid (net) (7.4) (4.3)
Net cash from operating activities 30.4 69.5
Cash flows from investing activities
Acquisition of businesses (21.9) (34.8)
Payments for non-rental property, plant and
equipment (48.2) (20.4)
Proceeds from disposal of non-rental property,
plant and equipment 6.8 4.5
Payments for purchase of intangible assets (1.7) -
Net cash used in investing activities (65.0) (50.7)
Cash flows from financing activities
Drawdown of loans 153.8 597.8
Redemption of loans (94.3) (634.5)
Capital element of finance lease payments (1.5) (3.0)
Purchase of own shares by the ESOT (3.5) (0.4)
Dividends paid (15.3) (14.6)
Net cash from/(used in) financing activities 39.2 (54.7)
Increase/(decrease) in cash and cash equivalents 4.6 (35.9)
Opening cash and cash equivalents 18.8 54.8
Effect of exchange rate differences - (0.1)
Closing cash and cash equivalents 23.4 18.8
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation
The financial statements for the year ended 30 April 2012 were
approved by the directors on 20 June 2012. This preliminary
announcement of the results for the year ended 30 April 2012
contains information derived from the forthcoming 2011/12 Annual
Report & Accounts and does not contain sufficient information
to comply with International Financial Reporting Standards (IFRS)
and does not constitute the statutory accounts for the purposes of
section 435 of the Companies Act 2006. The 2010/11 Annual Report
& Accounts has been delivered to the Registrar of Companies.
The 2011/12 Annual Report & Accounts will be delivered to the
Registrar of Companies and made available on the Group's website at
www.ashtead-group.com in July 2012. The auditor's reports in
respect of both years are unqualified, do not include a reference
to any matter by way of emphasis without qualifying the report and
do not contain a statement under section 498(2) or (3) of the
Companies Act 2006.
The results for the year ended and quarter ended 30 April 2012
have been prepared in accordance with relevant IFRS and the
accounting policies set out in the Group's Annual Report &
Accounts for the year ended 30 April 2011 except for the adoption
of the 'Amendments to IFRS 7 Financial instruments: disclosures -
transfers of financial assets'. This amendment has no impact on the
consolidated results or financial position of the Group.
The financial statements have been prepared on the going concern
basis. After reviewing the Group's annual budget, plans and
financing arrangements, the directors consider that the Group has
adequate resources to continue in operation for the foreseeable
future and consequently that it is appropriate to adopt the going
concern basis in preparing the financial statements.
The figures for the fourth quarter are unaudited.
The exchange rates used in respect of the US dollar are:
2012 2011
Average for the quarter ended 30 April 1.59 1.62
Average for the year ended 30 April 1.59 1.56
At 30 April 1.62 1.67
2. Segmental analysis
Operating
profit before Operating
Revenue amortisation Amortisation profit
Three months to 30 April GBPm GBPm GBPm GBPm
2012
Sunbelt 237.2 38.4 (0.5) 37.9
A-Plant 50.6 1.9 (0.5) 1.4
Corporate costs - (2.3) - (2.3)
287.8 38.0 (1.0) 37.0
2011
Sunbelt 198.2 20.5 (0.3) 20.2
A-Plant 44.6 (0.4) (0.4) (0.8)
Corporate costs - (1.9) - (1.9)
242.8 18.2 (0.7) 17.5
Year to 30 April
2012
Sunbelt 945.7 181.9 (1.4) 180.5
A-Plant 188.9 7.3 (1.7) 5.6
Corporate costs - (7.9) - (7.9)
1,134.6 181.3 (3.1) 178.2
2011
Sunbelt 782.7 103.6 (0.8) 102.8
A-Plant 165.8 2.7 (0.9) 1.8
Corporate costs - (7.5) - (7.5)
948.5 98.8 (1.7) 97.1
Other
financial
Taxation assets -
Segment assets Cash assets derivatives Total assets
At 30 April 2012
Sunbelt 1,549.4 - - - 1,549.4
A-Plant 301.4 - - - 301.4
Corporate items 0.1 23.4 2.6 7.2 33.3
1,850.9 23.4 2.6 7.2 1,884.1
At 30 April 2011
