Interim Results
Speedy Hire PLC
28 November 2007
28 November 2007
Speedy Hire Plc
Interim results for the six months ended 30 September 2007
Speedy Hire is the number one provider of tool and equipment hire services in
the UK
Financial Highlights
Unaudited Unaudited %
2007 2006 Change
Revenue £209.5m £154.4m +35.7
Profit Before Taxation £18.2m £15.5m +17.4
Profit Before Amortisation Exceptionals and Taxation £22.9m £17.2m +33.1
Basic Earnings Per Share 28.70p 24.94p +15.1
Basic Earnings Per Share Before Amortisation and Exceptionals 35.60p 27.55p +29.2
Dividend Per Share 6.4p 5.5p +16.4
Return on Capital (before Amortisation and Exceptionals) 16.3% 15.9% -
Gearing 107.5% 111.6% -
• Strong performance across the Group
• Integration of Hewden Tools on track and to plan
• Legislation continues drive towards hire
• Tool and plant hire ideally positioned within UK industry
• Market expected to grow by 12% in period to 2010
Outlook
'I am delighted to report our best interim results ever. Construction activity
is forecast to remain on a steady upward path and Health and Safety as well as
Environmental legislation continues the drive towards hire. In addition, our
recently acquired business Hewden Tools offers a great opportunity to grow the
enlarged business. Consequently, we remain confident of reporting further good
progress.'
David Wallis - Chairman
For further information:
Speedy Hire Plc Hudson Sandler
Steve Corcoran (Chief Executive) Nick Lyon / Wendy Baker/
Neil O'Brien (Group Finance Director) Kate Hough Tel: 020 7796 4133
Wednesday 28 November 2007 only: 020 7796 4133
Thursday 29 November 2007 onwards: 01942 720000
High resolution photographs are available for download, free of charge, at
www.vismedia.co.uk
Interim Management Statement for the 6 months to 30 September 2007
Speedy Hire has achieved a great deal over the last six months. The existing
businesses have enjoyed double digit organic growth, our start-up operations
have made strong progress and we have invested £120 million in acquisitions
which have re-shaped the UK tool hire industry. To support this growth, we have
continued to invest in the development of our internal infrastructure,
particularly in the areas of new Management Information Systems and People
Development and Training.
As a result of all this activity, the company is in a strong financial position
with record levels of profit, a strong balance sheet, substantial cash flows and
record levels of earnings per share, pre amortisation of goodwill and
integration costs.
Financial Performance
I have summarised the financial results in the table below.
Unaudited Unaudited % Change
2007 2006
Revenue £209.5m £154.4m +35.7
EBITDA £58.2m £44.7m +30.2
Profit Before Tax (pre amortisation & exceptionals) £22.9m £17.2m +33.1
Group EBIT Margin 14.0% 13.9% -
Earnings Per Share 28.70pps 24.94pps +15.1
Earnings Per Share (pre amortisation & 35.60pps 27.55pps +29.2
exceptionals)
Return on Capital (pre amortisation & exceptionals) 16.3% 15.9% -
Total Equity £231.2m £154.1m +50.0
Gearing 107.5% 111.6% -
Your Board intends to pay an interim dividend of 6.4 pence per share (2006: 5.5
pence) an increase of 16.4%, which will be paid on 25 January 2008, to those
shareholders on the register as at 4 January 2008.
Acquisitions
Hewden
On 1 August 2007, we completed the acquisition of Hewden Tools, the trade and
assets of the tool hire division of Hewden Stuart Plc. This is already proving
to be an excellent deal. The consideration of £115 million was met through a
placing of 4,359,800 new ordinary shares for cash at £12.50 per share and by
increasing bank borrowings. The Group has successfully negotiated a new five
year revolving credit facility of £325 million. Both the share placing and debt
syndication were substantially over-subscribed.
This acquisition consolidates Speedy Hire's position as the market leader in the
hire industry in the UK. With over 500 sites nationwide, we have a better
network for service and delivery and a strengthened business offering and
customer reach. Speedy Hire's customer base has expanded by 40% to around
100,000 accounts and established a stronger position with Industrial, Utility
and Government customers. This broader customer base will enable us to increase
the level of cross-selling across the Speedy Hire range and we have earmarked an
additional £10 million for investment in new fleet in order to meet the wider
demands of this enlarged customer base.
Strategic planning is one thing, but good execution quite another. A very
detailed integration plan was immediately put in place, the first part of which
was extensive communication with the 1,100 new people joining Speedy Hire and
all Hewden Tools' customers. Where there was branch overlap, 21 depots of the
188 acquired were integrated by the half year, with the employees being
re-deployed elsewhere in the business. All retained depots, hire assets and
vehicles will be re-branded as Speedy Hire by January 2008. Early next year, we
will be on a common IT platform and be trading using a single product catalogue.
Following our extensive due diligence, we have found the business and assets
as expected and feel even more confident of delivering the £20 million of
synergy benefits forecast at the time of acquisition, whilst remaining within
the budgeted level of £10 million of exceptional costs associated with the
purchase, resulting in enhanced value for shareholders. Our plans have been
enthusiastically received by our new employees and customers and I am pleased to
report that we are firmly on track. In summary, we could not be more pleased
with progress thus far.
Waterford Hire
On 30 July 2007, we announced the acquisition of Waterford Hire Services Ltd, a
long-standing, well respected tool and equipment hire business, with two outlets
in Waterford and Kilkenny in the Republic of Ireland, for a maximum
consideration of €6.5 million. Whilst at the opposite end of the scale in terms
of size, this was nevertheless an important milestone in building our brand in
the Republic of Ireland, where our operations are already contributing to
operating profit during their second year, following the well established Speedy
Hire business model.
