We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Customisable watchlists with full streaming quotes from leading exchanges, such as LSE, NASDAQ, NYSE, AMEX, Bovespa, BIT and more.
| 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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 52.00 | 0.90% | 5,840.00 | 5,840.00 | 5,842.00 | 5,842.00 | 5,784.00 | 5,788.00 | 47,366 | 10:49:13 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Heavy Constr Eq Rental,lease | 9.67B | 1.62B | 3.6961 | 15.80 | 25.55B |
From May 2019 to May 2024
TIDMAHT
RNS Number : 5376C
Ashtead Group PLC
18 June 2019
18 June 2019
Audited results for the year and unaudited results
for the fourth quarter ended 30 April 2019
Hot Features
Premium
Fourth quarter Year
2019 2018 Growth(1) 2019 2018 Growth(1)
GBPm GBPm % GBPm GBPm %
Underlying results(2,
3)
Rental revenue 1,014.4 798.7 19% 4,138.0 3,418.2 18%
EBITDA 490.4 390.6 17% 2,106.6 1,733.1 19%
Profit before taxation 222.5 185.3 11% 1,110.2 927.3 17%
Earnings per share 35.0p 25.1p 29% 174.2p 127.5p 33%
Statutory results
Revenue 1,105.8 890.8 17% 4,499.6 3,706.0 19%
Profit before taxation 208.6 174.7 10% 1,059.5 862.1 20%
Profit after taxation(4) 154.5 99.9 34% 796.9 968.8 -20%
Earnings per share(4) 32.8p 20.6p 40% 166.1p 195.3p -17%
Full year highlights
-- Revenue up 19%(1) ; rental revenue up 18%(1)
-- Pre-tax profit(2) of GBP1,110m (2018: GBP927m)
-- Earnings per share(2) up 33%(1) to 174.2p (2018: 127.5p)
-- Post-tax profit(4) of GBP797m (2018: GBP969m)
-- GBP1.6bn of capital invested in the business (2018: GBP1.2bn)
-- GBP622m spent on bolt-on acquisitions (2018: GBP392m)
-- Net debt to EBITDA leverage(1) of 1.8 times (2018: 1.6 times)
-- Proposed final dividend of 33.5p, making 40.0p for the full year, up 21% (2018: 33.0p)
(1) Calculated at constant exchange rates applying current period exchange
rates.
(2) Underlying results are stated before exceptional items and intangible
amortisation.
(3) Throughout this announcement we refer to a number of alternative performance
measures which are defined in the Glossary on page 39.
(4) Prior year profit after tax and earnings per share figures include
a one-off benefit from the US Tax Cuts and Jobs Act of 2017.
Ashtead's chief executive, Brendan Horgan, commented:
"The Group delivered a strong quarter with good performance across the business. As a result, Group rental revenue increased 18% for the year and underlying pre-tax profit increased 17% to GBP1,110m, both at constant exchange rates.
We continue to experience strong end markets in North America and are executing well on our strategy of organic growth supplemented by targeted bolt-on acquisitions. We invested GBP1.6bn in capital and a further GBP622m on bolt-on acquisitions in the period, which has added 146 locations across the Group. This investment reflects the structural growth opportunity that we continue to see in the business as we broaden our product offering, geographic reach and end markets, thus increasing market share and diversifying our business.
We remain focused on responsible growth. Our increasing scale and strong margins are delivering good earnings growth and significant free cash flow generation. This provides significant operational and financial flexibility, enabling us to invest in the long-term structural growth opportunity and enhance returns to shareholders, while maintaining leverage within our target range of 1.5 to 2.0 times net debt to EBITDA. We have spent GBP675m under our share buyback programme announced in December 2017, which has now concluded, and expect to spend a minimum of GBP500m on share buybacks in 2019/20.
Our business continues to perform well in supportive end markets. Looking forward, we anticipate a similar level of capital expenditure in 2019/20, consistent with our strategic plan. So, with our business performing well and a strong balance sheet to support our plans, the Board continues to look to the medium term with confidence."
Contacts:
Director of Investor +44 (0)20 7726
Will Shaw Relations 9700
+44 (0)20 7379
Neil Bennett Maitland/AMO } 5151
James McFarlane Maitland/AMO
Brendan Horgan and Michael Pratt will hold a meeting for equity analysts to discuss the results and outlook at 9am on Tuesday, 18 June 2019. The meeting will be webcast live via the Company's website at www.ashtead-group.com and a replay will be available via the website shortly after the meeting concludes. A copy of this announcement and the slide presentation used for the meeting are 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 meeting and conference call for bondholders but any eligible person not having received details should contact the Company's PR advisers, Maitland/AMO (Jessica Sandwell) 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.
Trading results
Revenue EBITDA Operating profit
2019 2018 2019 2018 2019 2018
Sunbelt US in $m 4,988.9 4,153.1 2,453.5 2,062.9 1,545.0 1,293.4
Sunbelt Canada in C$m 344.0 223.4 124.1 68.1 54.8 28.4
Sunbelt US in GBPm 3,824.3 3,103.7 1,880.9 1,541.7 1,184.3 966.6
A-Plant 475.1 471.7 168.4 167.3 62.3 70.2
Sunbelt Canada in GBPm 200.2 130.6 72.2 39.9 31.9 16.6
Group central costs - - (14.9) (15.8) (14.9) (15.9)
4,499.6 3,706.0 2,106.6 1,733.1 1,263.6 1,037.5
Net financing costs (153.4) (110.2)
Profit before amortisation,
exceptional items and
tax 1,110.2 927.3
Amortisation (50.7) (43.5)
Exceptional items - (21.7)
Profit before taxation 1,059.5 862.1
Taxation (charge)/credit (262.6) 106.7
Profit attributable to equity holders
of the Company 796.9 968.8
Margins
Sunbelt US 49.2% 49.7% 31.0% 31.1%
A-Plant 35.5% 35.5% 13.1% 14.9%
Sunbelt Canada 36.1% 30.5% 15.9% 12.7%
Group 46.8% 46.8% 28.1% 28.0%
Group revenue for the year increased 21% to GBP4,500m (2018: GBP3,706m) with strong growth in the US and Canadian markets. This revenue growth, combined with our focus on drop-through, generated underlying profit before tax of GBP1,110m (2018: GBP927m).
The Group's strategy remains unchanged with growth being driven by strong organic growth (same-store and greenfield) supplemented by bolt-on acquisitions. Sunbelt US, A-Plant and Sunbelt Canada delivered 20%, 4% and 66% rental only revenue growth respectively. The significant growth in Sunbelt Canada reflects the impact of acquisitions, most notably the acquisition of CRS in August 2017.
Sunbelt US's revenue growth continues to benefit from cyclical and structural trends and can be explained as follows:
$m
2018 rental only revenue 3,091
Organic (same-store and greenfields) 15% 472
Bolt-ons since 1 May 2017 5% 148
2019 rental only revenue 20% 3,711
Ancillary revenue 17% 926
2019 rental revenue 19% 4,637
Sales revenue 32% 352
2019 total revenue 20% 4,989
Sunbelt US's revenue growth demonstrates the successful execution of our long-term structural growth strategy. We continue to capitalise on the opportunity presented by our markets through a combination of organic growth (same-store growth and greenfields) and bolt-ons as we expand our geographic footprint and our specialty businesses. We added 123 new stores in the US in the year, the majority of which were specialty locations.
Rental only revenue growth was 20% in strong end markets. This growth was driven by increased fleet on rent year-over-year with yield flat. While revenue was impacted by our involvement in the clean-up efforts following hurricanes Florence and Michael, it was much less than last year with estimated incremental rental revenue of $30-35m (2018: c. $100m). Average physical utilisation for the year was 71% (2018: 72%). Sunbelt US's total revenue, including new and used equipment, merchandise and consumable sales, increased 20% to $4,989m (2018: $4,153m).
A-Plant generated rental only revenue of GBP357m, up 4% on the prior year (2018: GBP344m). This was driven by increased fleet on rent with a 1% improvement in yield, mainly due to product mix. The rate environment in the UK market remains competitive. A-Plant's total revenue increased 1% to GBP475m (2018: GBP472m).
In Canada, the acquisitions of CRS and Voisin's are distortive to year-over-year comparisons as they have tripled the size of the Sunbelt Canada business. On a pro forma basis, Canadian rental only revenue increased 18%. Sunbelt Canada's total revenue was C$344m (2018: C$223m).
We continue to focus on operational efficiency as we look to maintain or improve margins. In Sunbelt US, 49% of revenue growth dropped through to EBITDA. The strength of our mature stores' incremental margin is reflected in the fact that this was achieved despite the drag effect of 185 greenfield openings and acquired stores in the last two years. This resulted in an EBITDA margin of 49% (2018: 50%) and contributed to a 19% increase in operating profit to $1,545m (2018: $1,293m) at a margin of 31% (2018: 31%).
The UK market remains competitive and after a period of sustained growth for the business, the focus is now on operational efficiency and improving returns. Drop-through of 52% contributed to an EBITDA margin of 35% (2018: 35%) while operating profit of GBP62m (2018: GBP70m) at a margin of 13% (2018: 15%) reflected the higher depreciation charge of a larger average fleet.
Sunbelt Canada is in a growth phase as it invests to expand its network and develop the business. Significant growth has been achieved while delivering a 36% EBITDA margin and generating an operating profit of C$55m (2018: C$28m) at a margin of 16% (2018: 13%). We continue to expect the Canadian business to generate EBITDA and operating profit margins of around 40% and 20% respectively in the near term.
