A
s
h
t
e
a
d
G
r
o
u
p
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
&
A
c
c
o
u
n
t
s
2
0
0
9
managing
the cycle
Ashtead Group plc
Kings House
36-37 King Street
London
EC2V 8BB
Phone: + 44 (0) 20 7726 9700
Fax: + 44 (0) 20 7726 9705
www.ashtead-group.com
2009
Annual Report & Accounts
Making more things possible
At Ashtead we make more things possible for
individuals and businesses.
We are a global leader in the provision of hire equipment,
from hand held tools to aerial platforms to complete
on-site contractor villages. We provide solutions and
systems that support our customers and pride ourselves
in delivering excellent levels of service and care.
Above all, it is our people that really make the difference.
Contents
01 Financial highlights
02 Company overview
04 Chairman’s statement
06 Business and fi nancial review:
07
Introduction
08–13 Case studies
14 What we do
15–17 Our markets
18–20 Our strategy
21–24 Our business model
25
KPIs
26–27 Business risks
28–33 Our fi nancials
34 Our directors
36 Directors’ report
38 Corporate governance report
41 Directors’ remuneration report
46 Corporate responsibility report
48 Auditors’ report
50 Consolidated income statement
51 Consolidated statement of recognised
income and expense
52 Consolidated balance sheet
53 Consolidated cash fl ow statement
54 Notes to the consolidated
fi nancial statements
84 Ten year history
85 Additional information
additional information
Future dates
Quarter 1 results
2009 Annual General Meeting
Quarter 2 results
Quarter 3 results
Quarter 4 and year end results
8 September 2009
8 September 2009
3 December 2009
9 March 2010
17 June 2010
Advisers
Auditors
Deloitte LLP
2 New Street Square
London
EC4A 3BZ
Registrars & Transfer Offi ce
Equiniti
The Causeway
Worthing
West Sussex
BN99 6DA
Financial PR Advisers
Maitland
Orion House
5 Upper St Martin’s Lane
London
WC2H 9EA
Solicitors
Slaughter and May
One Bunhill Row
London
E1Y 8YY
Skadden, Arps, Slate, Meagher & Flom LLP
333 West Wacker Drive
Chicago, IL 60606
Parker, Poe, Adams & Bernstein LLP
Three First Union Center
401 South Tryon Street
Charlotte, NC 28202
Brokers
UBS Investment Bank Limited
1 Finsbury Avenue
London
EC2M 2PP
RBS Hoare Govett Limited
250 Bishopsgate
London
EC2M 4AA
Registered number
1807982
Registered Offi ce
Kings House
36-37 King Street
London
EC2V 8BB
Cert no. SGS-COC-O620
Printed on Revive 75 Silk, which contains
a minimum of 75% recovered fi bre
Designed and produced by
| 35 Communications
Printed in the UK by Beacon Press
2009 in summary
1
●
●
●
●
●
●
Robust performance despite diffi cult market conditions
Cost reduction programme announced in December now fully
implemented delivering operating cost savings of at least £100m
£246m net cash infl ow generated in the year (2008: £1m outflow)
of which £157m was from operations. A minimum inflow of £100m
is targeted for 2009/10
£217m of the net inflow applied to pay down debt with £29m
returned to equity holders
Debt package remains committed for the long term and structured
to remain covenant free throughout the cycle
Final dividend of 1.675p per share proposed (2008: 1.675p),
making 2.575p for the year (2008: 2.5p)
Underlying revenue
Underlying operating profit
Underlying profit before taxation
Profit/(loss) before taxation
£1,073.5m
£155.0m
£87.4m
£0.8m
.
8
7
4
0
1
,
.
1
6
9
8
.
0
8
3
6
.
7
3
2
5
.
5
3
7
0
1
,
.
1
7
8
1
.
5
0
5
1
.
0
5
5
1
.
1
1
1
1
.
1
7
6
.
3
2
1
1
.
4
7
8
.
4
1
8
.
5
7
6
.
4
2
2
.
7
9
0
1
.
7
1
8
.
2
2
3
.
5
6
3
-
8
0
.
05
06
07
08 09
05
06
07
08 09
05
06
07
08 09
05
06
07
08 09
The fi gures for 2008 and 2009 include as revenue the proceeds generated from the sale of used rental equipment following the adoption of
the amendment to IAS 16 – Property, plant and equipment (and consequent amendment to IAS 7 – Statement of cash fl ows) included within
the 2008 ‘Improvements to IFRSs’. Prior years have not been restated.
Underlying revenue, profi t and earnings per share are stated before exceptional items, amortisation of acquired intangibles and non-cash fair
value remeasurements of embedded derivatives in long term debt. The defi nition of exceptional items is set out in note 1. The reconciliation of
underlying earnings per share and underlying cash tax earnings per share to basic earnings per share is shown in note 9 to the fi nancial statements.
Ashtead Group plc Annual Report & Accounts 2009
our group
at a glance
Ashtead Group provides solutions for customers who need a quick, effi cient and cost
effective service. We provide equipment that lifts, powers, generates, moves, digs, supports,
scrubs, pumps, directs, ventilates – whatever the job needs.
UK:
A-Plant
The second largest
equipment rental
company with
122 depots
throughout England,
Scotland and Wales
122
No. of stores
2,100
Employees
£208m
Revenues
£16m
Profi ts
5.1%
Return on Investment*
what we do
We rent equipment on fl exible terms so that our customers
can focus on what they do best rather than maintaining
and servicing equipment they may use only periodically.
We make sure the equipment is there when it needs to be
and is ready to work immediately and effi ciently. Our profi t
centres are located where they are most required and we
guarantee our service. Whether customers need a small
hand held tool or the largest aerial work platform, our staff
are there, able and willing, to help our customers ensure
the job gets done.
Facilitating
fi t-out
and ongoing
maintenance for
offi ce blocks.
On-site
tool hire and
maintenance for
a new residential
construction
site.
Replacing
worn out
sewage
infrastructure.
Designing and
implementing
traffi c
management
systems.
Advising on
health and safety
aspects of
equipment in use
at new sports
stadium.
3
US:
Sunbelt
The third largest
equipment rental
business in the
US market with 398
stores in 35 states
398
No. of stores
6,100
Employees
$1,450m
Revenues
$242m
Profi ts
10.8%
Return on Investment*
* Return on Investment is defi ned as underlying operating profi t divided by the weighted average cost of capital employed (shareholders’ funds plus net debt and net
tax liabilities, minus/plus the pension fund surplus/defi cit).
Equipment types
A broad range of construction and industrial equipment
including earthmoving equipment, aerial work platforms,
high reach forklifts and other materials handling units,
smaller tools, pumps, power generation, portable site
accommodation, scaffolding, formwork and falsework,
and temporary traffi c management equipment.
Customer base
Construction industry, facilities management, disaster relief
agencies, sport and music event organisers, governments,
local authorities, homeowners.
Installing
generators,
lighting
and temporary
accommodation
units for an
outdoor music
festival.
Providing
ongoing facilities
management for
a new shopping
centre complex.
Providing an
on-site hire depot
and ‘Contractors’
Village’ for a long
term hospital
construction
project.
Drying out
and cleaning up
after a fl ash fl ood
at an industrial
warehouse.
Ashtead Group plc Annual Report & Accounts 2009
chairman’s statement
Chris Cole,
Chairman
Recovery
Top of the
market
managing
the cycle
Downturn
I am pleased to report that Ashtead
has continued to perform well over the
past year, despite increasingly diffi cult
economic conditions.
As announced with our interim results last December, we took an early
decision to implement a signifi cant cost reduction programme across the
Group. Combined with our strong operating culture, this has enabled us
to deliver good profi ts in the past year against a background of slowing
economies. The programme has also helped us prepare the business for
the market conditions ahead, as well as generating a positive contribution
to our cash fl ow.
In addition, the cost reduction programme has been carefully structured
to ensure that we have retained intact the ability to service all our core
markets. This, I believe, means that Ashtead will prove to be well positioned
to benefi t quickly from the economic upturn when it comes. Your
management team describes in detail in this report the strategies we
have in place to maximise performance throughout the downturn and
return to growth once the cycle moves on to the next phase.
Financial results and dividends
We achieved good fi rst half profi ts and earnings growth in slowing
markets which deteriorated further in the second half but this still led
to a robust underlying pre-tax profi t for the year of £87m (2008: £112m).
Underlying revenue was £1.07bn (2008: £1.05bn) whilst, after exceptionals
and amortisation, the profi t before tax was £1m (2008: £110m).
Our cost reduction programme, announced in December 2008, has
lowered the annual cost base by more than £100m and was substantially
complete by year end. Including the proceeds generated from the sale of
surplus equipment, the programme generated a net cash infl ow of around
£40m. The accounts include a one-time exceptional charge of £54m after
tax incurred in delivering the cost savings, whilst last June’s sale of our
Ashtead Technology division generated a net exceptional profi t after tax of
£59m. Underlying earnings per share for the year were 11.9p (2008: 14.8p)
whilst, after exceptionals, basic earnings per share were 12.5p (2008: 14.2p).
The Board is recommending a fi nal dividend of 1.675p per share (2008:
1.675p) making 2.575p for the year (2008: 2.5p). Refl ecting the benefi t of
the reduced share count following the share buy-backs earlier in the year,
payment of the 2008/9 dividend will cost £12.8m and is covered 4.5 times
by underlying earnings from continuing operations. If approved at the
forthcoming Annual General Meeting, the fi nal dividend will be paid on
11 September 2009 to shareholders on the register on 21 August 2009.
In addition, the Group returned £16m to shareholders during the year
through share buy-backs. In total, from December 2007 when the
buy-back commenced until January 2009, the Group acquired 10%
of its issued capital or 59m shares at a cost of £39m. The buy-back
programme was suffi cient to eliminate any earnings dilution resulting
from the Technology disposal at a cost equivalent to around 40%
of the £89m Technology net disposal proceeds, with the other 60%
or £50m used to reduce outstanding debt.
The Board intends to continue to renew its shareholders’ authority for
share buy-backs at the forthcoming 2009 Annual General Meeting, but
will be discerning in its use given the current economic uncertainty.
Balance sheet strength
As part of the Board’s ongoing strategic review processes, in recent
years we have devoted considerable effort to ensuring that our fi nancial
structure, as well as our business model, is suited to our cyclical business.
This emphasis has ensured that our debt package is structured to cope
with the challenges of the current market conditions. We retain substantial
headroom on our debt facilities which are committed for the long term.
Availability at 30 April 2009 was $550m, substantially in excess of the
$125m level above which all our facilities are covenant free. Net debt
to underlying EBITDA at constant exchange rates was 2.6 times at
30 April 2009, only marginally above last year’s 2.5 times and still
close to the mid-point of our two to three times target range.
Moving forward, the Group retains substantial long term commitments
from its lenders with the fi rst maturity being the syndicated bank loan
which only becomes due in more than two years’ time in August 2011.
The Board keeps the Group’s debt maturities under regular review and,
in the coming fi scal year, will continue to assess the appropriate timing
for refi nancing this debt well ahead of its maturity.
5
“ Conditions have clearly become
more difficult; however, we continue
to believe that the fundamentals of
our market remain attractive.” Chris Cole
Our people
As always the Board and management of Ashtead owe a huge debt
of thanks to our employees. This year has been a diffi cult one and we
expect next year to be equally challenging. We are very grateful for the
continuing dedication and loyalty of our workforce who make Ashtead
a great place to work and provide a superior resource for our customers.
Current trading and outlook
May and early June have seen rental volumes in line with our expectations
whilst rental yields have shown some tentative signs of fl attening month
on month. As a result, the Board confi rms that its current expectations
regarding 2009/10 performance are unchanged from those described in
the trading update issued on 11 May.
We continue to believe that the fundamentals of our markets remain
attractive and that, with our continuing focus on meeting the challenges
of current market conditions and on cash generation, we are well
positioned for the next phase of the cycle.
Chris Cole
17 June 2009
Corporate governance
The Board continues to be committed to maintaining high standards of
corporate governance. In the current climate the Board’s rigorous scrutiny
of the business becomes ever more important and throughout the year
we have conducted a thorough review of the Company’s strategy and
risk management to help the business withstand the economic downturn.
Despite operating in diffi cult and uncertain markets we are confi dent
that we have the necessary structures in place to minimise trading risk.
In addition, we have continued to make good progress this year on
our environmental, health and safety initiatives and management has
established a Group Risk Committee to pull together all the work we
are doing at subsidiary level and provide further impetus in this
important area.
