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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Ashtead Group Plc | LSE:AHT | London | Ordinary Share | GB0000536739 | ORD 10P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-38.00 | -0.67% | 5,636.00 | 5,680.00 | 5,682.00 | 5,722.00 | 5,646.00 | 5,702.00 | 1,032,659 | 16:35:03 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Heavy Constr Eq Rental,lease | 9.67B | 1.62B | 3.6961 | 15.37 | 24.86B |
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
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