Reflecting the strong performance of the divisions, Group underlying operating profit increased to GBP1,264m (2018: GBP1,037m), up 19% at constant exchange rates. Net financing costs increased to GBP153m (2018: GBP110m) reflecting a higher average interest rate and higher average debt levels. As a result, Group profit before amortisation of intangibles, exceptional items and taxation was GBP1,110m (2018: GBP927m). After a tax charge of 25% (2018: 32%) of the underlying pre-tax profit, underlying earnings per share increased 33% at constant currency to 174.2p (2018: 127.5p). The reduction in the Group's underlying tax charge from 32% to 25% reflects the reduction in the US federal rate of tax from 35% to 21% with effect from 1 January 2018, following the enactment of the Tax Cuts and Jobs Act of 2017. The underlying cash tax charge was 5%. We anticipate the cash tax charge to increase to c.10% in 2019/20.
Statutory profit before tax was GBP1,059m (2018: GBP862m). This is after amortisation of GBP51m (2018: GBP43m) and, in the prior year, an exceptional charge of GBP22m. The exceptional tax credit of GBP12m (2018: GBP401m) relates to a tax credit of GBP12m (2018: GBP13m) in relation to the amortisation of intangibles. In addition, the prior year includes a GBP7m tax credit in relation to exceptional net financing costs and a GBP381m credit as a result of the change in the US federal tax rate. As a result, basic earnings per share were 166.1p (2018: 195.3p).
Capital expenditure and acquisitions
Capital expenditure for the year was GBP1,587m gross and GBP1,385m net of disposal proceeds (2018: GBP1,239m gross and GBP1,081m net). This level of capital expenditure reflects the strong market and our ability to take market share. Reflecting this investment, the Group's rental fleet at 30 April 2019 at cost was GBP8.3bn. Our average fleet age is now 34 months (2018: 32 months).
We invested GBP622m (2018: GBP392m), including acquired debt, in 24 bolt-on acquisitions during the year as we continue to both expand our footprint and diversify our specialty markets.
We expect a similar level of capital expenditure in 2019/20, consistent with our strategic plan.This should result in low teens revenue growth in 2019/20.
Return on Investment
Sunbelt US's pre-tax return on investment (excluding goodwill and intangible assets) in the 12 months to 30 April 2019 was 24% (2018: 24%). In the UK, return on investment (excluding goodwill and intangible assets) was 9% (2018: 11%). This decline reflects the competitive nature of the UK market and the rate environment. In Canada, return on investment (excluding goodwill and intangible assets) was 12% (2018: 11%). We have made a significant investment in Canada and, as we develop the potential of the market, we expect returns to increase. For the Group as a whole, return on investment (including goodwill and intangible assets) was 18% (2018: 18%).
Cash flow and net debt
As expected, debt increased during the year as we continued to invest in the fleet and made a number of bolt-on acquisitions. In addition, weaker sterling increased reported debt by GBP126m. During the year, we spent GBP460m on share buybacks.
In July, the Group issued $600m 5.25% senior secured notes maturing in August 2026. The proceeds of the issue were used to pay related fees and expenses and repay an element of the amount outstanding under the senior credit facility. In December, the Group also increased and extended its asset-based senior bank facility, with $4.1bn committed until December 2023 at a lower cost. Other principal terms and conditions remain unchanged. This ensures our debt package remains well structured and flexible, enabling us to take advantage of prevailing end market conditions. The Group's debt facilities are now committed for an average of six years at a weighted average interest cost of less than 5%.
Net debt at 30 April 2019 was GBP3,745m (2018: GBP2,712m) while, reflecting our strong earnings growth, the ratio of net debt to EBITDA was 1.8 times (2018: 1.6 times) on a constant currency basis. The Group's target range for net debt to EBITDA is 1.5 to 2 times.
IFRS 16, Leases, is applicable to the Group from 1 May 2019. On transition, this will increase our reported debt by in the region of GBP900m and on a pro forma basis, the ratio of net debt to EBITDA as at 30 April 2019 would have been 2.1 times compared with the 1.8 times above. Accordingly, as a result of the application of IFRS 16, we expect our reported leverage to be 0.3 - 0.4 times higher than previously reported and so we have adjusted our target leverage range to 1.9 - 2.4 times to reflect this change. In the near term, we will continue to report leverage pre and post the impact of IFRS 16. Further details on the impact of IFRS 16 are provided on page 14.
At 30 April 2019, availability under the senior secured debt facility was $1,622m, with an additional $2,385m of suppressed availability - substantially above the $410m 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 33.5p per share (2018: 27.5p) making 40.0p for the year (2018: 33.0p), an increase of 21%. If approved at the forthcoming Annual General Meeting, the final dividend will be paid on 13 September 2019 to shareholders on the register on 16 August 2019.
Capital allocation
The Group remains disciplined in its approach to allocation of capital with the overriding objective being to enhance shareholder value. Our capital allocation framework remains unchanged and prioritises:
-- organic fleet growth; - same-stores; - greenfields; -- bolt-on acquisitions; and
-- a progressive dividend with consideration to both profitability and cash generation that is sustainable through the cycle.
Additionally, we consider further returns to shareholders. In this regard, we assess continuously our medium term plans which take account of investment in the business, growth prospects, cash generation, net debt and leverage. Therefore the amount allocated to buybacks is simply driven by that which is available after organic growth, bolt-on M&A and dividends, whilst allowing us to operate within our 1.5 to 2.0 times target range for net debt to EBITDA (amended to 1.9 to 2.4 times post IFRS 16).
In line with these priorities, we have spent GBP675m under the share buyback programme announced in December 2017, which has now concluded, and expect to spend at least GBP500m in 2019/20.
Current trading and outlook
Our business continues to perform well in supportive end markets. Looking forward, we anticipate a similar level of capital expenditure in 2019/20, consistent with our strategic plan. So, with our business performing well and a strong balance sheet to support our plans, the Board continues to look to the medium term with confidence.
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 2019. Certain parts thereof are not included in this announcement.
"We confirm to the best of our 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;
b) the Strategic 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; and
c) the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide information necessary for shareholders to assess the Group's performance, business model and strategy.
By order of the Board
Eric Watkins
Company secretary
17 June 2019"
CONSOLIDATED INCOME STATEMENT FOR THE THREE MONTHSED 30 APRIL 2019
2019 2018
Before
exceptional Exceptional
Before items items
and and
amortisation Amortisation Total amortisation amortisation Total
GBPm GBPm GBPm GBPm GBPm GBPm
Fourth quarter - unaudited
Revenue
Rental revenue 1,014.4 - 1,014.4 798.7 - 798.7
Sale of new equipment,
merchandise and consumables 43.9 - 43.9 33.4 - 33.4
Sale of used rental
equipment 47.5 - 47.5 58.7 - 58.7
1,105.8 - 1,105.8 890.8 - 890.8
Operating costs
Staff costs (264.8) - (264.8) (214.0) - (214.0)
Used rental equipment
sold (37.9) - (37.9) (46.6) - (46.6)
Other operating costs (312.7) - (312.7) (239.6) - (239.6)
(615.4) - (615.4) (500.2) - (500.2)
EBITDA* 490.4 - 490.4 390.6 - 390.6
Depreciation (226.2) - (226.2) (177.7) - (177.7)
Amortisation of intangibles - (13.9) (13.9) - (10.6) (10.6)
Operating profit 264.2 (13.9) 250.3 212.9 (10.6) 202.3
Interest expense (41.7) - (41.7) (27.6) - (27.6)
Profit on ordinary
activities
before taxation 222.5 (13.9) 208.6 185.3 (10.6) 174.7
Taxation (57.5) 3.4 (54.1) (61.9) (12.9) (74.8)
Profit attributable
to equity
holders of the Company 165.0 (10.5) 154.5 123.4 (23.5) 99.9
Basic earnings per
share 35.0p (2.2p) 32.8p 25.1p (4.5p) 20.6p
Diluted earnings per
share 34.8p (2.2p) 32.6p 25.0p (4.5p) 20.5p
* EBITDA is presented here as an alternative performance measure as it is commonly used by investors and lenders.
All revenue and profit is generated from continuing operations.
Details of principal risks and uncertainties are given in the Review of Fourth Quarter, Balance Sheet and Cash Flow accompanying these condensed consolidated financial statements.
CONSOLIDATED INCOME STATEMENT FOR THE YEARED 30 APRIL 2019
2019 2018
Before
exceptional Exceptional
Before items items
and and
amortisation Amortisation Total amortisation amortisation Total
GBPm GBPm GBPm GBPm GBPm GBPm
Year to 30 April 2019
- audited
Revenue
Rental revenue 4,138.0 - 4,138.0 3,418.2 - 3,418.2
Sale of new equipment,
merchandise and consumables 170.5 - 170.5 139.2 - 139.2
Sale of used rental
equipment 191.1 - 191.1 148.6 - 148.6
4,499.6 - 4,499.6 3,706.0 - 3,706.0
Operating costs
Staff costs (1,019.4) - (1,019.4) (863.4) - (863.4)
Used rental equipment
sold (159.7) - (159.7) (128.2) - (128.2)
Other operating costs (1,213.9) - (1,213.9) (981.3) - (981.3)
(2,393.0) - (2,393.0) (1,972.9) - (1,972.9)
EBITDA* 2,106.6 - 2,106.6 1,733.1 - 1,733.1
Depreciation (843.0) - (843.0) (695.6) - (695.6)
Amortisation of intangibles - (50.7) (50.7) - (43.5) (43.5)
Operating profit 1,263.6 (50.7) 1,212.9 1,037.5 (43.5) 994.0
Investment income 0.1 - 0.1 - - -
Interest expense (153.5) - (153.5) (110.2) (21.7) (131.9)
Profit on ordinary
activities
before taxation 1,110.2 (50.7) 1,059.5 927.3 (65.2) 862.1
Taxation (274.9) 12.3 (262.6) (294.8) 401.5 106.7
Profit attributable
to equity
holders of the Company 835.3 (38.4) 796.9 632.5 336.3 968.8
Basic earnings per
share 174.2p (8.1p) 166.1p 127.5p 67.8p 195.3p
Diluted earnings per
share 173.4p (8.0p) 165.4p 126.9p 67.5p 194.4p
* EBITDA is presented here as an alternative performance measure as it is commonly used by investors and lenders.