Board composition
A lot of time was spent by the Nomination Committee in the year
considering the effectiveness of the executive directors and in particular
the future management and direction of the Group’s principal subsidiary,
Sunbelt. As a result, it was decided to recruit a new chief executive for
Sunbelt and the Nomination Committee was delighted to identify and
recruit Joseph (Joe) Phelan who joined Sunbelt and the Board in April.
Joe, an American citizen, joined Ashtead from Deutsche Post DHL where
he was chief executive of DHL Global Mail and a member of Deutsche
Post’s executive committee. Before joining DHL in 2004, Joe held a
number of senior executive positions with American Airlines. Joe’s broad
operational management experience has been welcomed by the Sunbelt
management team and together they are looking forward to addressing
the challenges of current market conditions and to further developing
Sunbelt in the next phase of the cycle.
Consequent to Joe’s appointment, Cliff Miller ceased being a director of
Ashtead and his employment with Sunbelt terminated. In his period as
chief executive of Sunbelt and throughout his 13 year career with Ashtead,
Cliff helped Ashtead develop Sunbelt from the small regional business it
was when he joined it in 1996 to the large national rental company it is
today. It is therefore appropriate that I place on record the Board’s thanks
to Cliff and our appreciation for all his efforts.
Ashtead Group plc Annual Report & Accounts 2009
project lifecycle
The phases of a typical project can be
described through these fi ve basic stages.
Although each job differs from the last,
the general needs are similar.
Site clearance,
excavation and
groundwork
Providing diggers, dumpers,
piling and acrow to support
main structures, trench shoring,
on-site depot, refuelling.
Fit-out
Smaller tools to fi nalise site for end
user, towers, scissor lifts, temporary
heating, air conditioning and power,
forklifts and telehandlers etc.
Site preparation
Preparing the temporary site
area, accommodation units,
traffi c management, power
and lighting, steel storage units
and security fencing.
Construction
Providing formwork and falsework
to support concrete structures,
powered access platforms, booms,
telehandlers, survey equipment,
dumpers, forklifts, concrete mixers.
Ongoing
maintenance
Various equipment for any facility,
aerial work platforms and smaller
tools and equipment for facility
management and ongoing
maintenance.
business and financial review
introduction
7
Right:
Geoff Drabble,
Chief executive
Far right:
Ian Robson,
Finance director
In the past year the Group has delivered good performance against the
background of a signifi cant downturn in our markets. This year we have focused
on getting the business in the best possible shape to withstand the recession
and also to benefi t quickly when the prevailing economic situation improves.
Ashtead serves cyclical markets and, consequently, managing cycles is inherent
to our business. We aim to ensure our business model is as fl exible as possible
to enable us to adapt to constant changes in the economic environment in
which we operate. While the current cycle is likely to involve a deeper downturn
than most others, our usual management principles still apply.
A major component of our strategy to create a fl exible business model is the
breadth of markets, geographies and industries we serve. While the largest
end market for our services is new-build, non-residential construction, we also
serve a wide range of other markets such as facilities management, repair and
renewal, disaster relief, event management and traffi c control. This diversifi cation
broadens the markets we serve beyond the new-build construction market
where economic cycles tend to be particularly pronounced.
Also we often play a signifi cant part in the background at many high profi le
projects such as the US presidential inauguration and the construction of the
London Olympic infrastructure. Over the next few pages we demonstrate the
breadth of the work that we have been involved with over the last year, as well
as showing how we typically work on major projects.
our projects
Ashtead Group plc Annual Report & Accounts 2009
UK Keeping Tower Bridge operational
Tower Bridge in London, one of the world’s most famous landmarks, is being refurbished over a four year period. The project is part of the City
of London Corporation’s plans to refurbish historic structures and key gateways to the City. During that time the bridge will remain fully open
due to the traffi c management support of A-Plant Lux.
A-Plant Lux is A-Plant’s specialist traffi c control and management business. We will be supporting the contractor managing the refurbishment
for the duration of the project. The 244 metre long structure, which was originally built in 1894, will be repainted in stages with up to 25% of the
bridge completely encapsulated by scaffolding at each stage of the work. Throughout the work, A-Plant Lux’s traffi c management equipment will
be on-site all day every day, keeping the bridge open to traffi c until it returns to its former glory.
9
US
Keeping the equipment moving through
hurricane season
Hurricane season 2008 saw Sunbelt making the most of our national network of depots as Dolly, Fay, Gustav, Hanna and Ike all wrought havoc
across the southern states of the US. When the fi rst hurricane, Dolly, hit San Padre Island in south Texas, we were on-site within 24 hours despite
the adverse weather conditions, helping to rebuild, clean and power the affected hotels.
When Hurricane Fay zigzagged through the state of Florida, becoming the fi rst storm in recorded history to make landfall in Florida four times, we
were quickly on hand to provide generators to get things moving again and the pumps required to clear fl ood water. We already had fl eet moving
across the country from Texas and the North East into Florida and Los Angeles while hurricanes Hanna and Gustav were making their presence felt
there. Our logistical focus then quickly had to change back to Texas, when Hurricane Ike struck and we mobilised yet more fl eet from our national
network, from Baltimore through Chicago to Los Angeles and Seattle.
US
Assisting the inauguration of the
44th president
Sunbelt has played a role in the US presidential inaugurations since 1993. This year was no different and Sunbelt was asked to help in a variety
of areas on the day itself and at other connected events. For example, we supplied over 2,000 pieces of traffi c control equipment to help direct
the estimated 1.8m people hoping to get a glimpse of the new president. Sunbelt was also the primary rental company involved in erecting stages
and viewing stands throughout the mall between the Capitol and the Lincoln Memorial, including the presidential viewing stand. Some 50 or so
aerial work platforms and forklifts were the main tools for this task and we also installed 39 light towers in and around the inauguration site.
We provided equipment for several private parties held in tents and nightclubs all over Washington DC. We supplied large numbers of heaters to
combat the extreme cold and also the generators to power those heaters. In addition, we provided equipment to several city blocks on the parade
route to enable vendors to serve the general public. We were able to provide a full service solution on one of the most exciting days in recent
US history.
11
US Cleaning up after the Cedar Rapids fl ood
In June 2008, a 30 foot surge of water rushed through downtown Cedar Rapids, Iowa, saturating the basements, fi rst fl oors and even second fl oors
of some buildings. Sunbelt’s Pump & Power division had support on the ground within 24 hours, working at fi rst to retain a yard to which equipment
could be delivered and from where it could be dispersed and serviced. Because of Sunbelt’s multi-year experience in managing emergency situations,
staff knew exactly how to stage the supply of equipment to ensure that the right kit was in place at each stage of the clean-up process.
First we delivered pumps and dewatering equipment to eliminate the remaining water infi ltration. Once the buildings were free of standing water,
our customers began the remediation and restoration processes, including demolition in some instances. The buildings that were salvageable were
cleaned, dehumidifi ed and restored. Dehumidifi ers coupled with generators then became the required equipment and Sunbelt was prepared with
the truckloads already delivered and several more on the way.
UK Decommissioning Sellafi eld
Sellafi eld was one of the fi rst nuclear power station sites in the UK and its earlier reactors are now being decommissioned as they are no longer
operational. A-Plant is assisting with this massive project from its Whitehaven depot which is just 15 minutes away from the Sellafi eld site. As with
any major engineering project, there are a number of large contractors working on the project at any one time, several of whom are national
account customers.
Our proximity to the site means we are able to provide a wide range of equipment to all the contractors in a timely and effi cient fashion, as well
as providing maintenance and health and safety instruction, and support for the equipment we supply. This equipment includes accommodation
units for contractors who are based on the site long term, concrete formwork, telehandlers, booms and scissor lifts as well as traffi c management
kit for the road widening project outside the site.
13
US Helping keep the Red Bulls fl ying
Another exciting project this past year for Sunbelt staff was their work in support of the Red Bull Air Race. This innovative sporting event combines
fl ying with the best of motor racing and fi rst took place in 2001. Using the fastest, most agile and lightweight racing planes, pilots navigate a
low-level aerial racetrack made up of air-fi lled pylons, reaching speeds of 370 kilometres per hour while withstanding forces of up to 12G.
Last year the race touched down in eight cities worldwide and the organisers turned to Sunbelt to provide the necessary equipment in San Diego
and Detroit. As usual, we supplied a wide range of equipment along the race tracks, such as temporary power and air conditioning units, forklifts
and light towers.
business and financial review continued
what we do
“ The way we have responded reflects
the flexibility inherent in our business
model and our experience of previous
downturns.” Geoff Drabble
Ashtead is the second largest equipment
rental group in the world. We operate in the
US as Sunbelt Rentals or Sunbelt and in the
UK as A-Plant. Sunbelt is the third largest
equipment rental company in the US, whilst
A-Plant is the second largest equipment
rental company in the UK, in each case,
measured by rental revenues.
We offer short term rental of a wide range of construction and industrial
equipment, ranging from everyday earthmoving and materials handling
equipment through to extensive pump and power systems used in major
disaster situations. We are a service business and it is our network, people
and systems that set us apart in our markets. At Group level, we are
focused on the management of asset intensive businesses with the aim
of delivering superior fi nancial returns over the long term.
We provide solutions in all manner of situations including the following:
•
•
•
•
•
Non-residential construction markets – providing all types
of construction equipment
Facilities management – again providing all types of equipment
for maintenance and repair
Disaster relief – providing pumps and power generation equipment
in all types of application, ranging from assistance at times of fl ooding
due to weather (e.g. hurricanes) or a burst water supply
Major event management – providing power generation, lighting
and other equipment for events such as major sporting events, music
concerts and festivals
Traffi c management – providing portable traffi c systems to facilitate
major engineering projects or clean-up after an accident
business and financial review continued
our markets
15
Diversified end markets
US non-residential construction
15%
15%
10%
60%
Residential construction
& home improvements
Infrastructure
Industrial
Commercial construction
$bn
800
700
600
500
400
300
200
100
0
The US
Sunbelt, our US construction and industrial
equipment rental division, trades exclusively
in the United States and operates 398 stores
(or profi t centres as we refer to them) grouped
into 47 Districts and three Territories.
Sunbelt’s business is broadly based and it dealt with over 650,000 customers
in the past year and conducted 2.0m rentals. We have a highly diversifi ed
customer base and as such, we are only able to estimate the ultimate
sources of our revenues as we only rarely deal direct with the property
occupier/owner. However, we believe our main end markets to be as
shown in the chart above.
This year we have, as expected, begun to see the impact of the global
economic downturn affecting our business, particularly in the second half.
The turnaround in our principal end market, commercial construction,
is shown in the above construction data produced by the US Department
of Commerce.
The US Department of Commerce divides non-residential construction
into the following categories:
Lodging
Offi ce
Commercial
Healthcare
Educational
Religious
Public safety
Amusement and recreation
Transportation
Communication
Power
Highway and street
Sewage and waste disposal
Water supply
Conservation and development
Manufacturing
04
05
06 07 08 09*
*12 months ended 30 April 2009
Sunbelt serves all of these end market categories. According to the US
Department of Commerce, healthcare, education, public safety, sewage
and waste disposal, power and conservation and development continue
to grow with total non-residential construction increasing slightly by
2.5% in the year ended April 2009.
Moving forward, the public sector or institutional element of the market,
which through the economic cycle tends to represent around 50% of the
total and includes categories such as schools, hospitals and transportation,
is expected to perform more strongly aided by the recently enacted US
infrastructure package. This will be driven in large part by the need for
increased infrastructure investment in the US following the signifi cant
population growth in the US in recent years (up from 280m in 2000 to
307m currently according to the US Census Bureau). The US population
also has one of the fastest annual growth rates amongst developed
economies at 0.98% per annum (compared to 0.28% in the UK and
0.48% on average in Western Europe) which we expect to continue
to be a favourable structural driver of construction demand and hence
growth for Sunbelt’s services in the future.
By contrast, private non-residential construction is expected to decline
signifi cantly in 2009 as projects fi nanced prior to the credit crunch
complete and little new commercially funded work is begun. Overall
we currently expect commercial construction markets to decline by
15% to 20% in the coming year.
We anticipate that our other end markets will likely perform better than
this but with residential construction still in decline after four years and
the other areas we serve inevitably impacted by the decline in US GDP,
we expect the rental industry to suffer signifi cant reductions in demand
during, at least, calendar 2009.
Beyond calendar 2009, a number of independent forecasters are predicting
that residential and homeowner related demand will begin to improve and
that the stimulus package will also provide additional public sector support.
