TIDMAHT
RNS Number : 2740W
Ashtead Group PLC
10 December 2019
Ashtead Group Plc
10 December 2019
Unaudited results for the half-year and
second quarter ended 31 October 2019
Second quarter First half
2019(1) 2018 Growth(2) 2019(1) 2018 Growth(2)
GBPm GBPm % GBPm GBPm %
Underlying results(3,
4)
Rental revenue 1,282 1,113 10% 2,447 2,074 13%
EBITDA 700 595 9% 1,327 1,099 11%
Profit before taxation 371 348 4% 690 633 6%
Earnings per share 60.5p 54.0p 9% 111.8p 98.8p 11%
Statutory results
Revenue 1,403 1,203 12% 2,681 2,250 14%
Operating profit 413 374 5% 771 679 8%
Profit before taxation 356 336 3% 660 610 6%
Earnings per share 57.9p 52.1p 9% 107.0p 95.1p 10%
Half-year highlights
-- Revenue up 14%(2) ; rental revenue up 13%(2)
-- Operating profit of GBP771m (2018: GBP679m)
-- Pre-tax profit(3) of GBP690m (2018: GBP633m); GBP705m excluding the impact of IFRS 16
-- Earnings per share(3) up 11%(2) to 111.8p (2018: 98.8p)
-- GBP1,010m of capital invested in the business (2018: GBP1,063m)
-- GBP231m spent on bolt-on acquisitions (2018: GBP362m)
-- Net debt to EBITDA leverage(2) of 1.9 times (2018: 1.8 times)
-- Interim dividend increased by 10% to 7.15p per share (2018: 6.5p per share)
(1) The results for the first half and Q2 2019 are not comparable directly
to the prior year due to the adoption of IFRS 16, Leases. Further
details are provided in note 2 to the interim financial statements
where we set out the impact of IFRS 16 on the results and present
the income statement on a comparable basis to the prior year.
(2) Calculated at constant exchange rates applying current period exchange
rates and excluding the impact of IFRS 16.
(3) Underlying results are stated before intangible amortisation.
(4) Throughout this announcement we refer to a number of alternative performance
measures which are defined in the Glossary on page 39.
Ashtead's chief executive, Brendan Horgan, commented:
"The Group continues to trade well with strong rental revenue
growth. Rental revenue increased 13% in the half year and
underlying earnings per share increased 11%, excluding the impact
of IFRS 16, both at constant exchange rates.
Our North American end markets remain strong and we continue to
execute well on our strategy of organic growth supplemented by
targeted bolt-on acquisitions. In contrast, the UK market remains
challenging and we are therefore refocusing A-Plant on leveraging
its platform to deliver long-term sustainable results, while
generating strong cash flow.
We invested GBP1bn in capital and a further GBP231m on bolt-on
acquisitions in the period, which added 50 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 excluding IFRS 16. We spent
GBP250m under our share buyback programme in the period, in line
with our expectation to spend a minimum of GBP500m on share
buybacks in 2019/20.
Our business continues to perform well in supportive North
American end markets, while we have taken decisive strategic action
to refocus our UK business in the challenging market conditions.
Thus, except for the UK and a currency headwind, we expect results
to be in line with our expectations and 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, 10
December 2019 at The London Stock Exchange, 10 Paternoster Square,
London, EC4M 7LS. 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 4.30pm (11.30am
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 (Audrey Da
Costa) 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.
First half trading results
Revenue EBITDA Profit(1)
2019 2018 2019 2018 2019 2018
Sunbelt US in $m 2,887.5 2,500.2 1,502.0 1,278.1 947.0 847.1
Sunbelt Canada in C$m 200.3 167.4 85.0 66.6 40.4 36.3
Sunbelt US in GBPm 2,304.8 1,902.2 1,198.9 972.4 755.9 644.5
A-Plant 255.9 250.5 85.8 95.2 30.0 44.2
Sunbelt Canada in GBPm 120.6 97.7 51.2 38.8 24.3 21.2
Group central costs - - (8.8) (7.6) (9.2) (7.7)
2,681.3 2,250.4 1,327.1 1,098.8 801.0 702.2
Net financing costs (111.1) (68.8)
Profit before amortisation
and tax 689.9 633.4
Amortisation (29.7) (23.4)
Profit before taxation 660.2 610.0
Taxation charge (166.3) (148.5)
Profit attributable to equity holders
of the Company 493.9 461.5
Margins as reported
Sunbelt US 52.0% 51.1% 32.8% 33.9%
A-Plant 33.5% 38.0% 11.7% 17.7%
Sunbelt Canada 42.4% 39.8% 20.2% 21.7%
Group 49.5% 48.8% 29.9% 31.2%
(1) Segment result presented is operating profit before
amortisation.
The Group adopted IFRS 16, Leases ('IFRS 16') on 1 May 2019. The
Group elected to apply IFRS 16 using the modified retrospective
approach with no restatement of comparative figures. As a result,
the results for the half year are not comparable directly to the
prior year with the adoption of IFRS 16 resulting in higher EBITDA
and operating profit but lower profit before amortisation and tax
than under the previous accounting standard. As a result, our comments
below are on both the reported figures and those excluding the
impact of IFRS 16 to aid comparability. Margins excluding the impact
of IFRS 16 are summarised below. Further details on the adoption
and impact of IFRS 16 are provided in note 2 to the interim financial
statements.
Margins excluding the impact of 2019 2018 2019 2018
IFRS 16
Sunbelt US 50.2% 51.1% 32.5% 33.9%
A-Plant 31.8% 38.0% 11.6% 17.7%
Sunbelt Canada 39.9% 39.8% 19.9% 21.7%
Group 47.6% 48.8% 29.6% 31.2%
--------------------------------------------- -------- -------- ------- -------
Group revenue increased 19% to GBP2,681m in the first half
(2018: GBP2,250m) with strong growth in the US and Canadian
markets. This revenue growth, combined with a continued focus on
drop-through, generated underlying profit before tax of GBP690m
(2018: GBP633m) or GBP705m excluding the impact of IFRS 16. This
performance reflects good profit growth in the US, a more moderate
improvement in Canada as we invest in the business and a drag from
weakness in the UK.
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 and Sunbelt Canada delivered
15% and 21% rental only revenue growth respectively, while
A-Plant's rental only revenue decreased 2%, reflecting the more
competitive landscape within a more uncertain UK market. The growth
in Sunbelt Canada continues to reflect the impact of recent
acquisitions.
Sunbelt US's revenue growth continues to benefit from cyclical
and structural trends and can be explained as follows:
$m
2018 rental only revenue 1,869
Organic (same-store and greenfields) 10% 181
Bolt-ons since 1 May 2018 5% 96
2019 rental only revenue 15% 2,146
Ancillary revenue 13% 521
2019 rental revenue 15% 2,667
Sales revenue 29% 220
2019 total revenue 15% 2,887
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 44 new stores in the US in the first
half, over half of which were specialty locations.
Rental only revenue growth was 15% in strong end markets, driven
by increased fleet on rent. This is a good performance after the
last two years which were impacted favourably by significant
hurricane activity, whereas the 2019 hurricane season was much
quieter. Sunbelt US's total revenue, including new and used
equipment, merchandise and consumable sales, increased 15% to
$2,887m (2018: $2,500m).
A-Plant generated rental only revenue of GBP187m, down 2% on the
prior year (2018: GBP191m). This resulted from a 3% reduction in
fleet on rent partially offset by a better yield, mainly due to
product mix. The rate environment in the UK market remains
competitive. A-Plant's total revenue increased 2% to GBP256m (2018:
GBP251m) reflecting higher used equipment sales as A-Plant
defleeted, selling under-utilised and low returning assets.
Sunbelt Canada's rental only revenue increased 21%, including
the benefit of recent acquisitions. On an organic basis, rental
only revenue increased 11%. Sunbelt Canada's total revenue was
C$200m (2018: C$167m).
We continue to focus on operational efficiency as we look to
maintain or improve margins. However, while US growth continues to
outpace the market, the relatively lower rate of growth compared
with recent years has put some pressure on drop-through, both in
some of our mature stores and from the drag effect of greenfield
openings and acquired stores. In Sunbelt US, excluding the impact
of IFRS 16, 48% of revenue growth dropped through to EBITDA. This
contributed to a reported EBITDA margin of 52% (2018: 51%) and a
12% increase in operating profit to $947m (2018: $847m) at a margin
of 33% (2018: 34%). Excluding the impact of IFRS 16, the EBITDA and
operating profit margins were 50% and 33% respectively for the
current period.
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. The EBITDA margin of 34% (2018:
38%) reflects the drag effect of the increased fleet disposals, the
challenging rate environment and investment in the infrastructure
of the business. Excluding the impact of the de-fleet exercise and
the adoption of IFRS 16, A-Plant generated an EBITDA margin of 35%
(2018: 39%). Operating profit of GBP30m (2018: GBP44m) at a margin
of 12% (2018: 18%) also reflected these impacts.
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 42% EBITDA margin (2018: 40%) and
generating an operating profit of C$40m (2018: C$36m) at a margin
of 20% (2018: 22%). Excluding the impact of IFRS 16, the EBITDA and
operating profit margins were 40% and 20%, respectively.
