Final Results
Ashtead Group PLC
10 July 2000
Preliminary results for the year ended 30 April 2000
Prospects transformed
* EBITDA up 11% to £127m (£114m)
* Turnover up 18% to £302m (£256m)
* Pre-tax profit (before goodwill amortisation) up 13% to £48.5m (£42.8m)
* Earnings per share (before goodwill amortisation) up 10% to 13.5p (12.3p)
* Total dividend increased by 17% to 3.16p with cover consistent at 4.2x
(4.4x)
* Net cash flow up 23% to £114.4m (£93.3m)
* Integration of BET USA bought from Rentokil for £320m in June going well.
Good response from both workforce and expanded customer base
* UK market remains competitive but our scale and heavy investment in
equipment and IT are giving Ashtead an advantage
* Ashtead transformed into the largest business of its kind in the UK, the
fourth largest in the United States and the fourth largest in the world
* Excellent start to current year with revenues in May/June - before the
contribution from BET USA - up 26% on last year
Ashtead's Chairman, Peter Lewis, commented:
'The acquisition of BET USA has substantially re-shaped the balance of our
business, created a powerful player in both the UK and US markets, and
transformed our opportunity to deliver substantial organic growth over the
long term. Our business model has consistently proved its effectiveness and
we now have the necessary scale to build our share of the rapidly growing
$22bn US market. In the competitive UK market we have delivered a sound
performance and maintained our leading position. Profits have increased for
the eighth year in succession, cash flow is strong at £114 million and, in the
light of the Board's confidence in the future prospects of the company, the
dividend for the year has been increased by 17%.'
Enquiries:
Peter Lewis, Executive Chairman
George Burnett, Chief Executive
Ashtead Group plc Tel: 020 7831 3113 (10 July)
http://www.Ashtead-Group.com Tel: 01372 362300 (thereafter)
Tim Spratt / Tania Wild
Financial Dynamics Tel: 020 7831 3113
THE YEAR AT A GLANCE
Preliminary Results for the year ended 30 April 2000
Year to April Year to April %
2000 1999 Increase
By number £m
Turnover 302.4 256.0 18
EBITDA 127.3 114.4 11
Depreciation 67.9 63.9 6
Operating profit* 59.4 50.5 18
Pre-tax profit* 48.5 42.8 13
Capital expenditure 161.2 150.5 7
Investment in hire
equipment 144.7 136.1 6
Net cash flow 114.4 93.3 23
Net gearing debt 191.3 126.1 52
By shares p
Earnings per share* 13.5 12.3 10
Dividends per share 3.16 2.7 17
By margin %
EBITDA 42.1 44.7
Operating profit* 19.6 19.7
Pre-tax profit* 16.0 16.7
Gearing 77.6 58.9
By people
Employees at year end 3,930 3,735 5
By location
Profit Centres at year
end 352 341 3
*Before goodwill
amortisation
FIVE YEARS AT A GLANCE
Year to Year to Year to Year to Year to Compound
30 April 30 April 30 April 30 April 30 April annual
£m 2000 1999 1998 1997 1996 growth (%)
Turnover 302.4 256.0 202.5 147.6 95.6 33
EBITDA 127.3 114.4 89.2 63.3 39.2 34
Operating
profit* 59.4 50.5 40.5 30.1 18.0 35
Profit before
tax* 48.5 42.8 35.5 28.3 16.8 30
Dividends per
share (p) 3.16 2.7 2.3 1.825 1.52 20
Earnings per
share* (p) 13.5 12.3 10.0 8.0 6.5 20
Net cash
inflow 114.4 93.3 77.4 57.4 31.6 38
Shareholders'
funds 246.4 214.2 153.8 120.8 107.7 23
*Before goodwill
amortisation
Extracts from Chairman's Statement
for the 12 months ended 30 April 2000
Last year was highly significant as we repositioned your Group in terms of its
scale and potential for future growth. This was not a straightforward process
and below I reprise the outcome of our strategic review, which culminated in
the largest acquisition ever made by a UK equipment rental company.
On turnover up 18% to £302m (£256m), EBITDA (earnings before interest, tax,
depreciation and amortisation), the most important measure of performance for
a rental company, rose 11% to £127m (£114m). Before goodwill amortisation,
operating profit grew 18% to £59.4m (£50.5m), pre-tax profits by 13% to £48.5m
(£42.8m) and earnings per share were up 10% at 13.5p (12.3p) after
incorporating the application of FRS15 to the depreciation charge which we
initiated with the interim results. The Directors are recommending a final
dividend of 2.6p making a total for the year of 3.16p, an increase of 17% and
reflecting confidence in the future progress of the enlarged Group.