All revenue and profit is generated from continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Audited
Three months Year to
to
30 April 30 April
2019 2018 2019 2018
GBPm GBPm GBPm GBPm
Profit attributable to equity holders of
the Company for the period 154.5 99.9 796.9 968.8
Items that will not be reclassified to profit
or loss:
Remeasurement of the defined benefit pension
plan (3.7) 8.7 (3.7) 8.7
Tax on defined benefit pension plan 0.7 (1.5) 0.7 (1.5)
(3.0) 7.2 (3.0) 7.2
Items that may be reclassified subsequently
to profit or loss:
Foreign currency translation differences 20.6 61.4 108.9 (115.2)
Total comprehensive income for the period 172.1 168.5 902.8 860.8
CONSOLIDATED BALANCE SHEET AT 30 APRIL 2019
Audited
2019 2018
GBPm GBPm
Current assets
Inventories 83.5 55.2
Trade and other receivables 843.6 669.4
Current tax asset 25.3 23.9
Cash and cash equivalents 12.8 19.1
965.2 767.6
Non-current assets
Property, plant and equipment
- rental equipment 5,413.3 4,430.5
- other assets 573.7 451.5
5,987.0 4,882.0
Goodwill 1,144.7 882.6
Other intangible assets 260.6 206.3
Net defined benefit pension plan asset - 4.5
7,392.3 5,975.4
Total assets 8,357.5 6,743.0
Current liabilities
Trade and other payables 632.4 617.5
Current tax liability 16.4 13.1
Short-term borrowings 2.3 2.7
Provisions 42.5 25.8
693.6 659.1
Non-current liabilities
Long-term borrowings 3,755.4 2,728.4
Provisions 46.0 34.6
Deferred tax liabilities 1,061.1 794.0
Net defined benefit pension plan liability 0.9 -
4,863.4 3,557.0
Total liabilities 5,557.0 4,216.1
Equity
Share capital 49.9 49.9
Share premium account 3.6 3.6
Capital redemption reserve 6.3 6.3
Own shares held by the Company (622.6) (161.0)
Own shares held by the ESOT (24.6) (20.0)
Cumulative foreign exchange translation
differences 234.7 125.8
Retained reserves 3,153.2 2,522.3
Equity attributable to equity holders
of the Company 2,800.5 2,526.9
Total liabilities and equity 8,357.5 6,743.0
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 APRIL 2019
Own Cumulative
Own shares foreign
Share Capital shares held exchange
Share premium redemption held through translation Retained
by the
capital account reserve Company the ESOT differences reserves Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 May 2017 49.9 3.6 6.3 - (16.7) 241.0 1,686.0 1,970.1
Profit for the
year - - - - - - 968.8 968.8
Other comprehensive
income:
Foreign currency
translation
differences - - - - - (115.2) - (115.2)
Remeasurement of
the defined
benefit pension
plan - - - - - - 8.7 8.7
Tax on defined
benefit
pension plan - - - - - - (1.5) (1.5)
Total comprehensive
income
for the year - - - - - (115.2) 976.0 860.8
Dividends paid - - - - - - (140.5) (140.5)
Own shares purchased
by
the ESOT - - - - (10.2) - - (10.2)
Own shares purchased
by
the Company - - - (161.0) - - - (161.0)
Share-based payments - - - - 6.9 - 0.1 7.0
Tax on share-based
payments - - - - - - 0.7 0.7
At 30 April 2018 49.9 3.6 6.3 (161.0) (20.0) 125.8 2,522.3 2,526.9
Profit for the
year - - - - - - 796.9 796.9
Other comprehensive
income:
Foreign currency
translation
differences - - - - - 108.9 - 108.9
Remeasurement of
the defined
benefit pension
plan - - - - - - (3.7) (3.7)
Tax on defined
benefit
pension plan - - - - - - 0.7 0.7
Total comprehensive
income
for the year - - - - - 108.9 793.9 902.8
Dividends paid - - - - - - (164.2) (164.2)
Own shares purchase
by
the ESOT - - - - (14.2) - - (14.2)
Own shares purchased
by
the Company - - - (461.6) - - - (461.6)
Share-based payments - - - - 9.6 - (2.0) 7.6
Tax on share-based
payments - - - - - - 3.2 3.2
At 30 April 2019 49.9 3.6 6.3 (622.6) (24.6) 234.7 3,153.2 2,800.5
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEARED 30 APRIL 2019
Audited
2019 2018
GBPm GBPm
Cash flows from operating activities
Cash generated from operations before exceptional
items and changes in rental equipment 2,042.5 1,681.2
Payments for rental property, plant and equipment (1,503.5) (1,081.7)
Proceeds from disposal of rental property,
plant and equipment 181.6 151.8
Cash generated from operations 720.6 751.3
Financing costs paid (net) (142.9) (110.0)
Exceptional financing costs paid - (25.2)
Tax paid (net) (51.0) (97.6)
Net cash generated from operating activities 526.7 518.5
Cash flows from investing activities
Acquisition of businesses (591.3) (359.0)
Payments for non-rental property, plant and
equipment (168.7) (138.6)
Proceeds from disposal of non-rental property,
plant and equipment 10.2 8.9
Payments for purchase of intangible assets - (2.6)
Net cash used in investing activities (749.8) (491.3)
Cash flows from financing activities
Drawdown of loans 1,820.3 1,580.8
Redemption of loans (963.8) (1,284.6)
Capital element of finance lease payments (1.2) (1.4)
Dividends paid (164.2) (140.5)
Purchase of own shares by the ESOT (14.2) (10.2)
Purchase of own shares by the Company (460.4) (158.2)
Net cash generated from/(used in) financing
activities 216.5 (14.1)
(Decrease)/increase in cash and cash equivalents (6.6) 13.1
Opening cash and cash equivalents 19.1 6.3
Effect of exchange rate difference 0.3 (0.3)
Closing cash and cash equivalents 12.8 19.1
Reconciliation of net cash flows to net debt
Decrease/(increase) in cash and cash equivalents
in the period 6.6 (13.1)
Increase in debt through cash flow 855.3 294.8
Change in net debt from cash flows 861.9 281.7
Debt acquired 28.4 40.7
Exchange differences 126.3 (139.8)
Non-cash movements:
- deferred costs of debt raising 15.4 (0.5)
- capital element of new finance leases 0.9 2.2
Increase in net debt in the period 1,032.9 184.3
Net debt at 1 May 2,712.0 2,527.7
Net debt at 30 April 3,744.9 2,712.0
NOTES TO THE CONDENSED CONSOLIDATED 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 financial statements as at, and for the year ended, 30 April 2019 comprise the Company and its subsidiaries ('the Group').
The financial statements for the year ended 30 April 2019 were approved by the directors on 17 June 2019.
This preliminary announcement of the results for the year ended 30 April 2019 contains information derived from the forthcoming 2018/19 Annual Report & Accounts and does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The statutory accounts for the year ended 30 April 2019 were approved by the directors on 17 June 2019 and will be delivered to shareholders and filed with the Registrar of Companies and made available on the Group's website at www.ashtead-group.com in July 2019. 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 financial statements for the year ended and quarter ended 30 April 2019 have been prepared in accordance with relevant International Financial Reporting Standards ('IFRS') as adopted by the European Union and the accounting policies set out in the Group's Annual Report and Accounts for the year ended 30 April 2018, except for the following new standards which are mandatory for the first time for the financial year beginning 1 May 2018:
-- IFRS 9, 'Financial instruments' ('IFRS 9'), relates to the classification, measurement and recognition of financial assets and liabilities, impairment of financial assets and hedge accounting.
There have been no changes to the measurement of the Group's financial assets or liabilities as a result of our adoption of IFRS 9, and no changes to the Group's level of provisioning as a result of our adoption of IFRS 9. The Group has no arrangements to which it applies hedge accounting.
-- IFRS 15, 'Revenue from Contracts with Customers' ('IFRS 15'), provides a five-step model of accounting for revenue recognition which includes identifying the contract, identifying performance obligations, determining the transaction price, allocating the transaction price to different performance obligations and the timing of recognition of revenue in connection with different performance obligations.
The Group's adoption of IFRS 15 has had no impact as our accounting policies were already in line with IFRS 15.
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 condensed consolidated financial statements and summarised in the Glossary on page 39.
The condensed consolidated 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 financial statements.
The exchange rates used in respect of the US dollar ($) and Canadian dollar (C$) are:
US dollar Canadian dollar
2019 2018 2019 2018
Average for the three months ended
30 April 1.31 1.40 1.74 1.79
Average for the year ended 30 April 1.30 1.34 1.72 1.71
At 30 April 1.30 1.38 1.75 1.77
Future financial reporting changes
IFRS 16, Leases, is applicable for the Group from 1 May 2019 and provides a new model for lease accounting under which lessees will recognise a lease liability reflecting future lease payments and a right-of-use asset on the balance sheet for all lease contracts other than certain short-term leases and leases of low-value assets. In the income statement, depreciation on the right-of-use asset and an interest expense on the lease liability will be recognised.