Reflecting the performance of the divisions, Group underlying
operating profit increased to GBP801m (2018: GBP702m), up 9% at
constant exchange rates. Net financing costs increased to GBP111m
(2018: GBP69m) reflecting the impact of the adoption of IFRS 16,
which resulted in an incremental interest charge of GBP21m in the
first half, and higher average debt levels. As a result, Group
profit before amortisation of intangibles and taxation was GBP690m
(2018: GBP633m). After a tax charge of 25% (2018: 24%) of the
underlying pre-tax profit, underlying earnings per share increased
8% at constant currency to 111.8p (2018: 98.8p). Excluding the
impact of IFRS 16, Group profit before amortisation of intangibles
and taxation was GBP705m and underlying earnings per share
increased 11% at constant currency. The underlying cash tax charge
was 12%.
Statutory profit before tax was GBP660m (2018: GBP610m). This is
after amortisation of GBP30m (2018: GBP23m). Included within the
total tax charge is a tax credit of GBP7m (2018: GBP5m) which
relates to the amortisation of intangibles. As a result, basic
earnings per share were 107.0p (2018: 95.1p).
Capital expenditure and acquisitions
Capital expenditure for the first half was GBP1,010m gross and
GBP866m net of disposal proceeds (2018: GBP1,063m gross and GBP963m
net). Reflecting this investment, the Group's rental fleet at 31
October 2019 at cost was GBP9.0bn. Our average fleet age is now 33
months (2018: 31 months). Looking forward to the full year, we
anticipate total capital expenditure to be towards the lower end of
our range of GBP1.4bn to GBP1.6bn.
We invested GBP231m (2018: GBP362m), including acquired debt, in
11 bolt-on acquisitions during the period as we continue to expand
our footprint and look to diversify our specialty markets.
Since the period end we have completed three further
acquisitions, the most notable of which was William F. White
('WFW') in Canada for GBP136m (C$234m) with contingent
consideration of up to GBP8m (C$14m), payable over the next year,
depending on EBITDA meeting or exceeding certain thresholds.
Including acquired debt, the total cash consideration was GBP151m
(C$260m). WFW is Canada's largest provider of production equipment,
services and studio facilities to the film and television
industry.
Return on Investment
Sunbelt US's pre-tax return on investment (excluding goodwill
and intangible assets) in the 12 months to 31 October 2019 was 23%
(2018: 24%). In the UK, return on investment (excluding goodwill
and intangible assets) was 7% (2018: 10%). This decline reflects
the competitive nature of the UK market and the rate environment
and the weaker performance of the business. In Canada, return on
investment (excluding goodwill and intangible assets) was 11%
(2018: 12%). 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 17% (2018: 18%). For
comparability, return on investment excludes the impact of IFRS
16.
Cash flow and net debt
As expected, debt increased during the first half as we
continued to invest in the fleet and made a number of bolt-on
acquisitions but also due to the adoption of IFRS 16, which added
GBP883m to debt as at 1 May 2019. During the period, we spent
GBP249m on share buybacks.
As a result, net debt at 31 October 2019 was GBP5,237m (2018:
GBP3,612m), resulting in a net debt to EBITDA ratio of 2.2 times on
a pro forma basis. The Group's target range for net debt to EBITDA
is 1.9 to 2.4 times following the adoption of IFRS 16. Excluding
the effect of IFRS 16, net debt at 31 October 2019 was GBP4,242m,
while the ratio of net debt to EBITDA was 1.9 times (2018: 1.8
times) on a constant currency basis.
At 31 October 2019, availability under the senior secured debt
facility was $1,001m, with an additional $2,930m of suppressed
availability - substantially above the $410m level at which the
Group's entire debt package is covenant free.
In November, the Group took advantage of good debt markets and
refinanced its debt facilities by issuing $600m 4.0% senior secured
notes maturing in May 2028 and $600m 4.25% senior secured notes
maturing in November 2029. The net proceeds of the issue were used
to repurchase the Group's $500m 5.625% senior secured notes which
would have matured in 2024, pay related fees and expenses and repay
an element of the amount outstanding under the ABL facility. These
actions ensure the Group's debt package continues to be well
structured and flexible, enabling us to optimise the opportunity
presented by end market conditions. The Group's debt facilities are
now committed for an average of six years at a weighted average
cost of 4%.
Dividend
In line with its policy of providing a progressive dividend,
having regard to both underlying profit and cash generation and to
sustainability through the economic cycle, the Board has increased
the interim dividend to 7.15p per share (2018: 6.5p per share).
This will be paid on 5 February 2020 to shareholders on the
register on 17 January 2020.
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 1.9 to 2.4 times target range for net debt to
EBITDA (1.5 to 2.0 times pre IFRS 16).
Current trading and outlook
Our business continues to perform well in supportive North
American end markets, while we have taken decisive strategic action
to refocus our UK business in the challenging market conditions.
Thus, except for the UK and a currency headwind, we expect results
to be in line with our expectations and the Board continues to look
to the medium term with confidence.
Directors' responsibility statement
We confirm that to the best of our knowledge:
a) the condensed consolidated interim financial statements have
been prepared in accordance with IAS 34 'Interim Financial
Reporting'; and
b) the interim management report includes a fair review of the
information required by Disclosure and Transparency Rule 4.2.7R
(indication of important events during the first six months and
description of principal risks and uncertainties for the remaining
six months of the year) and Disclosure and Transparency Rules
4.2.8R (disclosure of related parties' transactions and changes
therein).
By order of the Board
Eric Watkins
Company secretary
9 December 2019
CONSOLIDATED INCOME STATEMENT FOR THE THREE MONTHSED 31 OCTOBER
2019
2019 2018
Before Before
amortisation Amortisation Total amortisation Amortisation Total
GBPm GBPm GBPm GBPm GBPm GBPm
Second quarter - unaudited
Revenue
Rental revenue 1,282.4 - 1,282.4 1,113.5 - 1,113.5
Sale of new equipment,
merchandise and consumables 49.4 - 49.4 41.2 - 41.2
Sale of used rental
equipment 71.3 - 71.3 48.3 - 48.3
1,403.1 - 1,403.1 1,203.0 - 1,203.0
Operating costs
Staff costs (305.5) - (305.5) (257.3) - (257.3)
Used rental equipment
sold (60.3) - (60.3) (40.2) - (40.2)
Other operating costs (336.8) - (336.8) (310.4) - (310.4)
(702.6) - (702.6) (607.9) - (607.9)
EBITDA* 700.5 - 700.5 595.1 - 595.1
Depreciation (272.1) - (272.1) (209.3) - (209.3)
Amortisation of intangibles - (15.4) (15.4) - (12.2) (12.2)
Operating profit 428.4 (15.4) 413.0 385.8 (12.2) 373.6
Investment income - - - 0.1 - 0.1
Interest expense (57.5) - (57.5) (38.1) - (38.1)
Profit on ordinary
activities
before taxation 370.9 (15.4) 355.5 347.8 (12.2) 335.6
Taxation (93.5) 3.7 (89.8) (86.7) 2.7 (84.0)
Profit attributable
to equity
holders of the Company 277.4 (11.7) 265.7 261.1 (9.5) 251.6
Basic earnings per
share 60.5p (2.6p) 57.9p 54.0p (1.9p) 52.1p
Diluted earnings per
share 60.2p (2.5p) 57.7p 53.8p (1.9p) 51.9p
* 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 Second Quarter, Balance Sheet and Cash Flow accompanying
these condensed consolidated interim financial statements.
CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHSED 31 OCTOBER
2019
2019 2018
Before Before
amortisation Amortisation Total amortisation Amortisation Total
GBPm GBPm GBPm GBPm GBPm GBPm
First half - unaudited
Revenue
Rental revenue 2,446.9 - 2,446.9 2,074.5 - 2,074.5
Sale of new equipment,
merchandise and consumables 96.0 - 96.0 79.7 - 79.7
Sale of used rental
equipment 138.4 - 138.4 96.2 - 96.2
2,681.3 - 2,681.3 2,250.4 - 2,250.4
Operating costs
Staff costs (590.9) - (590.9) (488.8) - (488.8)
Used rental equipment
sold (118.9) - (118.9) (79.6) - (79.6)
Other operating costs (644.4) - (644.4) (583.2) - (583.2)
(1,354.2) - (1,354.2) (1,151.6) - (1,151.6)
EBITDA* 1,327.1 - 1,327.1 1,098.8 - 1,098.8
Depreciation (526.1) - (526.1) (396.6) - (396.6)
Amortisation of intangibles - (29.7) (29.7) - (23.4) (23.4)
Operating profit 801.0 (29.7) 771.3 702.2 (23.4) 678.8
Investment income - - - 0.1 - 0.1
Interest expense (111.1) - (111.1) (68.9) - (68.9)
Profit on ordinary
activities
before taxation 689.9 (29.7) 660.2 633.4 (23.4) 610.0
Taxation (173.5) 7.2 (166.3) (153.9) 5.4 (148.5)
Profit attributable
to equity
holders of the Company 516.4 (22.5) 493.9 479.5 (18.0) 461.5
Basic earnings per
share 111.8p (4.8p) 107.0p 98.8p (3.7p) 95.1p
Diluted earnings per
share 111.4p (4.8p) 106.6p 98.4p (3.7p) 94.7p
* 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
Three months Six months to
to
31 October 31 October
2019 2018 2019 2018
GBPm GBPm GBPm GBPm
Profit attributable to equity holders of
the Company for the period 265.7 251.6 493.9 461.5
Items that may be reclassified subsequently
to profit or loss:
Foreign currency translation differences (146.4) 57.2 9.9 160.1
Total comprehensive income for the period 119.3 308.8 503.8 621.6
CONSOLIDATED BALANCE SHEET AT 31 OCTOBER 2019
Unaudited Audited
31 October 30 April
2019 2018 2019
GBPm GBPm GBPm
Current assets
Inventories 88.7 65.0 83.5
Trade and other receivables 978.8 907.2 843.6
Current tax asset 4.2 28.5 25.3
Cash and cash equivalents 19.4 23.3 12.8
1,091.1 1,024.0 965.2
Non-current assets
Property, plant and equipment
- rental equipment 5,891.0 5,433.5 5,413.3
- other assets 658.5 536.4 573.7
6,549.5 5,969.9 5,987.0
Right-of-use asset 991.2 - -
Goodwill 1,224.6 1,074.4 1,144.7
Other intangible assets 291.9 242.5 260.6
Net defined benefit pension plan asset - 4.4 -
9,057.2 7,291.2 7,392.3
Total assets 10,148.3 8,315.2 8,357.5
Current liabilities
Trade and other payables 748.7 799.5 632.4
Current tax liability 6.1 15.3 16.4
Lease liabilities 100.1 - -
Short-term borrowings - 2.5 2.3
Provisions 42.9 36.0 42.5
897.8 853.3 693.6
Non-current liabilities
Lease liabilities 899.2 - -
Long-term borrowings 4,256.8 3,632.5 3,755.4
Provisions 36.9 30.3 46.0
Deferred tax liabilities 1,161.6 1,001.5 1,061.1
Net defined benefit pension plan liability 1.1 - 0.9
6,355.6 4,664.3 4,863.4
Total liabilities 7,253.4 5,517.6 5,557.0
Equity
Share capital 49.9 49.9 49.9
Share premium account 3.6 3.6 3.6
Capital redemption reserve 6.3 6.3 6.3
Own shares held by the Company (872.8) (370.6) (622.6)
Own shares held by the ESOT (27.7) (24.6) (24.6)
Cumulative foreign exchange translation
differences 244.6 285.9 234.7
Retained reserves 3,491.0 2,847.1 3,153.2
Equity attributable to equity holders
of the Company 2,894.9 2,797.6 2,800.5
Total liabilities and equity 10,148.3 8,315.2 8,357.5
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHSED
31 OCTOBER 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
Unaudited
At 1 May 2018 49.9 3.6 6.3 (161.0) (20.0) 125.8 2,522.3 2,526.9
Profit for the
period - - - - - - 461.5 461.5
Other comprehensive
income:
Foreign currency
translation
differences - - - - - 160.1 - 160.1
Total comprehensive
income
for the period - - - - - 160.1 461.5 621.6
Dividends paid - - - - - - (133.3) (133.3)
Own shares purchased
by
the ESOT - - - - (14.2) - - (14.2)
Own shares purchased
by
the Company - - - (209.6) - - - (209.6)
Share-based payments - - - - 9.6 - (5.8) 3.8
Tax on share-based
payments - - - - - - 2.4 2.4
At 31 October 2018 49.9 3.6 6.3 (370.6) (24.6) 285.9 2,847.1 2,797.6
Profit for the
period - - - - - - 335.4 335.4
Other comprehensive
income:
Foreign currency
translation
differences - - - - - (51.2) - (51.2)
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 period - - - - - (51.2) 332.4 281.2
Dividends paid - - - - - - (30.9) (30.9)
Own shares purchase
by
the ESOT - - - - - - - -
Own shares purchased
by
the Company - - - (252.0) - - - (252.0)
Share-based payments - - - - - - 3.8 3.8
Tax on share-based
payments - - - - - - 0.8 0.8
At 30 April 2019 49.9 3.6 6.3 (622.6) (24.6) 234.7 3,153.2 2,800.5
Effect of initial
application of
IFRS 16 - - - - - - 8.1 8.1
At 1 May 2019 (restated) 49.9 3.6 6.3 (622.6) (24.6) 234.7 3,161.3 2,808.6
Profit for the
period - - - - - - 493.9 493.9
Other comprehensive
income:
Foreign currency
translation
differences - - - - - 9.9 - 9.9
Total comprehensive
income
for the period - - - - - 9.9 493.9 503.8
Dividends paid - - - - - - (154.4) (154.4)
Own shares purchased
by
the ESOT - - - - (17.5) - - (17.5)
Own shares purchased
by
the Company - - - (250.2) - - - (250.2)
Share-based payments - - - - 14.4 - (10.0) 4.4
Tax on share-based
payments - - - - - - 0.2 0.2
At 31 October 2019 49.9 3.6 6.3 (872.8) (27.7) 244.6 3,491.0 2,894.9
CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHSED 31 OCTOBER
2019
Unaudited
2019 2018
GBPm GBPm
Cash flows from operating activities
Cash generated from operations before
exceptional
items and changes in rental equipment 1,228.3 966.8
Payments for rental property, plant
and equipment (815.4) (869.5)
Proceeds from disposal of rental property,
plant and equipment 107.0 93.0
Cash generated from operations 519.9 190.3
Financing costs paid (net) (108.2) (60.4)
Tax paid (net) (65.2) (22.7)
Net cash generated from operating
activities 346.5 107.2
Cash flows from investing activities
Acquisition of businesses (245.8) (334.8)
Payments for non-rental property,
plant and equipment (122.1) (89.2)
Proceeds from disposal of non-rental
property, plant and equipment 3.7 4.1
Net cash used in investing activities (364.2) (419.9)
Cash flows from financing activities
Drawdown of loans 687.4 1,320.8
Redemption of loans (211.6) (646.7)
Repayment of principal under lease
liabilities (30.2) (0.7)
Dividends paid (154.4) (133.3)
Purchase of own shares by the ESOT (17.5) (14.2)
Purchase of own shares by the Company (249.4) (209.6)
Net cash generated from financing
activities 24.3 316.3
Increase in cash and cash equivalents 6.6 3.6
Opening cash and cash equivalents 12.8 19.1
Effect of exchange rate difference - 0.6
Closing cash and cash equivalents 19.4 23.3
Reconciliation of net cash flows to
net debt
Increase in cash and cash equivalents
in the period (6.6) (3.6)
Increase in debt through cash flow 445.6 673.4
Change in net debt from cash flows 439.0 669.8
Debt acquired - 26.9
Exchange differences 29.6 200.4
Non-cash movements:
- deferred costs of debt raising 2.9 2.1
- new lease liabilities 137.5 0.5
Increase in net debt in the period 609.0 899.7
Net debt at 1 May (as previously stated) 3,744.9 2,712.0
Effect of initial application of IFRS 882.8 -
16
Net debt at 1 May (restated) 4,627.7 2,712.0
Net debt at 31 October 5,236.7 3,611.7
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
1. General information
Ashtead Group plc ('the Company') is a company incorporated and
domiciled in England and Wales and listed on the London Stock
Exchange. The condensed consolidated interim financial statements
as at, and for the six months ended, 31 October 2019 comprise the
Company and its subsidiaries ('the Group').
The condensed consolidated interim financial statements for the
six months ended 31 October 2019 were approved by the directors on
9 December 2019.
The condensed consolidated interim financial statements do not
constitute statutory accounts as defined in Section 434 of the
Companies Act 2006. The statutory accounts for the year ended 30
April 2019 were approved by the directors on 17 June 2019 and have
been mailed to shareholders and filed with the Registrar of
Companies. The auditor's report on those accounts was unqualified,
did not include a reference to any matter by way of emphasis and
did not contain a statement under Section 498(2) or (3) of the
Companies Act 2006.
The condensed consolidated interim financial statements for the
six months ended 31 October 2019 are unaudited but have been
reviewed by the Group's auditors. Their report is on page 38.
2. Basis of preparation
The condensed consolidated interim financial statements for the
six months ended 31 October 2019 have been prepared in accordance
with relevant International Financial Reporting Standards ('IFRS')
as adopted by the European Union, including IAS 34, and the
accounting policies set out in the Group's Annual Report and
Accounts for the year ended 30 April 2019, except for the adoption
of IFRS 16, Leases ('IFRS 16'), further details of which are set
out below.
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 the Glossary of Terms
on page 39.
The condensed consolidated interim financial statements have
been prepared on the going concern basis. The Group's internal
budgets and forecasts of future performance, available financing
facilities and facility headroom (see note 13), provide a
reasonable expectation that the Group has adequate resources to
continue in operation for the foreseeable future and consequently
the going concern basis continues to be appropriate in preparing
the condensed consolidated interim financial statements.