Sunbelt’s revenues are impacted not only by the volume of activity in its
end markets but also by two other factors: rental penetration and market
share. Both of these factors are positive and are therefore helping
moderate some of the volume decline in our end markets.
Ashtead Group plc Annual Report & Accounts 2009
business and financial review continued
our markets
Increasing rental penetration
US rental market
%
70
60
50
40
30
20
10
0
$bn
40
35
30
25
20
15
10
5
0
US
US
UK
Japan
94 95 96 97 98 99 00 01 02 03
04 05 06 07 08 09
1995 2000
2005
2010E
2008E
2008E
Source: American Rental Association
Rental penetration
Rental penetration continues to increase as shown by the chart above.
Increasingly, building contractors in the US are coming to appreciate
the advantages of outsourcing their equipment needs in terms of:
•
•
•
Having available exactly the right equipment required for the task
at hand;
Removing the need to manage and service a non-core activity;
Removing the balance sheet fi nancing requirement that comes
with ownership.
We anticipate that the current recession and the period of recovery that
will inevitably follow, will drive additional outsourcing as more and more
US contractors come to fully appreciate the benefi t of not needing to
own and service their own equipment.
The American Rental Association commissions an annual survey into
the size of the US rental market which is summarised above.
This chart shows how the rental market has exhibited an average annual
growth rate of 7.5%, well ahead of the growth in the US economy overall
as measured by GDP, driven in particular by increased outsourcing of
equipment needs driving higher rental penetration.
Competitors and market share
There are four large national equipment rental companies in the US as
shown in the table below:
United Rentals
RSC
Sunbelt Rentals
Hertz Equipment Rental Co
No. of
stores
618
347
398
244
US revenue
($bn)
2.7
1.6
1.5
1.2
Approx.
market share
7%
4%
4%
4%
Like us, United Rentals, RSC and Hertz are publicly listed businesses.
Beyond the top four, the market in which Sunbelt operates is characterised
by a large number of small competitors. We expect the recession to result
in further consolidation of the industry and growth in market share for
the larger companies, each of which have stable fi nancial structures and
are therefore well positioned for the cycle relative to smaller, less well
funded competitors.
Specifi cally, we therefore anticipate that, as has been the case throughout
almost all its development since Ashtead fi rst acquired it in 1990, Sunbelt
will continue to develop its market share.
Future market trends
We do not expect end construction markets in the US to improve
materially until late 2010 or 2011, which is why we have made appropriate
adjustments to our cost base and business model, discussed further below,
to deal with this recessionary part of the cycle.
However, in the medium to long term we remain confi dent in our
end markets. We also expect increased demand through greater
outsourcing. This will be driven by increased concerns over health and
safety issues, as well as the fact that use of an outsourced specialist
provides the contractor with the ability to rent exactly the right piece
of equipment for the task at hand while being confi dent that the
equipment will be of recent manufacture and maintained by an
experienced, specialist workforce.
Finally, as discussed in greater detail in the strategy section below we
see opportunities to take advantage of the cycle to gain market share,
principally from our smaller and less well fi nanced competitors, many
of whom may not survive the recession.
17
UK rental market
£bn
5
4
3
2
1
0
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Source: AMA Research Limited
Competitors
A-Plant is one of the top three equipment rental businesses in the UK with
its key peers being shown in the table below:
Speedy Hire
A-Plant
Hewdens
HSS
No. of
stores
399
122
100
230
Revenue
(£m)
476
209
183
173
Approx.
market share
11%
5%
4%
4%
Future market trends
We do not expect to see a signifi cant upturn in the UK market until late
2010 or 2011. Housing and consumer-facing construction will continue
to decline in 2009 and most commercial sectors will also be weak.
Infrastructure renewal and major projects such as the Olympics and
Crossrail will become a larger part of the market as public sector rather
than private investment becomes the main driver of demand.
Once conditions improve, we expect that A-Plant will be seen to have
gained market share through the recession, as we anticipate that a
number of its less well fi nanced competitors will either exit the market
or downsize their operations.
The UK
A-Plant, our UK business, rents a similar
range of equipment to Sunbelt, to a similar
profi le of general industrial and construction
oriented customers. A-Plant operates
122 profi t centres and dealt with 34,000
customers in the past year. A-Plant serves
a more mature market than in the US and
one where rental penetration is estimated
to be fairly stable at around 70%.
The recession this past year has seen increased pressure on our UK
business and we expect this to continue in the short term as construction
volumes decline. We believe that A-Plant is relatively well positioned
in the market at this time, given its emphasis on both the utility and
infrastructure markets (power, water, sewerage and roads) and major
projects such as nuclear decommissioning and the Olympics, as these
areas remain strong. In the medium term, a return to growth will come
with an improving economy which will bring with it an improved private
commercial sector and housing market. Public sector work will remain
important with key projects in power, education and transport. However,
we remain realistic in our expectations regarding the level of public
expenditure in the medium term due to concerns around the likely
pressures on the government budget.
The UK plant and tool market is not well researched but AMA Research
Limited recently published the results of an updated market survey which
is shown above.
This chart shows that whilst the rental market has exhibited good long
term growth with a 14 year average annual growth rate of 2.8%, it is
inevitably slower growth than the immature rental market in the US.
Ashtead Group plc Annual Report & Accounts 2009
Understanding our business
We understand the cyclical nature of our business
and we have structured our business to maximise the
opportunities available at different stages of the cycle.
Recovery
• Rate recovery
• Improving utilisation
• Capex investment high
• Fleet lead time management
• Declining leverage
• Organic growth
• Take advantage of those
who have just survived
Top of the
market
• High utilisation
• High rate
• High margins
• Moderate capex
• Minimum leverage
• Optimise opportunity
• Prepare balance sheet
for downturn
managing
the cycle
Downturn
• Low utilisation
• Inevitable pressure
on rate
• Market share decisions
• Low capex
• High cash generation
• Cost reduction vs
recovery preparation
business and financial review continued
our strategy
19
“ The stability of our debt structure
has been demonstrated during these
difficult times and reflects our long
term cyclical planning.” Geoff Drabble
Ashtead aims to be a leader in the global
equipment rental business delivering good
returns for our investors through building
strong relationships with our customers
and delivering the services they require
effi ciently. In good market conditions we
achieve these objectives by generating
strong organic growth combined with growth
through acquisition, as well as delivering high
levels of customer satisfaction. In weaker
markets, we cease growth investment and
utilise our cash fl ow to manage debt levels
and thereby keep our capital structure solid
through all parts of the cycle.
A further element of the Group’s strategy is its focus on managing and
incentivising its human capital to deliver strong returns on investment
from a capital asset base comprising large numbers of individual assets,
as well as the computer systems it has developed to facilitate this. These
skills were fi rst applied successfully in the UK through A-Plant and then in
the US, where Sunbelt has now grown to be four times larger than A-Plant
in a substantially larger market.
We describe ourselves as being a late cycle business in that our main end
market, non-residential construction, is usually one of the last parts of the
economy to be affected by adverse economic conditions. This means that
we have a high degree of visibility of when we are likely to be adversely
affected, as the warning signs will have been visible in other parts of the
economy for some time. We are therefore able to plan accordingly and we
outline below the moves we have made this year to prepare the business
for recession.
We are confi dent that these actions make us amongst the best positioned
of our peer group to survive the coming months. Key to execution of our
strategy at the moment is the planning we are undertaking to capitalise
on the opportunities presented by the cycle for both organic growth
from winning market share from less well positioned competitors and
possibly also acquisitive growth as and when suitably priced, distressed
opportunities arise. Our ability to do this is enhanced by the conservative
balance sheet structure we have maintained whilst the cycle was strong,
judging our pace of investment in the good years to hold leverage within
our two to three times leverage range. This balance sheet strength was
reinforced further by the manner in which we rapidly lowered investment
levels to ensure we generated signifi cant free cash fl ow in the year to
April 2009 and throughout the recession.
Response to the current recession
In performance terms, the past year was characterised by good rental
volumes and profi ts in our fi rst half followed by a rapid decline into
recessionary conditions and weak profi tability in the second half. Although
the pace of decline from still good market volumes last summer into
recessionary conditions was signifi cantly more rapid than has been seen
in previous cycles, the market conditions we face and the way our markets
are moving through the cycle are not without precedent. Consequently,
the way we have responded refl ects the fl exibility inherent in our business
model and our experience of previous downturns.
Private non-residential construction was the fi rst of our major markets to
see a slowdown, particularly amongst the smaller builders. Sectors which
are most exposed to consumer spending, such as retail, were affected fi rst
but the impact is now widespread across all sectors. The speed of the
decline in the current cycle is evidenced by the number of private sector
projects where the decision was taken to stop work mid-project, but many
more have been postponed or cancelled without work ever having begun.
As usual it will take a return to GDP growth before growth returns but a
consequence of the rapid slowdown is the large number of projects that
are ready to recommence as soon as developers and fi nanciers gain the
necessary confi dence to resume development.
Ashtead Group plc Annual Report & Accounts 2009
business and financial review continued
our strategy
“ We have configured our business to
be as efficient as possible… we have
ensured that we remain positioned
to service all our main geographies
and markets.” Geoff Drabble
Infrastructure work, most of which is publicly fi nanced, will as usual
remain stronger through the cycle with particular areas of strength being
utilities, prisons, schooling and transportation. Future strength, however,
depends on central funding and hence it is helpful that both US and UK
administrations are committed to delivering public sector investment to
improve ageing infrastructure and support employment. On the ground,
however, the fact that this spending is largely delivered by local and not
central government brings uncertainty over which projects will be
supported and generates some delay in projects proceeding.
We believe that a combination of fi nancial constraint and uncertain
order books will result in contractors, particularly in the US, increasingly
choosing the rental option. We therefore expect the established trend
towards increased outsourcing of equipment supply in the US will
accelerate through the cycle. At the same time our industry remains
fragmented with a number of smaller rental companies surviving on
leasing fi nance often with low or zero cost interest rates which historically
was provided by the equipment manufacturers. As this source of fi nance
has become increasingly scarce and substantially more expensive, we
expect the rental market to consolidate further during the downturn,
benefi tting the larger, better fi nanced players such as ourselves.
As a result, with strong market positions in both the UK and US, supported
by young fl eets and sound long term debt facilities, we continue to expect
that we will emerge from the current downturn with greater market share
and, in the US, in a market with enhanced rental penetration.
Cash generative in tough markets
The fl exibility inherent in our business model allows us to focus on
generating free cash fl ow. When the economy is expanding, we utilise this
free cash fl ow to increase investment in our rental fl eet to support revenue,
EBITDA and earnings growth and reduce the age of our rental fl eet. In a less
favourable economic environment, we reduce the rate at which we invest
in new equipment and increase the age of our rental fl eet, which
consequently increases free cash fl ow. This reduces our economic risk.
Our ability to fl ex our cash fl ow through the business cycle is also crucial
for the effi cient management of our debt and allows us to manage our
business model according to our position in the economic cycle. This year,
with the economy slowing and demand lower than normal, we have
reduced our capital expenditure and generated cash which we applied to
pay down debt. Over the year to 30 April 2009, we generated total
cash of £246m and applied 88% to debt pay down with the balance
being returned to shareholders through dividends and share buy-backs.
All our debt is committed for the long term and structured to remain
covenant free, enabling us to get on with running the business unimpeded
by debt obligations. More detail on the specifi c structure of our debt can
be found on page 31.
Cost reduction programmes
This year we also focused early on preparing the business for a sustained
downward economic cycle. To this end, last autumn, we instigated a cost
reduction programme to prepare the business for the lower levels of
demand we expect in the coming year. Combined with our ongoing focus
on operational effi ciency, a key element of this programme has been to
reduce the size of our rental fl eets by about 10% in both the UK and US.
We also merged or shut 100 profi t centres across the Group and reduced
our workforce by around 14%. Overall these actions resulted in savings of
around £100m compared to last summer in our annualised local currency
cost base.
Critically, in taking rationalisation action, we have ensured that we
remain positioned to service all our main geographies and markets when
the upturn comes. The one-time exceptional charge incurred in delivering
the savings, much of which is non-cash relating to asset impairments
and future costs on closed properties, was £83m. Including the proceeds
realised from the sale of the surplus equipment, the programme generated
a net cash infl ow in the year of around £40m.