Board
As foreshadowed in my letter to you in the Annual Report, a number of changes to
the composition of the Board have taken place or are planned for the near
future.
At the AGM in July, I was able to welcome Ishbel Macpherson as an additional
non-executive director. Ishbel, an experienced corporate financier, is
presently a non executive director of MITIE Group plc, GAME Group plc and
Hydrogen Group plc. I also announced that Frank Dee, Speedy Hire's senior non
executive director and chairman of the Remuneration Committee, would be stepping
down at the end of the financial year, having completed seven years' service. A
search is currently underway for his replacement. I shall report more fully on
these changes in the 2008 Annual Report.
In September, we announced that Neil O'Brien, the Group Finance Director,
intends to leave the Group, after eight years' service, to pursue other
opportunities. However, to ensure a smooth transition of responsibilities, Neil
has agreed to remain in place until the publication of the results for the year
ending 31 March 2008, or until a successor is found. This is typical of Neil's
commitment and professionalism demonstrating the significant role he has played
in building Speedy Hire into the business it is today. Neil has built a very
strong finance team to support him, which remains in place. The search for his
replacement is now well advanced and a further update will be given early in the
New Year.
Finally, I am delighted to report that we have further strengthened the board
with the appointment as of today of Claudio Veritiero as Chief Operating
Officer. Claudio joined the Group in 2004 from the Investment Banking arm of
Rothschild, initially in Business Development with responsibility for
acquisitions and strategic development. He later became Managing Director of
Speedy Lifting, overseeing the acquisition and integration of Lifting Gear Hire
and built the business into the clear UK market leader in its field.
Outlook
The financial markets remain uncertain, as global economic indicators continue
to display mixed signals. Economic growth in the UK is forecast to slow over the
next 12 months, though will still remain positive and market conditions for the
majority of our customers remain extremely encouraging.
The construction 'industry' has a number of distinct sub sectors influenced by
different market drivers. The level of activity within these sub sectors ebbs
and flows and informed comment currently seems to point to more challenging
times in the housebuilding market. It is worth restating that revenues from
this sub sector are a minor part of our total revenues. The overall
construction market has shown steady and progressive growth over many, many
years. Speedy's record of 20 years of unbroken revenue and profit growth is
built on our ability to supply all construction sectors and in recent years we
have reached well beyond construction into new sectors such as petrochemicals,
pharmachemicals and government. With projected investment in UK infrastructure
expected to continue in education, social housing, energy, water, transport and
the Olympics, all areas of substantial benefit to us, our key customers continue
to report strong order books both in the short term and for a considerable time
into the future.
In addition, the Hewden Tools acquisition has given us an outstanding
opportunity to enable us to grow the enlarged business across the whole range of
tools and equipment. Although much work remains to be done, we are delighted
with progress to date.
Finally, as legislation continues to develop, ensuring a safer environment for
operators of tools and equipment, along with increasing emphasis around
environmental responsibility, additional impetus continues to be added to the
hire market.
Our product range, customer base and geographic spread are extensive and
unrivalled in the industry. With strong foundations in place, and assuming no
significant change in the performance of the economy, the Board remains
confident of reporting further good progress.
David Wallis
Chairman
Business Review
Highlights of the six month period
• Our largest ever, industry-transforming acquisition - Hewden Tools
• 170 depots operating on our new IT system
• Recent trading at record levels
• Start up businesses, Pumps and Ireland, are moving into profit and
growing in line with expectations
• Our first acquisition in the Republic of Ireland - Waterford Hire
Services
Financial performance
The Group has delivered another very strong performance, with both divisions
reporting record revenue and operating profits. These results reflect the
benefit of organic growth, acquisitions and the development of the start-up
businesses, Speedy Pumps and Speedy Ireland. The results include the two-month
impact of the Hewden Tools acquisition, which is described in more detail below.
Total revenue of £209.5m for the period is split approximately 52:48 between the
Tool and Equipment divisions, and represents an increase of 35.7% on the same
time last year.
Operating profits before amortisation and integration costs amounted to £29.3m,
an increase of 36.3% on the prior year (2006: £21.5m). The operating margin at
14.0% was slightly higher than last year (2006: 13.9%). The improvement in the
underlying business has more than offset the anticipated dilutive effect of the
Hewden Tools acquisition which generated £0.3m operating profit on sales of
approximately £13.4m. Return on capital (before amortisation and integration
costs) is 16.3% compared to 15.9% in the comparative period.
Profit before taxation rose by 17.4% to £18.2m, after charging net financial
expenses of £6.8m. Overall the exceptional costs charged in the 6 month period
were £2.1m (2006: £nil) £1.7m of the exceptional costs were charged to trading
costs reflecting onerous leases and project costs. The financial expense
includes an exceptional £0.4m of accelerated amortisation of issue costs
resulting from the re-financing undertaken in the period to support the
acquisition of Hewden Tools. Earnings per share, adjusted for amortisation of
intangibles and integration costs were 35.60 pence, an increase of 29.2% on the
prior year (2006: 27.55 pence).
We have maintained our investment in the hire fleet ensuring that we have the
largest, most up to date and durable fleet available in the industry, sustaining
a solid platform for continued growth. Gross capital expenditure in the period
was £46.0m (2006: £47.7m). A further £120.2m was spent on acquisitions in the
period. Net assets increased by £77.1m (50%) to £231.2m, aided by the share
placings in June and July 2007.
We remain a strongly cash-generative company, and have generated £49.4m of
operating cash flow in the period, increasing by 36.5% on the previous period.