The exchange rates used in respect of the US dollar ($) and
Canadian dollar (C$) are:
US dollar Canadian dollar
2019 2018 2019 2018
Average for the three months ended
31 October 1.24 1.30 1.64 1.69
Average for the six months ended
31 October 1.25 1.31 1.66 1.71
At 30 April 1.30 1.38 1.75 1.77
At 31 October 1.29 1.28 1.70 1.68
IFRS 16, Leases
IFRS 16 has been applicable for the Group from 1 May 2019 and
provides a new model for lease accounting under which lessees
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.
Under IFRS 16 the Group recognises depreciation of right-of-use
assets and interest on lease liabilities in the consolidated income
statement, whereas under IAS 17, Leases ('IAS 17') operating leases
previously gave rise to a straight-line expense included within
other operating expenses. In addition, right-of-use assets will be
tested for impairment in accordance with IAS 36, Impairment of
Assets. This replaces the previous requirement to recognise a
provision for onerous lease contracts.
Under IFRS 16 the Group separates the total amount of cash paid
for leases that are on balance sheet into a principal portion
(presented within financing activities) and interest (presented
within operating activities) in the consolidated cash flow
statement. Under IAS 17 operating lease payments were presented as
operating cash outflows.
Details of the Group's accounting policies under IFRS 16 are set
out below, together with a description of the impact of adopting
IFRS 16. Significant judgements applied in the adoption of IFRS 16
included determining the lease term for those leases with
termination or extension options and determining an incremental
borrowing rate where the rate in the lease could not be determined
readily.
Accounting policy under IFRS 16
The Group assesses whether a contract is a lease, or contains a
lease, at inception of the contract. The Group recognises a
right-of-use asset and a corresponding lease liability with respect
to all lease arrangements in which it is the lessee, except for
short-term leases (defined as leases with a lease term of 12 months
or less) and leases of low value assets. For these leases, the
Group recognises the lease payments as an operating expense on a
straight-line basis over the term of the lease unless another
systematic basis is more representative of the time pattern in
which economic benefits from the leased assets are consumed.
The lease liability is measured initially at the present value
of future lease payments at the commencement date, discounted by
using the rate implicit in the lease. If this rate cannot be
readily determined, the Group uses its incremental borrowing rate.
Lease payments included in the measurement of the Group's lease
liability comprise:
-- fixed lease payments, less any lease incentives received; and
-- variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement
date.
The lease liability is presented as a separate line in the
consolidated balance sheet.
The lease liability is subsequently measured by increasing the
carrying amount to reflect interest on the lease liability (using
the effective interest method) and by reducing the carrying amount
to reflect the lease payments made.
The Group remeasures the lease liability (and makes a
corresponding adjustment to the related right-of-use asset)
whenever:
-- the lease term changes, in which case the lease liability is
remeasured by discounting the revised lease payments using a
revised discount rate;
-- the lease payments change due to changes in an index or rate,
in which case the lease liability is remeasured by discounting the
revised lease payments using the initial discount rate (unless the
lease payments change is due to a change in a floating interest
rate, in which case a revised discount rate is used); or
-- a lease contract is modified and the lease modification is
not accounted for as a separate lease, in which case the lease
liability is remeasured by discounting the revised lease payments
using a revised discount rate.
The right-of-use asset comprises the initial measurement of the
corresponding lease liability, lease payments made at or before the
commencement date and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and
impairment losses.
Right-of-use assets are depreciated over the shorter period of
the lease term and the useful life of the underlying asset with
depreciation commencing at the commencement date of the lease.
Variable lease payments that do not depend on an index or rate
are not included in the measurement of the lease liability and the
right-of-use asset. The related payments are recognised as an
expense in the period in which the event or condition that triggers
those payments occurs and are included in the line "other operating
costs" in the income statement.
For short-term leases (lease terms of 12 months or less) and
leases of low-value assets (such as photocopiers, vending machines,
etc.), the Group has opted to recognise a lease expense on a
straight-line basis as permitted by IFRS 16. This expense is
presented within other operating costs in the consolidated income
statement.
Approach to transition
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 of
GBP8m has been recognised as an adjustment to opening retained
earnings on 1 May 2019 with no restatement of comparatives.
The Group's weighted average incremental borrowing rate applied
to lease liabilities as at 1 May 2019 was 4.5%.
Practical expedients adopted on transition
As part of the Group's adoption of IFRS 16 and application of
the modified retrospective approach to transition, the Group
elected to use the following practical expedients:
-- a single discount rate has been applied to portfolios of
leases with reasonably similar characteristics;
-- right-of-use assets have been adjusted by the carrying amount
of onerous lease provisions at 30 April 2019 instead of performing
impairment reviews under IAS 36;
-- hindsight has been used in determining the lease term and as
such the Group has assumed that all available lease extension
options are taken unless there are plans to exit a location based
on our historical experience; and
-- leases where the remaining lease term on transition was less
than 12 months have been excluded from the lease liability on
transition.
Financial impact
The application of IFRS 16 to leases previously classified as
operating leases under IAS 17 resulted in the recognition of
right-of-use assets and lease liabilities. The table below sets out
the adjustments recognised at the date of initial application of
IFRS 16 in relation to the opening balance sheet:
As previously Impact of As restated
reported at
at 30 April 2019 IFRS 16 1 May 2019
GBPm GBPm GBPm
Current assets
Trade and other receivables 843.6 (8.0) 835.6
Other current assets 121.6 - 121.6
965.2 (8.0) 957.2
Non-current assets
Property, plant and
equipment 5,987.0 (4.8) 5,982.2
Right-of-use asset - 894.3 894.3
Other non-current assets 1,405.3 - 1,405.3
7,392.3 889.5 8,281.8
Current liabilities
Trade and other payables 632.4 (10.6) 621.8
Lease liabilities - 89.0 89.0
Short-term borrowings 2.3 (2.3) -
Provisions 42.5 (0.5) 42.0
Other current liabilities 16.4 - 16.4
693.6 75.6 769.2
Non-current liabilities
Lease liabilities - 798.8 798.8
Long-term borrowings 3,755.4 (2.7) 3,752.7
Provisions 46.0 (0.9) 45.1
Deferred tax liabilities 1,061.1 2.6 1,063.7
Other non-current liabilities 0.9 - 0.9
4,863.4 797.8 5,661.2
Net assets 2,800.5 8.1 2,808.6
The table below presents a reconciliation of the minimum
operating lease commitments disclosed at 30 April 2019 to the lease
liabilities recognised at 1 May 2019 under IFRS 16:
GBPm
Minimum operating lease commitments disclosed under
IAS 17 at 30 April 2019 495.2
Commitments under reasonably certain extension options 761.8
Short-term and low value lease commitments (5.4)
Effect of discounting (368.8)
Finance lease liabilities recognised under IAS 17
at 30 April 2019 5.0
Lease liabilities recognised at 1 May 2019 under
IFRS 16 887.8
In terms of the income statement impact, the application of IFRS
16 resulted in a decrease in other operating expenses and an
increase in depreciation and interest expense compared to IAS 17.
The impact on the consolidated income statement is detailed below
where pro forma adjustments have been made to eliminate the
depreciation and interest which arise under IFRS 16 and to include
the operating lease costs within EBITDA which would have been
recorded under IAS 17.