Seasonality
In addition to economic cycles, our business is also subject to signifi cant
fl uctuations in performance from quarter to quarter as a result of seasonal
effects. Commercial construction activity tends to increase in the summer
and during extended periods of mild weather and to decrease in the
winter and during extended periods of inclement weather. Furthermore,
due to the incidence of public holidays in the US and the UK, there are
more billing days in the fi rst half of our fi nancial year than the second half
leading to our revenue normally being higher in the fi rst half. On a
quarterly basis, the second quarter is typically our strongest quarter,
followed by the fi rst and then the third and fourth quarters. We manage
the business to accommodate these natural annual cycles.
business and financial review continued
our business model
21
Broad range of fleet
Sunbelt
16%
4%
7%
19%
36%
18%
The Group focuses on equipment rental. During 2008/9 approximately
91% of our revenue was derived from equipment rental and rental-related
services, with the balance coming from sales of new and used equipment,
parts and associated goods, such as equipment accessories. The Group
believes that this focused and dedicated approach improves the
effectiveness of our rental sales force by encouraging them to build
and reinforce relationships with customers and to concentrate on strong,
whole-life returns from our rental fl eet, rather than on short term returns
from sales of equipment.
Our operating model is key to the way we deliver returns and
encompasses the following elements:
•
•
•
•
our local management teams are strong and highly incentivised,
producing superior fi nancial returns and high quality standards. Many
of our most senior people started their careers by working in the front
line at a profi t centre;
in the US we achieve scale through a ‘clustered market’ approach
of grouping our rental locations into clusters of three to 15 locations
in each of our developed markets throughout the US. Sunbelt has
developed such ‘clustered markets’ in 34 major cities including
Washington DC, Dallas, Houston, Charlotte, Atlanta, Orlando and
Seattle. This approach allows us to provide a comprehensive product
offering and convenient service to our customers wherever their job
sites may be within these markets;
in the smaller geography of the UK, our strategy is focused on having
suffi cient profi t centres to allow us to offer a full range of equipment
on a nationwide basis. We continue to invest in migrating our network
towards larger locations which are able to address all the needs of our
customers in the major markets;
we provide a wide range of equipment within our rental fl eets to
maximise the extent to which we can fulfi l our customers’ needs;
A-Plant
22%
13%
10%
5%
5%
5%
11%
29%
Aerial work platforms
Forklifts
Earth moving
Accommodation
Pump and power
Acrow
Traffic
Scaffold
Other
•
•
we also aim to offer a full service solution for our customers. Our
product range includes specialist equipment types such as pump and
power, scaffolding and traffi c management systems, which involve
providing service expertise as well as equipment;
we invest heavily in our computerised point of sale and service systems.
We use these systems not only to help us manage our business to deliver
strong fi nancial returns, but also to meet the needs of our customers.
We deployed some of the fi rst extranets in the industry in both the US
and UK to provide qualifying customers with complete information on
the equipment they have on rent and the status of their account. We use
PDAs to capture and record the time of delivery and the customer’s
signature electronically, allowing us to systematically monitor and report
on on-time deliveries. We also use electronic tracking systems to
monitor and secure the location and usage of large equipment.
In the US we have recently concluded a project to develop price modelling
software suitable for use in our high transaction volume, low value
industry. This software, which is being deployed to our sales force through
use of smartphone-based technology, will we believe represent the fi rst
consistent application of these techniques in our industry. We anticipate
that this investment will mean that our sales force will have immediately
to hand in a usable format the data they require to reach appropriate and
consistent pricing decisions throughout our business.
Ashtead Group plc Annual Report & Accounts 2009
business and financial review continued
our business model
Return on Investment ahead of cost of capital across the cycle
%
20
15
10
5
0
Apr
04
Jul
04
Oct
04
Jan
05
Apr
05
Jul
05
Oct
05
Jan
06
Apr
06
Jul
06
Oct
06
Jan
07
Apr
07
Jul
07
Oct
07
Jan
08
Apr
08
Jul
08
Oct
08
Jan
09
Apr
09
Our rental fl eets
Our fl eet mix is broadly similar to that of our large peers. However, we
differentiate our business both by emphasising smaller equipment types
which we believe offer the potential for higher returns and in the manner
in which we incentivise our staff. It is the needs of our customers and
overall demand that drive the composition of our equipment fl eet,
with the size, age and mix of our equipment rental fl eet driven by our
diversifi ed customer base. The equipment we provide to each customer
is equally diverse and we are often involved in supplying various types
of different equipment over a number of years at each distinct stage
of a project’s development.
The breadth of our fl eet mix supports our ability to service not only the
rental opportunities that exist in new-build construction, but also in a
wide range of other applications including industrial, events and facilities
management. We believe in ensuring a balanced mix of business
throughout the cycle which allows us to mitigate the extremes of
particular sectors. We will, however, continue to develop our portfolio of
larger national and regional accounts utilising the scale and geographical
footprint the NationsRent acquisition provided. The larger accounts will
cover a range of both construction and industrial markets.
Over the coming year we anticipate that investment in our fl eet will be for
replacement rather than growth.
Return on Investment
One of the key performance indicators we use to monitor our businesses
at all levels is return on investment (RoI). For the Group as a whole our
objective is always to ensure that, averaged across the economic cycle,
we deliver RoI well ahead of our cost of capital. This continues to be the
case as shown by the chart above.
The Group maximises its return on investment through encouraging
effective management of invested capital by:
•
•
•
•
maintaining a concentration of higher-return (often specialised)
equipment within the overall rental equipment fl eet;
promoting the transfer of equipment to locations where maximum
utilisation rates and returns can be obtained;
monitoring the amount of invested capital at each of our profi t
centres; and
empowering regional and local managers to adapt pricing policies
in response to local demand in order to maximise the overall return
achieved from the investment in our rental fl eet.
23
Diversified customer base
Sunbelt
33%
12%
6%
9%
9%
11%
6%
14%
A-Plant
14%
9%
14%
40%
3%
11%
9%
Commercial construction
Government & institutional
Industrial, manufacturing
& agriculture
Infrastructure
Non-construction services
Residential construction
Small contractor
Speciality trade contractors
Our customers
Our business is highly diverse. Our customers range in size and scale from
multinational businesses, through strong local contractors to individual
do-it-yourselfers. In the year to April 2009, Sunbelt dealt with over
650,000 customers, wrote 2.0m rental contracts with an average value of
$540 per contract and issued over 2.5m invoices. A-Plant, though smaller,
is almost as diverse. In 2008/9 it dealt with over 34,000 customers, wrote
0.4m rental contracts with an average value of £380 per contract and
issued 0.9m invoices.
In the UK, we have focused in recent years, on building deeper
relationships with our larger customers with the top 150 accounting
for 50% of A-Plant’s 2008/9 revenues.
The Group’s diversifi ed customer base includes construction, industrial
and homeowner customers, as well as government entities and specialist
contractors and is analysed by Standard Industry Classifi cation in the
tables above.
However, the Group’s geographical scale and diversifi ed customer base
assist in mitigating the adverse impact of these factors on the Group’s
performance through:
•
•
•
reducing the impact of localised economic fl uctuations on our overall
fi nancial performance;
reducing our dependence on any particular customer or group of
customers; and
enabling us to meet the needs of larger customers who have a wide
range of equipment needs.
Our suppliers
Like other large participants in the industry and in favourable market
conditions, the Group purchases large amounts of equipment, parts and
other items from its suppliers. This year, however, our capital expenditure
on rental equipment was limited to replacement rather than expansion
of our fl eet as both the US and UK economies slowed.
We have worked with a lot of our customers for many years. Our experience
is that we gain a large amount of repeat business. Our operating methods
and focus on customer service aim to support and enhance this. We
guarantee our service standards in both our businesses and voluntarily
accept fi nancial penalties if we fail to meet our commitments to our
customers. We believe that our focus on customer service and these
guarantees help distinguish our businesses from competitors and assist
us in delivering superior fi nancial returns.
Across our rental fl eet, we generally seek to carry equipment from one
or two manufacturers in each product range and to limit the number of
model types of each product. We believe that having a standardised fl eet
results in lower costs because we obtain greater discounts by purchasing
spare parts in bulk and reduce maintenance costs through more focused,
and therefore reduced, training requirements for our workshop staff.
We are also able to share spare parts between profi t centres which helps
to minimise the risk of over-stocking.
As a large portion of the Group’s customer base comes from the
commercial construction and industrial sectors, the Group is dependent
on levels of commercial construction or industrial activity. The factors
which infl uence this activity include:
•
•
•
the strength of the US and UK economies over the long term, including
the level of government spending;
the availability of fi nance and the level of interest rates; and
demand within business that drives the need for commercial
construction or industrial equipment.
We purchase equipment from vendors with strong reputations for product
quality and reliability and maintain close relationships with these vendors
to ensure good after-purchase service and support. However, we believe
the Group has suffi cient alternative sources of supply for the equipment
it purchases in each of its product categories.
Ashtead Group plc Annual Report & Accounts 2009
business and financial review continued
our business model
Improved staff retention
Sunbelt
%
50
A-Plant
%%
50
40
30
20
10
0
40
30
20
10
0
05
06
07 08 09
05
06
07 08 09
Our people
We are a service business and we differentiate ourselves by the strength
of our service offering. Central to our service offering is our people. We have
a strong team which numbered almost 8,200 people at 30 April 2009.
This year, as part of our cost reduction programme, it has been necessary
to reduce the overall size of our workforce. The nature of our business is
such that we require skilled individuals working within a highly devolved
structure and we have tried hard to ensure that, despite the need to lower
costs, we have preserved these cultural strengths.
The rental industry generally suffers from high staff turnover, particularly
within certain job categories such as outside sales and delivery truck
drivers, with turnover being particularly high within the fi rst year of
employment. We have made generally good progress in improving our
staff retention in recent years as shown in the chart above.
Both Sunbelt and A-Plant have extensive programmes in place to ensure the:
•
•
•
•
recruitment of appropriate personnel to fulfi l any vacancies caused
by promotion or turnover;
ongoing training and development of employees at all levels throughout
the organisation;
alignment of our employees with the Company’s objectives, particularly
in relation to customer service; and
appraisal, review and reward of our employees.
These processes are subject to periodic review and development especially
in response to changing business needs and market conditions.
We motivate and reward our people through our profi t share programmes
which ensure that driving our return on investment is an important part
of our reward programmes. Our sales force is also incentivised based on
sales volume and a broad measure of return on investment determined
by reference to equipment type and discount level.
We invest heavily in training and last year Sunbelt staff attended over
9,700 classroom training sessions with a further 18,700 web-based
sessions undertaken, whilst A-Plant staff attended over 2,400 sessions.
business and financial review continued
key performance indicators
25
“ We measure the effectiveness of our
business model through a number of
key performance indicators.” Ian Robson
We constantly review our strategy and our business performance to
ensure we are delivering against our stated objectives. At Group level,
we measure the performance of the business using a number of key
performance indicators (KPIs) which are shown in the table on the right.
Certain KPIs are more appropriately measured for each of our two
operating businesses, whereas other KPIs are best measured for the
Group as a whole and this is shown in the adjacent table.
Whilst we have prepared the table to summarise in one place in
this report the KPIs we use in the business, each KPI is repeated and
discussed in context throughout this report.
Change in rental revenue due to:
– fl eet size
– utilisation
– rate and yield
– total
Dollar utilisation (rental revenue as a
percentage of fl eet at cost)
Physical utilisation (fl eet on rent
relative to total fl eet measured at cost)
Sunbelt
A-Plant
Group
–
+6%
-2%
-5%
-8%
-6%
-8%
-8%
57%
52%
66%
67%
–
–
–
–
–
–
Underlying EBITDA margin
34.5% 30.2% 33.2%
Underlying operating profi t margin
16.7%
7.7% 14.4%
Underlying EPS
Return on Investment
Average fl eet age in months
–
–
10.8%
5.1%
38
27
Staff turnover (ignoring redundancies)
15.6% 21.3%
11.9p
9.7%
35
–
Net free cash fl ow generated (before
growth investment and M&A)
Net debt to EBITDA leverage
Availability on our senior bank debt
Debtor days
–
–
–
42
–
£157m
– 2.6 times
–
62
$550m
47
Ashtead Group plc Annual Report & Accounts 2009
business and financial review continued
principal risks and uncertainties
“ The Group faces a number of risks and
uncertainties and it is management’s
role to manage those risks.” Ian Robson
The Group faces a number of risks and
uncertainties in its day-to-day operations
and it is management’s role to mitigate
and manage these risks. The Board has
established a formal risk management
process which has identifi ed the following
principal risks and uncertainties which could
affect employees, operations, revenues,
profi ts, cash fl ows and assets of the Group.