Net debt at the end of the period was £248.7m, and interest costs were covered
by profit 3.7 times (3.9 times adjusted for exceptional interest costs). The
Group increased its available bank facilities to £325m during the period, with
the facility available until June 2012.
Our business
Our business services the UK and Ireland hire markets. Our origins were in Tool
Hire, but as we have extended our product range and identified areas requiring a
more detailed focus on a specific market, we have established new lines of
business. Today, our UK business is structured into two divisions, Tool Hire
and Equipment Hire. Our business in the Republic of Ireland provides a full
range of hire services from one operating company.
Tool Hire
The Tool Hire business operates on a regional basis from over 400 depots. The
division offers an extensive range of products, including access towers, podium
steps, drills, breakers, woodworking tools, heaters, dryers, temporary lighting,
small generators, welders, and plumbing equipment.
During the period, we acquired 188 depots from Hewden Stuart Plc as part of the
acquisition of its Hewden Tools business ('Hewden Tools'). The acquisition is
discussed in more detail below. We have also opened 5 greenfield sites in
London, the North and the Isle of Wight, strengthening the depot network.
Our UK network for the Tool Hire business is now in place. Whilst we are always
looking for potential new locations to strengthen the network, we do not
anticipate significant additions of greenfield locations in the forthcoming
year. We expect the business to continue to grow as existing depots mature,
through the extension of range of products and services we offer, and by
identifying opportunities to cross-sell the entire range of Speedy services.
In the six months to 30 September 2007, the Tool Hire division saw total revenue
grow by 38.2% to £111.7m (2006: £80.8). Up to the time of the Hewden Tools
acquisition, like-for-like revenue growth for the Tool Hire division was 11.4%
and strong momentum has been maintained since then.
We have already outlined our decision not to report like-for-like revenue growth
during the integration period. The re-organisation of the depot network to
integrate the Hewden depots means that like-for-like measures are unreliable -
customers acquired from Hewden Tools will be serviced from an existing Speedy
depot, and other cases, trade may be transferred the other way. Comparing
year-on-year performance on a depot-by-depot basis is therefore not possible,
until we are past the first anniversary of ownership.
Operating profit before amortisation and integration costs for the six months
increased to £16.8m, (2006: £11.7m) an increase of 43.6% on the prior period.
The division generated £28.6m EBITDA (earnings before interest, tax,
depreciation and amortisation), an increase of £7.1m (33.0%) on the prior year
(2006: £21.5m).
On 30 July 2007 we announced our first acquisition in the Republic of Ireland
with the purchase of the entire share capital of Waterford Hire Services Limited
for a maximum consideration of €6.5m. The consideration was made up as €5.2m in
cash, with the remainder in shares contingent upon performance. The business
generated revenues of €0.6m in the period of our ownership to 30 September
2007. The business will be integrated into the Speedy Ireland operation, under
the control of the newly-appointed Managing Director, Eugene Heather. Eugene
joined the group on 27 September 2007 from SAM Hire, where he grew the business
from a single depot to a nation-wide network.
Equipment Hire
The Equipment division comprises five business units operated nationally
concentrating on specific product ranges. Our customers require that we
understand their business, and the unique requirements that many of them have.
Structuring the businesses nationally allows us to provide greater expertise in
meeting their demands, and ensures that we provide excellent customer service.
Revenue grew by 32.9% to £101.4m, reflecting a full six months contribution from
the LCH Generators and Lifting Gear Hire businesses acquired in the previous
year and strong underlying growth within the existing businesses (2006: £76.3m).
In total, 4 new depot locations have been opened.
Operating profit before amortisation was £17.9m, representing an increase of
27.0% over the same period last year (2006: £14.1m). As a result of the
integration of the two sizeable acquisitions, and the effect of expanding our
Space business through opening in Scotland and offering modular accommodation,
the operating margin for the period was 17.7% (2006: 18.5%). Equipment hire
utilisation has continued to improve to 68.5% (2006: 67.5%). The Division
generated £31.6m EBITDA, an increase of £5.7m (22.0%) on the prior year (2006:
£25.9m).
Hewden Tools
The Hewden Tools business is a national network of 188 depots, with
approximately 1,100 employees. The business is an excellent strategic fit with
the existing Speedy depot network, and ensures that we are now within reach of
95% of the UK population in less than an hour's travel time. Since the
acquisition, we have been working to deliver the integration programme. Key
actions so far include:
• the Hewden depots have been aligned with, and integrated into, the
Speedy Tools management structure;
• following requests from the Hewden Tools employees, we have
accelerated the process of aligning employee terms and conditions, including the
launch of a Summer issue of the all-employee SAYE to include Hewden employees
within the Speedy share-owning workforce;
• assets and employees at 21 depots have been re-organised to remove
surplus capacity, improve asset availability and enhance customer service;
• supplier agreements have been consolidated to ensure consistency of
product across the enlarged business;
• the vehicle fleet has been disposed of via a sale and lease-back
arrangement, in line with Speedy's policy of leasing the delivery fleet, and
maintaining a modern fleet of delivery vehicles;
• the new Speedy IT system is being installed to the Hewden depot
network. This is a rolling process which is expected to be completed by the
financial year end; and
• discussions with customers in order to align terms have commenced
and are progressing well. A single customer catalogue with harmonised prices is
expected for 2008.
We are confident of delivering the £20m synergy number referred to in June.
We have made good progress on the integration programme in the short time we
have owned the business. We are confident that the long-term benefits to be
gained by bringing the businesses together will be achieved. The business is
trading in line with the Board's expectations. We are expecting the Hewden
depots to deliver the same level of performance as any other Speedy depot, and
to that extent, it will increasingly become 'business as usual'.