Sunbelt 1,284.4 - - - 1,284.4
A-Plant 291.8 - - - 291.8
Corporate items 0.1 18.8 3.4 - 22.3
1,576.3 18.8 3.4 - 1,598.5
3. Operating costs
2012 2011
Before Before
amortisation Amortisation Total amortisation Amortisation Total
GBPm GBPm GBPm GBPm GBPm GBPm
Three months to 30 April
Staff costs:
Salaries, bonuses and commissions 76.0 - 76.0 69.8 - 69.8
Social security costs 7.2 - 7.2 7.1 - 7.1
Other pension costs 1.6 - 1.6 0.5 - 0.5
84.8 - 84.8 77.4 - 77.4
Used rental equipment sold 28.0 - 28.0 20.2 - 20.2
Other operating costs:
Vehicle costs 21.0 - 21.0 20.1 - 20.1
Spares, consumables & external
repairs 17.1 - 17.1 15.1 - 15.1
Facility costs 11.3 - 11.3 11.5 - 11.5
Other external charges 36.9 - 36.9 35.2 - 35.2
86.3 - 86.3 81.9 - 81.9
Depreciation and amortisation:
Depreciation 50.7 - 50.7 45.1 - 45.1
Amortisation of acquired
intangibles - 1.0 1.0 - 0.7 0.7
50.7 1.0 51.7 45.1 0.7 45.8
249.8 1.0 250.8 224.6 0.7 225.3
Year to 30 April
Staff costs:
Salaries, bonuses and commissions 304.0 - 304.0 266.1 - 266.1
Social security costs 24.1 - 24.1 22.6 - 22.6
Other pension costs 5.9 - 5.9 2.3 - 2.3
334.0 - 334.0 291.0 - 291.0
Used rental equipment sold 74.6 - 74.6 55.0 - 55.0
Other operating costs:
Vehicle costs 84.2 - 84.2 75.6 - 75.6
Spares, consumables & external
repairs 62.8 - 62.8 58.8 - 58.8
Facility costs 47.0 - 47.0 45.4 - 45.4
Other external charges 150.9 - 150.9 138.9 - 138.9
344.9 - 344.9 318.7 - 318.7
Depreciation and amortisation:
Depreciation 199.8 - 199.8 185.0 - 185.0
Amortisation of acquired
intangibles - 3.1 3.1 - 1.7 1.7
199.8 3.1 202.9 185.0 1.7 186.7
953.3 3.1 956.4 849.7 1.7 851.4
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 issue. 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.
Exceptional items, amortisation and fair value remeasurements
are set out below:
Three months to Year to 30 April
30 April
2012 2011 2012 2011
GBPm GBPm GBPm GBPm
Write off of deferred financing
costs - 15.4 - 15.4
Early redemption fee - 6.5 - 6.5
Fair value remeasurements (7.3) - (7.3) 5.7
Amortisation of acquired intangibles 1.0 0.7 3.1 1.7
(6.3) 22.6 (4.2) 29.3
Taxation 2.6 (7.7) 1.9 (10.1)
(3.7) 14.9 (2.3) 19.2
Fair value remeasurements relate to the changes in fair value of
the embedded call options in our senior secured note issue.
The items detailed in the table above are presented in the
income statement as follows:
Three months to Year to 30 April
30 April
2012 2011 2012 2011
GBPm GBPm GBPm GBPm
Amortisation of acquired intangibles 1.0 0.7 3.1 1.7
Charged in arriving at operating
profit 1.0 0.7 3.1 1.7
Investment income (7.3) - (7.3) -
Interest expense - 21.9 - 27.6
Charged in arriving at profit before
taxation (6.3) 22.6 (4.2) 29.3
Taxation 2.6 (7.7) 1.9 (10.1)
(3.7) 14.9 (2.3) 19.2
5. Financing costs
Three months to Year to 30 April
30 April
2012 2011 2012 2011
GBPm GBPm GBPm GBPm
Investment income:
Expected return on assets of defined
benefit
pension plan (1.1) (0.9) (4.2) (3.7)
Interest expense:
Bank interest payable 4.0 3.2 16.9 15.7
Interest payable on second priority
senior
secured notes 7.8 10.8 31.1 45.3
Interest payable on finance leases - - 0.2 0.2
Non-cash unwind of discount on defined
benefit
pension plan liabilities 0.7 0.9 3.0 3.5
Non-cash unwind of discount on self-insurance
provisions 0.4 0.3 1.3 1.4
Amortisation of deferred costs of
debt raising 0.6 1.2 2.4 5.4
Total interest expense 13.5 16.4 54.9 71.5
Net financing costs before exceptional
items and remeasurements 12.4 15.5 50.7 67.8
Exceptional items - 21.9 - 21.9
Fair value remeasurements (7.3) - (7.3) 5.7
Net financing costs 5.1 37.4 43.4 95.4
6. Taxation
The tax charge for the period has been computed using an
estimated effective rate for the year of 39% in the US (2011: 21%)
and 27% in the UK (2011: 31%). The blended effective rate for the
Group as a whole is 34% (2011: 35%).