2019 2018
Pre IFRS 16 As
IFRS 16 impact reported Total
GBPm GBPm GBPm GBPm
Revenue
Rental revenue 2,446.9 - 2,446.9 2,074.5
Sale of new equipment,
merchandise and consumables 96.0 - 96.0 79.7
Sale of used rental equipment 138.4 - 138.4 96.2
2,681.3 - 2,681.3 2,250.4
Operating costs
Staff costs (590.9) - (590.9) (488.8)
Used rental equipment
sold (118.9) - (118.9) (79.6)
Other operating costs (694.1) 49.7 (644.4) (583.2)
(1,403.9) 49.7 (1,354.2) (1,151.6)
EBITDA 1,277.4 49.7 1,327.1 1,098.8
Depreciation (482.8) (43.3) (526.1) (396.6)
Amortisation of intangibles (29.7) - (29.7) (23.4)
Operating profit 764.9 6.4 771.3 678.8
Investment income - - - 0.1
Interest expense (89.9) (21.2) (111.1) (68.9)
Profit on ordinary activities
before taxation 675.0 (14.8) 660.2 610.0
Taxation (170.0) 3.7 (166.3) (148.5)
Profit attributable to
equity
holders of the Company 505.0 (11.1) 493.9 461.5
3. Segmental analysis
Three months to 31 October
2019
Sunbelt Corporate
Sunbelt US A-Plant Canada items Group
GBPm GBPm GBPm GBPm GBPm
Revenue
Rental revenue 1,118.9 108.4 55.1 - 1,282.4
Sale of new equipment, merchandise
and consumables 35.3 8.7 5.4 - 49.4
Sale of used rental equipment 60.2 7.4 3.7 - 71.3
1,214.4 124.5 64.2 - 1,403.1
Operating profit before amortisation 403.2 14.6 14.8 (4.2) 428.4
Amortisation (15.4)
Net financing costs (57.5)
Profit before taxation 355.5
Taxation (89.8)
Profit attributable to equity
shareholders 265.7
Three months to 31 October
2018
Sunbelt Corporate
Sunbelt US A-Plant Canada items Group
GBPm GBPm GBPm GBPm GBPm
Revenue
Rental revenue 956.7 111.1 45.7 - 1,113.5
Sale of new equipment, merchandise
and consumables 28.1 7.6 5.5 - 41.2
Sale of used rental equipment 40.0 6.2 2.1 - 48.3
1,024.8 124.9 53.3 - 1,203.0
Operating profit before amortisation 354.6 22.0 12.9 (3.7) 385.8
Amortisation (12.2)
Net financing costs (38.0)
Profit before taxation 335.6
Taxation (84.0)
Profit attributable to equity
shareholders 251.6
Six months to 31 October 2019
Sunbelt Corporate
Sunbelt US A-Plant Canada items Group
GBPm GBPm GBPm GBPm GBPm
Revenue
Rental revenue 2,128.7 217.8 100.4 - 2,446.9
Sale of new equipment, merchandise
and consumables 67.4 17.1 11.5 - 96.0
Sale of used rental equipment 108.7 21.0 8.7 - 138.4
2,304.8 255.9 120.6 - 2,681.3
Operating profit before amortisation 755.9 30.0 24.3 (9.2) 801.0
Amortisation (29.7)
Net financing costs (111.1)
Profit before taxation 660.2
Taxation (166.3)
Profit attributable to equity
shareholders 493.9
Six months to 31 October 2018
Sunbelt Corporate
Sunbelt US A-Plant Canada items Group
GBPm GBPm GBPm GBPm GBPm
Revenue
Rental revenue 1,771.6 221.3 81.6 - 2,074.5
Sale of new equipment, merchandise
and consumables 51.3 17.3 11.1 - 79.7
Sale of used rental equipment 79.3 11.9 5.0 - 96.2
1,902.2 250.5 97.7 - 2,250.4
Operating profit before amortisation 644.5 44.2 21.2 (7.7) 702.2
Amortisation (23.4)
Net financing costs (68.8)
Profit before taxation 610.0
Taxation (148.5)
Profit attributable to equity
shareholders 461.5
Sunbelt Corporate
Sunbelt US A-Plant Canada items Group
GBPm GBPm GBPm GBPm GBPm
At 31 October 2019
Segment assets 8,649.9 889.9 577.1 7.8 10,124.7
Cash 19.4
Taxation assets 4.2
Total assets 10,148.3
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
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 31 October
Staff costs:
Salaries 280.4 - 280.4 236.5 - 236.5
Social
security
costs 19.9 - 19.9 16.7 - 16.7
Other pension
costs 5.2 - 5.2 4.1 - 4.1
305.5 - 305.5 257.3 - 257.3
Used rental
equipment
sold 60.3 - 60.3 40.2 - 40.2
Other
operating
costs:
Vehicle costs 84.4 - 84.4 73.8 - 73.8
Spares,
consumables &
external
repairs 71.7 - 71.7 58.0 - 58.0
Facility costs 12.2 - 12.2 30.7 - 30.7
Other external
charges 168.5 - 168.5 147.9 - 147.9
336.8 - 336.8 310.4 - 310.4
Depreciation
and
amortisation:
Depreciation 272.1 - 272.1 209.3 - 209.3
Amortisation
of
intangibles - 15.4 15.4 - 12.2 12.2
272.1 15.4 287.5 209.3 12.2 221.5
974.7 15.4 990.1 817.2 12.2 829.4
2019 2018
Before Before
amortisation Amortisation Total amortisation Amortisation Total
GBPm GBPm GBPm GBPm GBPm GBPm
Six months to
31 October
Staff costs:
Salaries 540.7 - 540.7 448.0 - 448.0
Social
security
costs 39.9 - 39.9 32.8 - 32.8
Other pension
costs 10.3 - 10.3 8.0 - 8.0
590.9 - 590.9 488.8 - 488.8
Used rental
equipment
sold 118.9 - 118.9 79.6 - 79.6
Other
operating
costs:
Vehicle costs 159.9 - 159.9 136.3 - 136.3
Spares,
consumables &
external
repairs 137.0 - 137.0 108.5 - 108.5
Facility
costs 24.3 - 24.3 59.6 - 59.6
Other
external
charges 323.2 - 323.2 278.8 - 278.8
644.4 - 644.4 583.2 - 583.2
Depreciation
and
amortisation:
Depreciation 526.1 - 526.1 396.6 - 396.6
Amortisation
of
intangibles - 29.7 29.7 - 23.4 23.4
526.1 29.7 555.8 396.6 23.4 420.0
1,880.3 29.7 1,910.0 1,548.2 23.4 1,571.6
5. Amortisation
Amortisation relates to the periodic write-off of intangible
assets. The Group believes this item should be disclosed separately
within the consolidated income statement to assist in the
understanding of the Group's financial performance. Underlying
profit and earnings per share are stated before amortisation of
intangibles.
Three months Six months
to to
31 October 31 October
2019 2018 2019 2018
GBPm GBPm GBPm GBPm
Amortisation of intangibles 15.4 12.2 29.7 23.4
Taxation (3.7) (2.7) (7.2) (5.4)
11.7 9.5 22.5 18.0
6. Net financing costs
Three months Six months to
to
31 October 31 October
2019 2018 2019 2018
GBPm GBPm GBPm GBPm
Investment income:
Net interest on the net defined benefit
pension plan asset - (0.1) - (0.1)
Interest expense:
Bank interest payable 22.1 15.5 42.1 29.9
Interest payable on second priority senior
secured notes 22.4 21.2 44.2 36.4
Interest payable on lease liabilities 11.3 0.1 21.5 0.2
Non-cash unwind of discount on provisions 0.2 0.2 0.4 0.4
Amortisation of deferred debt raising
costs 1.5 1.1 2.9 2.0
57.5 38.1 111.1 68.9
7. Taxation
The tax charge for the period has been computed using a tax rate
of 25% in the US (2018: 25%), 19% in the UK (2018: 19%) and 27% in
Canada (2018: 27%). The blended rate for the Group as a whole is
25% (2018: 24%).
The tax charge of GBP174m (2018: GBP154m) on the underlying
profit before taxation of GBP690m (2018: GBP633m) can be explained
as follows:
Six months to 31 October
2019 2018
GBPm GBPm
Current tax
- current tax on income for the period 84.1 27.4
- adjustments to prior year (2.1) (4.0)
82.0 23.4
Deferred tax
- origination and reversal of temporary
differences 89.8 128.2
- adjustments to prior year 1.7 2.3
91.5 130.5
Tax on underlying activities 173.5 153.9
Comprising:
- UK 12.3 11.1
- US 157.5 138.8
- Canada 3.7 4.0
173.5 153.9
In addition, the tax credit of GBP7m (2018: GBP5m) on
amortisation of GBP30m (2018: GBP23m) consists of a current tax
credit of GBP4m (2018: GBPnil) relating to the US, a deferred tax
credit of GBP1m (2018: GBP1m) relating to the UK, GBP1m (2018:
GBP3m) relating to the US and GBP1m (2018: GBP1m) relating to
Canada.
8. Earnings per share
Basic and diluted earnings per share for the three and six
months ended 31 October 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 Six months to
to
31 October 31 October
2019 2018 2019 2018
Profit for the financial period (GBPm) 265.7 251.6 493.9 461.5
Weighted average number of shares
(m) - basic 458.8 483.2 461.8 485.5
- diluted 460.4 484.9 463.5 487.4
Basic earnings per share 57.9p 52.1p 107.0p 95.1p
Diluted earnings per share 57.7p 51.9p 106.6p 94.7p
Underlying earnings per share (defined in any period as the
earnings before amortisation of intangibles for that period divided
by the weighted average number of shares in issue in that period)
may be reconciled to the basic earnings per share as follows:
Three months Six months to
to
31 October 31 October
2019 2018 2019 2018
Basic earnings per share 57.9p 52.1p 107.0p 95.1p
Amortisation of intangibles 3.4p 2.5p 6.4p 4.8p
Tax on amortisation (0.8p) (0.6p) (1.6p) (1.1p)
Underlying earnings per share 60.5p 54.0p 111.8p 98.8p
9. Dividends
During the period, a final dividend in respect of the year ended
30 April 2019 of 33.5p (2018: 27.5p) per share was paid to
shareholders costing GBP154m (2018: GBP133m). In addition, the
directors are proposing an interim dividend in respect of the year
ending 30 April 2020 of 7.15p (2019: 6.5p) per share to be paid on
5 February 2020 to shareholders who are on the register of members
on 17 January 2020.
10. Property, plant and equipment
2019 2018
Rental Rental
equipment Total equipment Total
Net book value GBPm GBPm GBPm GBPm
At 1 May (as previously
stated) 5,413.3 5,987.0 4,430.5 4,882.0
Effect of initial application - (4.8) - -
of IFRS 16
At 1 May (restated) 5,413.3 5,982.2 4,430.5 4,882.0
Exchange differences 51.9 57.0 293.1 321.1
Reclassifications (1.2) - (1.0) -
Additions 891.8 1,010.4 971.1 1,063.1
Acquisitions 73.9 99.2 171.6 185.3
Disposals (112.8) (117.1) (81.0) (85.0)
Depreciation (425.9) (482.2) (350.8) (396.6)
At 31 October 5,891.0 6,549.5 5,433.5 5,969.9
11. Right-of-use assets
Property Other
Net book value leases leases Total
GBPm GBPm GBPm
At 1 May 2019 (as previously - - -
stated)
Effect of initial application
of IFRS 16 889.5 4.8 894.3
At 1 May 2019 (restated) 889.5 4.8 894.3
Exchange differences 8.3 - 8.3
Additions 111.0 0.8 111.8
Remeasurement 22.2 - 22.2
Disposals (1.0) (0.5) (1.5)
Depreciation (43.3) (0.6) (43.9)
At 31 October 2019 986.7 4.5 991.2
On transition, the right-of-use asset has been adjusted for the
impact of onerous lease provisions (GBP1m) and lease prepayments
(GBP8m).