Risks and Uncertainties
Our 2007 Annual Report (pages 29 & 30) outlines the Board's assessment of the
principal risks facing the business, together with a description of the
mitigating processes which are in place to monitor and address the risks.
Looking forward to the second half of the current year, we believe that the
risks and processes identified in the 2007 Annual Report are still applicable.
Outlook in the wider economy has changed since our last report. Growth in the
overall economy is forecast to slow, and we are mindful of the potential impact
this may have on our own marketplace. We continually monitor market opportunity
to assess the potential impact on the business.
We have also completed our most significant acquisition in the period, Hewden
Tools. The successful integration of the acquisition into the existing Speedy
Tools operation will play a major part in the success of our performance in the
second half of the current year. Progress to date is extremely encouraging, and
we are confident we have the right people and resources to ensure that the
integration is successfully delivered.
Our markets
In our March 2007 Operating and Financial Review, we included an analysis of our
view of the UK hire market, and Speedy's positioning within it. The overall
Tool and Plant hire market is estimated to be worth around £4.4bn annually. We
believe we provide products for hire that account for £3.5bn of this overall
market. The market is expected to grow by 12% in the period to 2010, driven by
a number of factors:
• continued high levels of activity in the construction market;
• increased legislative and regulatory emphasis on safer working
practices;
• the maintained drive towards outsourcing of non-core activities; and
• customers increasing emphasis on quality assurance, supply chain and
health & safety standards.
We believe that our strategy is entirely consistent with these factors. Our
national network, modern fleet, range of products and commitment to safety
standards have been our core objectives for a number of years.
We aim to offer our customers a service-based solution, rather than just a
supply-based provision of tools and equipment for hire. Our 'Safety from the
Ground Up' campaign (which was awarded the Responsible Marketing award from
BITC) reflects our desire to provide customers with solutions to the problems
they face. This campaign has become the platform upon which we communicate new
products, legislation and operator awareness for changes in safe working
practice.
Whilst the construction market is undoubtedly still our prime market, the range
of products and services we offer continues to widen. Our equipment businesses,
notably the lifting and power businesses, have helped us widen our customer base
to include industrial markets, such as petrochemical plants and steelworks. We
also provide a growing range of add-on services, including testing and
calibration, as well as servicing and inspection of the customers' own
equipment.
We continue to monitor market activity closely. We regularly review market
opportunities that are available to us, and will continue to invest in the
business where we perceive the growth prospects to be sound. We are confident
that there are further opportunities to expand our business, both geographically
and in the range of products and services we offer. Our business strategy is
designed to deliver success, growth and sustainable profitability for years to
come and we are confident it will do so.
Steve Corcoran
Chief Executive
Directors' responsibility statement in respect of the interim financial report
We confirm that to the best of our knowledge:
• the condensed set of financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU;
• the interim management report includes a fair review of the information
required by:
(i) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial statements;
and a description of the principal risks and uncertainties for the remaining six
months of the year; and
(ii) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do so.
For and on behalf of the Board of Directors
SJ Corcoran NC O'Brien
Director Director
Consolidated income statement
for the six months ended 30 September 2007
Note Before Exceptionals Unaudited Unaudited Audited
Exceptionals (note 3) & Total Six months Year
& amortisation ended 30 ended 31
amortisation September March
2007 2007 2007 2006 2007
£m £m £m £m £m
Revenue 2 209.5 - 209.5 154.4 335.5
Cost of sales (72.5) - (72.5) (51.5) (118.7)
Gross profit 137.0 - 137.0 102.9 216.8
Distribution costs (26.5) - (26.5) (17.1) (43.2)
Administrative expenses (81.2) (4.3) (85.5) (66.0) (127.7)
Analysis of operating profit
Operating profit before 29.3 (1.7) 27.6 21.5 50.0
amortisation
Amortisation - (2.6) (2.6) (1.7) (4.1)
Operating profit 2 29.3 (4.3) 25.0 19.8 45.9
Financial income 4 0.2 - 0.2 0.1 0.4
Financial expense (6.6) (0.4) (7.0) (4.4) (9.9)
Profit before taxation 22.9 (4.7) 18.2 15.5 36.4
Taxation 5 (6.0) 1.4 (4.6) (4.3) (9.8)
Profit for the financial year 16.9 (3.3) 13.6 11.2 26.6
Attributable to:
Equity holders of the parent 13.6 11.2 26.6
Minority interests - - -
13.6 11.2 26.6
Pence Pence Pence
Earnings per share
- Basic 6 28.70 24.94 58.74
- Diluted 6 28.31 24.67 57.78
Dividend per share 6.40 5.50 17.00
Consolidated statement of recognised income and expense
for the six months ended 30 September 2007
Unaudited Unaudited Audited
Six months Six months Year