Economic conditions
The construction industry in which we earn the majority of our revenues
is cyclical with construction industry cycles typically lagging the general
economic cycle by between six and 18 months. We recognise that we
operate in a cyclical industry and expect that demand for our products
and services will decline during the down phase of the cycle. As a result
we seek to manage our operations prudently through the different phases
of the cycle to our competitive advantage. We have also arranged our
capital structure and our debt facilities in recognition of the cyclical nature
of our industry.
Competition
The Group operates in a highly competitive market. While there are
a small number of large companies, such as ourselves, operating on a
national basis in each of our markets, there are also a large number of
much smaller competitors at a local level. Considerable barriers to entry
make it unlikely that additional national competitors will emerge in the
short to medium term due to the signifi cant effort and resources needed
to develop the suitable IT systems, personnel, locations and equipment
fl eets required to operate on a national scale. However, on a local basis
there is considerable churn amongst our smaller competitors.
The competitive trading environment in which we operate helps maintain
our business focus on creating commercial advantage by providing our
customers with a high level of service, consistently, and at a price they
consider good value. We regularly estimate and monitor our market share
and track the performance of our competitors to ensure that we are
performing effectively.
People
Our ability to attract and retain good people is key to delivering superior
performance and customer service. We believe we provide attractive
remuneration packages that reward and incentivise our staff, many of
whom remain with us for much of their careers, thus preserving our skills
base. If we were to suffer excessive staff turnover then it is likely that
there would be an impact on our ability to maintain the appropriate
quality of service to our customers which would ultimately adversely
impact our fi nancial performance.
Health and safety
The Board is determined to ensure that our businesses provide a safe
working environment for all our employees. We also have substantial
processes in place to help support our customers exercise their
responsibility to their own workforces when using our equipment.
We maintain appropriate health and safety policies and procedures
to reasonably guard our employees against risk and reinforce these
procedures through appropriate training and induction programmes.
Failures in our health and safety practices could have an adverse impact
on individuals, attract fi nancial penalties or harm our reputation.
Acquisitions
It is part of the Group’s strategy at the appropriate time in the
construction cycle to acquire businesses in our core markets which
add value. We recognise the risks associated in acquiring businesses
and mitigate the risk of failure of an acquisition through a rigorous
acquisition process, which is overseen by the Board. We undertake
detailed operational and fi nancial due diligence to ensure particularly
that operational risks are identifi ed and appropriately factored into
our valuation of the target. Risks associated with the post-acquisition
integration of an acquired business are mitigated through the
development of a rigorous integration plan with close management
and monitoring to ensure synergies are realised fully.
Information technology
Our businesses involve us in tracking and recording a high volume of
relatively low value transactions. For example we own over 280,000
units of rental equipment and in the past year entered into 2.4m rental
contracts which are tracked and controlled using fully integrated
computer systems in the US and UK. We are therefore heavily dependent
on the robustness of the application software and network infrastructure
which delivers these systems.
Both Sunbelt and A-Plant have invested in sophisticated and well
protected data centres with multiple data links to protect against the
risk of failure and consequently ensure these systems are on-line to all
our locations every working day. A serious uncured failure in this area
would have an immediate effect so each business also maintains separate
near-live back-up data centres which are designed to be able to provide
the necessary services in the event of a failure at the primary site.
Both businesses have also prepared detailed business recovery plans
which are tested periodically.
Compliance with laws and regulations
The regulatory environment changes frequently imposing a continuing
need on the Group to ensure that it has appropriate processes in place
to achieve compliance with relevant legislation. The Group’s policies and
practices therefore evolve as we update them to take account of changes
in legal obligations. Our training and induction programmes are designed
to ensure that our staff receive appropriate training and briefi ng on the
policies relevant to their position and function in the organisation.
This is underpinned by a Group-wide ethics policy and ‘whistle-blowing’
arrangements, by which employees may, in confi dence, raise concerns
about any alleged improprieties. Failures in these processes could result
in reputational damage or fi nancial penalty.
Accounting and treasury
There is a risk that fraud or accounting discrepancies may occur if our
fi nancial and operational control framework is inadequate. This could
result in a misstatement of the Group’s fi nancial performance. The Group
believes that it has established a robust internal fi nancial control
framework to mitigate this risk.
The Group’s trading and fi nancial activities expose it to various fi nancial
risks which, if left unmanaged, could adversely affect current or future
earnings. Principal amongst these are the risks that either the Group’s
existing debt facilities become unavailable by virtue of non-compliance
with the terms of those agreements or that the Group fails to replace
existing facilities prior to their maturity and consequently has inadequate
debt facilities available to it to meet its borrowing requirements.
27
The risk that the Group’s existing facilities become unavailable for any
reason is substantially mitigated by the form of facilities chosen by the
Group as discussed under ‘net debt’ on page 31 which results in there
being effectively no quarterly monitored fi nancial covenants to adhere
to and also in the Group maintaining substantial availability on its
asset-based senior bank debt. The Group maintains close contacts with
the providers of all its debt facilities to ensure they have timely access
to all the information about the Group that they require.
The liquidity risk, relating to the continued availability to the Group
of suffi cient debt facilities is managed fi rstly by the long maturity profi le
in the Group’s existing facilities which have an average remaining term
of 4.6 years at 30 April 2009. Within this the earliest maturity is of the
asset-based senior bank debt facility where the existing commitment
expires on 31 August 2011. The fi nance director reports regularly to the
Board on the management of our debt liquidity profi le.
Suppliers
The inability to obtain the right equipment and parts at the right time for
a reasonable cost could have an adverse impact on the Group’s fi nancial
performance. We have established close relationships with suppliers that
have a strong reputation for product quality and reliability and good
after-sales service and support. We believe the Group also has suffi cient
alternative sources of supply for the equipment it purchases in each of
its product categories. The size and scale of our business and of our rental
fl eets also enables us to negotiate favourable delivery, pricing, warranty
and other terms with our suppliers.
Environmental
Our operations are subject to numerous laws governing environmental
protection and occupational health and safety matters. These laws
regulate such issues as wastewater, stormwater, solid and hazardous
wastes and materials, and air quality. Under these laws, we may be
liable for, among other things, the cost of investigating and remediating
contamination at our sites as well as sites to which we send hazardous
wastes for disposal or treatment regardless of fault, and also fi nes and
penalties for non-compliance.
Our operations generally do not raise signifi cant environmental risks, but
we use potentially hazardous materials to clean and maintain equipment,
dispose of solid and hazardous waste and wastewater from equipment
washing, and store and dispense petroleum products from underground
and above-ground storage tanks located at some of our locations. We take
our environmental and health and safety responsibilities seriously and
have very stringent policies and procedures in place at all our depots to
help minimise undue impact on the environment and keep our employees
safe. More on this can be found in the Corporate Responsibility Report.
Ashtead Group plc Annual Report & Accounts 2009
business and financial review continued
our financials
Results
Sunbelt in $m
2009
1,450.0
Sunbelt in £m
A-Plant
Group central costs
Continuing operations
Net fi nancing costs
Profi t before tax, exceptionals and amortisation from continuing operations
Ashtead Technology
Exceptional items (net)
Amortisation
Total Group profi t before taxation
Taxation
Profi t attributable to equity holders of the Company
865.5
208.0
–
1,073.5
Margins
Sunbelt
A-Plant
Group
Revenue
2008
1,626.0
810.0
237.8
–
1,047.8
2009
500.4
298.7
62.8
(5.4)
356.1
EBITDA
2008
598.9
298.4
73.2
(7.9)
363.7
Operating profi t
2008
330.9
2009
241.8
144.4
16.1
(5.5)
155.0
(67.6)
87.4
2.8
(17.1)
(3.4)
69.7
(6.7)
63.0
164.9
30.2
(8.0)
187.1
(74.8)
112.3
10.6
–
(2.6)
120.3
(42.7)
77.6
34.5%
30.2%
33.2%
36.8%
30.8%
34.7%
16.7%
7.7%
14.4%
20.4%
12.7%
17.9%
The year’s results refl ect markedly different performances in the fi rst and second half of the year. In the fi rst half we saw revenue and profi t growth
whereas the second half saw more signifi cant local currency revenue and profi t declines. During the second half operating results also benefi ted from
the stronger dollar. As a result, reported Group revenues grew to £1.07bn1 (2008: £1.05bn), whilst the underlying pre-tax profi t was £87.4m (2008:
£112.3m). Measured at constant exchange rates, to eliminate currency translation effects, underlying revenue declined 11% and underlying pre-tax
profi t declined 29%.
Sunbelt
For the year, Sunbelt’s rental revenue declined 8% to $1,311m refl ecting a
rental fl eet which was on average broadly fl at, physical utilisation of 66%
(2008: 68%) and a decline in yield which averaged 5% for the year as a
whole. Rental revenue grew 2% in the fi rst half followed by a 19% decline
in the second half as markets slowed. In the fourth quarter, measured
against strong comparatives, rental revenue declined 24% refl ecting an
8% reduction in fl eet size, physical utilisation of 61% (2008: 64%) and
a 14% reduction in yield.
A-Plant
For the year, A-Plant’s rental revenue declined 8% to £191m refl ecting a
6% increase in average fl eet size, physical utilisation of 67% (2008: 71%)
and an 8% reduction in average yield. As with Sunbelt, this refl ected fi rst
half growth followed by a rapid reduction in the second half. For the
fourth quarter, again measured against a strong comparative, A-Plant’s
rental revenue decline was 22% refl ecting a fl eet size 5% smaller than
in the prior year, physical utilisation at 68% (2008: 74%) and a yield
reduction of 11%.
Since the acquisition of NationsRent in August 2006, Sunbelt reconfi gured
and reshaped its enlarged business to deliver improved services to its
customer base cost effectively. The ongoing benefi t of these steps was
underpinned by the cost reduction actions taken in the second half
resulting in an 8% reduction in Sunbelt’s full year operating cost base
(excluding depreciation). The fourth quarter cost reduction was greater,
with pre-depreciation costs down 20% as the additional cost reduction
measures took hold.
As a result, Sunbelt’s EBITDA for the year declined 16% to $500m.
Depreciation refl ected broadly the movement in Sunbelt’s average fl eet
size and declined 4% in the year to give an underlying operating profi t for
the year of $242m (2008: $331m).
Action taken to reduce A-Plant’s costs resulted in a 12% reduction in
underlying full year operating costs (excluding depreciation) to £145m
and a much larger 23% reduction in the fourth quarter to £31m.
Refl ecting these factors, A-Plant’s full year EBITDA declined 14% to £63m
whilst the depreciation charge rose 9% to £47m refl ecting the growth in
its fl eet size in the second half of the previous year. Consequently
A-Plant’s full year underlying operating profi t was £16m down from £30m
in the previous year.
Group results
On a continuing basis, excluding Ashtead Technology throughout, Group
EBITDA before exceptional items declined 2% to £356m whilst underlying
operating profi t reduced 17% to £155m. This refl ected the trading results
discussed above together with the translation benefi t from the stronger
dollar which averaged $1.68 in the year to April 2009, 16% stronger than
2007/8’s average of $2.01.
Lower average interest rates and signifi cantly lower underlying average
debt levels resulted in a lower fi nancing cost despite an adverse translation
effect from the stronger dollar in which 99% of our debt is denominated.
1 Following adoption in the year end accounts of the provisions of the 2008 ‘Improvements to IFRSs’, underlying revenue now includes as revenue £43.9m of proceeds generated from the sale of used
rental equipment whilst underlying costs include as a cost of revenue, the £37.3m net book value of the equipment sold. This aligns our treatment of used sale proceeds under IFRS with that followed
by Sunbelt’s peers under US GAAP. Previously under IFRS, Ashtead would have shown the £6.6m net gain as other income. Consequently this presentational change has had no impact on reported
operating profi t or earnings.
29
Exceptional items
Exceptional items comprised the £83m discussed above in relation to the
cost reduction programmes together with a £66m pre-tax gain from the
sale of Ashtead Technology in June 2008. Technology also contributed a
£2m profi t in the period prior to disposal. After amortisation of acquired
intangibles of £3m, the reported profi t before tax for the year was £1m
(2008: £110m) whilst the underlying pre-tax profi t from continuing
operations before exceptionals was £87m (2008: £112m).
Taxation
The effective tax rate for the year was stable at 34% (2008: 35%) with,
again, virtually no cash tax being due. Accordingly the tax charge
comprised almost entirely deferred tax. Moving forward, with more
diffi cult markets ahead, the Group does not anticipate making signifi cant
cash tax payments until economies in the UK and US recover from the
current recession.
Earnings per share
Underlying earnings per share for the year decreased 20% to 11.9p (2008:
14.8p) whilst basic earnings per share for the year were 12.5p (2008: 14.2p).