The tax charge of GBP44.4m (2011: GBP10.9m) on the underlying
pre-tax profit of GBP130.6m (2011: GBP31.0m) can be explained as
follows:
Year to 30 April
2012 2011
GBPm GBPm
Current tax
- current tax on income for the year 8.1 7.3
- adjustments to prior years (0.4) (1.3)
7.7 6.0
Deferred tax
- origination and reversal of temporary differences 37.7 2.8
- adjustments to prior years (1.0) 2.1
36.7 4.9
Tax on underlying activities 44.4 10.9
Comprising:
- UK tax 10.1 11.0
- US tax 34.3 (0.1)
44.4 10.9
In addition, the tax charge of GBP1.9m (2011: credit of
GBP10.1m) on exceptional items, amortisation and fair value
remeasurements of GBP4.2m (2011: loss of GBP29.3m) consists of a
current tax credit of GBPnil (2011: GBP2.9m) relating to the UK, a
deferred tax credit of GBP0.5m (2011: GBP0.2m) relating to the UK
and a deferred tax charge of GBP2.4m (2011: credit of GBP7.0m)
relating to the US.
7. Earnings per share
Basic and diluted earnings per share for the three and twelve
months ended 30 April 2012 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 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 Year to
30 April 30 April
2012 2011 2012 2011
Profit/(loss) for the financial period
(GBPm) 23.5 (13.1) 88.5 0.9
Weighted average number of shares
(m) - basic 498.8 497.7 498.3 497.7
-
diluted 509.7 505.6 511.2 504.2
Basic earnings per share 4.7p (2.6p) 17.8p 0.2p
Diluted earnings per share 4.6p (2.6p) 17.3p 0.2p
Underlying earnings per share (defined in any period as the
earnings before exceptional items, 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 Year to
30 April 30 April
2012 2011 2012 2011
Basic earnings per share 4.7p (2.6p) 17.8p 0.2p
Exceptional items, amortisation of acquired
intangibles and fair value remeasurements (1.2p) 4.6p (0.9p) 5.9p
Tax on exceptionals, amortisation and
remeasurements 0.5p (1.6p) 0.4p (2.1p)
Underlying earnings per share 4.0p 0.4p 17.3p 4.0p
Other deferred tax 0.7p (0.1p) 7.4p 1.0p
Cash tax earnings per share 4.7p 0.3p 24.7p 5.0p
8. Dividends
During the year, a final dividend in respect of the year ended
30 April 2011 of 2.07p (2010: 2.0p) per share and an interim
dividend for the year ended 30 April 2012 of 1.0p (2011: 0.93p) per
share were paid to shareholders costing GBP15.3m (2011:
GBP14.6m).
9. Property, plant and equipment
2012 2011
Rental Rental
equipment Total equipment Total
Net book value GBPm GBPm GBPm GBPm
At 1 May 914.5 1,036.2 969.7 1,101.6
Exchange difference 22.4 25.0 (55.9) (62.5)
Reclassifications (0.6) - (0.5) -
Additions 426.2 476.4 202.4 224.8
Acquisitions 2.1 2.8 11.7 12.1
Disposals (71.3) (77.2) (50.9) (54.8)
Depreciation (174.9) (199.8) (162.0) (185.0)
At 30 April 1,118.4 1,263.4 914.5 1,036.2
10. Called up share capital
Ordinary shares of 10p each:
2012 2011 2012 2011
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
At 30 April 2012, 50m shares were held by the Company and a
further 4.6m shares were held by the Company's Employee Share
Ownership Trust.