ended 30 ended 30 ended 31
September September March
2007 2006 2007
£m £m £m
Cash flow hedges: Gains taken to equity - 0.2 0.5
Net income recognised directly in equity - 0.2 0.5
Profit for the period 13.6 11.2 26.6
Total recognised income and expense for the period 13.6 11.4 27.1
Attributable to:
Equity holders of the Parent 13.6 11.4 27.1
Minority interests - - -
13.6 11.4 27.1
Consolidated Balance Sheet
At 30 September 2007
Note Unaudited Unaudited Audited
30 30 31
September September March
2007 2006 2007
£m £m £m
ASSETS
Non-current assets
Intangible assets 8 119.2 60.4 71.3
Property, plant & equipment 9 360.9 283.5 295.7
480.1 343.9 367.0
Current assets
Inventories 15.3 9.3 10.9
Trade and other receivables 144.4 90.7 101.2
Other financial receivables 10 0.7 0.2 0.7
Cash 9.4 4.2 10.3
169.8 104.4 123.1
Total assets 649.9 448.3 490.1
LIABILITIES
Current liabilities
Borrowings 11 (10.0) - -
Trade & other payables (118.7) (80.8) (91.8)
Current income tax (6.7) (8.4) (6.0)
(135.4) (89.2) (97.8)
Non-current liabilities
Borrowings 11 (248.1) (176.1) (186.5)
Deferred tax liabilities (35.2) (28.9) (34.7)
(283.3) (205.0) (221.2)
Total liabilities (418.7) (294.2) (319.0)
Net assets 231.2 154.1 171.1
EQUITY
Share capital 12 2.5 2.3 2.3
Share premium account 12 108.3 55.4 57.8
Merger reserve 12 3.7 3.7 3.7
Hedging reserve 12 0.5 0.2 0.5
Retained earnings 12 116.0 92.3 106.6
Total equity attributable to equity holders of the parent 231.0 153.9 170.9
Minority interests 12 0.2 0.2 0.2
Total equity 231.2 154.1 171.1
Consolidated cash flow statement
for the six months ended 30 September 2007
Unaudited Unaudited Audited
30 30 31
September September March
2007 2006 2007
£m £m £m
Cash flow from operating activities
Profit before tax 18.2 15.5 36.4
Financial income (0.2) (0.1) (0.4)
Financial expense 7.0 4.4 9.9
Intangible amortisation 2.6 1.7 4.1
Depreciation 30.6 23.2 50.3
Profit on disposal of property plant and (3.3) (2.9) (7.0)
equipment
Equity-settled share-based payments 1.3 0.8 1.7
56.2 42.6 95.0
Increase in inventories (2.4) (0.4) (0.8)
Increase in trade and other receivables (21.1) (12.0) (19.1)
Increase in trade and other payables 16.7 6.0 9.5
Cash generated from operations 49.4 36.2 84.6
Interest received 0.1 0.1 0.5
Interest paid (6.5) (4.3) (9.8)
Income tax paid (3.4) (1.6) (6.1)
Net cash flow from operating activities 39.6 30.4 69.2
Cash flow from investing activities
Acquisition of businesses (120.2) (55.5) (61.9)
Purchase of property, plant & equipment (46.0) (47.5) (93.4)
Disposal of property, plant & equipment 9.3 7.9 19.7
Net cash flow from investing activities (156.9) (95.1) (135.6)
Net cash flow before financing activities (117.3) (64.7) (66.4)
Cash flow from financing activities
Proceeds from shares issued 50.7 - -
Proceeds from new loans 71.2 66.7 77.0
Dividends paid (5.5) (4.2) (6.7)
Net cash flow from financing activities 116.4 62.5 70.3
(Decrease) / Increase in cash (0.9) (2.2) 3.9
Cash at the start of the year 10.3 6.4 6.4
Cash at the end of the period 9.4 4.2 10.3
Notes to the financial statements
1 Basis of preparation
The interim financial statements of the Company as at and for the six months
ended 30 September 2007 comprise the Company and its subsidiaries ('together
referred to as 'the Group').
The financial statements of the Group for the year ended 31 March 2007 are
available from the Company's registered office, or from the website:
www.speedyhire.plc.uk.
These interim financial statements have been prepared in accordance with
International Financial Reporting Standard ('IFRS') IAS 34 Interim Financial
Reporting. They do not include all the information required for full annual
statements, and should be read in conjunction with the Group's consolidated
financial statements for the year ended 31 March 2007. The accounting policies
applied by the Group in these interim financial statements are the same as those
applied by the Group in its consolidated financial statements for the year ended
31 March 2007.
The preparation of interim financial statements requires management to make
judgements, estimates, and assumptions that affect the application of accounting
policies and the reported amounts of assets and liabilities, income and expense.
Actual results may differ from these estimates. In preparing the interim
financial statements, the significant judgements made by management in applying
the Groups accounting policies and key sources of estimation uncertainty were
the same as those that applied to the consolidated financial statements for the
year ended 31 March 2007.
The comparative figures for the financial year ended 31 March 2007 are not the
company's statutory accounts for that financial year. Those accounts have been
reported on by the company's auditors and delivered to the registrar of
companies. The report of the auditors was (i) unqualified, (ii) did not include
a reference to any matters to which the auditors drew attention by way of
emphasis without qualifying their report, and (iii) did not contain a statement
under section 237(2) or (3) of the Companies Act 1985.
These interim financial statements were approved by the Board of Directors on 27
November 2007.
2 Segmental analysis
The Group's primary segmental reporting format is class of business, as the
Group's management and internal reporting are structured in this manner. The
Group's activity is conducted solely within the United Kingdom & Republic of
Ireland.