12. Lease liability
31 October 30 April
2019 2019
GBPm GBPm
Current 100.1 -
Non-current 899.2 -
999.3 -
13. Borrowings
31 October 30 April
2019 2019
GBPm GBPm
Current
Finance lease obligations - 2.3
Non-current
First priority senior secured bank debt 2,500.3 2,010.7
Finance lease obligations - 2.7
5.625% second priority senior secured notes,
due 2024 382.5 379.3
4.125% second priority senior secured notes,
due 2025 458.5 454.7
5.250% second priority senior secured notes,
due 2026 457.4 453.6
4.375% second priority senior secured notes,
due 2027 458.1 454.4
4,256.8 3,755.4
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.
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 five years. The weighted average interest cost
of these facilities (including non-cash amortisation of deferred
debt raising costs) is 4%. The terms of the senior secured notes
are such that financial performance covenants are only measured at
the time new debt is raised. The $500m 5.625% senior secured notes
were refinanced in November 2019 and further details are provided
in note 18.
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 31 October
2019, the fixed charge ratio exceeded the covenant requirement.
At 31 October 2019, availability under the senior secured bank
facility was $1,001m ($1,622m at 30 April 2019), with an additional
$2,930m of suppressed availability, meaning that the covenant did
not apply at 31 October 2019 and is unlikely to apply in
forthcoming quarters.
Fair value of financial instruments
At 31 October 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 31 October At 30 April 2019
2019
Book Fair Book Fair
value value value value
GBPm GBPm GBPm GBPm
5.625% senior secured notes 386.4 398.0 383.5 397.5
4.125% senior secured notes 463.7 473.6 460.3 455.1
5.250% senior secured notes 463.7 494.4 460.3 476.9
4.375% senior secured notes 463.7 475.3 460.3 451.6
1,777.5 1,841.3 1,764.4 1,781.1
Deferred costs of raising
finance (21.0) - (22.4) -
1,756.5 1,841.3 1,742.0 1,781.1
The fair value of the second priority senior secured notes has
been calculated using quoted market prices at 31 October 2019.
14. Share capital
Ordinary shares of 10p
each:
31 October 30 April 31 October 30 April
2019 2019 2019 2019
Number Number GBPm GBPm
Issued and fully paid 499,225,712 499,225,712 49.9 49.9
During the period, the Company purchased 11.5m ordinary shares
at a total cost of GBP250m under the Group's share buyback
programme, which are held in treasury. At 31 October 2019, 41.7m
(April 2019: 30.3m) shares were held by the Company and a further
1.5m (April 2019: 1.6m) shares were held by the Company's Employee
Share Ownership Trust.
15. Notes to the cash flow statement
a) Cash flow from operating activities
Six months to 31 October
2019 2018
GBPm GBPm
Operating profit before exceptional items and
amortisation 801.0 702.2
Depreciation 526.1 396.6
EBITDA before exceptional items 1,327.1 1,098.8
Profit on disposal of rental equipment (19.5) (16.6)
Profit on disposal of other property, plant
and equipment (0.4) (0.4)
Increase in inventories (7.5) (5.1)
Increase in trade and other receivables (86.8) (159.6)
Increase in trade and other payables 10.9 45.9
Exchange differences 0.1 -
Other non-cash movements 4.4 3.8
Cash generated from operations before exceptional
items
and changes in rental equipment 1,228.3 966.8
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 Adoption of Cash Exchange New lease Other 31 October
2019 IFRS 16 flow movement liabilities movements 2019
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Short-term borrowings 2.3 (2.3) - - - - -
Long-term borrowings 3,755.4 (2.7) 475.8 25.4 - 2.9 4,256.8
Lease liabilities - 887.8 (30.2) 4.2 137.5 - 999.3
Total liabilities
from
financing activities 3,757.7 882.8 445.6 29.6 137.5 2.9 5,256.1
Cash and cash
equivalents (12.8) - (6.6) - - - (19.4)
Net debt 3,744.9 882.8 439.0 29.6 137.5 2.9 5,236.7
Non-cash movements
1 Cash Exchange Debt Other 31 October
May
2018 flow movement acquired movements 2018
GBPm GBPm GBPm GBPm GBPm GBPm
Short-term borrowings 2.7 (8.7) - 7.9 0.6 2.5
Long-term borrowings 2,728.4 682.1 201.0 19.0 2.0 3,632.5
Total liabilities from
financing activities 2,731.1 673.4 201.0 26.9 2.6 3,635.0
Cash and cash equivalents (19.1) (3.6) (0.6) - - (23.3)
Net debt 2,712.0 669.8 200.4 26.9 2.6 3,611.7
Details of the Group's cash and debt are given in note 13 and
the Review of Second Quarter, Balance Sheet and Cash Flow
accompanying these condensed consolidated interim financial
statements.
c) Acquisitions
Six months to 31 October
2019 2018
GBPm GBPm
Cash consideration paid:
- acquisitions in the period 228.5 332.9
- contingent consideration 17.3 1.9
245.8 334.8
During the period, 11 businesses were acquired with cash paid of
GBP229m (2018: GBP333m), after taking account of net cash acquired
of GBP2m. Further details are provided in note 16.
Contingent consideration of GBP17m (2018: GBP2m) was paid
relating to prior year acquisitions.
16. Acquisitions
During the period, the following acquisitions were
completed:
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.
iv) On 20 June 2019, Sunbelt US acquired the business and assets
of Six and Mango, LLP ('SME'). SME is a general equipment business
in Texas.
v) On 28 June 2019, A-Plant acquired the entire share capital of
Ellerbeck Industries Limited, trading as Inlec UK Limited ('Inlec')
and Evercal Limited ('Evercal'). Inlec and Evercal are industrial
test and measurement businesses.
vi) On 19 July 2019, Sunbelt US acquired the business and assets
of King Equipment, LLC ('King') for a cash consideration of GBP152m
($191m), including properties for GBP21m, with contingent
consideration of up to GBP2m ($3m) payable over the next year
depending on revenue meeting or exceeding certain thresholds. King
is a general equipment business in California.
vii) On 28 August 2019, Sunbelt US acquired the business and
assets of Redi-Rents, Inc. ('Redi-Rents'). Redi-Rents is a general
equipment business in California.
viii) On 5 September 2019, Sunbelt US acquired the business and
assets of Midwest Scaffold Services, LLC ('MSS'). MSS is a scaffold
business in the US midwest.
ix) On 1 October 2019, Sunbelt Canada acquired the entire share
capital of Rental Experts, Inc. and the business and assets of
River City Aerial Lifts, Inc. (together 'Rental Experts/River
City'). Rental Experts/River City is a general equipment business
in Manitoba.
x) On 2 October 2019, Sunbelt US acquired the business and
assets of Allwest Underground, Inc. ('Allwest'). Allwest is a
trench shoring business in Washington and Oregon.
xi) On 15 October 2019, Sunbelt US acquired the business and
assets of Beavercreek Rentals, Inc. ('Beavercreek'). Beavercreek is
a general equipment business in Ohio.
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 13.1
Inventory (2.6)
Property, plant and equipment
- rental equipment 73.9
- other assets 25.3
Creditors (1.6)
Current tax 0.2
Deferred tax (2.5)
Intangible assets (non-compete agreements,
brand names and customer relationships) 58.8
164.6
Consideration:
- cash paid and due to be paid (net of
cash acquired) 230.8
- contingent consideration payable in
cash 5.8
236.6
Goodwill 72.0
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. GBP68m of the goodwill is
expected to be deductible for income tax purposes.
The gross value and the fair value of trade receivables at
acquisition was GBP13m.
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 2019 to their date of acquisition was not material.
17. 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 GBP35m as at 31 October 2019. Based on
the current status of the investigation, we have concluded that no
provision is required in relation to this amount.
18. Events after the balance sheet date
Since the balance sheet date, the Group has completed three
acquisitions as follows:
i) On 14 November 2019, Sunbelt US acquired the business and
assets of the New Braunfels Texas branch of Harris County Rentals,
LLC, trading as Texas State Rentals ('HCR'). HCR is a general
equipment business in Texas.
ii) On 26 November 2019, Sunbelt US acquired the business and
assets of Kitsap Rentals, Inc. ('Advanced Rentals'). Advanced
Rentals is a general equipment business in Washington.
iii) On 2 December 2019, Sunbelt Canada acquired the entire
share capital of William F. White International, Inc. ('WFW') for a
cash consideration of GBP136m (C$234m) with contingent
consideration of up to GBP8m (C$14m), payable over the next year,
depending on EBITDA meeting or exceeding certain thresholds.