11. Notes to the cash flow statement
Year to 30 April
2012 2011
GBPm GBPm
a) Cash flow from operating activities
Operating profit before exceptional items and
amortisation 181.3 98.8
Depreciation 199.8 185.0
EBITDA before exceptional items 381.1 283.8
Profit on disposal of rental equipment (9.4) (5.6)
Profit on disposal of other property, plant and
equipment (1.1) (0.8)
Increase in inventories (0.4) (2.6)
Increase in trade and other receivables (20.2) (21.2)
Increase in trade and other payables 12.1 24.7
Exchange differences - (0.2)
Non-cash share-based remuneration expense 2.5 1.6
Cash generated from operations before exceptional
items
and changes in rental equipment 364.6 279.7
b) Reconciliation of net debt
(Increase)/decrease in cash in the period (4.6) 35.9
Increase/(decrease) in debt through cash flow 58.0 (39.7)
Change in net debt from cash flows 53.4 (3.8)
Exchange differences 20.6 (73.1)
Non-cash movements:
* deferred costs of debt raising 2.4 21.0
* capital element of new finance leases 2.2 2.6
Increase/(reduction) in net debt in the period 78.6 (53.3)
Opening net debt 775.7 829.0
Closing net debt 854.3 775.7
c) Analysis of net debt
1 May Exchange Cash Non-cash 30 April
2011 movement flow movements 2012
GBPm GBPm GBPm GBPm GBPm
Cash (18.8) - (4.6) - (23.4)
Debt due within 1
year 1.7 - (1.5) 1.9 2.1
Debt due after 1
year 792.8 20.6 59.5 2.7 875.6
Total net debt 775.7 20.6 53.4 4.6 854.3
d) Acquisitions
Year to 30 April
2012 2011
GBPm GBPm
Cash consideration paid 21.9 34.8
Details of the Group's cash and debt are given in the Review of
Fourth Quarter, Balance Sheet and Cash Flow accompanying these
financial statements.
12. Contingent liabilities
The Group is subject to periodic legal claims in the ordinary
course of its business, none of which is expected to have a
significant impact on the Group's financial position.
As previously reported, in Spring 2011, following audits of the
tax returns of the Group's US subsidiaries for the four years ended
30 April 2009, the US Internal Revenue Service ("IRS") issued
revised assessments and associated notices of interest and
penalties arising from its proposed reclassification of certain US
intercompany debt in those years from debt to equity and its
consequent proposed recharacterisation of US interest payments to
the UK as equity-like distributions. The revised assessments would
have resulted in additional net tax payments due of $31m together
with interest and penalties of $15m. We disagreed with these
assessments and defended our position vigorously.
Sunbelt and its advisers recently reached a satisfactory
preliminary agreement with the IRS Appeals team on these matters.
This preliminary agreement is expected to be documented and
formally agreed following further internal review within the IRS
during the coming fiscal year. There was no significant impact on
the 2012 financial statements as a result of the preliminary
agreement and the Board does not anticipate these issues generating
any material impact on the Group's future results or financial
position.
13. Acquisition of Topp Construction Services, Inc. ("Topp")
Sunbelt acquired the entire issued share capital of Topp
Construction Services, Inc. and its related company, Precision
Steel Works, LLC ("Precision") for US$33.5m (GBP21m) on 3 April
2012. Estimated additional consideration of US$1.9m (GBP1.2m) is
expected to become payable later in 2012 by way of tax
equalisation.
Topp is a specialist rental provider of air conditioning,
heating and dehumidification equipment based in Philadelphia with
16 branches located principally in major cities across the United
States. Precision runs a small assembly and manufacturing facility
in support of Topp's business.
The net assets acquired and the provisional goodwill arising on
the acquisition are as follows:
Acquiree's At provisional
book value fair value
GBPm GBPm
Net assets acquired
Trade and other receivables 1.6 1.6
Inventory 1.1 1.1
Cash and cash equivalents 0.1 0.1
Property, plant and equipment
- rental equipment 1.5 2.4
- other assets 0.7 0.7
Intangible assets (brand name, distribution
and non-
compete agreements and customer relationships) - 10.5
Trade and other payables (1.2) (1.2)
3.8 15.2
Consideration:
- cash paid 21.0
- deferred consideration (tax equalisation)
payable in cash 1.2
22.2
Goodwill 7.0
The goodwill arising can be attributed to the key management
personnel and workforce of the acquired business and to the
benefits the Group expects to derive from the acquisition. Subject
to agreement and payment to the vendor of the tax equalisation
charge, this goodwill will become deductible for tax purposes and
has been treated as such.
Trade receivables at acquisition were GBP1.5m at fair value, net
of GBP0.1m provision for debts which may not be collected, and had
a gross face value of GBP1.6m.
Topp's revenue and operating loss in the period from the date of
acquisition to 30 April 2012 were GBP0.5m ($0.8m) and GBP0.3m
($0.5m) respectively. Had the acquisition taken place on 1 May 2011
then Group reported revenue and operating profit for the year ended
30 April 2012 would have been higher by GBP12.9m ($20.6m) and
GBP2.9m ($4.7m) respectively.