Unaudited Unaudited Audited
30 30 31
September September March
2007 2006 2007
£m £m £m
Revenue
Tools 111.7 80.8 175.5
Equipment 101.4 76.3 166.6
213.1 157.1 342.1
Intra-group revenue (3.6) (2.7) (6.6)
209.5 154.4 335.5
Operating profit
Tools - pre-amortisation & exceptional items 16.8 11.7 27.7
- amortisation (0.6) (0.3) (0.4)
- exceptional items (1.7) - -
14.5 11.4 27.3
Equipment - pre-amortisation 17.9 14.1 31.3
- amortisation (2.0) (1.4) (3.7)
15.9 12.7 27.6
Operating profit before corporate costs 30.4 24.1 54.9
Corporate costs (5.4) (4.3) (9.0)
25.0 19.8 45.9
Net assets
Tools 277.1 122.9 146.6
Equipment 236.3 200.6 221.2
513.4 323.5 367.8
Unallocated net (liabilities)/assets (33.4) 2.5 (20.5)
Net debt (248.7) (171.9) (176.2)
231.3 154.1 171.1
Capital expenditure
Tools 76.4 20.7 38.7
Equipment 22.5 45.7 71.1
Intangible assets 50.4 35.1 51.5
Unallocated capital expenditure 2.8 4.8 7.5
152.1 106.3 168.8
3 Exceptional items
'Exceptional items' relate to the costs associated with the integration of the
Hewden Tools acquisition. On 1 August 2007, the Group acquired the trade and
assets of the tool hire operations of Hewden Stuart Plc. The costs incurred in
the period relate to a provision for lease costs associated with properties made
vacant by the relocation into other depots within the tool network (£1.0m),
together with consultancy and other one-off costs associated with the
integration (£0.7m). In addition, and in connection with the acquisition, the
Group re-negotiated its banking facilities, increasing the available facilities
to £325m. Costs associated with the bank original facility amounting to £0.4m
which were being charged to profit over the life of the facility have been
written off during the period. Further details of the acquisition are contained
in note 8 below. A description of the progress made on the integration
programme is included in the business review above.
4 Net financial expense
Unaudited Unaudited Audited
30 30 31
September September March
2007 2006 2007
£m £m £m
Financial income
Bank interest received 0.2 0.1 0.2
Gains on hedging instruments - - 0.2
0.2 0.1 0.4
Financial expense
Interest on bank loans and overdrafts (6.5) (4.3) (9.7)
Amortisation of issue costs (0.1) (0.1) (0.2)
Exceptional amortisation of issue costs (0.4) - -
(7.0) (4.4) (9.9)
Net financial expense (6.8) (4.3) (9.5)
5 Taxation
The corporation tax charge for the six months ended 30 September 2007 is based
on an effective rate of taxation of 25% (2006: 27.5%). This has been calculated
by reference to the projected charge for the full year ending 31 March 2008,
applying the applicable UK corporation tax rate of 30%. Deferred tax
liabilities have been calculated using the reduced corporation tax rate of 28%
applicable to future periods following the enactment of the changes to the
standard rate of corporation tax and capital allowance legislation outlined in
the March 2007 budget.
6 Earnings per share
The calculation of basic earnings per share is based on the profit attributable
to equity holders of the parent of £13.6m (2006: £11.2m) and the weighted
average number of 5 pence ordinary shares in issue during the six months ended
30 September 2007 calculated as follows:
Unaudited Unaudited Audited
30 30 31
September September March
2007 2006 2007
Earnings (£m)
Profit for the period after tax- basic earnings 13.6 11.2 26.6
Intangible amortisation charge (after tax) 1.8 1.2 2.8
Exceptional items (after tax) 1.5 - -
Adjusted earnings - before amortisation and exceptional items 16.9 12.4 29.4
Weighted average number of shares in issue (million)
At the beginning of the period 45.2 43.7 43.7
Issue of ordinary shares 2.0 1.4 1.5
Exercise of share options 0.2 - -
At the end of the period - Basic number of shares 47.4 45.1 45.2
Share options 0.3 0.3 0.4
Employee share scheme 0.4 0.2 0.3
At the end of the period - Diluted number of shares 48.1 45.6 45.9
Earnings per share (pence)
Basic earnings per share 28.70 24.94 58.74
Amortisation of issue costs 3.74 2.61 6.26
Exceptional items 3.16 - -
Adjusted earnings per share 35.60 27.55 65.00
Basic earnings per share 28.70 24.94 58.74
Share options (0.18) (0.17) (0.55)
Employee share scheme (0.21) (0.10) (0.41)
Diluted earnings per share 28.31 24.67 57.78
7 Dividends
Unaudited Unaudited Audited
30 30 31
September September March
2007 2006 2007
£m £m £m
2006 final dividend (9.4 pence per share on 45.2m shares) - 4.2 4.2
2007 interim dividend (5.5 pence per share on 45.4m shares) - - 2.5
2007 final dividend (11.5 pence per share on 48.2m shares) 5.5 - -
5.5 4.2 6.7
Subsequent to the end of the period, the directors declared an interim dividend
of 6.4 pence per share (2006: 5.5 pence), to be paid on 25 January to
shareholders on the register on 4 January.
8 Acquisitions
Hewden Tools
During the period, the Group acquired the trade and assets of the Hewden Tools
business from Hewden Stuart Plc. Total consideration for the acquisition
amounted to £115.4m paid entirely in cash.
Tangible assets acquired on the acquisition have been estimated at £53.0m, based
on an initial assessment of fair values. Intangible assets in respect of
customer list, non-compete agreements, and the use of the Hewden brand (for a
five-month period to 31 December 2007) have been identified, and valued
provisionally at £17.8m based on an independent valuation. Working capital
balances comprising inventory, trade and other receivables, and trade and other
payables amounting to a net £14.0m have also been acquired.
Goodwill arising on the acquisition is estimated to be in the region of £30.6m,
pending completion of the fair value exercise in the second half of the
financial year.
Further disclosures are considered impractical at this time (in accordance with
IFRS3 para 67f), due to the acquisitions occurring close to the end of the
financial period.
Waterford Hire
The Group also acquired the entire share capital of Waterford Hire Services
Limited, a company registered in the Republic of Ireland for a maximum
consideration of €6.5m. The consideration is made up of €5.2m in the form of
cash, together with a maximum of 74,587 shares in Speedy Hire Plc payable on 28
February 2008 depending on the company's performance in the year ending 31
December 2007.