Your Group has been established in America for more than 10 years. During
that time, our first class management team has built an enviable business the
hard way, almost entirely by greenfield openings - what we call cold starts.
Despite a three-year record of opening a new Profit Centre in America on
average every 2.5 weeks, your Board had been concerned about the dangers of
the
Group being marginalised in a fast changing US market. We were being
challenged by the dichotomy of the faster our organic growth, the further we
were falling behind the market leaders fuelled as they were by acquisitions at
prices we could not justify to our shareholders.
As a result of this analysis, in August 1999 we announced a strategic review
to examine all options to deliver long term value to shareholders. During this
review, the share prices of our US competitors, the consolidators, fell as the
market re-assessed its confidence in the value of their strategies. We
received one highly conditional approach, which was thoroughly explored by
your Board and its advisors. However, it failed to deliver sufficient
substance, value or certainty to enable us to put it before our shareholders.
At that time, although unable to disclose it then, we were well advanced in
our negotiations with Rentokil to acquire BET USA. These culminated on 20
April in an agreement to purchase debt free assets of £250m and operating
profit of £32m for £320m, a price which compares very favourably with other
transactions in the industry. Rentokil's decision to fund 42% of the
consideration by way of a bond which converts at 150p per Ashtead share was a
welcome statement of belief in your Group's management.
It was your Board's view that with the intense phase of US consolidation
coming to a close, a more normal trading environment would ensue. We believe
the US market has enormous potential for growth. Currently valued at $22bn,
it is growing at 15% per annum with rental penetration of only 20%. We
believe we have consistently demonstrated that we have a better operating
model than any of our competitors, and that applying our practices to a
substantially increased US operation will enable us to grow market share and
bring greatest value to shareholders in the near future.
The acquisition of BET USA is arguably the most important single event in your
Group's 16-year history. On a pro forma basis, it creates an Anglo-American
equipment rental group with revenues exceeding £500m making Ashtead the
largest business of its kind in the UK, the fourth largest in the United
States and also the fourth largest in the world.
We have already begun to implement detailed plans to achieve synergies in
marketing, procurement and IT and we are already introducing our successful
Profit Centre culture into the BET operations. We anticipate that in the year
to 30 April 2001, reorganisation costs will be in the region of £10m,
resulting in pre-tax synergies of £4m per annum from April 2001.
Principal events of the year - operational review
USA - Sunbelt Rentals
2000 1999 %
£m £m Increase
Turnover 113.1 79.2 43
EBITDA 46.6 35.4 32
EBITDA margin % 41.2 44.6
Depreciation 24.1 20.7 16
Operating profit* 22.5 14.7 53
Operating profit margin %* 19.9 18.6
Investment in hire equipment 75.7 58.1 30
Employees at year end 1,220 883 38
Profit Centres at year end 88 66 33
*Before goodwill amortisation
Once again Sunbelt achieved impressive organic growth with turnover up 43% to
£113m (£79m) with the crucial EBITDA rising 32% to £46.6m (£35.4m). In the
process, 22 new Profit Centres were added and the year end number of 88 has
been supplemented by a further three in May.
With the completion of the BET USA purchase of 60 additional Profit Centres on
2 June 2000, Sunbelt was transformed from an Eastern Seaboard major regional
company to a national rental business operating in 26 key states, representing
approximately 75% of the total population.
While the acquisition of BET USA provides fertile ground for cost reductions,
just as importantly we expect revenue enhancement from the combined businesses
given their wider appeal to larger multi-state customers. We expect to
improve utilisation rates significantly in the well-invested BET USA rental
fleet. BET USA is a platform acquisition which will allow us to build in
major cities across America the same multi-branch clusters or networks within
large urban centres that has characterised our success in our previous 11
state region in cities such as Washington DC, Charlotte NC and Orlando FL.