Including acquired debt, the total cash consideration was GBP151m
(C$260m). WFW is a film and television equipment rental business
operating across Canada.
The initial accounting for these acquisitions is incomplete. Had
these acquisitions taken place on 1 May 2019, their contribution to
revenue and operating profit would not have been material.
In November 2019, the Group issued $600m 4.0% second priority
senior secured notes maturing in May 2028 and $600m 4.25% second
priority senior secured notes maturing in November 2029. The net
proceeds of the issues were used to repurchase the Group's $500m
5.625% senior secured notes which would have matured in 2024, pay
related fees and expenses and repay an element of the amount
outstanding under the senior credit facility. Subsequent to the
refinancing, the Group's debt facilities are committed for an
average of six years.
The redemption of the $500m 5.625% senior secured notes gave
rise to non-recurring interest charges relating to the call premium
expense, duplicate interest and the write-off of deferred financing
costs of approximately GBP16m ($21m). These items will be
recognised as an exceptional interest expense in the Group's income
statement in the third quarter.
Following redemption of the $500m 5.625% senior secured notes,
the second priority fixed and floating charges over the Group's
property, plant and equipment, inventory and trade receivables
securing the senior secured notes have been released and the senior
secured notes are no longer secured by these assets. The senior
secured notes continue to be guaranteed by Ashtead Group plc and
all its principal subsidiary undertakings.
REVIEW OF SECOND QUARTER, BALANCE SHEET AND CASH FLOW
Second quarter
Revenue EBITDA Profit(1)
2019 2018 2019 2018 2019 2018
Sunbelt US in $m 1,506.6 1,332.7 786.0 687.5 500.4 461.3
Sunbelt Canada in C$m 105.5 90.5 47.4 38.3 24.4 22.0
Sunbelt US in GBPm 1,214.4 1,024.8 633.6 528.6 403.2 354.6
A-Plant 124.5 124.9 42.2 47.7 14.6 22.0
Sunbelt Canada in GBPm 64.2 53.3 28.8 22.5 14.8 12.9
Group central costs - - (4.1) (3.7) (4.2) (3.7)
1,403.1 1,203.0 700.5 595.1 428.4 385.8
Net financing costs (57.5) (38.0)
Profit before amortisation
and tax 370.9 347.8
Amortisation (15.4) (12.2)
Profit before taxation 355.5 335.6
Margins as reported
Sunbelt US 52.2% 51.6% 33.2% 34.6%
A-Plant 33.9% 38.2% 11.8% 17.7%
Sunbelt Canada 44.9% 42.3% 23.1% 24.3%
Group 49.9% 49.5% 30.5% 32.1%
(1) Segment result presented is operating profit before
amortisation.
The Group adopted IFRS 16, Leases ('IFRS 16') on 1 May 2019. The
Group elected to apply IFRS 16 using the modified retrospective
approach with no restatement of comparative figures. As a result,
the results for the half year are not comparable directly to the
prior year with the adoption of IFRS 16 resulting in higher EBITDA
and operating profit but lower profit before amortisation and tax
than under the previous accounting standard. As a result, our comments
below are on both the reported figures and those excluding the
impact of IFRS 16 to aid comparability. Margins excluding the impact
of IFRS 16 are summarised below. Further details on the adoption
and impact of IFRS 16 are provided in note 2 to the interim financial
statements.
Margins excluding the impact of 2019 2018 2019 2018
IFRS 16
Sunbelt US 50.4% 51.6% 32.9% 34.6%
A-Plant 32.2% 38.2% 11.7% 17.7%
Sunbelt Canada 42.5% 42.3% 22.9% 24.3%
Group 48.1% 49.5% 30.3% 32.1%
--------------------------------------------- -------- -------- ------- -------
Group revenue increased 17% to GBP1,403m in the second quarter
(2018: GBP1,203m) with a strong performance in the US and Canadian
markets. This revenue growth, combined with continued focus on
operational efficiency, generated underlying profit before tax of
GBP371m (2018: GBP348m).
As for the half year, the Group's growth was driven by good
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 996
Organic (same-store and greenfields) 8% 76
Bolt-ons since 1 August 2018 4% 44
2019 rental only revenue 12% 1,116
Ancillary revenue 10% 272
2019 rental revenue 12% 1,388
Sales revenue 34% 119
2019 total revenue 13% 1,507
Sunbelt US's organic growth of 8% 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 4% 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 12% was driven by an increase in fleet on rent. This is a
good performance after the last two years which were impacted
favourably by significant hurricane activity, whereas the 2019
hurricane season was much quieter.
A-Plant generated rental only revenue of GBP93m (2018: GBP96m),
down 3% compared with the comparable quarter. This reflected the
competitive rate environment in the UK market in addition to a
reduction in fleet on rent following A-Plant's targeted defleet
programme.
Sunbelt Canada delivered revenue of C$106m (2018: C$90m) in the
quarter.
Group operating profit increased 11% to GBP428m (2018: GBP386m).
Net financing costs were GBP57m (2018: GBP38m), reflecting the
impact of IFRS 16 and higher average debt levels. As a result,
Group profit before amortisation of intangibles, exceptional items
and taxation was GBP371m (2018: GBP348m). After amortisation of
GBP15m, the statutory profit before taxation was GBP356m (2018:
GBP336m).
Balance sheet
Fixed assets
Capital expenditure in the first half totalled GBP1,010m (2018:
GBP1,063m) with GBP892m invested in the rental fleet (2018:
GBP971m). Expenditure on rental equipment was 88% 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 $m 324.1 725.3 1,049.4 1,070.2
Sunbelt Canada in C$m 43.2 40.2 83.4 120.2
Sunbelt US in GBPm 250.5 560.6 811.1 837.5
A-Plant 31.7 - 31.7 62.0
Sunbelt Canada in GBPm 25.4 23.6 49.0 71.6
Total rental equipment 307.6 584.2 891.8 971.1
Delivery vehicles, property improvements &
IT equipment 118.6 92.0
Total additions 1,010.4 1,063.1
In a strong US rental market, $725m of rental equipment capital
expenditure was spent on growth while $324m was invested in
replacement of existing fleet. The growth proportion is estimated
on the basis of the assumption that replacement capital expenditure
in any period is equal to the original cost of equipment sold.
The average age of the Group's serialised rental equipment,
which constitutes the substantial majority of our fleet, at 31
October 2019 was 33 months (2018: 31 months) on a net book value
basis. Sunbelt US's fleet had an average age of 33 months (2018: 31
months), A-Plant's fleet had an average age of 40 months (2018: 34
months) and Sunbelt Canada's fleet had an average age of 30 months
(2018: 28 months).
LTM
Rental fleet at original cost LTM rental dollar
31 October 2019 30 April LTM average revenue utilisation
2019
Sunbelt US in
$m 10,001 9,125 9,260 4,975 54%
Sunbelt Canada
in C$m 709 660 672 315 47%
Sunbelt US in
GBPm 7,728 6,999 7,272 3,906 54%
A-Plant 879 907 897 413 46%
Sunbelt Canada
in GBPm 417 376 397 186 47%
9,024 8,282 8,566 4,505
Dollar utilisation was 54% at Sunbelt US (2018: 55%), 46% at
A-Plant (2018: 47%) and 47% at Sunbelt Canada (2018: 55%). The
lower Sunbelt Canada dollar utilisation reflects the mix of the
business and the impact of the lower dollar utilisation Voisin's
business.
Trade receivables
Receivable days at 31 October 2019 were 49 days (2018: 51 days).
The bad debt charge for the last twelve months ended 31 October
2019 as a percentage of total turnover was 0.5% (2018: 0.7%). Trade
receivables at 31 October 2019 of GBP828m (2018: GBP756m) are
stated net of allowances for bad debts and credit notes of GBP62m
(2018: GBP56m) with the allowance representing 7.0% (2018: 6.9%) of
gross receivables.
Trade and other payables
Group payable days were 58 days in 2019 (2018: 59 days) with
capital expenditure related payables, which have longer payment
terms, totalling GBP297m (2018: GBP368m). 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
Six months LTM to Year to
to
31 October 31 October 30 April
2019 2018 2019 2019
GBPm GBPm GBPm GBPm
EBITDA before exceptional items 1,327.1 1,098.8 2,334.9 2,106.6
Cash inflow from operations before
exceptional
items and changes in rental equipment 1,228.3 966.8 2,304.0 2,042.5
Cash conversion ratio* 92.6% 88.0% 98.7% 97.0%
Replacement rental capital expenditure (290.1) (258.1) (504.9) (472.9)
Payments for non-rental capital expenditure (122.1) (89.2) (201.6) (168.7)
Rental equipment disposal proceeds 107.0 93.0 195.6 181.6
Other property, plant and equipment
disposal proceeds 3.7 4.1 9.8 10.2
Tax (net) (65.2) (22.7) (93.5) (51.0)
Financing costs (108.2) (60.4) (190.7) (142.9)
Cash inflow before growth capex and
payment of exceptional costs 753.4 633.5 1,518.7 1,398.8
Growth rental capital expenditure (525.3) (611.4) (944.5) (1,030.6)
Free cash flow 228.1 22.1 574.2 368.2
Business acquisitions (245.8) (334.8) (502.3) (591.3)
Total cash absorbed (17.7) (312.7) 71.9 (223.1)
Dividends (154.4) (133.3) (185.3) (164.2)
Purchase of own shares by the Company (249.4) (209.6) (500.2) (460.4)
Purchase of own shares by the ESOT (17.5) (14.2) (17.5) (14.2)
Increase in net debt due to cash flow (439.0) (669.8) (631.1) (861.9)
* Cash inflow from operations before exceptional items and
changes in rental equipment as a percentage of EBITDA before
exceptional items.