Goodwill arising on the acquisition has been estimated at £2.0m pending
finalisation of the exercise to determine the fair value of assets acquired.
Further disclosures are considered impractical at this time (in accordance with
IFRS3 para 67f), due to the acquisitions occurring close to the end of the
financial period.
9 Property, plant & equipment
Land and Hire Fixtures Total
buildings equipment fittings &
motor
vehicles
£m £m £m £m
Cost
At 31 March 2006 16.5 340.0 16.3 372.8
Additions 2.0 43.4 2.3 47.7
Arising on acquisition of businesses - 33.3 - 33.3
Disposals (0.2) (9.4) (0.1) (9.7)
At 30 September 2006 18.3 407.3 18.5 444.1
Additions 2.7 38.9 4.0 45.6
Arising on acquisition of businesses 0.2 7.1 8.4 15.7
Disposals (0.8) (15.0) (2.3) (18.1)
At 31 March 2007 20.4 438.3 28.6 487.3
Additions 1.4 40.7 3.9 46.0
Arising on acquisition of businesses 0.7 94.8 12.9 108.4
Disposals - (17.1) (1.9) (19.0)
At 30 September 2007 22.5 556.7 43.5 622.7
Depreciation
At 31 March 2006 6.8 116.6 8.0 131.4
Charged in the year 1.0 21.2 1.0 23.2
Arising on acquisition of businesses - 10.7 - 10.7
On disposal - (4.7) - (4.7)
At 30 September 2006 7.8 143.8 9.0 160.6
Charged in the year 1.5 24.1 1.5 27.1
Arising on acquisition of businesses 0.1 8.2 6.0 14.3
On disposal (0.1) (8.2) (2.1) (10.4)
At 31 March 2007 9.3 167.9 14.4 191.6
Charged in the year 1.5 27.8 1.3 30.6
Arising on acquisition of businesses 0.7 43.6 8.3 52.6
On disposal - (11.3) (1.7) (13.0)
At 30 September 2007 11.5 228.0 22.3 261.8
Net book value
At 30 September 2007 11.0 328.7 21.2 360.9
At 31 March 2007 11.1 270.4 14.2 295.7
At 30 September 2006 10.5 263.5 9.5 283.5
10 Financial risk management
The Group holds and uses financial instruments to finance its operations and to
manage its interest rate and liquidity risks. The Group primarily finances its
operations using share capital, retained profits and borrowings. The main risks
arising from the Group's financial instruments are credit, interest rate,
foreign currency and liquidity risk. The Board reviews and agrees the policies
for managing each of these risks and they have remained unchanged since the end
of the last financial year. A full description of the Group's approach to
managing these risks is set out in the 2007 Annual Report on pages 65 & 65.
The notional contract amounts and the related fair value of the Group's
financial instruments can be analysed as follows:
30 September 2007 30 September 2006 31 March 2007
Notional Notional Notional
Fair value amount Fair value amount Fair value amount
£m £m £m £m £m £m
Designated as cash flow hedges
Fixed interest rate swaps 0.5 55.0 0.1 30.0 0.5 55.0
Interest rate collars - 62.0 - 27.5 - 20.0
Interest rate caps - 25.0 0.1 15.0 - 25.0
0.5 142.0 0.2 72.5 0.5 100.0
Other instruments
Fixed interest rate swaps 0.1 5.0 - 5.0 0.1 5.0
Interest rate collars - - - 12.0 - 12.0
Interest rate caps 0.1 5.0 - 5.0 0.1 5.0
0.2 10.0 - 22.0 0.2 22.0
0.7 152.0 0.2 94.5 0.7 122.0
The weighted average interest rate of the fixed interest rate hedge is 6.136%
(31 March 2007: 5.703%) and the instruments are for a weighted average period of
13 months (31 March 2007: 18 months).
Collar instruments bear interest rates between 4.770% and 7.450% (31 March 2007:
between 4.395% and 7.075%), for a weighted average period of 27 months (31 March
2007: 25 months)
Capped rate instruments bear a weighted average maximum interest rate of 6.384%
(31 March 2007: 6.420%) for a weighted average period of 21 months (31 March
2007: 23 months)
11 Borrowings and net debt
The Group had available a £325m term and revolving credit facility, and a £5m
overdraft facility as at 30 September 2007. Of these facilities, £64.8m
remained unutilised at 30 September 2007, comprising £59.8m of the revolving
credit facility and £5m of the overdraft facility. The term and revolving loan
facility was entered into in June 2007 and is sub-divided into:
(i) an A Facility of £100m, which is repayable in four equal annual
instalments of £10m on the anniversary of the issue date, with the remaining
£60m being due for repayment in June 2012; and
(ii) a B Facility of £225m repayable on the fifth anniversary of the
issue date.
The Group's overdrafts are secured by cross guarantees and debentures given by
Group companies in favour of Barclays Bank Plc. The revolving credit facility
is secured by a fixed and floating charge over all the assets of the Group.
The maturity profile of the borrowings is as follows:
Unaudited Unaudited Audited
30 30 31
September September March
2007 2006 2007
£m £m £m
Current borrowings
- term loan 10.0 -
-
Non-current borrowings
Maturing between two and five years
- term loan 90.0 - -
- revolving credit facility 160.2 176.7 187.0
- unamortised issue costs (2.1) (0.6) (0.5)
Total non-current borrowings 248.1 176.1 186.5
Total borrowings 258.1 176.1 186.5
Less; cash at bank and in hand (9.4) (4.2) (10.3)
Net debt 248.7 171.9 176.2
The revolving credit facility can be drawn for various periods specified by the
Company, up to the maturity date, with interest being calculated for the drawn
period by reference to the London Inter Bank Offer Rate applicable to the period
drawn.