Dividends
The Board is proposing a fi nal dividend of 1.675p (2008: 1.675p) making
2.575p for the year (2008: 2.5p) and costing £12.8m (2008: £12.8m).
The proposed full year dividend is covered 4.5 times by underlying profi ts
after tax from continuing operations. If approved by shareholders at the
forthcoming Annual General Meeting, the fi nal dividend will be paid on
11 September 2009 to shareholders on record at 21 August 2009.
Current trading and outlook
Most of our markets remain weak with limited visibility. However, May
and early June have seen rental volumes in line with our expectations
whilst rental yields have shown some tentative signs of fl attening month
on month. As a result, the Board confi rms that its current expectations
regarding 2009/10 performance are unchanged from those described in
the trading update issued on 11 May.
We continue to believe that the fundamentals of our markets remain
attractive and that, with our continuing focus on meeting the challenges
of current market conditions and on cash generation, we are well
positioned for the next phase of the cycle.
Balance sheet
Fixed assets
Capital expenditure in the year was £238m (2008: £331m) of which
£208m was invested in the rental fl eet (2008: £295m in total). Disposal
proceeds totalled £100m (2008: £78m) giving net expenditure at £138m
(2008: £253m).
Expenditure on rental equipment was 87% of total capital expenditure
with the balance relating to the delivery vehicle fl eet, property
improvements and to computer equipment. Capital expenditure by
division was as follows:
Sunbelt in $m
Sunbelt in £m
A-Plant
Continuing operations
Ashtead Technology
Total rental equipment
Delivery vehicles, property improvements & computers
Total additions
2009
221.0
149.1
58.4
207.5
–
207.5
30.8
238.3
2008
352.2
177.8
108.3
286.1
8.7
294.8
36.2
331.0
Refl ecting the fl eet downsizing undertaken in the second half, both Sunbelt’s
and A-Plant’s rental fl eets are smaller at 30 April 2009 than at 30 April 2008.
Accordingly, this year’s capital expenditure was entirely for replacement.
In 2008, £126m was spent on growth and £169m on replacement.
The average age of the Group’s serialised rental equipment, which
constitutes the substantial majority of our fl eet, at 30 April 2009 was
35 months (2008: 31 months) on a net book value basis. Sunbelt’s fl eet
had an average age of 38 months (2008: 34 months) comprising 39
months for aerial work platforms which have a longer life and 36 months
for the remainder of its fl eet whilst A-Plant’s fl eet had an average age of
27 months (2008: 23 months).
Next year’s capital expenditure is again expected to be entirely for
replacement rather than growth. We currently anticipate spending around
70% of depreciation or around £100m net of disposal proceeds but, with
short lead times and no forward commitments, we have the fl exibility to
adjust this as required to refl ect market conditions.
The original cost of the Group’s rental fl eet and the dollar utilisation for the year ended 30 April 2009 are shown below:
Sunbelt in $m
Sunbelt in £m
A-Plant
30 April 2009
2,136
Rental fl eet at original cost
LTM average
2,284
30 April 2008
2,314
LTM rental and
rental related
revenues
1,311
1,442
321
1,763
1,168
360
1,528
1,541
365
1,906
783
191
974
LTM dollar
utilisation
57%
LTM physical
utilisation
66%
57%
52%
66%
67%
Dollar utilisation is defi ned as rental revenues divided by average fl eet at original (or ‘fi rst’) cost. Dollar utilisation at Sunbelt was 57% in the year ended
30 April 2009 (2008: 62%). Dollar utilisation of 52% (2008: 60%) at A-Plant refl ects the lower pricing (relative to equipment cost) in the competitive
UK market. Physical utilisation is time-based utilisation, which is calculated at the daily average of the original cost of equipment on rent as a
percentage of the total value of equipment in the fl eet at the measurement date.
Ashtead Group plc Annual Report & Accounts 2009
business and financial review continued
our financials
Trade receivables
Receivable days at 30 April were 47 days (2008: 52 days). The bad debt
charge for the year ended 30 April 2009 as a percentage of total turnover
was 1.6% (2008: 0.8%). Trade receivables at 30 April 2009 of £124m
(2008: £137m) are stated net of provisions for bad debts and credit notes
of £18m (2008: £13m) with the provision representing 12.4% (2008:
8.4%) of gross receivables.
Trade and other payables
Group payable days were 53 days in 2009 (2008: 70 days). The reduction
is due, primarily, to lower capital expenditure related payables at 30 April
2009 of £9m (2008: £24m) which have longer payment terms. Payment
periods for purchases other than rental equipment vary between seven
and 45 days and for rental equipment between 30 and 120 days.
Provisions
Provisions of £54m (2008: £28m) relate to the provision for self-insured
retained risk under the Group’s self-insurance policies, as well as to the
vacant property provisions.
The Group’s business exposes it to claims for personal injury, death or
property damage resulting from the use of the equipment it rents and
from injuries caused in motor vehicle accidents in which its vehicles are
involved. The Group carries insurance covering a wide range of potential
claims at levels it believes are suffi cient to cover existing and future
claims. Our liability insurance programmes provide that we can only
recover the liability related to any particular claim in excess of an agreed
excess amount of typically between $500,000 and $650,000 depending
on the particular liability programme.
In certain, but not all, cases this liability excess amount is subject to an
annual cap, which limits the Group’s maximum liability in respect of these
excess amounts. A higher excess of up to $2m existed on our general
liability policies until September 2008. Our insured liability coverage is
limited in total to a maximum of £150m per occurrence.
Pensions
The Group operates a number of pension plans for the benefi t of
employees, for which the overall charge included in the fi nancial
statements was £5.8m (2008: £4.8m). Amongst these, the Group now
has just one defi ned benefi t pension plan which covers approximately
180 employees in the UK and which was closed to new members in 2001.
All our other pension plans are defi ned contribution plans.
The Group’s defi ned benefi t pension plan, measured in accordance with
IAS 19 – Employee Benefi ts, was £0.3m in surplus at 30 April 2009. During
the year, asset values decreased by £16.7m against the expected return
on plan assets of £4.1m included in the income statement. However,
offsetting this impact was the benefi t of changes in the required market
linked discount rate which increased from 6.25% in 2008 to 7.0% in 2009,
reducing the value of liabilities by £9.3m. Accordingly there was a net
actuarial loss of £7.4m in the year, which was taken to the statement
of recognised income and expense.
Contingent liabilities
Sunbelt is subject to a class action lawsuit in Florida alleging, inter alia,
that NationsRent (prior to its acquisition by Sunbelt in 2006) improperly
charged its customers an environmental fee. In February 2009 the court
certifi ed a class of all persons charged an environmental fee by
NationsRent in the period between June 2003 and August 2006. The
plaintiffs are asking that the environmental fee be returned to class
members (an estimated $20m), plus interest and legal costs. The plaintiff’s
claim is based on the theory that because NationsRent did not place the
environmental fee revenue into an escrow account, it spent no money on
‘environmental related’ expenses and the fee was ‘pure profi t’. Sunbelt’s
legal advisers believe that the merits of the lawsuit are weak because
there is no legal obligation to place the environmental fee into a
segregated account. Moreover, NationsRent never indicated to its
customers the environmental fee was hypothecated to any particular
expenditure and, regardless, NationsRent incurred substantial
‘environmental related’ costs. On 28 May 2009, a similar case was fi led in
the North Carolina Court against Sunbelt by a plaintiff represented by the
same plaintiff attorneys acting in the Florida case.
The Group is also subject to periodic legal claims and tax audits in the
ordinary course of its business, none of which, including the NationsRent
environmental matter, is expected to have a signifi cant impact on the
Group’s fi nancial position.
Cash fl ow
EBITDA before exceptional items
2009
£m
358.9
Year to 30 April
2008
£m
380.0
Cash infl ow from operations before exceptional
costs and changes in rental equipment
Cash effi ciency ratio*
373.6
104.1%
356.4
93.8%
Maintenance rental capital expenditure
Non-rental capital expenditure
Rental equipment disposal proceeds
Other property, plant and equipment disposal proceeds
Tax received/(paid)
Financing costs paid
Cash fl ow before growth capex and exceptionals
Growth capital expenditure
Exceptional costs
Free cash fl ow
Business disposals/(acquisitions)
Total cash generated/(absorbed)
Dividends paid
Share buy-backs & other equity transactions (net)
Decrease/(increase) in net debt
(208.5)
(27.1)
85.3
6.6
0.8
(64.7)
166.0
–
(9.4)
156.6
89.0
245.6
(12.9)
(15.9)
216.8
(195.3)
(35.8)
87.1
5.6
(6.4)
(76.4)
135.2
(120.4)
(9.5)
5.3
(5.9)
(0.6)
(10.5)
(24.0)
(35.1)
* Cash infl ow from operations before exceptional costs and changes in rental equipment as
a percentage of EBITDA before exceptional items.
Cash infl ow from operations before exceptional costs and changes
in rental equipment increased 4.8% to £374m and the cash effi ciency
ratio was 104.1% (2008: 93.8%) as we converted over 100% of our
pre-exceptional EBITDA into cash.
This year payments for capital expenditure were broadly in line with
capital expenditure delivered into the fl eet with a net £144m spent in
the year (2008: £259m).
There was a small tax recovery refl ecting the fact that tax payments
remain low as a result of tax depreciation in excess of book and utilisation
of tax losses. Financing costs paid differ slightly from the accounting charge
in the income statement due to the timing of interest payments in the
year and non-cash interest charges. They reduced signifi cantly due to the
impact of both lower average interest rates and lower average debt levels.
After exceptional costs paid of £9m, representing mostly staff severance
and vacant property costs, the Group generated £246m of net cash infl ow
in the year. This refl ected net cash generation of £157m from operations
and a further £89m generated from the sale of Ashtead Technology.
£29m of this net infl ow was returned to equity shareholders by way of
dividends (£13m) and share buy-backs (£16m) with the balance of £217m
applied to reduce outstanding debt.
31
Net debt
The chart below shows how we held debt fl at in 2006 and 2007 whilst
investing signifi cantly in fl eet reconfi guration and de-ageing following
the NationsRent acquisition. Through 2008 and into the new fi scal year,
we have signifi cantly lowered our capital expenditure, taking advantage
of our young average fl eet age, and consequently have achieved and
expect to continue to deliver signifi cant reductions in outstanding debt.
Net debt at constant currency
£m
1,400
1,300
1,200
1,400
1,000
900
800
Debt
Leverage
4.0
3.5
3.0
2.5
2.0
t
e
g
r
a
T
Aug
06
Oct
06
Jan
07
Apr
07
Jul
07
Oct
07
Jan
08
Apr
08
Jul
08
Oct
08
Jan
09
Apr
09
Apr
10
In greater detail, closing net debt at 30 April 2009 comprised:
First priority senior secured bank debt
Finance lease obligations
8.625% second priority senior secured notes, due 2015
9% second priority senior secured notes, due 2016
Cash and cash equivalents
Total net debt
2009
£m
501.1
7.9
165.1
363.5
1,037.6
(1.7)
1,035.9
2008
£m
556.2
15.2
122.2
271.4
965.0
(1.8)
963.2
Net debt at 30 April 2009 was signifi cantly lower than last year on a
comparable basis at £1,036m (2008 net debt at constant exchange rates:
£1,268m). Closing net debt was also $20m below the $1,555m target
we originally announced a year ago. Closing net debt, however, includes
an adverse translation increase of £285m since last year end refl ecting
sterling’s 25% decline against the dollar in the past year and the fact that
99% of our debt is drawn in dollars to provide a natural hedge against
Sunbelt’s dollar based assets on which there was an equivalent £355m
translation gain.
The ratio of net debt to underlying EBITDA at constant rates was 2.6 times
at 30 April 2009, almost unchanged from last year’s 2.5 times and well
within our 2–3 times target range. This calculation uses the Group’s
£395m EBITDA before exceptionals from continuing operations (excluding
Ashtead Technology) for the 2008/9 year calculated at constant 30 April
2009 exchange rates.
Our debt package remains well structured for the challenges of current
market conditions. We retain substantial headroom on facilities which
are committed for the long term, an average of 4.6 years at 30 April 2009,
with the fi rst maturity on our asset-based senior bank facility not being
due until August 2011. The weighted average interest cost of these
facilities (including non-cash amortisation of deferred debt raising costs)
is approximately 6%, most of which is tax deductible in the US where the
tax rate is 39%.