REVIEW OF FOURTH QUARTER, BALANCE SHEET AND CASH FLOW
Fourth quarter Revenue EBITDA Operating profit
2012 2011 2012 2011 2012 2011
Sunbelt in $m 376.6 321.0 124.3 90.2 61.1 33.7
Sunbelt in GBPm 237.2 198.2 78.3 55.4 38.4 20.5
A-Plant 50.6 44.6 12.6 9.8 1.9 (0.4)
Group central costs - - (2.2) (1.9) (2.3) (1.9)
287.8 242.8 88.7 63.3 38.0 18.2
Net financing costs (12.4) (15.5)
Profit before tax, exceptionals,
remeasurements and amortisation 25.6 2.7
Exceptional items - (21.9)
Fair value remeasurements 7.3 -
Amortisation (1.0) (0.7)
Total Group profit before taxation 31.9 (19.9)
Margins
Sunbelt 33.0% 28.1% 16.2% 10.5%
A-Plant 24.8% 22.0% 3.6% -1.0%
Group 30.8% 26.1% 13.2% 7.5%
Fourth quarter results reflect continued progress at Sunbelt
with its rental revenue growing 19% to $323m (2011: $273m). This
comprised a 13% increase in average fleet on rent and 6% higher
yield. In the UK, A-Plant's fourth quarter rental revenue grew by
5% to GBP43m (2011: GBP41m) including 3% yield improvement and 1%
growth in average fleet on rent.
Total revenue growth for the Group of 19% included higher used
equipment sales revenue of GBP30m (2011: GBP24m) as we increased
capital expenditure and hence sold more used equipment.
Costs remained under close control as reflected in the high
'drop-through' seen all year with Sunbelt's EBITDA increasing by
$34m or 67% of the $50m increase in fourth quarter rental revenue.
Both businesses grew Q4 operating profit significantly with A-Plant
notably avoiding a loss in the seasonally weak fourth quarter this
year.
Group pre-tax profit before fair value remeasurements and
amortisation was GBP26m (2011: GBP3m). This reflected the operating
profit growth and lower net financing costs of GBP12m (2011:
GBP15m), mainly as a result of the benefits of the debt refinancing
undertaken in the fourth quarter of 2010/11. After a non-cash
credit of GBP7m relating to the remeasurement to fair value of the
early prepayment option in our long-term debt and GBP1m of
intangible amortisation, the statutory profit before tax was GBP32m
(2011: loss of GBP20m).
Balance sheet
Fixed assets
Capital expenditure in the year was GBP476m (2011: GBP225m) with
GBP426m invested in the rental fleet (2011: GBP202m). Capital
expenditure by division is as follows:
2012 2011
Growth Maintenance Total Total
Sunbelt in $m 295.9 300.3 596.2 295.0
Sunbelt in GBPm 182.2 185.0 367.2 176.9
A-Plant 14.6 44.4 59.0 25.5
Total rental equipment 196.8 229.4 426.2 202.4
Delivery vehicles, property improvements
and computers 50.2 22.4
Total additions 476.4 224.8
Expenditure on rental equipment was 89% of total capital
expenditure with the balance relating to the delivery vehicle
fleet, property improvements and computer equipment.
With good demand in the US, $296m of rental equipment capital
expenditure was spent on growth while $300m 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 our fleet, at 30
April 2012 was 37 months (2011: 44 months) weighted on a net book
value basis. Sunbelt's fleet had an average age of 36 months (2011:
44 months) while A-Plant's fleet had an average age of 41 months
(2011: 42 months).
The original cost of the Group's rental fleet and the dollar and
physical utilisation for the year ended 30 April 2012 is shown
below:
Rental fleet at original cost LTM LTM
LTM LTM rental dollar physical
30 April 30 April average revenue utilisation utilisation
2012 2011
Sunbelt in $m 2,453 2,151 2,319 1,335 58% 70%
Sunbelt in GBPm 1,511 1,289 1,428 838 58% 70%
A-Plant 358 343 352 168 48% 65%
1,869 1,632 1,780 1,006
Dollar utilisation is defined as rental revenue divided by
average fleet at original (or "first") cost and, in the year ended
30 April 2012, was 58% at Sunbelt (2011: 51%) and 48% at A-Plant
(2011: 47%). 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 and, in the year ended 30
April 2012, was 70% at Sunbelt (2011: 68%) and 65% at A-Plant
(2011: 69%). At Sunbelt, physical utilisation is measured for
equipment with an original cost in excess of $7,500 which comprised
approximately 90% of its fleet at 30 April 2012.
Trade receivables
Receivable days at 30 April were 44 days (2011: 46 days). The
bad debt charge for the year ended 30 April 2012 as a percentage of
total turnover was 0.7% (2011: 0.8%). Trade receivables at 30 April
2012 of GBP149m (2011: GBP132m) are stated net of provisions for
bad debts and credit notes of GBP14m (2011: GBP14m) with the
provision representing 8.5% (2011: 9.4%) of gross receivables.