12 Reconciliation of movements in Equity
Share Share Merger Hedging Retained Sub-total Minority Total
capital premium reserve reserve earnings interest equity
£m £m £m £m £m £m £m £m
Total equity as at 1 April 2006 2.3 51.0 3.7 - 84.1 141.1 0.2 141.3
Profit and total recognised income
& expense for the period
- - - - 11.2 11.2 - 11.2
Dividends - - - - (4.2) (4.2) - (4.2)
Gains on cash flow hedges - - - 0.2 - 0.2 - 0.2
Cost of share-based payments - - - - 0.8 0.8 - 0.8
Tax on share based payments taken
directly to equity
- - - - 0.4 0.4 - 0.4
Issue of ordinary shares - 4.4 - - - 4.4 - 4.4
Total equity as at 30 September 2.3 55.4 3.7 0.2 92.3 153.9 0.2 154.1
2006
Profit and total recognised income
& expense for the year
- - - - 15.4 15.4 - 15.4
Dividends - - - - (2.5) (2.5) - (2.5)
Gains & losses on cash flow hedges - - - 0.3 - 0.3 - 0.3
Cost of share-based payments - - - - 0.9 0.9 - 0.9
Tax on share based payments taken
directly to equity
- - - - 0.5 0.5 - 0.5
Issue of ordinary shares - 2.4 - - - 2.4 - 2.4
Total equity as at 31 March 2007 2.3 57.8 3.7 0.5 106.6 170.9 0.2 171.1
Profit and total recognised income
& expense for the period
- - - - 13.6 13.6 - 13.6
Dividends - - (5.5) (5.5) - (5.5)
Cost of share-based payments - - 1.3 1.3 - 1.3
Issue of ordinary shares 0.2 50.5 - - 50.7 - 50.7
Total equity at 30 September 2007 2.5 108.3 3.7 0.5 116.0 231.0 0.2 231.2
The movement in share capital during the period was as follows:
Number
000s £m
At 31 March 2007 46,034 2.3
Placing of ordinary shares - 20 June 2007 2,180 0.1
- 27 July 2007 2,180 0.1
Other share issues 4 -
At 30 September 2007 50,398 2.5
13 Contingent liabilities
The Group has given warranties (including taxation warranties) to the purchasers
of eight businesses disposed of over the last seven years. These warranties
expire at various dates up to seven years from the date of disposal.
The Group has given guarantees with a value of up to £0.3m (2006: £0.3m) in
respect of ongoing contractual commitments.
14 Related party disclosures
David Galloway is a Non-Executive Director of May Gurney Integrated Services Plc
('May Gurney'). May Gurney is a customer of the Group, and trade with it on an
arm's length basis in the normal course of business. During the period, the
value of sales to May Gurney amounted to £0.6m, and the outstanding debtor at 31
March 2007 amounted to £0.2m.
David Galloway is a Non-Executive Director of Carter & Carter Plc ('Carter &
Carter'). Carter & Carter is a supplier to the Group, and trades with it on an
arm's length basis in the normal course of business. During the period, Carter
& Carter provided training and associated services to the Group with a value of
£0.3m, and the outstanding creditor at 30 September 2007 amounted to £0.3m.
Ishbel Macpherson is a Non-Executive Director of MITIE Group Plc ('MITIE').
MITIE is both a supplier and customer of the Group, and trades with it on an
arm's length basis in the normal course of business. From 17 July 2007 (the
date of appointment), the Group provided hire services to MITIE amounting to
£0.3m, and the outstanding debtor at 30 September 2007 amounted to £0.2m.
The Group's key management personnel are the Executive and Non-Executive
Directors.
In addition to their salaries, the Group also provides non-cash benefits to
Executive Directors, and contributes to approved pension schemes on their
behalf. Executive Directors also participate in the Group's share option
schemes.
Non-Executive Directors receive a fee for their services to the Speedy Hire Plc
Board.
Full details of key management personnel interests in the share capital of the
Company as at 31 March 2007 are given in the Remuneration report on pages 38 to
40 of the 2007 Annual Report. Total remuneration in respect of key management
personnel for the six months ended to 30 September 2007 amounted to £0.8m (2006:
£0.7m). During the period, 247,304 share options relating to the 2004
Performance and Co-investment Plans were awarded with and exercised by key
management personnel. The options were awarded with an exercise price of nil
pence per share. A further 130,333 options were granted in respect of the 2007
Performance and Co-investment Plans with performance criteria in line with the
prior share option scheme outlined in the Remuneration report contained in the
2007 Annual Report.
Independent review report by KPMG Audit Plc to Speedy Hire Plc
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2007 which comprises the Consolidated Income Statement, Consolidated
Statement of Recognised Income and Expense, Consolidated Balance Sheet,
Consolidated Cash Flow Statement and the related explanatory notes. 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 set of financial
statements.
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Disclosure
and Transparency Rules ('the DTR') of the UK's Financial Services Authority ('
the UK FSA'). Our review has been undertaken so that we might state to the
company those matters we are required to state to it in this 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 reached.
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 DTR of the UK FSA.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with IFRSs as adopted by the EU. The condensed set of
financial statements included in this half-yearly financial report has been
prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the
EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of 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 Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, 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 Ireland) 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 set of financial statements in the half-yearly financial
report for the six months ended 30 September 2007 is not prepared, in all
material respects, in accordance with IAS 34 as adopted by the EU and the DTR of
the UK FSA.
KPMG Audit Plc
Chartered Accountants
St James Square
Manchester
M2 6DS
This information is provided by RNS
The company news service from the London Stock Exchange
Tuesday, 28th May 2024
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