Financial performance covenants under the two senior secured notes
issues are only measured at the time new debt is raised. There are two
fi nancial performance covenants under the asset-based fi rst priority
senior bank facility:
•
•
funded debt to EBITDA before exceptional items not to exceed 4.0
times; and
a fi xed charge ratio comparing EBITDA before exceptional items less
net capital expenditure paid in cash to the sum of scheduled debt
repayments plus cash interest, cash tax payments and dividends paid
which is required to be equal or greater to 1.1 times.
These covenants are not, however, required to be adhered to when
availability (the difference between the borrowing base and facility
utilisation) exceeds $125m. At 30 April 2009 availability under the bank
facility was $550m ($602m at 30 April 2008). Consequently the Group’s
entire debt package is effectively covenant free.
Although the covenants were not required to be measured at 30 April
2009, the Group was in compliance with both of them at that date as
it had been throughout the fi scal year.
Debt facilities
The Group’s principal debt facilities are as follows:
Asset-based fi rst priority, secured bank debt
The $1.75bn fi rst priority asset-based senior secured loan facility (‘ABL
facility’) consists of a $1.5bn revolving credit facility and a $250m term
loan and is secured by a fi rst priority interest in substantially all of the
Group’s assets. Pricing for the revolving credit facility is based on the ratio
of funded debt to EBITDA according to a grid which varies, depending on
leverage, from LIBOR plus 225bp to LIBOR plus 150bp. The term loan is
priced at LIBOR plus 175bp. At 30 April 2009, the Group’s borrowing rate
was LIBOR plus 175bp on both the term loan and the revolver.
The ABL facility carries minimal amortisation of 1% per annum ($2.5m)
on the term loan and is otherwise fully committed until August 2011.
As the ABL facility is asset-based, the maximum amount available to be
borrowed (which includes drawings in the form of standby letters of
credit) depends on asset values (receivables, inventory, rental equipment
and real estate) which are subject to periodic independent appraisal.
8.625% second priority senior secured notes due 2015 having
a nominal value of $250m
On 3 August 2005, the Group, through its wholly owned subsidiary
Ashtead Holdings plc, issued $250m of 8.625% second priority senior
secured notes due 1 August 2015. The notes are secured by second
priority security interests over substantially the same assets as the fi rst
priority senior secured credit facility and are also guaranteed by Ashtead
Group plc.
9% second priority senior secured notes due 2016 having a nominal
value of $550m
On 15 August 2006, the Group, through its wholly owned subsidiary
Ashtead Capital, Inc., issued $550m of 9% second priority senior secured
notes due 15 August 2016. The notes are secured by second priority
security interests over substantially the same assets as the senior secured
credit facility and are also guaranteed by Ashtead Group plc. The two note
issues rank pari passu on a second lien basis.
Under the terms of both the 8.625% and 9% notes, the Group is, subject
to important exceptions, restricted in its ability to incur additional debt,
pay dividends, make investments, sell assets, enter into sale and leaseback
transactions and merge or consolidate with another company. Interest
is payable on the 8.625% notes on 1 February and 1 August of each year
and on the 9% notes on 15 February and 15 August. Both senior secured
notes are listed on the Offi cial List of the UK Listing Authority.
Ashtead Group plc Annual Report & Accounts 2009
business and financial review continued
our financials
Minimum contracted debt commitments
The table below summarises the maturity of the Group’s debt and also shows the minimum annual commitments under off balance sheet operating
leases at 30 April 2009 by year of expiry:
Bank and other debt
Finance leases
8.625% senior secured notes
9% senior secured notes
Deferred costs of raising fi nance
Cash at bank and in hand
Net debt
Operating leases1
Total
2010
£m
1.7
5.2
–
–
6.9
–
(1.7)
5.2
42.9
48.1
2011
£m
1.7
2.4
–
–
4.1
–
–
4.1
33.0
37.1
2012
£m
502.3
0.3
–
–
502.6
(4.6)
–
498.0
29.1
527.1
2013
£m
–
–
–
–
–
–
–
–
26.1
26.1
Payments due by year ended 30 April
Total
£m
Thereafter
£m
2014
£m
–
–
–
–
–
–
–
–
22.3
22.3
–
–
168.7
371.2
539.9
(11.3)
–
528.6
96.0
624.6
505.7
7.9
168.7
371.2
1,053.5
(15.9)
(1.7)
1,035.9
249.4
1,285.3
1 Represents the minimum payments to which we were committed under operating leases.
Operating leases relate principally to properties which constituted 99%
(£247m) of our total minimum operating lease commitments. There are
also a few remaining operating leases relating to the vehicle fl eet which
constituted the remaining 1% (£2m) of such commitments.
Except for the off balance sheet operating leases described above, £21m
($32m) of standby letters of credit issued at 30 April 2009 under the fi rst
priority senior debt facility relating to the Group’s self-insurance programmes
and $1.4m of performance bonds granted by Sunbelt, we have no material
commercial commitments that we could be obligated to pay in the future
which are not included in the Group’s consolidated balance sheet.
Presentation of fi nancial information
Currency translation and interest rate exposure
Our reporting currency is the pound sterling. However, a majority of
our assets, liabilities, revenue and costs are denominated in US dollars.
Fluctuations in the value of the US dollar with respect to the pound
sterling have had, and may continue to have, a signifi cant impact on
our fi nancial 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.
We have arranged our fi nancing so that approximately 99% of our
debt was denominated in US dollars at 30 April 2009. At that date,
dollar denominated debt represented approximately 81% of the value
of dollar denominated net assets (other than debt) providing a partial,
but substantial, hedge against the translation effects of changes in the
dollar exchange rate.
The dollar interest payable on this debt also limits the impact of changes
in the dollar exchange rate on our pre-tax profi ts and earnings. Based on
the currency mix of our profi ts currently prevailing and on current dollar
debt levels and interest rates, every 1% change in the US dollar exchange
rate would impact pre-tax profi t by 1.5%.
Revenue
Our revenue is a function of our prices and the size, utilisation and mix of our
equipment rental fl eet. The prices we charge are affected in large measure by
utilisation and the relative attractiveness of our rental equipment, while
utilisation is determined by market size and our market share, as well as
general economic conditions. Utilisation is time-based utilisation which is
calculated as the original cost of equipment on rent as a percentage of the
total value of equipment in the fl eet at the measurement date. In the US, we
measure time utilisation on those items in our fl eet with an original cost of
$7,500 or more which constituted 84% of our US serialised rental equipment
at 30 April 2009. In the UK, time utilisation is measured for all our serialised
rental equipment. The size, mix and relative attractiveness of our rental
equipment fl eet is affected signifi cantly by the level of our capital expenditure.
The main components of our revenue are:
•
•
•
revenue from equipment rentals, including related revenues such as the
fees we charge for equipment delivery, erection and dismantling services
for our scaffolding rentals, fuel provided with the equipment we rent
to customers, and loss damage waiver and environmental fees;
revenue from sales of new merchandise, including sales of parts and
revenues from a limited number of sales of new equipment; and
revenues from the sale of used rental equipment.
Costs
The main components of our total costs are:
•
•
•
staff costs – staff costs at our profi t centres as well as at our central
support offi ces represent the largest single component of our total
costs. Staff costs consist of salaries, profi t share and bonuses, social
security costs, and other pension costs, and comprised 30% of our total
operating costs in the year ended 30 April 2009;
used rental equipment sold which comprises the net book value of the used
equipment sold in the year as it was stated in our accounts immediately
prior to the time at which it was sold and any direct costs of disposal,
comprised 8% of our operating costs in the year ended 30 April 2009;
other operating costs – comprised 39% of total costs in the year ended
30 April 2009. These costs include:
–
–
–
–
spare parts, consumables and outside repair costs – costs incurred for
the purchase of spare parts used by our workshop staff to maintain
and repair our rental equipment as well as outside repair costs;
facilities costs – rental payments on leased facilities as well as utility
costs and local property taxes relating to these facilities;
vehicle costs – costs incurred for the purchase, maintenance and
operation of our vehicle fl eet, which consists of our delivery trucks,
the light commercial vehicles used by our mobile workshop staff
and cars used by our sales force, profi t centre managers and other
management staff;
other costs – all other costs incurred in operating our business,
including the costs of new equipment and merchandise sold,
advertising costs and bad debt expense;
•
depreciation – the depreciation of our property, plant and equipment,
including rental equipment, comprised 23% of total costs in the year
ended 30 April 2009.
33
Self-insurance
We establish provisions at the end of each fi nancial year to cover our
estimate of the discounted liability for uninsured retained risks on unpaid
claims arising out of events occurring up to the end of the fi nancial year.
The estimate includes events incurred but not reported at the balance
sheet date. The provision is established using advice received from external
actuaries who help us extrapolate historical trends and estimate the most
likely level of future expense which we will incur on outstanding claims.
These estimates may however change, based on varying circumstances,
including changes in our experience of the costs we incur in settling claims
over time. Accordingly, we may be required to increase or decrease the
provision held for self-insured retained risk. At 30 April 2009, the total
provision for self-insurance recorded in our consolidated balance sheet
was £27m (2008: £22m).
Revenue recognition
Revenue represents the total amount receivable for the provision of
goods and services to customers net of returns and value added tax.
Rental revenue, including loss damage waiver and environmental fees,
is recognised on a straight-line basis over the period of the rental contract.
Because the terms and conditions of a rental contract can extend across
fi nancial reporting periods, the Group records unbilled rental revenue and
deferred revenue at the beginning and end of the reporting periods so
rental revenue is appropriately stated in the fi nancial statements.
Revenue from rental equipment delivery and collection is recognised
when delivery or collection has occurred and is recorded as rental revenue.
Revenue from the sale of rental equipment, new equipment, parts and
supplies, retail merchandise and fuel is recognised at the time of delivery
to, or collection by, the customer and when all obligations under the
sales contract have been fulfi lled.
Revenue from sales of rental equipment in connection with trade-in
arrangements with certain manufacturers from whom the Group purchases
new equipment are accounted for at the lower of transaction value or fair
value based on independent appraisals. If the trade-in price of a unit of
equipment exceeds the fair market value of that unit, the excess is accounted
for as a reduction of the cost of the related purchase of new rental equipment.
Geoff Drabble
Chief executive
17 June 2009
Ian Robson
Finance director
A large proportion of our costs are fi xed in the short to medium term, and
material adjustments in the size of our cost base typically result only from
openings or closures of one or more of our profi t centres. Accordingly, our
business model is such that small increases or reductions in our revenue
can result in little or no change in our costs and often therefore have a
disproportionate impact on our profi ts. We refer to this feature of our
business as ‘operational leverage’.
Critical accounting policies
We prepare and present our fi nancial statements in accordance with
applicable International Financial Reporting Standards (IFRS). In applying
many accounting principles, we need to make assumptions, estimates and
judgements. These assumptions, estimates and judgements are often
subjective and may be affected by changing circumstances or changes in our
analysis. Changes in these assumptions, estimates and judgements have the
potential to materially affect our results. We have identifi ed below those of
our accounting policies that we believe would most likely produce materially
different results were we to change underlying assumptions, estimates and
judgements. These policies have been applied consistently.
Useful lives of property, plant and equipment
We record expenditures for property, plant and equipment at cost. We
depreciate equipment using the straight-line method over its estimated
useful economic life (which ranges from three to 20 years with a weighted
average life of eight years). We use an estimated residual value of 10% of
cost in respect of most types of our rental equipment, although the range
of residual values used varies between zero and 30%. We establish our
estimates of useful life and residual value with the objective of allocating
most appropriately the cost of property, plant and equipment to our profi t
and loss account, over the period we anticipate it will be used in our business.
We may need to change these estimates if experience shows that the
current estimates are not achieving this objective. If these estimates
change in the future, we may then need to recognise increased or
decreased depreciation expense. Our total depreciation expense in the
year ended 30 April 2009 was £245m.
Impairment of assets
Goodwill is not amortised but is tested annually for impairment at 30 April.
Assets that are subject to amortisation or depreciation are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised
in the income statement for the amount by which the asset’s carrying
amount exceeds its recoverable amount. For the purposes of assessing
impairment, assets are grouped at the lowest level for which there are
separately identifi able and independent cash fl ows for the asset being
tested for impairment. In the case of goodwill, impairment is assessed
at the level of the Group’s reporting units. The recoverable amount is
the higher of an asset’s fair value less costs to sell and value in use.
Management necessarily applies its judgement in estimating the timing
and value of underlying cash fl ows within the value in use calculation as
well as determining the appropriate discount rate. Subsequent changes
to the magnitude and timing of cash fl ows could impact the carrying
value of the respective assets.