Trade and other payables
Group payable days were 70 days in 2012 (2011: 57 days) with
capital expenditure-related payables, which have longer payment
terms, totalling GBP133m (2011: GBP58m). Payment periods for
purchases other than rental equipment vary between seven and 45
days and for rental equipment between 30 and 120 days.
Cash flow and net debt
Year to 30 April
2012 2011
GBPm GBPm
EBITDA before exceptional items 381.1 283.8
Cash inflow from operations before exceptional
items and changes in rental equipment 364.6 279.7
Cash conversion ratio* 95.7% 98.6%
Maintenance rental capital expenditure paid (222.4) (182.2)
Payments for non-rental capital expenditure (49.9) (20.4)
Rental equipment disposal proceeds 83.4 55.0
Other property, plant and equipment disposal proceeds 6.8 4.5
Tax paid (7.4) (4.3)
Financing costs paid (49.1) (66.7)
Cash flow before growth capex and payment of exceptional
costs 126.0 65.6
Growth rental capital expenditure paid (135.4) -
Exceptional operating costs paid (3.3) (12.0)
Free cash flow (12.7) 53.6
Business acquisitions (21.9) (34.8)
Total cash (absorbed)/generated (34.6) 18.8
Dividends paid (15.3) (14.6)
Purchase of own shares by the ESOT (3.5) (0.4)
(Increase)/decrease in net debt (53.4) 3.8
* Cash inflow from operations before exceptional items and
changes in rental equipment as a percentage of EBITDA before
exceptional items.
Cash inflow from operations rose 30% to GBP365m (2011: GBP280m)
reflecting the 34% growth in EBITDA and good cash conversion. The
cash conversion ratio fell slightly to 96% (2011: 99%) due to the
higher gains on sale this year (GBP10.5m in 2011/12 v GBP6.4m in
2010/11) and the need to fund higher receivables which was partly
offset by higher payables.
Total payments for capital expenditure (rental equipment, other
PPE and purchased intangibles) during the year were GBP408m (2011:
GBP203m). Disposal proceeds received totalled GBP90m, giving net
payments for capital expenditure of GBP318m in the year (2011:
GBP143m). Interest payments reduced to GBP49m (2011: GBP67m)
reflecting the benefit of the debt refinancing undertaken in the
fourth quarter of 2010/11, whilst tax payments were GBP7m (2011:
GBP4m). Interest payments differ from the GBP51m net accounting
charge in the income statement due to non-cash interest
charges.
The Group generated GBP126m of net cash inflow before growth
capex in the year whilst there was a GBP13m outflow (2011: inflow
of GBP54m) after growth capex and the payment of exceptional costs
provided in earlier years relating to closed premises.
After GBP22m spent on acquisitions and GBP19m distributed to
shareholders through dividends and share purchases by our ESOT, the
increase in net debt from cash flow was GBP53m.
Net debt
2012 2011
GBPm GBPm
First priority senior secured bank debt 539.9 467.1
Finance lease obligations 3.8 3.0
9% second priority senior secured notes,
due 2016 334.0 324.4
877.7 794.5
Cash and cash equivalents (23.4) (18.8)
Total net debt 854.3 775.7
Net debt at 30 April 2012 was GBP854m (30 April 2011: GBP776m)
which includes a translation increase in the year of GBP21m
reflecting the weakening of the pound against the dollar. The
Group's EBITDA for the year ended 30 April 2012 was GBP381m and the
ratio of net debt to EBITDA was therefore 2.2 times at 30 April
2012 (2011: 2.7 times).
At year end $1.4bn was committed by our senior lenders under the
asset-based bank facility until March 2016 while the amount
utilised was $918m (including letters of credit totalling $25m).
Since year end the Company has obtained additional commitments from
its lenders which have increased the size of the asset-based bank
facility by $400m to $1.8bn with no other changes to its terms or
to the March 2016 maturity. The $550m 9% senior secured notes are
committed until August 2016.
Our debt facilities therefore remain committed for the long
term, with an average of 4.1 years remaining at 30 April 2012. The
weighted average interest cost of these facilities (including
non-cash amortisation of deferred debt raising costs) is
approximately 5%.
Financial performance covenants under the 9% senior secured note
issue are 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.