UK - A-Plant
2000 1999 %
£m £m Increase
Turnover 181.5 167.5 8
EBITDA 75.9 72.5 5
EBITDA margin % 41.8 43.3
Depreciation 41.5 40.4 3
Operating profit* 34.4 32.1 7
Operating profit margin %* 19.0 19.2
Investment in hire equipment 66.4 74.5 (11)
Employees at year end 2,672 2,813 (5)
Profit Centres at year end 261 272 (4)
*Before goodwill amortisation
As we have indicated previously, the UK market has not been easy. Rental
rates have been under pressure in a changing market place. Like many other
businesses, your UK management has been dealing with the consequences of
effective zero minus inflation. Also in this year, as evidenced by an
increase in receiverships amongst UK businesses following the earlier threat
of a UK recession, we experienced an increase in bad debts. However, the
changing market place brings opportunities. Increasingly, major customers now
require their rental suppliers to offer comprehensive service and IT packages
in support of the equipment. In these conditions, the resources and size we
can bring to bear have undoubtedly benefited your Group.
In the summer of 1998, in anticipation of these market changes, we appointed a
Group-wide Director of IT Applications whose principal role is to identify and
respond to changing customer needs. Subsequently, we have invested heavily in
adapting our external IT to support the growing requirement for tailor-made
customer packages. Our appointment as long term sole suppliers to Birse Group
in May and now Kvaerner Construction UK Building this month are examples of
the success of this customer care programme. The development of our IT will
enable A-Plant to offer direct e-commerce facilities to its key customers
before the end of the financial year.
Following the addition of 124 new Profit Centres in the previous two years,
this has been a year of consolidation in the UK. With the strategic review
process behind us, a reduction in bad debts, together with our successful
adaptation to new market place conditions, our prospects in the UK are
improving. In the circumstances, including the impact of the extended
millennium holiday period, the operating profit before goodwill amortisation
for the year of £34.4m (£32.1m) was creditable.
Offshore - Ashtead Technology
2000 1999 %
£m £m Increase
Turnover 7.8 9.3 (16)
EBITDA 4.8 6.5 (26)
EBITDA margin % 61.5 70.3
Depreciation 2.3 2.8 (18)
Operating profit* 2.5 3.7 (32)
Operating profit margin %* 32.1 40.1
Investment in hire equipment 2.6 3.5 (26)
Employees at year end 36 36 -
Profit Centres at year end 3 3 -
*Before goodwill amortisation
There is no disguising the fact that the support market for the offshore oil
and gas industry has been very difficult for all participants over the past
year. The reduction in exploration, production and maintenance activities has
had its inevitable impact. Over time, the effect of this market slowdown will
be beneficial to Ashtead Technology as it will present opportunities to
consolidate our established world leadership. In the meantime, an operating
profit of £2.5m (£3.7m) is a worthy achievement in the worst market conditions
since the early nineties.
Financial
Net cash inflow from operating activities improved 23% to £114.4m (£93.3m).
Despite the modernity of our fleet - the youngest in our industry - we
continued our long established policy of full, unrestricted equipment
maintenance. Your Group also continued its policy of not capitalising any
repairs with the charge to expenses for spares and parts rising to £17.7m
(£15.4m). The investment in new equipment was largely unchanged at £144.7m
(£136.1m) but there was a new record depreciation charge of £67.9m (£63.9m).
The sale of retired assets produced a gain of £6.0m (£3.9m).
As explained fully in our interim results announcement, the Group has adopted
Financial Reporting Standard number 15 ('FRS15') dealing with fixed assets
this year. Consequently, new estimated residual values for fixed assets have
been applied prospectively in the calculation of this year's depreciation
charge as required by FRS15. Had the revised estimated residual values been
in use throughout the year ended 30 April 1999, the depreciation charge for
that year would have been £55.9m, £8.0m lower than reported.
Gearing at the year end was 78% (59%), reflecting expenditure on expansion of
the business particularly in the United States.
Board and Management
In February, your Directors were pleased to welcome to the Board Ted Forshaw,
49 and Bruce Dressel, 36, respectively Chief Executives of A-Plant and
Sunbelt. Both have made significant contributions to the growth of your Group
over the last few years.
Ian Robson, BSc, FCA, 41, joined the Group in May and the Board in June as
Finance Director. For the last four years, Ian has held a series of senior
financial positions with Reuters and before that he was an Audit Partner for
PricewaterhouseCoopers. He succeeds Alan Anderson, who has retired to pursue
private interests unrelated to your Group's activities, after a 14-year
tenure. Your Directors would like to record their appreciation of Alan's
immense contribution to your Group's success over many years and to wish him
every success in his chosen, more tranquil, lifestyle.
As we indicated in our interim statement, I will become Non-Executive Chairman
of the Group in December when I am 60.
As ever, your team has performed magnificently at all levels in what has been,
in many respects, a trying year. People, in our judgement, are the only
meaningful difference between one service company and any other. Ashtead
people are our difference.