The Group has completed its work in assessing the impact of the new standard, which requires a number of judgements in its application:
-- transition approach: the Group has elected to apply IFRS 16 using the modified retrospective approach, with the right-of-use asset equal to the lease liability on transition subject to required transitional adjustments. As such, the cumulative effect of adopting IFRS 16 will be recognised as an adjustment to opening retained earnings on 1 May 2019 with no restatement of comparatives;
-- recognition exemption options: short-term leases and leases of low-value assets will be excluded from the lease liability recognised, as permitted by IFRS 16;
-- assessment of lease term: most of the Group's leases relate to properties. The typical structure of our property leases is an initial lease term (usually ten years) with a series of options to extend the lease at our discretion (usually two or three five-year options). The Group has concluded that recognition of the lease term, including the extension options, best reflects the Group's assessment of the options available, our past experience and growth strategy. The average remaining lease term at 1 May 2019 was 12 years, compared with the minimum remaining average lease term of four years; and
-- discount rate: IFRS 16 requires future lease payments to be discounted using the interest rate implicit in the lease, or where this rate cannot be readily determined, to use an incremental borrowing rate ('IBR'). The Group has concluded that it is not possible to determine the rate implicit in its portfolio of property leases and therefore will adopt an IBR methodology. The weighted average discount rate at 1 May 2019 was 4%.
On 1 May 2019, an additional lease liability in the region of GBP900m will be recognised on the balance sheet together with a corresponding right-of-use asset, adjusted for rent prepayments and accruals as at the date of transition. This compares with the undiscounted minimum lease commitment of GBP495m, as determined in accordance with existing accounting standards.
Based on the leases held at 1 May 2019 and our anticipated greenfield opening programme, our best estimate of the income statement impact for 2019/20 is as follows:
-- EBITDA is expected to increase by c. GBP100m as the operating lease expense which was previously recognised is replaced with depreciation on the right-of-use asset and interest on the lease liability;
-- operating profit will increase by c. GBP15m due to the benefit from the elimination of the historical operating lease charge, partially offset by depreciation on the right-of-use asset;
-- profit before tax is estimated to decrease by c. GBP30m.
The total income statement charge over the life of the leases remains unchanged, with the difference reflecting the 'front-end loaded' nature of operating lease charges under the IFRS 16 model. In addition, we expect total Group leverage to increase by 0.3x - 0.4x as a result of the adoption of IFRS 16.
There are no other IFRS or IFRIC Interpretations that are not yet effective that would be expected to have a material impact on the Group.
3. Segmental analysis
Three months to 30 April 2019
Sunbelt Corporate
Sunbelt A-Plant Canada items Group
US
GBPm GBPm GBPm GBPm GBPm
Revenue
Rental revenue 875.1 98.2 41.1 - 1,014.4
Sale of new equipment, merchandise
and
consumables 31.9 8.1 3.9 - 43.9
Sale of used rental equipment 33.9 8.4 5.2 - 47.5
940.9 114.7 50.2 - 1,105.8
Operating profit before amortisation 256.1 7.6 4.2 (3.7) 264.2
Amortisation (13.9)
Net financing costs (41.7)
Profit before taxation 208.6
Taxation (54.1)
Profit attributable to equity
shareholders 154.5
Three months to 30 April 2018
Sunbelt Corporate
Sunbelt A-Plant Canada items Group
US
GBPm GBPm GBPm GBPm GBPm
Revenue
Rental revenue 672.9 96.7 29.1 - 798.7
Sale of new equipment, merchandise
and
consumables 22.6 6.7 4.1 - 33.4
Sale of used rental equipment 42.5 14.3 1.9 - 58.7
738.0 117.7 35.1 - 890.8
Operating profit before amortisation 207.2 13.4 (3.1) (4.6) 212.9
Amortisation (10.6)
Net financing costs (27.6)
Profit before taxation 174.7
Taxation (74.8)
Profit attributable to equity
shareholders 99.9
Year to 30 April 2019
Sunbelt Corporate
Sunbelt A-Plant Canada items Group
US
GBPm GBPm GBPm GBPm GBPm
Revenue
Rental revenue 3,554.2 416.4 167.4 - 4,138.0
Sale of new equipment, merchandise
and
consumables 118.4 32.5 19.6 - 170.5
Sale of used rental equipment 151.7 26.2 13.2 - 191.1
3,824.3 475.1 200.2 - 4,499.6
Operating profit before amortisation 1,184.3 62.3 31.9 (14.9) 1,263.6
Amortisation (50.7)
Net financing costs (153.4)
Profit before taxation 1,059.5
Taxation (262.6)
Profit attributable to equity
shareholders 796.9
Year to 30 April 2018
Sunbelt Corporate
Sunbelt A-Plant Canada items Group
US
GBPm GBPm GBPm GBPm GBPm
Revenue
Rental revenue 2,904.6 405.3 108.3 - 3,418.2
Sale of new equipment, merchandise
and
consumables 91.9 31.4 15.9 - 139.2
Sale of used rental equipment 107.2 35.0 6.4 - 148.6
3,103.7 471.7 130.6 - 3,706.0
Operating profit before amortisation 966.6 70.2 16.6 (15.9) 1,037.5
Amortisation (43.5)
Net financing costs (110.2)
Exceptional items (21.7)
Profit before taxation 862.1
Taxation 106.7
Profit attributable to equity
shareholders 968.8
Sunbelt Corporate
Sunbelt A-Plant Canada items Group
US
GBPm GBPm GBPm GBPm GBPm
At 30 April 2019
Segment assets 6,991.8 851.6 475.7 0.3 8,319.4
Cash 12.8
Taxation assets 25.3
Total assets 8,357.5
At 30 April 2018
Segment assets 5,507.6 847.3 344.6 0.5 6,700.0
Cash 19.1
Taxation assets 23.9
Total assets 6,743.0
4. Operating costs and other income
2019 2018
Before Before
amortisation Amortisation Total amortisation Amortisation Total
GBPm GBPm GBPm GBPm GBPm GBPm
Three months
to 30 April
Staff costs:
Salaries 239.3 - 239.3 194.3 - 194.3
Social
security
costs 19.4 - 19.4 15.7 - 15.7
Other pension
costs 6.1 - 6.1 4.0 - 4.0
264.8 - 264.8 214.0 - 214.0
Used rental
equipment
sold 37.9 - 37.9 46.6 - 46.6
Other
operating
costs:
Vehicle costs 64.1 - 64.1 49.8 - 49.8
Spares,
consumables &
external
repairs 61.6 - 61.6 42.2 - 42.2
Facility
costs 35.5 - 35.5 28.6 - 28.6
Other
external
charges 151.5 - 151.5 119.0 - 119.0
312.7 - 312.7 239.6 - 239.6
Depreciation
and
amortisation:
Depreciation 226.2 - 226.2 177.7 - 177.7
Amortisation
of
intangibles - 13.9 13.9 - 10.6 10.6
226.2 13.9 240.1 177.7 10.6 188.3
841.6 13.9 855.5 677.9 10.6 688.5
2019 2018
Before Before
amortisation Amortisation Total amortisation Amortisation Total
GBPm GBPm GBPm GBPm GBPm GBPm
Year to 30
April
Staff costs:
Salaries 930.3 - 930.3 788.2 - 788.2
Social
security
costs 70.6 - 70.6 60.3 - 60.3
Other pension
costs 18.5 - 18.5 14.9 - 14.9
1,019.4 - 1,019.4 863.4 - 863.4
Used rental
equipment
sold 159.7 - 159.7 128.2 - 128.2
Other
operating
costs:
Vehicle costs 267.8 - 267.8 211.3 - 211.3
Spares,
consumables &
external
repairs 227.4 - 227.4 181.5 - 181.5
Facility
costs 128.4 - 128.4 108.4 - 108.4
Other
external
charges 590.3 - 590.3 480.1 - 480.1
1,213.9 - 1,213.9 981.3 - 981.3
Depreciation
and
amortisation:
Depreciation 843.0 - 843.0 695.6 - 695.6
Amortisation
of
intangibles - 50.7 50.7 - 43.5 43.5
843.0 50.7 893.7 695.6 43.5 739.1
3,236.0 50.7 3,286.7 2,668.5 43.5 2,712.0
5. Amortisation and exceptional items
Amortisation relates to the periodic write-off of intangible assets. Exceptional items are items of income or expense which the directors believe should be disclosed separately by virtue of their significant size or nature to enable a better understanding of the Group's financial performance. Underlying profit and earnings per share are stated before amortisation of intangibles and exceptional items.
Three months Year to
to
30 April 30 April
2019 2018 2019 2018
GBPm GBPm GBPm GBPm
Amortisation of intangibles 13.9 10.6 50.7 43.5
Write-off of deferred financing costs - - - 8.1
Release of premium - - - (11.6)
Early redemption fee - - - 23.7
Call period interest - - - 1.5
Taxation:
- tax on exceptional items and amortisation (3.4) (3.1) (12.3) (20.0)
- reduction in US deferred tax liability
due to change in
US federal tax rate - (4.7) - (402.2)
- reassessment of historical amounts
deductible for tax - 20.7 - 20.7
10.5 23.5 38.4 (336.3)
The costs associated with the redemption of the $900m 6.5% senior secured notes in the prior year were classified as exceptional items. The write-off of deferred financing costs consisted of the unamortised balance of the costs relating to the notes, whilst the release of premium related to the unamortised element of the premium which arose at the time of issuance of the $400m add-on to the initial $500m 6.5% senior secured notes. In addition, an early redemption fee of GBP24m ($31m) was paid to redeem the notes prior to their scheduled maturity. The call period interest represents the interest charge on the $900m notes for the period from the issue of the new $1.2bn notes to the date the $900m notes were redeemed. Of these items, total cash costs were GBP25m, whilst GBP3.5m (net income) were non-cash items and credited to the income statement.