These covenants do not, however, apply when availability (the
difference between the borrowing base and facility utilisation)
exceeds 12% of the facility size ($216m following the recent
increase in the facility size to $1.8bn discussed above). At 30
April 2012 excess availability under the enlarged bank facility was
$735m ($479m at 30 April 2011) meaning that covenants were not
measured at 30 April 2012 and are unlikely to be measured in
forthcoming quarters.
As a matter of good practice, we still, however, calculate the
covenant ratios each quarter. At 30 April 2012, as a result of the
significant investment in our rental fleet, the fixed charge ratio
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 the going concern
basis.
Financial risk management
The Group's trading and financing activities expose it to
various financial risks that, if left unmanaged, could adversely
impact on current or future earnings. Although not necessarily
mutually exclusive, these financial risks are categorised
separately according to their different generic risk
characteristics and include market risk (foreign currency risk and
interest rate risk), credit risk and liquidity risk.
Market risk
The Group's activities expose it primarily to interest rate and
currency risk. Interest rate risk is monitored on a continuous
basis and managed, where appropriate, through the use of interest
rate swaps whereas the use of forward foreign exchange contracts to
manage currency risk is considered on an individual non-trading
transaction basis. The Group is not exposed to commodity price risk
or equity price risk as defined in IFRS 7.
Interest rate risk
The Group has fixed and variable rate debt in issue with 38% of
the drawn debt at a fixed rate as at 30 April 2012. The Group's
accounting policy requires all borrowings to be held at amortised
cost. As a result, the carrying value of fixed rate debt is
unaffected by changes in credit conditions in the debt markets and
there is therefore no exposure to fair value interest rate risk.
The Group's debt that bears interest at a variable rate comprises
all outstanding borrowings under the senior secured credit
facility. The interest rates currently applicable to this variable
rate debt are LIBOR as applicable to the currency borrowed (US
dollars or pounds) plus 225bp.
The Group periodically utilises interest rate swap agreements to
manage and mitigate its exposure to changes in interest rates.
However, during the year ended and as at 30 April 2012, the Group
had no such outstanding swap agreements. The Group also holds cash
and cash equivalents, which earn interest at a variable rate.
Currency exchange risk
Currency exchange risk is limited to translation risk as there
are no transactions in the ordinary course of business that take
place between foreign entities. The Group's reporting currency is
the pound sterling. However, a majority of our assets, liabilities,
revenue and costs is denominated in US dollars. The Group has
arranged its financing such that virtually all of its debt is also
denominated in US 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 30 April 2012,
dollar denominated debt represented approximately 75% 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 30 April 2012, a 1% change in the US
dollar exchange rate would impact pre-tax profit by GBP1.3m.
The Group's exposure to exchange rate movements on trading
transactions is relatively limited. All Group companies invoice
revenue in their respective local currency and generally incur
expense and purchase assets in their local currency. Consequently,
the Group does not routinely hedge either forecast foreign exchange
exposures or the impact of exchange rate movements on the
translation of overseas profits into sterling. Where the Group does
hedge, it maintains appropriate hedging documentation. Foreign
exchange risk on significant non-trading transactions (e.g.
acquisitions) is considered on an individual basis.
Credit risk
The Group's financial assets are cash and bank balances and
trade and other receivables. The Group's credit risk is primarily
attributable to its trade receivables. The amounts presented in the
balance sheet are net of allowances for doubtful receivables. The
credit risk on liquid funds and derivative financial instruments is
limited because the counterparties are banks with high credit
ratings assigned by international credit rating agencies.
The Group has a large number of unrelated customers, serving
almost 500,000 during the financial year, and does not have any
significant credit exposure to any particular customer. Each
business segment manages its own exposure to credit risk according
to the economic circumstances and characteristics of the markets
they serve. The Group believes that management of credit risk on a
devolved basis enables it to assess and manage credit risk more
effectively. However, broad principles of credit risk management
practice are observed across the Group, such as the use of credit
rating agencies and the maintenance of a credit control
function.
Liquidity risk
Liquidity risk is the risk that the Group could experience
difficulties in meeting its commitments to creditors as financial
liabilities fall due for payment.
The Group generates significant free cash flow (defined as cash
flow from operations less replacement capital expenditure net of
proceeds of asset disposals, interest paid and tax paid). This free
cash flow is available to the Group to invest in growth capital
expenditure, acquisitions and dividend payments or to reduce
debt.
In addition to the free cash flow from normal trading
activities, additional liquidity is available through the Group's
ABL facility. At 30 April 2012, excess availability under the
enlarged $1.8bn facility was $735m (GBP453m).