Current and Future Opportunities
Ashtead is now a powerful force in both the UK and US equipment rental
markets. We are determined to seize the opportunities that we see before us,
leveraging our scale, skills and market position for the benefit of
shareholders. We enjoyed a strong finish to our year with billings per day in
April at record levels. This trend has continued into May and June with
revenues - before the contribution from BET USA - up 26%. We expect to be
able to report further sound progress for the year as a whole as we start to
realise the benefits of our considerably enhanced growth prospects.
Peter Lewis
Chairman
10 July 2000
ASHTEAD GROUP PLC
Consolidated Income Statement
For the year ended 30 April 2000
Unaudited Audited
2000 1999
£m £m
Turnover 302.4 256.0
Cost of sales (221.6) (190.0)
Gross profit 80.8 66.0
Administrative expenses (21.4) (15.5)
Operating profit before goodwill
amortisation 59.4 50.5
Goodwill amortisation (0.4) -
Operating profit 59.0 50.5
Interest receivable 1.1 1.6
Interest payable and similar charges (12.0) (9.3)
Profit on ordinary activities before
taxation 48.1 42.8
Taxation on profit on ordinary
activities (4.9) (5.2)
Profit attributable to the Shareholders
of Ashtead Group plc 43.2 37.6
Dividends (10.2) (8.6)
Retained profits transferred to reserves 33.0 29.0
Basic earnings per share 13.4p 12.3p
Adjusted earnings per share (before
goodwill amortisation) 13.5p 12.3p
13.2p 12.1p
Fully diluted earnings per share
All acquisitions made this year were immediately integrated into the Group's
ongoing operations. No segregated post-acquisition results are therefore
available.
Consolidated statement of total recognised gains and losses
For the year ended 30 April 2000
Unaudited Audited
2000 1999
£m £m
Profit attributable to shareholders 43.2 37.6
Foreign currency translation differences (0.8)) (0.6)
Total recognised gains and losses for
the year 42.4 38.2
There is no material difference between the results shown above and those
which would have been shown on an unadjusted historical cost basis.
ASHTEAD GROUP PLC
Reconciliation of movements in shareholders' funds
For the year ended 30 April 2000
Unaudited Audited
2000 1999
£m £m
Profit for the period 43.2 37.6
Dividends (10.2) (8.6)
33.0 29.0
Share capital issued - 30.8
Foreign currency translation differences (0.8) 0.6
Other reserve movements - -
Net addition to Shareholders' funds 32.2 60.4
Opening Shareholders' funds 214.2 153.8
Closing Shareholders' funds 246.4 214.2
ASHTEAD GROUP PLC
Consolidated balance sheet
At 30 April 2000
Unaudited Audited
2000 1999
£m £m
Fixed assets
Intangible assets
- goodwill 9.9 2.9
Tangible assets
- plant for hire 459.0 382.4
- other fixed assets 62.5 55.5
531.4 440.8
Current assets
Stocks 10.0 7.0
Debtors 80.1 70.3
Liquid resources 15.0 15.5
Cash at bank and in hand 0.1 10.1
105.2 102.9
Creditors - amounts falling due
within one year
Loans and overdrafts (97.0) (36.4)
Trade and other creditors (170.7) (170.6)
Hire purchase liabilities - (2.3)
(267.7) (209.3)
Net current liabilities (162.5) (106.4)
Total assets less current liabilities 368.9 334.4
Creditors - amounts falling due after
more than one year
Loans (109.4) (113.0)
Deferred taxation (13.1) (7.2)
Total net assets 246.4 214.2
Capital and reserves
Called up share capital 32.3 32.3
Share premium account 99.7 99.7
Revaluation reserve 0.5 0.5
Other reserves (17.3) (17.3)
Profit and loss account 131.2 99.0
Total capital and reserves (equity
interests) 246.4 214.2
ASHTEAD GROUP PLC
Consolidated cash flow statement
For the year ended 30 April 2000
Unaudited Audited
2000 1999
Note £m £m £m £m
Net cash inflow from
operating activities 1 114.4 93.3
Returns on investments
and servicing of
Finance
Interest received 1.0 1.6
Interest paid (11.3) (8.8)
Interest element of hire
purchase payments - (0.1)
(10.3) (7.3)
Taxation (3.2) (5.9)
Capital expenditure
Purchase of tangible
fixed assets (166.3) (140.2)
Sale of tangible fixed
assets 25.0 13.7
(141.3) (126.5)
Acquisitions and
disposals (11.3) (4.3)
Equity dividends paid (9.0) (7.2)
Net cash outflow before
use of liquid resources (60.7) (57.9)