In addition, the US Tax Cuts and Jobs Act of 2017 was enacted in December 2017 and, amongst other things, reduced the US federal tax rate from 35% to 21%. The exceptional tax credit of GBP402m ($543m) in the prior year arose from the resultant remeasurement of the Group's US deferred tax liabilities at the new rate of 21% rather than the historical rate of 35%. The exceptional deferred tax charge of GBP21m ($28m) related to the reassessment of historical amounts deductible for tax purposes in the US.
The items detailed in the table above are presented in the income statement as follows:
Three months Year to
to
30 April 30 April
2019 2018 2019 2018
GBPm GBPm GBPm GBPm
Amortisation of intangibles 13.9 10.6 50.7 43.5
Charged in arriving at operating profit 13.9 10.6 50.7 43.5
Net financing costs - - - 21.7
Charged in arriving at profit before
taxation 13.9 10.6 50.7 65.2
Taxation (3.4) 12.9 (12.3) (401.5)
10.5 23.5 38.4 (336.3)
6. Net financing costs
Three months Year to
to
30 April 30 April
2019 2018 2019 2018
GBPm GBPm GBPm GBPm
Investment income:
Net interest on the net defined benefit - - (0.1) -
pension plan asset
Interest expense:
Bank interest payable 19.0 12.4 68.6 45.6
Interest payable on second priority senior
secured notes 21.2 14.1 79.1 60.5
Interest payable on finance leases 0.1 - 0.4 0.3
Net interest on the net defined benefit
pension plan liability - 0.1 - 0.1
Non-cash unwind of discount on provisions 0.1 0.1 0.8 0.7
Amortisation of deferred debt raising
costs 1.3 0.9 4.6 3.0
Total interest expense 41.7 27.6 153.5 110.2
Net financing costs before exceptional
items 41.7 27.6 153.4 110.2
Exceptional items - - - 21.7
Net financing costs 41.7 27.6 153.4 131.9
7. Taxation
The tax charge for the year has been computed using a tax rate of 25% in the US (2018: 34%), 19% in the UK (2018: 19%) and 27% in Canada (2018: 27%). The blended rate for the Group as a whole is 25% (2018: 32%).
The tax charge of GBP275m (2018: GBP295m) on the underlying profit before taxation of GBP1,110m (2018: GBP927m) can be explained as follows:
Year to 30 April
2019 2018
GBPm GBPm
Current tax
- current tax on income for the period 54.3 80.4
- adjustments to prior year 1.1 (10.4)
55.4 70.0
Deferred tax
- origination and reversal of temporary
differences 218.1 213.0
- adjustments to prior year 1.4 11.8
219.5 224.8
Tax on underlying activities 274.9 294.8
Comprising:
- UK 17.8 17.9
- US 252.8 275.0
- Canada 4.3 1.9
274.9 294.8
In addition, the exceptional tax credit of GBP12m (2018: GBP401m) relates to a tax credit of GBP12m (2018: GBP20m) on amortisation and exceptional items of GBP51m (2018: GBP65m) and consists of a current tax credit of GBPnil (2018: GBP7m) relating to the US, and a deferred tax credit of GBP2m (2018: GBP2m) relating to the UK, GBP7m (2018: GBP9m) relating to the US and GBP3m (2018: GBP2m) relating to Canada. In addition, the 2018 tax credit of GBP401m included a US current tax charge of GBP25m and a US deferred tax credit of GBP406m as a result of the reduction in the US federal tax rate and associated remeasurement of deferred tax liabilities.
8. Earnings per share
Basic and diluted earnings per share for the three and twelve months ended 30 April 2019 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 Year to
to
30 April 30 April
2019 2018 2019 2018
Profit for the financial period (GBPm) 154.5 99.9 796.9 968.8
Weighted average number of shares
(m) - basic 471.4 492.1 479.7 496.0
- diluted 473.4 494.3 481.7 498.3
Basic earnings per share 32.8p 20.6p 166.1p 195.3p
Diluted earnings per share 32.6p 20.5p 165.4p 194.4p
Underlying earnings per share (defined in any period as the earnings before amortisation of intangibles and exceptional items 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 Year to
to
30 April 30 April
2019 2018 2019 2018
Basic earnings per share 32.8p 20.6p 166.1p 195.3p
Amortisation of intangibles 2.9p 2.1p 10.6p 8.7p
Exceptional items - - - 4.4p
Tax on exceptional items and amortisation (0.7p) (0.6p) (2.5p) (4.0p)
Exceptional tax credit (US tax reforms) - (1.2p) - (81.1p)
Exceptional tax charge (reassessment
of
historical amounts deductible for
tax) - 4.2p - 4.2p
Underlying earnings per share 35.0p 25.1p 174.2p 127.5p
9. Dividends
During the year, a final dividend in respect of the year ended 30 April 2018 of 27.5p (2017: 22.75p) per share and an interim dividend for the year ended 30 April 2019 of 6.5p (2018: 5.5p) per share were paid to shareholders costing GBP164m (2018: GBP140m).
In addition, the directors are proposing a final dividend in respect of the year ended 30 April 2019 of 33.5p (2018: 27.5p) per share which will absorb GBP156m of shareholders' funds, based on the 466m shares qualifying for dividend on 17 June 2019. Subject to approval by shareholders, it will be paid on 13 September 2019 to shareholders who are on the register of members on 16 August 2019.
10. Property, plant and equipment
2019 2018
Rental Rental
equipment Total equipment Total
Net book value GBPm GBPm GBPm GBPm
At 1 May 4,430.5 4,882.0 4,092.8 4,504.6
Exchange difference 210.9 231.1 (206.0) (224.7)
Reclassifications (1.9) - (1.5) -
Additions 1,416.8 1,587.1 1,100.4 1,238.7
Acquisitions 259.4 296.9 182.4 191.2
Disposals (156.9) (167.1) (123.5) (132.2)
Depreciation (745.5) (843.0) (614.1) (695.6)
At 30 April 5,413.3 5,987.0 4,430.5 4,882.0
11. Borrowings
30 April 30 April
2019 2018
GBPm GBPm
Current
Finance lease obligations 2.3 2.7
Non-current
First priority senior secured bank debt 2,010.7 1,508.5
Finance lease obligations 2.7 2.6
5.625% second priority senior secured notes,
due 2024 379.3 358.4
4.125% second priority senior secured notes,
due 2025 454.7 429.5
5.250% second priority senior secured notes, 453.6 -
due 2026
4.375% second priority senior secured notes,
due 2027 454.4 429.4
3,755.4 2,728.4
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.
In July, the Group issued $600m 5.25% senior secured notes maturing in August 2026. The proceeds of the issue were used to pay related fees and expenses and repay an element of the amount outstanding under the senior credit facility.
In December, the Group amended its asset-based senior credit facility so that under the terms of our asset-based senior credit facility, $4.1bn is committed until December 2023 at a lower cost. The other principal terms and conditions remain unchanged.
The $500m 5.625% senior secured notes mature in October 2024, the $600m 4.125% senior secured notes mature in August 2025, the $600m 5.25% senior secured notes mature in August 2026 and the $600m 4.375% senior secured notes mature in August 2027. Our debt facilities therefore remain committed for the long term, with an average maturity of six years. The weighted average interest cost of these facilities (including non-cash amortisation of deferred debt raising costs) is less than 5%. The terms of the 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 credit 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 $410m. The covenant ratio is calculated each quarter. At 30 April 2019, the fixed charge ratio exceeded the covenant requirement.
At 30 April 2019, availability under the senior secured bank facility was $1,622m ($1,115m at 30 April 2018), with an additional $2,385m of suppressed availability, meaning that the covenant did not apply at 30 April 2019 and is unlikely to apply in forthcoming quarters.
Fair value of financial instruments
At 30 April 2019, the Group had no derivative financial instruments.
With the exception of the Group's second priority senior secured notes detailed in the table below, the carrying value of non-derivative financial assets and liabilities is considered to equate materially to their fair value.
At 30 April
2019 2018
Book Fair Book Fair
value value value value
GBPm GBPm GBPm GBPm
- 5.625% senior secured notes 383.5 397.5 363.0 374.7
- 4.125% senior secured notes 460.3 455.1 435.5 413.8
- 5.250% senior secured notes 460.3 476.9 - -
- 4.375% senior secured notes 460.3 451.6 435.5 407.2
1,764.4 1,781.1 1,234.0 1,195.7
Deferred costs of raising
finance (22.4) - (16.7) -
1,742.0 1,781.1 1,217.3 1,195.7
The fair value of the second priority senior secured notes has been calculated using quoted market prices at 30 April 2019.
12. Share capital
Ordinary shares of 10p each:
2019 2018 2019 2018
Number Number GBPm GBPm
Issued and fully paid 499,225,712 499,225,712 49.9 49.9
During the year, the Company purchased 22.4m ordinary shares at a total cost of GBP462m under the share buyback programme announced in December 2017, which are held in treasury. At 30 April 2019, 30.3m (2018: 7.9m) shares were held by the Company and a further 1.6m (2018: 1.7m) shares were held by the Company's Employee Share Ownership Trust.
13. Notes to the cash flow statement
a) Cash flow from operating activities
Year to 30 April
2019 2018
GBPm GBPm
Operating profit before exceptional items and
amortisation 1,263.6 1,037.5
Depreciation 843.0 695.6
EBITDA before exceptional items 2,106.6 1,733.1
Profit on disposal of rental equipment (31.4) (20.4)
Profit on disposal of other property, plant
and equipment (0.8) (0.7)
Increase in inventories (14.9) (7.7)
Increase in trade and other receivables (84.7) (83.1)
Increase in trade and other payables 60.7 53.0
Exchange differences (0.6) -
Other non-cash movements 7.6 7.0
Cash generated from operations before exceptional
items
and changes in rental equipment 2,042.5 1,681.2
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 translated to pounds sterling at rates of exchange ruling at the balance sheet date.