Principal risks and uncertainties
The Group faces a number of risks and uncertainties in its
day-to-day operations and it is management's role to mitigate and
manage these risks. The Board has established a formal risk
management process which has identified the following principal
risks and uncertainties which could affect employees, operations,
revenue, profits, cash flows and assets of the Group.
Economic conditions
Potential impact
The construction industry, from which we earn the majority of
our revenue, is cyclical and typically lags the general economic
cycle by between six and eighteen months. Our performance is
currently ahead of the economic cycle and we therefore expect to
see further upside as the economy returns to growth.
Mitigation
-- Prudent management through the different phases of the cycle.
-- Flexibility in the business model.
-- Capital structure and debt facilities arranged in recognition
of the cyclical nature of our market.
Competition
Potential impact
The already competitive market could become even more
competitive and we could suffer increased competition from large
national competitors or small companies operating at a local level
resulting in reduced market share and lower revenue.
Mitigation
-- Create commercial advantage by providing the highest level of
service, consistently and at a price which offers value.
-- Excel in the areas that provide barriers to entry to
newcomers: industry-leading IT, experienced personnel and a broad
network and equipment fleet.
-- Regularly estimate and monitor our market share and track the
performance of our competitors.
Financing
Potential impact
Debt facilities are only ever committed for a finite period of
time and we need to plan to renew our facilities before they mature
and guard against default. Our loan agreements also contain
conditions (known as covenants) with which we must also comply.
Mitigation
-- Maintain conservative 2-3 times net debt to EBITDA leverage
which helps minimise our refinancing risk.
-- Maintain long debt maturities - currently four years.
-- Use of asset-based senior facility means none of our debt
contains quarterly financial covenants when availability under the
enlarged facility ($735m at year end) exceeds $216m.
Business continuity
Potential impact
We are heavily dependent on technology for the smooth running of
our business given the large number of both units of equipment we
rent and our customers. A serious uncured failure in our point of
sale IT platforms would have an immediate impact, rendering us
unable to record and track our high volume, low transaction value
operations.
Mitigation
-- Robust and well protected data centres with multiple data
links to protect against the risk of failure.
-- Detailed business recovery plans which are tested periodically.
-- Separate near-live back-up data centres which are designed to
be able to provide the necessary services in the event of a failure
at the primary site.
People
Potential impact
Retaining and attracting good people is key to delivering
superior performance and customer service.
Excessive staff turnover is likely to impact on our ability to
maintain the appropriate quality of service to our customers and
would ultimately impact our financial performance adversely.
Mitigation
-- Provide well structured and competitive reward and benefit
packages that ensure our ability to attract and retain the
employees we need.
-- Ensure that our staff have the right working environment and
equipment to enable them to do the best job possible and maximise
their satisfaction at work.
-- Invest in training and career development opportunities for
our people to support them in their careers.
Health and safety
Potential impact
Accidents could happen which might result in injury to an
individual, claims against the Group and damage to our
reputation.
Mitigation
-- Maintain appropriate health and safety policies and
procedures to reasonably guard our employees against the risk of
injury.
-- Induction and training programmes reinforce health and safety policies.
-- Programmes to support our customers exercising their
responsibility to their own workforces when using our
equipment.
Compliance with laws and regulations
Potential impact
Failure to comply with the frequently changing regulatory
environment could result in reputational damage or financial
penalty.
Mitigation
-- Maintaining a legal function to oversee management of these
risks and to achieve compliance with relevant legislation.
-- Group-wide ethics policy and whistle blowing arrangements.
-- Policies and practices evolve to take account of changes in legal obligations.
-- Training and induction programmes ensure our staff receive
appropriate training and briefing on the relevant policies.
Environmental
Potential impact
We need to comply with the numerous laws governing environmental
protection and occupational health and safety matters. These laws
regulate such issues as wastewater, stormwater, solid and hazardous
wastes and materials, and air quality. Breaches potentially create
hazards to our employees, damage to our reputation and expose the
Group to, amongst other things, the cost of investigating and
remediating contamination and also fines and penalties for
non-compliance.
Mitigation
-- Policies and procedures in place at all our stores regarding
the need to adhere to local law and regulations.
-- Procurement policies reflect the need for the latest
available emissions management and fuel efficiency tools in our
fleet.
-- Monitoring and reporting of carbon emissions.
OPERATING STATISTICS
Profit centre numbers Staff numbers
2012 2011 2012 2011
Sunbelt 376 356 6,605 6,231
A-Plant 109 106 1,939 1,921
Corporate office - - 11 11
Group 485 462 8,555 8,163
Sunbelt's profit centre numbers include 16 stores resulting from
the acquisition of Topp.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FMMPTMBMTBBT
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