Management of liquid
resources
Decrease/(increase) in
liquid resources 0.3 (15.5)
Financing
Issue of ordinary share
capital - 13.3
Increase in unsecured
loans 29.3 56.9
Redemption of loans (9.3) (0.4)
Principal payment under
hire purchase agreements (2.3) (1.7)
17.7 68.1
Decrease in cash (42.7) (5.3)
Reconciliation to net debt
Unaudited Audited
2000 1999
£m £m
Decrease in cash in the period (42.7) (5.3)
Decrease in debt and hire
purchase finance (17.7) (54.8)
Cash out flow from increase in
liquid resources (0.3) 15.5
Change in net debt from cash flows (60.7) (44.6)
Loans and hire purchase
agreements acquired with acquisition - (1.4)
Translation difference (4.5) (2.7)
Movements in net debt in the period (65.2) (48.7)
Net debt at 1 May (126.1) (77.4)
Net debt at 30 April (191.3) (126.1)
ASHTEAD GROUP PLC
Note 1 to the Consolidated cash flow statement
For the year ended 30 April 2000
Unaudited Audited
2000 1999
£m £m
Net cash flow from operating activities
Operating profit 59.0 50.5
Depreciation of tangible fixed assets 67.9 63.9
Amortisation of goodwill 0.4 -
Gain on sale of tangible fixed assets (6.0) (3.9)
Increase in stocks (2.6) (3.1)
Increase in trade debtors (0.9) (15.3)
Increase in trade creditors 4.7 1.2
114.4 93.3
NOTES
1. The abridged 1999 Profit and Loss Account, Balance Sheet and Cash Flow
Statement is taken from the statutory accounts for the year ended 30 April
1999 which have been filed with the Registrar of Companies. The auditor's
report on these accounts was unqualified and did not contain a statement
under section 237 of the Companies Act 1985.
2. The Directors have recommended a final dividend of 2.6p net per share
(making a total of 3.16p for the whole year) which, subject to approval,
will be paid on 11 October 2000 to shareholders on the register on 8
September 2000.
3. Earnings per share for the year ended 30 April have been calculated based
on the profit attributable to the Shareholders of Ashtead Group plc and on
322,987,960 Ordinary Shares, being the weighted average number or Ordinary
Shares in issue during the year (1999 - 306,270,950 Ordinary Shares).
Adjusted earnings per share for the year ended 30 April have been
calculated based on the profit attributable to the Shareholders of Ashtead
Group plc adjusted to add back the goodwill amortisation charge of £0.4m
(1999 - £nil) and on 322,987,960 Ordinary Shares, being the weighted
average number or Ordinary Shares in issue during the year (1999 -
306,270,950 Ordinary Shares).
Fully diluted earnings per share for the year ended 30 April 2000 have
been calculated based on the profit attributable to the Shareholders of
Ashtead Group plc and on 327,040,607 Ordinary Shares, being the weighted
average number of Ordinary Shares in issue during the year (1999 -
312,028,795 Ordinary Shares).
4. Segmental analysis
Turnover Operating Profit Net assets
Unaudited Audited Unaudited Audited Unaudited Audited
2000 1999 2000 1999 2000 1999
£m £m £m £m £m £m
UK plant
hire 181.5 167.5 34.0 32.1 259.0 220.2
Ashtead
Technology 7.8 9.3 2.5 3.7 8.1 7.7
US plant
hire 113.1 79.2 22.5 14.7 170.6 112.4
Central
items
(funding
related) - - - - (191.3) (126.1)
302.4 256.0 59.0 50.5 246.4 214.2
Operating profit for UK plant hire is stated after charging £0.4m (1998/99
- £nil) in respect of goodwill amortisation.
5. The unaudited preliminary results information has been prepared on the
basis of accounting policies set out in the Group's 1998/99 statutory
accounts, as amended for the introduction of Financial Reporting Standard
number 15 dealing with tangible fixed assets.
6. The effective rate of tax in the year was 10% (1999 - 12%), which was
largely due to unequalised timing differences arising from the substantial
capital investment over the past two years.
7. Changes have been made in the year ended 30 April 2000 to the estimated
residual values of fixed assets. The depreciation charge for the year
ended 30 April 1999 computed using the revised estimated residual values
is £55.9m, £8.0m lower than the charge reported for that year.
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