Non-cash movements
1 May Cash Exchange Debt Other 30 April
2018 flow movement acquired movements 2019
GBPm GBPm GBPm GBPm GBPm GBPm
Short-term borrowings 2.7 (9.1) - 7.9 0.8 2.3
Long-term borrowings 2,728.4 864.4 126.6 20.5 15.5 3,755.4
Total liabilities from
financing activities 2,731.1 855.3 126.6 28.4 16.3 3,757.7
Cash and cash
equivalents (19.1) 6.6 (0.3) - - (12.8)
Net debt 2,712.0 861.9 126.3 28.4 16.3 3,744.9
Non-cash movements
1 May Cash Exchange Debt Other 30 April
2017 flow movement acquired movements 2018
GBPm GBPm GBPm GBPm GBPm GBPm
Short-term borrowings 2.6 (42.1) - 40.7 1.5 2.7
Long-term borrowings 2,531.4 336.9 (140.1) - 0.2 2,728.4
Total liabilities from
financing activities 2,534.0 294.8 (140.1) 40.7 1.7 2,731.1
Cash and cash
equivalents (6.3) (13.1) 0.3 - - (19.1) Net debt 2,527.7 281.7 (139.8) 40.7 1.7 2,712.0
Details of the Group's cash and debt are given in note 11 and the Review of Fourth Quarter, Balance Sheet and Cash Flow accompanying these condensed consolidated financial statements.
c) Acquisitions
Year to 30 April
2019 2018
GBPm GBPm
Cash consideration paid:
- acquisitions in the period 589.4 351.2
- contingent consideration 1.9 7.8
591.3 359.0
During the year, 24 businesses were acquired with cash paid of GBP589m (2018: GBP351m), after taking account of net cash acquired of GBP3m. Further details are provided in note 14.
Contingent consideration of GBP2m (2018: GBP8m) was paid relating to prior year acquisitions.
14. Acquisitions
During the year, the following acquisitions were completed:
i) On 1 June 2018, Sunbelt Canada acquired the entire share capital of Voisin's Equipment Rental Ltd. and Universal Rental Services Limited (together 'Voisin's') for an aggregate cash consideration of GBP18m (C$32m) with contingent consideration of up to GBP1m (C$2.5m), payable over the next year, depending on revenue meeting or exceeding certain thresholds. Including acquired debt, the total cash consideration was GBP44m (C$76m). Voisin's is a general equipment rental business in Ontario, Canada.
ii) On 29 June 2018, A-Plant acquired the entire share capital of Astra Site Services Limited ('Astra') for a cash consideration of GBP6m. Including acquired debt, the total cash consideration was GBP7m. Astra is a hydraulic attachment rental business.
iii) On 3 July 2018, Sunbelt Canada acquired the entire share capital of Richlock Rentals Ltd. ('Richlock') for a cash consideration of GBP7m (C$13m). Richlock is a general equipment rental business in British Columbia, Canada.
iv) On 17 July 2018, Sunbelt US acquired the business and assets of Wistar Equipment, Inc. ('Wistar') for a cash consideration of GBP18m ($23m). Wistar is an industrial power rental business in New Jersey.
v) On 20 July 2018, Sunbelt US acquired the entire share capital of Blagrave No 2 Limited, the parent company of Mabey, Inc. ('Mabey') for a cash consideration of GBP70m ($93m). Mabey is a ground protection and trench shoring business on the east coast of the US.
vi) On 8 August 2018, Sunbelt US acquired the business and assets of Berry Holdings, LLC, trading as Taylor Rental Center ('Taylor'), for a cash consideration of GBP1m ($1m). Taylor is a general equipment rental business in Ohio.
vii) On 13 August 2018, Sunbelt US acquired the business and assets of Interstate Aerials, LLC ('Interstate') for a cash consideration of GBP161m ($206m). Interstate is a general equipment rental business in Philadelphia and northern New Jersey.
viii) On 5 September 2018, Sunbelt US acquired the business and assets of Equipment 4 Rent ('E4R') for a cash consideration of GBP13m ($17m), with contingent consideration of up to GBP0.4m ($0.5m), payable over the next year, depending on revenue meeting or exceeding certain thresholds. E4R is a general equipment rental business in Massachusetts.
ix) On 25 September 2018, Sunbelt US acquired the business and assets of Gauer Service & Supply Company ('Gauer') for a cash consideration of GBP1m ($1m). Gauer is a general equipment rental business in Ohio.
x) On 28 September 2018, Sunbelt US acquired the business and assets of Midwest High Reach, Inc. ('MHR') for a cash consideration of GBP34m ($45m). MHR is a general equipment rental business in Illinois.
xi) On 1 October 2018, Sunbelt Canada acquired the business and assets of 2231147 Ontario Inc., trading as Innovative Industrial Solutions ('Innovative'), for a cash consideration of GBP2m (C$4m). Innovative is a flooring solutions rental business in Ontario, Canada.
xii) On 17 October 2018, Sunbelt Canada acquired the business and assets of Patcher Energy Management Ltd. ('Patcher') for a cash consideration of GBP4m (C$7m). Patcher is a temporary power rental business in Alberta, Canada.
xiii) On 1 November 2018, A-Plant acquired the entire share capital of Precision Geomatics Limited ('Precision') for a cash consideration of GBP4m. Precision is a survey equipment hire business.
xiv) On 1 November 2018, Sunbelt US acquired the business and assets of Apex Pump & Equipment LLC ('Apex') for a cash consideration of GBP79m ($103m) with contingent consideration of up to GBP12m ($15m), payable over the next three years, depending on EBITDA meeting or exceeding certain thresholds. Apex is a pump business in Texas.
xv) On 1 November 2018, Sunbelt Canada acquired the business and assets of Full Impact Enterprises Ltd., trading as GWG Rentals ('GWG Rentals') for a cash consideration of GBP4m (C$6m). GWG Rentals is a general equipment rental business in British Columbia, Canada.
xvi) On 8 November 2018, Sunbelt US acquired the business and assets of Underground Safety Equipment, LLC ('USE') for a cash consideration of GBP25m ($33m) with contingent consideration of up to GBP5m ($6m), payable over the next two years, depending on EBITDA meeting or exceeding certain thresholds. USE is a trench shoring business operating in Colorado, Utah, Tennessee and Texas.
xvii) On 30 November 2018, A-Plant acquired the entire share capital of Hoist It Limited ('Hoist It') for a cash consideration of GBP4m. Including acquired debt, the total cash consideration was GBP5m. Hoist It is a specialist provider of lifting solutions.
xviii) On 11 January 2019, Sunbelt US acquired the business and assets of Hull Brothers Rental, Inc. ('Hull Brothers') for a cash consideration of GBP10m ($12m). Hull Brothers is a general equipment rental business in Michigan.
xix) On 28 January 2019, Sunbelt US acquired the business and assets of Koslowski Rentals, Inc., trading as A Rental Center ('A Rental') for a cash consideration of GBP1m ($1m). A Rental is a general equipment rental business in California.
xx) On 8 February 2019, Sunbelt US acquired the business and assets of Temp Air, Inc. ('Temp Air') for a cash consideration of GBP92m ($119m). Temp Air is a climate control business operating across 13 markets within the US.
xxi) On 8 February 2019, Sunbelt US acquired the business and assets of Baystate Equipment & Rental Sales Co., Inc. ('Baystate') for a cash consideration of GBP9m ($11m). Baystate is a general equipment business in Massachusetts.
xxii) On 15 February 2019, Sunbelt US acquired the business and assets of Bat's Inc., trading as Harper Car and Truck Rental of Hawaii ('Harper') for a cash consideration of GBP3m ($4m). Harper will operate as a general equipment business in Hawaii.
xxiii) On 8 March 2019, Sunbelt Canada acquired the business and assets of Winn Rentals ('Winn') for a cash consideration of GBP15m (C$26m) with contingent consideration of up to GBP0.6m (C$1m), payable over the next two years, depending on EBITDA meeting or exceeding certain thresholds. Winn is a general equipment business operating in British Columbia, Canada.
xxiv) On 10 April 2019, Sunbelt US acquired the business assets of Bilcan Inc, trading as El Camino Rentals and B&C Leasing, Inc. (together 'ECR') for a cash consideration of GBP13m ($17m). ECR is a general equipment business operating in California.
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 48.9
Inventory 11.4
Property, plant and equipment
- rental equipment 259.4
- other assets 37.5
Creditors (17.6)
Debt (28.4)
Current tax (0.5)
Deferred tax (19.0)
Intangible assets (non-compete agreements,
brand names and customer relationships) 98.2
389.9
Consideration:
- cash paid and due to be paid (net of cash acquired) 593.4
- contingent consideration payable in cash 17.7
611.1
Goodwill 221.2
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. GBP179m of the goodwill is expected to be deductible for income tax purposes.
The fair value of trade receivables at acquisition was GBP49m. The gross contractual amount for trade receivables due was GBP51m, net of a GBP2m provision for debts which may not be collected.
Due to the operational integration of acquired businesses with Sunbelt US, Sunbelt Canada 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 2018 to their date of acquisition was not material.
15. 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 material impact on the Group's financial position.
Following its state aid investigation, the European Commission announced its decision in April 2019 that the Group Financing Exemption in the UK controlled foreign company ('CFC') legislation does constitute state aid in some circumstances. In common with other UK-based international companies, the Group may be affected by the outcome of this investigation and is therefore monitoring developments. If the decision reached by the European Commission is not successfully appealed, we have estimated the Group's maximum potential liability to be GBP34m as at 30 April 2019. Based on the current status of the investigation, we have concluded that no provision is required in relation to this amount.