Cash inflow from operations before payment of exceptional costs
and the net investment in the rental fleet increased by 27% to
GBP1,228m. The first half cash conversion ratio was 93% (2018:
88%).
Total payments for capital expenditure (rental equipment and
other PPE) in the first half were GBP938m (2018: GBP959m). Disposal
proceeds received totalled GBP111m (2018: GBP97m), giving net
payments for capital expenditure of GBP827m in the period (2018:
GBP862m). Financing costs paid totalled GBP108m (2018: GBP60m)
while tax payments were GBP65m (2018: GBP23m). Financing costs paid
typically differ from the charge in the income statement due to the
timing of interest payments in the year and non-cash interest
charges.
Accordingly, in the first half the Group generated GBP753m
(2018: GBP633m) 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, there was a
free cash inflow of GBP228m (2018: GBP22m) and, after acquisition
expenditure of GBP246m (2018: GBP335m), a net cash outflow of
GBP18m (2018: GBP313m), before returns to shareholders. Excluding
the impact of IFRS 16, there was a free cash inflow of GBP197m
(2018: GBP22m) and a net cash outflow of GBP49m (2018: GBP313m),
before returns to shareholders.
Net debt
31 October 30 April
2019 2018 2019
GBPm GBPm GBPm
First priority senior secured bank debt 2,500.3 1,854.3 2,010.7
5.625% second priority senior secured
notes, due 2024 382.5 386.7 379.3
4.125% second priority senior secured
notes, due 2025 458.5 463.4 454.7
5.250% second priority senior secured
notes, due 2026 457.4 462.3 453.6
4.375% second priority senior secured
notes, due 2027 458.1 463.2 454.4
Total external borrowings 4,256.8 3,629.9 3,752.7
Lease liabilities 999.3 5.1 5.0
5,256.1 3,635.0 3,757.7
Cash and cash equivalents (19.4) (23.3) (12.8)
Total net debt 5,236.7 3,611.7 3,744.9
Net debt at 31 October 2019 was GBP5,237m with the increase
since 30 April 2019 reflecting the adoption of IFRS 16, the net
cash outflow set out above and a small impact from weaker sterling
(GBP30m). The Group's EBITDA for the twelve months ended 31 October
2019 was GBP2,335m. On a pro forma basis, including the impact of
IFRS 16, the ratio of net debt to EBITDA was 2.2 times at 31
October 2019. Excluding the impact of IFRS 16, the ratio of net
debt to EBITDA was 1.9 times (2018: 1.8 times) on a constant
currency basis and 1.9 times (2018: 1.9 times) on a reported basis
as at 31 October 2019.
Principal risks and uncertainties
Risks and uncertainties in achieving the Group's objectives for
the remainder of the financial year, together with assumptions,
estimates, judgements and critical accounting policies used in
preparing financial information remain broadly unchanged from those
detailed in the 2019 Annual Report and Accounts on pages 32 to
35.
The principal risks and uncertainties facing the Group are:
-- economic conditions - 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.
-- competition - 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.
-- financing - 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.
-- cyber security - 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.
-- health and safety - 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.
-- people - 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.
-- environmental - 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.
-- laws and regulations - failure to comply with the frequently
changing regulatory environment could result in reputational damage
or financial penalty.
Further details, including actions taken to mitigate these
risks, are provided within the 2019 Annual Report and Accounts.
Our business is subject to significant fluctuations in
performance from quarter to quarter as a result of seasonal
effects. Commercial construction activity tends to increase in the
summer and during extended periods of mild weather and to decrease
in the winter and during extended periods of inclement weather.
Furthermore, due to the incidence of public holidays in the US,
Canada and the UK, there are more billing days in the first half of
our financial year than the second half leading to our revenue
normally being higher in the first half. On a quarterly basis, the
second quarter is typically our strongest quarter, followed by the
first and then the third and fourth quarters.
In addition, the current trading and outlook section of the
interim statement provides commentary on market and economic
conditions for the remainder of the year.
Fluctuations in the value of the US dollar with respect to the
pound sterling have had, and may continue to have, a significant
impact on our financial condition and results of operations as
reported in pounds due to the majority of our assets, liabilities,
revenues and costs being denominated in US dollars. The Group has
arranged its financing such that, at 31 October 2019, 92% of its
debt (including lease liabilities) was denominated in US (and
Canadian) dollars so that there is a natural partial offset between
its dollar-denominated net assets and earnings and its
dollar-denominated debt and interest expense. At 31 October 2019,
dollar-denominated debt represented approximately 66% of the value
of dollar-denominated net assets (other than debt). Based on the
current currency mix of our profits and on dollar debt levels,
interest and exchange rates at 31 October 2019, a 1% change in the
US dollar exchange rate would impact underlying pre-tax profit by
approximately GBP11m.
OPERATING STATISTICS
Number of rental stores Staff numbers
31 October 30 April 31 October 30 April
2019 2018 2019 2019 2018 2019
Sunbelt US 815 719 773 14,031 12,216 13,015
A-Plant 190 194 196 3,728 3,693 3,789
Sunbelt Canada 69 64 67 1,050 887 984
Corporate office - - - 17 15 15
Group 1,074 977 1,036 18,826 16,811 17,803
Sunbelt US's rental store number includes 19 Sunbelt at Lowes
stores at 31 October 2019 (2018: 19).
INDEPENT REVIEW REPORT TO THE BOARD OF DIRECTORS OF ASHTEAD
GROUP PLC
We have been engaged by the Company to review the condensed
consolidated interim financial statements for the six months ended
31 October 2019 which comprise the consolidated income statement,
the consolidated statement of comprehensive income, the
consolidated balance sheet, the consolidated statement of changes
in equity, the consolidated cash flow statement and related notes 1
to 18. We have read the other information contained in the
half-yearly financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed consolidated interim financial
statements.
The report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the Company those matters we are required to state to them
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our review
work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with IFRS as adopted by the
European Union. The condensed consolidated interim financial
statements included in this half-yearly financial report have been
prepared in accordance with International Accounting Standard 34,
"Interim Financial Reporting", as adopted by the European
Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed consolidated interim financial statements in the
half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed consolidated interim
financial statements for the six months ended 31 October 2019 are
not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
9 December 2019
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.
Where relevant, the APMs exclude the impact of IFRS 16 to aid
comparability with prior year metrics. 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 15.
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 Second Quarter, Balance Sheet Return on Investment ('RoI'):
and Cash Flow section. last 12-month ('LTM') underlying
operating profit, divided by the
Constant currency: calculated last 12-month average of the sum
by applying the current period of net tangible and intangible
exchange rate to the comparative fixed assets, plus net working
period result. The relevant foreign capital but excluding net debt
currency exchange rates are provided and tax. In the current year,
within the Basis of Preparation the impact of IFRS 16 has been
section. excluded so as not to distort
this metric. RoI is used by management
Dollar utilisation: dollar utilisation to help inform capital allocation
is trailing 12-month rental revenue decisions within the business
divided by average fleet size and a reconciliation of Group
at original (or 'first') cost RoI is provided below:
measured over a 12-month period.
Details are shown within the Review LTM underlying operating profit
of Second Quarter, Balance Sheet (GBPm) 1,356
and Cash Flow section. Average net assets (GBPm) 7,900
Return on Investment 17%
EBITDA: EBITDA is earnings before
interest, tax, depreciation and RoI for the businesses is calculated
amortisation. A reconciliation in the same way, but excludes
of EBITDA to profit before tax goodwill and intangible assets.
is shown on the income statement.
Same-store: same-stores are those
Drop-through: calculated as the locations which were open at the
incremental rental revenue which start of the comparative financial
converts into EBITDA. In the current period.
year, the impact of IFRS 16 has
been excluded so as not to distort Suppressed availability: represents
this metric. the amount on a given date that
the asset base exceeds the facility
Exceptional items: those items size under the terms of our $4.1bn
of income or expense which the asset-backed senior credit facility.
directors believe should be disclosed
separately by virtue of their Underlying: underlying results
significant size or nature to are results stated before exceptional
enable a better understanding items and the amortisation of
of the Group's financial performance. acquired intangibles. A reconciliation
is shown on the income statement.
Fleet age: net book value weighted
age of serialised rental assets. Yield: reflects a combination
Serialised rental assets constitute of the rental rate charged, rental
the substantial majority of our period and product and customer
fleet. mix.
Fleet on rent: quantity measured
at original cost of our rental
fleet on rent.
Free cash flow: cash generated
from operating activities less
non-rental net property, plant
and equipment expenditure. Non-rental
net property, plant and equipment
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
IR VKLFBKLFLFBE
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