16. Events after the balance sheet date
Since the balance sheet date, the Group has completed three acquisitions as follows:
i) On 9 May 2019, Sunbelt US acquired the business and assets of Westside Rental and Sales, LLC ('Westside'). Westside is a general equipment business in Tennessee.
ii) On 17 May 2019, Sunbelt US acquired the business and assets of the Harlingen Texas branch of Harris County Rentals, LLC, trading as Texas State Rentals ('HCR'). HCR is a general equipment business in Texas.
iii) On 29 May 2019, Sunbelt US acquired the business and assets of the Tampa branch of Contractors Building Supply Co., LLC ('CBS'). CBS is a general equipment business in Florida.
The initial accounting for these acquisitions is incomplete. Had these acquisitions taken place on 1 May 2018, their contribution to revenue and operating profit would not have been material.
REVIEW OF FOURTH QUARTER, BALANCE SHEET AND CASH FLOW
Fourth quarter (unaudited)
Revenue EBITDA Operating profit
2019 2018 2019 2018 2019 2018
Sunbelt US in $m 1,229.8 1,034.3 577.0 494.5 334.9 292.3
Sunbelt Canada in C$m 87.4 62.4 28.6 8.4 7.4 (4.9)
Sunbelt US in GBPm 940.9 738.0 441.6 351.9 256.1 207.2
A-Plant 114.7 117.7 36.3 38.8 7.6 13.4
Sunbelt Canada in GBPm 50.2 35.1 16.4 4.5 4.2 (3.1)
Group central costs - - (3.9) (4.6) (3.7) (4.6)
1,105.8 890.8 490.4 390.6 264.2 212.9
Net financing costs (41.7) (27.6)
Profit before amortisation
and tax 222.5 185.3
Amortisation (13.9) (10.6)
Profit before taxation 208.6 174.7
Margins
Sunbelt US 46.9% 47.8% 27.2% 28.3%
A-Plant 31.8% 33.0% 6.7% 11.4%
Sunbelt Canada 32.7% 13.5% 8.5% -7.8%
Group 44.3% 43.8% 23.9% 23.9%
Group revenue increased 24% to GBP1,106m in the fourth quarter (2018: GBP891m) with a strong performance in the US and Canada. This revenue growth, combined with continued focus on operational efficiency, generated underlying profit before tax of GBP222m (2018: GBP185m).
As for the year, the Group's growth was driven by strong organic growth supplemented by bolt-on acquisitions. Sunbelt US's revenue growth for the quarter can be analysed as follows:
$m
2018 rental only revenue 743
Organic (same-store and greenfields) 15% 111
Bolt-ons (since 1 February 2018) 7% 54
2019 rental only revenue 22% 908
Ancillary revenue 17% 236
2019 rental revenue 21% 1,144
Sales revenue -4% 86
2019 total revenue 19% 1,230
Sunbelt US's organic growth of 15% is well in excess of that of the rental market as we continue to take market share. In addition, bolt-ons 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 22% was driven by an increase in fleet on rent.
A-Plant generated rental only revenue up 2% at GBP84m (2018: GBP82m) in the quarter. This represented increased fleet on rent and better yield than a year ago. The principal driver of yield was product mix.
Sunbelt Canada delivered revenue of C$87m (2018: C$62m) in the quarter.
Group operating profit increased 24% to GBP264m (2018: GBP213m). Net financing costs were GBP42m (2018: GBP28m), reflecting higher average debt levels. As a result, Group profit before amortisation of intangibles and taxation was GBP222m (2018: GBP185m). After amortisation of GBP14m (2018: GBP11m), the statutory profit before taxation was GBP209m (2018: GBP175m).
Balance sheet
Fixed assets
Capital expenditure in the year totalled GBP1,587m (2018: GBP1,239m) with GBP1,417m invested in the rental fleet (2018: GBP1,100m). Expenditure on rental equipment was 89% of total capital expenditure with the balance relating to the delivery vehicle fleet, property improvements and IT equipment. Capital expenditure by division was:
2019 2018
Replacement Growth Total Total
Sunbelt US in $m 480.3 1,127.1 1,607.4 1,267.8
Sunbelt Canada in C$m 56.2 99.5 155.7 76.2
Sunbelt US in GBPm 368.5 864.6 1,233.1 920.4
A-Plant 61.2 33.7 94.9 136.9
Sunbelt Canada in GBPm 32.0 56.8 88.8 43.1
Total rental equipment 461.7 955.1 1,416.8 1,100.4
Delivery vehicles, property improvements &
IT equipment 170.4 138.3
Total additions 1,587.2 1,238.7
In a strong US rental market, $1,127m of rental equipment capital expenditure was spent on growth while $480m 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 30 April 2019 was 34 months (2018: 32 months) on a net book value basis. Sunbelt US's fleet had an average age of 33 months (2018: 32 months), A-Plant's fleet had an average age of 38 months (2018: 32 months) and Sunbelt Canada's fleet had an average age of 30 months (2018: 28 months).
LTM LTM
Rental fleet at original cost LTM rental dollar physical
30 April 2019 30 April LTM average revenue utilisation utilisation
2018
Sunbelt US in
$m 9,125 7,552 8,479 4,637 55% 71%
Sunbelt Canada
in C$m 660 394 589 288 49% 61%
Sunbelt US in
GBPm 6,999 5,482 6,500 3,555 55% 71%
A-Plant 907 862 893 416 47% 69%
Sunbelt Canada
in GBPm 376 223 343 167 49% 61%
8,282 6,567 7,736 4,138
Dollar utilisation was 55% at Sunbelt US (2018: 55%), 47% at A-Plant (2018: 48%) and 49% at Sunbelt Canada (2018: 60%). The Sunbelt US dollar utilisation is in line with where it was a year ago. The lower A-Plant dollar utilisation reflects the drag effect of yield while Sunbelt Canada reflects the mix of the business with a full year of CRS and the impact of the lower dollar utilisation Voisin's business. Physical utilisation at Sunbelt US was 71% (2018: 72%), 69% at A-Plant (2018: 68%) and 61% at Sunbelt Canada.
Trade receivables
Receivable days at 30 April 2019 were 51 days (2018: 50 days). The bad debt charge for the last twelve months ended 30 April 2019 as a percentage of total turnover was 0.6% (2018: 0.6%). Trade receivables at 30 April 2019 of GBP756m (2018: GBP556m) are stated net of allowances for bad debts and credit notes of GBP53m (2018: GBP43m) with the allowance representing 7.1% (2018: 7.2%) of gross receivables.
Trade and other payables
Group payable days were 55 days in 2019 (2018: 57 days) with capital expenditure related payables, which have longer payment terms, totalling GBP196m (2018: GBP269m). 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
Year to
30 April
2019 2018
GBPm GBPm
EBITDA before exceptional items 2,106.6 1,733.1
Cash inflow from operations before
exceptional
items and changes in rental equipment 2,042.5 1,681.2
Cash conversion ratio* 97.0% 97.0%
Replacement rental capital expenditure (472.9) (375.8)
Payments for non-rental capital expenditure (168.7) (141.2)
Rental equipment disposal proceeds 181.6 151.8
Other property, plant and equipment
disposal proceeds 10.2 8.9
Tax (net) (51.0) (97.6)
Financing costs (142.9) (110.0)
Cash inflow before growth capex and
payment of exceptional costs 1,398.8 1,117.3
Growth rental capital expenditure (1,030.6) (705.9)
Exceptional costs - (25.2)
Free cash flow 368.2 386.2
Business acquisitions (591.3) (359.0)
Total cash (absorbed)/generated (223.1) 27.2
Dividends (164.2) (140.5)
Purchase of own shares by the Company (460.4) (158.2)
Purchase of own shares by the ESOT (14.2) (10.2)
Increase in net debt due to cash flow (861.9) (281.7)
* 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 21% to GBP2,043m. The cash conversion ratio for the year was 97% (2018: 97%).
Total payments for capital expenditure (rental equipment and other PPE) during the year were GBP1,672m (2018: GBP1,223m). Disposal proceeds received totalled GBP192m (2018: GBP161m), giving net payments for capital expenditure of GBP1,480m in the year (2018: GBP1,062m). Financing costs paid totalled GBP143m (2018: GBP110m) while tax payments were GBP51m (2018: GBP98m). 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. The exceptional costs incurred in the prior year represent the amounts paid to settle the interest and call premium due on the $900m senior secured notes which were satisfied and discharged in August 2017.
Accordingly, the Group generated GBP1,399m (2018: GBP1,117m) of net cash before discretionary investments made to enlarge the size and hence earning capacity of its rental fleet and on acquisitions. After growth capital expenditure and payment of exceptional costs, there was a free cash inflow of GBP368m (2018: GBP386m) and, after acquisition expenditure of GBP591m (2018: GBP359m), a net cash outflow of GBP223m (2018: inflow of GBP27m), before returns to shareholders.
Net debt
2019 2018
GBPm GBPm
First priority senior secured bank debt 2,010.7 1,508.5
Finance lease obligations 5.0 5.3
5.625% second priority senior secured
notes, due 2024 379.3 358.4
4.125% second priority senior secured
notes, due 2025 454.7 429.5
5.250% second priority senior secured 453.6 -
notes, due 2026
4.375% second priority senior secured
notes, due 2027 454.4 429.4
3,757.7 2,731.1
Cash and cash equivalents (12.8) (19.1)
Total net debt 3,744.9 2,712.0
Net debt at 30 April 2019 was GBP3,745m with the increase since 30 April 2018 reflecting the net cash outflow set out above and the impact of weaker sterling (GBP126m). The Group's EBITDA for the year ended 30 April 2019 was GBP2,107m and the ratio of net debt to EBITDA was 1.8 times at 30 April 2019 (2018: 1.6 times) on a constant currency basis and on a reported 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 46% of the drawn debt at a fixed rate as at 30 April 2019. 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 plus 150bp.
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 2019, the Group had no such swap agreements outstanding. The Group may, at times, hold cash and cash equivalents, which earn interest at a variable rate.
Currency risk
Currency risk is predominantly translation risk as there are no significant 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, at 30 April 2019, 93% 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 30 April 2019, dollar denominated debt represented approximately 60% 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 2019, a 1% change in the US dollar exchange rate would impact pre-tax profit by GBP11m.
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 principal 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 over 710,000 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 reference agencies and the maintenance of credit control functions.
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 before investment (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 before investment is available to the Group to invest in growth capital expenditure, acquisitions, dividend payments and other returns to shareholders or to reduce debt.
In addition to the strong free cash flow from normal trading activities, additional liquidity is available through the Group's senior secured debt facility. At 30 April 2019, availability under the $4.1bn facility was $1,622m (GBP1,244m).
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
In the longer term, there is a link between demand for our services and levels of economic activity. The construction industry, which affects our business, is cyclical and typically lags the general economic cycle by between 12 and 24 months.
The impact of Brexit on the UK economy is considered part of this risk.
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 and able to withstand market shocks.
Change
Our performance is benefitting from the economic cycle and we expect to see further upside as the economic growth continues. However, our longer term planning is focused on the next downturn to ensure we have the financial firepower at the bottom of the cycle to achieve the next 'step-change' in business performance. As we move further into this cycle, the risk of an economic downturn increases.
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.
-- Differentiation of service.
-- Enhance the barriers to entry to newcomers provided by our platform: 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.
Change
Our competitive position continues to improve. We are growing faster than our larger competitors and the market, and continue to take market share from our smaller, less well financed competitors. We have a 9% market share in the US, a 4% market share in Canada and 8% in the UK.
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 comply.
Mitigation
-- Maintain conservative (1.5 to 2 times excluding the impact of IFRS 16), net debt to EBITDA leverage which helps minimise our refinancing risk.
-- Maintain long debt maturities.
-- Use of an asset-based senior facility means none of our debt contains quarterly financial covenants when availability under the facility exceeds $410m.
Change
At 30 April 2019, our facilities were committed for an average of six years, leverage was at 1.8 times and availability under the senior debt facility was $1,622m.
Cyber security
Potential impact
A cyber-attack or serious uncured failure in our systems could result in us being unable to deliver service to our customers and / or the loss of data. In particular, 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. As a result, we could suffer reputational loss, revenue loss and financial penalties.
This is the most significant factor in our business continuity planning.
Mitigation
-- Stringent policies surrounding security, user access, change control and the ability to download and install software.
-- Testing of cyber security including system penetration testing and internal phishing training exercises undertaken.
-- Use of antivirus and malware software, firewalls, email scanning and internet monitoring as an integral part of our security plan.
-- Use of firewalls and encryption to protect systems and any connections to third parties. -- Use of multi-factor authentication.
-- Continued focus on development of IT strategy taking advantage of cloud technology available.
-- 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 a primary site.
Change
Risk separately identified in current year having previously been considered as part of the business continuity risk.
We continue to enhance our response to cyber security threats.
Our business continuity plans were reviewed and updated during the year and our disaster recovery plans are tested regularly.
Health and safety
Potential impact
We need to comply with laws and regulations governing occupational health and safety matters. Furthermore, 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 regarding the need to comply with laws and regulations and 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.
-- Maintain appropriate insurance coverage.
Change
In terms of reportable incidents, the RIDDOR (Reporting of Injuries, Diseases and Dangerous Occurrences Regulations) reportable rate was 0.34 (2018: 0.33) in Sunbelt US, 0.28 (2018: 0.08) in Sunbelt Canada and 0.22 (2018: 0.22) in A-Plant.
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.
At a leadership level, succession planning is required to ensure the Group can continue to inspire the right culture, leadership and behaviours and meet its strategic objectives.
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.
-- Ensure succession plans are in place and reviewed regularly which meet the ongoing needs of the Group.
Change
Our compensation and incentive programmes have continued to evolve to reflect market conditions and the economic environment.
Staff turnover has remained relatively constant with the prior year as our well-trained, knowledgeable staff have become targets for our competitors.
Increased focus on recruitment and induction training programmes as our highest level of turnover is within the first two years of employment.
We continue to invest in training and career development with over 250 courses offered across both businesses.
Environmental
Potential impact
We need to comply with environmental laws. 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 laws 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.
Change
We continue to seek to reduce the environmental impact of our business and invest in technology to reduce the environmental impact on our customers' businesses. In 2018/19 our carbon emission intensity ratio reduced to 67 (2018: 72) in Sunbelt US and 56 (2018: 67) in Sunbelt Canada. A-Plant's carbon emission intensity ratio was 75 (2018: 74).
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. -- Evolving policies and practices to take account of changes in legal obligations.
-- Training and induction programmes ensure our staff receive appropriate training and briefing on the relevant policies.
Change
We monitor regulatory and legislation changes to ensure our policies and practices reflect them and we comply with relevant legislation.
Our whistle-blowing arrangements are well established and the Company Secretary reports matters arising to the Audit Committee during the course of the year.
During the year over 2,300 people in Sunbelt US, 125 people in Canada and 525 people in A-Plant underwent induction training and additional training programmes were undertaken in safety.
OPERATING STATISTICS
Number of rental stores Staff numbers
2019 2018 2019 2018
Sunbelt US 773 658 13,015 11,722
A-Plant 196 187 3,789 3,571
Sunbelt Canada 67 54 984 688
Corporate office - - 15 15
Group 1,036 899 17,803 15,996
Sunbelt US's rental store number includes 19 Sunbelt at Lowes stores at 30 April 2019 (2018: 19).
GLOSSARY OF TERMS
The glossary of terms below sets out definitions of terms used throughout this announcement. Included are a number of alternative performance measures ('APMs') which the directors have adopted in order to provide additional useful information on the underlying trends, performance and position of the Group. The directors use these measures, which are common across the industry, for planning and reporting purposes. These measures are also used in discussions with the investment analyst community and credit rating agencies. The APMs are not defined by IFRS and therefore may not be directly comparable with other companies' APMs and should not be considered superior to or a substitute for IFRS measures.
Availability: represents the headroom Leverage: leverage is net debt
on a given date under the terms divided by underlying EBITDA.
of our $4.1bn asset-backed senior Leverage calculated at constant
credit facility, taking account exchange rates uses the current
of current borrowings. balance sheet exchange rate.
Capital expenditure: represents Net debt: net debt is total debt
additions to rental equipment less cash balances, as reported.
and other tangible assets (excluding An analysis of net debt is provided
assets acquired through a business in
combination). note 13.
Cash conversion ratio: represents Organic: organic measures comprise
cash flow from operations before all locations, excluding locations
exceptional items and changes arising from a bolt-on acquisition
in rental equipment as a percentage completed after the start of the
of underlying EBITDA. Details comparative financial period.
are provided within the Review
of Fourth Quarter, Balance Sheet Physical utilisation: physical
and Cash Flow section. utilisation is measured as the
daily average of the amount of
Constant currency: calculated itemised fleet at cost on rent
by applying the current period as a percentage of the total fleet
exchange rate to the comparative at cost and for Sunbelt US is
period result. The relevant foreign measured only for equipment whose
currency exchange rates are provided cost is over $7,500, which comprised
within the Basis of Preparation 88% of its fleet at 30 April 2019.
section.
Return on Investment ('RoI'):
Dollar utilisation: dollar utilisation last 12-month ('LTM') underlying
is trailing 12-month rental revenue operating profit divided by the
divided by average fleet size last 12-month average of the sum
at original (or 'first') cost of net tangible and intangible
measured over a 12-month period. fixed assets, plus net working
Details are shown within the Review capital but excluding net debt
of Fourth Quarter, Balance Sheet and tax. RoI is used by management
and Cash Flow section. to help inform capital allocation
decisions within the business
EBITDA: EBITDA is earnings before and a reconciliation of Group
interest, tax, depreciation and RoI is provided below:
amortisation. A reconciliation LTM underlying operating
of EBITDA to profit before tax profit (GBPm) 1,264
is shown on the income statement. Average net assets (GBPm) 7,117
Return on Investment 18%
Drop-through: calculated as the
incremental rental revenue which
converts into EBITDA. RoI for the businesses is calculated
in the same way, but excludes
Exceptional items: those items goodwill and intangible assets.
of income or expense which the
directors believe should be disclosed Same-store: same-stores are those
separately by virtue of their locations which were open at the
significant size or nature to start of the comparative financial
enable a better understanding period.
of the Group's financial performance.
Suppressed availability: represents
Fleet age: net book value weighted the amount on a given date that
age of serialised rental assets. the asset base exceeds the facility
Serialised rental assets constitute size under the terms of our $4.1bn
the substantial majority of our asset-backed senior credit facility.
fleet.
Underlying: underlying results
Fleet on rent: quantity measured are results stated before exceptional
at original cost of our rental items and the amortisation of
fleet on rent. acquired intangibles. A reconciliation
is shown on the income statement.
Free cash flow: cash generated
from operating activities less Yield: reflects a combination
non-rental net property, plant of the rental rate charged, rental
and equipment expenditure. Non-rental period and product and customer
net property, plant and equipment mix.
expenditure comprises payments
for non-rental capital expenditure
less disposal proceeds received
in relation to non-rental asset
disposals.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR FRMPTMBIBBJL
(END) Dow Jones Newswires
June 18, 2019 02:00 ET (06:00 GMT)
1 Year Ashtead Chart |
1 Month Ashtead Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