Ashtead Group plc Annual Report & Accounts 2009
our directors
1. Chris Cole
Non-executive chairman
Aged 62, Chris Cole has been a director since January 2002 and was
appointed as non-executive chairman from 1 March 2007. Chris is
chairman of the Nomination Committee and a member of the Finance
and Administration Committee. He is chief executive of WSP Group plc.
Executive directors
2. Geoff Drabble
Chief executive
Aged 49, Geoff Drabble was appointed as chief executive on 1 January
2007, having served as chief executive designate from 2 October 2006
and as a non-executive director since April 2005. Geoff was previously
an executive director of The Laird Group PLC where he was responsible
for its Building Products division. Prior to joining The Laird Group, he held
a number of senior management positions at Black & Decker. Geoff is
chairman of the Finance and Administration Committee and a member
of the Nomination Committee.
3. Ian Robson
Finance director
Aged 50, Ian Robson has been fi nance director since June 2000. Prior
to June 2000, Ian held a series of senior fi nancial positions at Reuters
Group plc for four years. Before joining Reuters Group plc, he was
a partner at Price Waterhouse (now PricewaterhouseCoopers LLP).
Ian is a member of the Finance and Administration Committee.
4. Joe Phelan
President and chief executive offi cer, Sunbelt
Aged 52, Joe Phelan was appointed a director on 23 April 2009.
Joe was formerly the chief executive offi cer of DHL Global Mail based
in Weston, Florida and was also a member of Deutsche Post’s executive
committee. Prior to joining DHL in 2004, he held a number of senior
executive positions with American Airlines. Joe is an American citizen
and lives in Weston, Florida.
5. Sat Dhaiwal
Chief executive offi cer, A-Plant
Aged 40, Sat Dhaiwal has been chief executive offi cer of A-Plant and
a director since March 2002. Sat was managing director of A-Plant East,
one of A-Plant’s four operational regions, from May 1998 to March 2002.
Before that he was an A-Plant trading director from 1995 and, prior to
1995, managed one of A-Plant’s profi t centres.
Non-executive directors
6. Hugh Etheridge
Senior independent non-executive director
Aged 59, Hugh Etheridge has been a director, chairman of the Audit
Committee and a member of the Remuneration and Nomination
Committees since January 2004. Hugh was appointed as senior
independent non-executive director on 1 March 2007. He is chief
fi nancial offi cer of the Waste and Resources Action Programme
(‘WRAP’), a non-profi t organisation established by the UK Government
to promote sustainable waste management. Before joining WRAP, he
was fi nance director of Waste Recycling Group plc and prior to that,
of Matthew Clark plc.
35
7. Gary Iceton
Independent non-executive director
Aged 59, Gary Iceton was appointed as a non-executive director and
a member of the Audit and Nomination Committees effective from
1 September 2004. Gary also became chairman of the Remuneration
Committee on 1 March 2007. Until 2000 he was a director of St Ives plc
and chairman and chief executive of its Books Division. More recently,
he was chairman of Jarrold Limited and, prior to that, chief executive
offi cer of Amertrans. With effect from 23 April 2008 he was appointed
a director of Norfolk Education Industry & Commerce Group Limited.
8. Michael Burrow
Independent non-executive director
Aged 56, Michael Burrow was appointed as a non-executive director
and member of the Audit, Remuneration and Nomination Committees
effective from 1 March 2007. Michael was formerly managing director
of the Investment Banking Group of Lehman Brothers Europe Limited.
9. Bruce Edwards
Independent non-executive director
Aged 54, Bruce Edwards was appointed as a non-executive director on
8 June 2007 and a member of the Nomination Committee effective from
26 February 2009. Bruce is the global chief executive offi cer for Exel
Supply Chain at Deutsche Post World Net, and a member of its board
of management. He joined DPWN following its acquisition of Exel PLC in
December 2005. Prior to the acquisition, he was a director of Exel PLC and
chief executive of its Americas businesses. Bruce is also a non-executive
director of Greif Inc, a NYSE-listed packaging and container manufacturer.
He is an American citizen and lives in Columbus, Ohio.
Details of the directors’ contracts, emoluments and share interests can
be found in the Directors’ Remuneration Report.
Key:
Audit Committee
Remuneration Committee
Nomination Committee
Finance and Administration Committee
Ashtead Group plc Annual Report & Accounts 2009
directors’ report
The directors present their report and the audited accounts for the
fi nancial year ended 30 April 2009.
Principal activities
The principal activity of the Company is that of an investment holding
and management company. The principal activity of the Group is the
rental of equipment to industrial and commercial users mainly in the
non-residential construction sectors of the US and the UK.
Trading results and dividends
The Group’s consolidated profi t before taxation for the year was £0.8m
(2008: £109.7m). A review of the Group’s performance and future
development, including the principal risks and uncertainties facing the
Group, is given in the Business and Financial Review on pages 7 to 33
and in note 25 to the fi nancial statements. These disclosures form part
of this report. The Company paid an interim dividend of 0.9p per ordinary
share in February and the directors recommend the payment of a fi nal
dividend of 1.675p per ordinary share, to be paid on 11 September 2009
to those shareholders on the register at the close of business on 21 August
2009, making a total dividend for the year of 2.575p (2008: 2.5p).
Share capital and major shareholders
Details of the Company’s share capital are given in note 20 to the
fi nancial statements.
Voting rights
Subject to the Articles of Association, every member who is present
in person at a general meeting shall have one vote and on a poll every
member who is present in person or by proxy shall have one vote for
every share of which he or she is the holder. The Trustees of the
Employee Share Option Trust ordinarily follow the guidelines issued
by the Association of British Insurers and do not exercise their right
to vote at general meetings.
Under the Companies Acts, members are entitled to appoint a proxy,
who need not be a member of the Company, to exercise all or any of their
rights to attend and speak and vote on their behalf at a general meeting
or any class of meeting. A member may appoint more than one proxy
provided that each proxy is appointed to exercise the rights attached to
a different share or shares held by that member. A corporate member may
appoint one or more individuals to act on its behalf at a general meeting
or any class of meeting as a corporate representative. The deadline for the
exercise of voting rights is as stated in the notice of the relevant meeting.
Transfer of shares
Certifi ed shares
(i) A share transfer form cannot be used to transfer more than one class
of share. Each class needs a separate form.
(ii) Transfers may be in favour of more than four joint holders, but the
directors can refuse to register such a transfer.
(iii) The share transfer form must be delivered to the registered offi ce, or
any other place decided on by the directors. The transfer form must
be accompanied by the share certifi cate relating to the shares being
transferred, unless the transfer is being made by a person to whom
the Company was not required to, and did not send, a certifi cate.
The directors can also ask (acting reasonably) for any other evidence to
show that the person wishing to transfer the shares is entitled to do so.
CREST shares
(i) Registration of CREST shares can be refused in the circumstances set
out in the Uncertifi ed Securities Regulations.
(ii) Transfers cannot be in favour of more than four joint holders.
Purchase of own shares
At the Annual General Meeting held on 23 September 2008 authority was
given for the Company to purchase, on market, up to 52,303,603 ordinary
shares at a maximum price of the higher of (i) an amount equal to 105%
of the average of the middle market prices for an ordinary share as derived
from The London Stock Exchange Daily Offi cial List for each of the fi ve
business days immediately preceding the date on which the ordinary share
is agreed to be purchased, and (ii) the price of the last independent trade
and the highest current independent bid on the London Stock Exchange
Offi cial List at the time the purchase is carried out. Details of the
purchases made during the year are set out in note 20 on page 70.
So far as the Company is aware, the only holdings of 3% or more of the
issued share capital of the Company as at 16 June 2009 (the latest
practicable date before approval of the fi nancial statements) are as follows:
Standard Life Investments Limited
Aviva plc
Ameriprise Financial Inc
JP Morgan Chase & Co
Lazard Asset Management LLC
AXA SA and Group of Companies
Legal & General plc
Gartmore Investment Limited
Morgan Stanley
%
8
7
5
5
5
5
4
4
3
Details of directors’ interests in the Company’s ordinary share capital and
in options over that share capital are given in the Directors’ Remuneration
Report on pages 41 to 45. Details of all shares subject to option are given
in the notes to the fi nancial statements on page 72.
Change of control provisions in loan
agreements
A change in control of the Company (defi ned, inter alia, as a person or a
group of persons acting in concert gaining control of more than 30% of
the Company’s voting rights) leads to an immediate event of default under
the Company’s asset-based senior lending facility. In such circumstances,
the agent for the lending group may, and if so directed by more than 50%
of the lenders shall, declare the amounts outstanding under the facility
immediately due and payable.
Such a change of control also leads to an obligation, within 30 days of
the change in control, for the Group to make an offer to the holders of the
Group’s senior secured notes to redeem them at 101% of their combined
face value of $800m.
Directors and directors’ insurance
Details of the directors of the Company are given on pages 34 and 35.
The policies related to their appointment and replacement are detailed
on page 38. Each of the directors as at the date of approval of this report
confi rms, as required by section 418 of the Companies Act 2006 that
to the best of their knowledge and belief:
(1) there is no signifi cant information known to the director relevant
to the audit, of which the Company’s auditors are unaware; and
(2) each director has taken reasonable steps to make himself aware of such
information and to establish that the Company’s auditors are aware of it.
The Company has maintained insurance throughout the year to cover all
directors against liabilities in relation to the Company and its subsidiary
undertakings.
37
Policy on payment of suppliers
Suppliers are paid in accordance with the individual payment terms agreed
with each of them. The number of Group creditor days at 30 April 2009
was 53 days (30 April 2008: 70 days) which refl ects the terms agreed
with individual suppliers. There were no trade creditors in the Company’s
balance sheet at any time during the past two years.
Political and charitable donations
Charitable donations in the year amounted to £55,329 in total (2008:
£24,573). No political donations were made in either year.
Auditors
Deloitte LLP has indicated its willingness to continue in offi ce and in
accordance with section 489 of the Companies Act 2006, a resolution
concerning its re-appointment and authorising the directors to fi x its
remuneration, will be proposed at the Annual General Meeting.
Annual General Meeting
The Annual General Meeting will be held at 2.00pm on Tuesday,
8 September 2009. Notice of the meeting is set out in the document
accompanying this Annual Report and Accounts.
In addition to the adoption of the 2008/9 Annual Report and Accounts,
the declaration of a fi nal dividend, resolutions dealing with the appointment
and re-election of directors and the resolution dealing with the approval
of the Directors’ Remuneration Report, there are six other matters which
will be considered at the Annual General Meeting. These relate to the
reappointment and remuneration of Deloitte LLP as auditors, the ability
for the directors to unconditionally allot shares up to approximately
one-third of the Company’s share capital, the disapplication of pre-
emption rights in relation to the previous resolution, empowering the
Company to buy back up to 15% of its issued share capital and the ability
to call a meeting other than a general meeting on not less than 14 days’
clear notice. The majority of these resolutions update for a further year
similar resolutions approved by shareholders in previous years.
By order of the Board
Eric Watkins
Company secretary
17 June 2009
Ashtead Group plc Annual Report & Accounts 2009
corporate governance report
The revised Combined Code on corporate governance was published
in June 2006 following a review by the Financial Reporting Council
(‘the 2006 FRC Code’).
of Sunbelt and A-Plant. The directors also have access to the
company secretary and are able to seek independent advice at
the Company’s expense.
The Company is committed to maintaining high standards of corporate
governance. The Board recognises that it is accountable to the Company’s
shareholders for corporate governance and this statement describes how
the Company has applied the relevant principles of the 2006 FRC Code.
The Company complied throughout the year with the provisions of the
2006 FRC Code on corporate governance.
All directors are subject to election by shareholders at the fi rst Annual
General Meeting after their appointment and to re-election thereafter
at intervals of no more than three years. Non-executive directors are
appointed for specifi ed terms not exceeding three years and are subject
to re-election and the provision of the Companies Act relating to the
removal of a director.
The Board
The Company’s Board comprises the non-executive chairman, the
chief executive, the fi nance director, the executive heads of Sunbelt and
A-Plant, the senior independent non-executive director and three other
independent non-executive directors. Short biographies of the directors
are given on page 35.
The chairman undertakes leadership of the Board by agreeing Board
agendas and encourages its effectiveness by the provision of timely,
accurate and clear information on all aspects of the Group’s business,
to enable the Board to take sound decisions and promote the success
of the business. The chairman, assisted by other directors, reviews the
effectiveness of each member of the Board no less than annually and
facilitates constructive relationships between the executive and non-
executive directors through both formal and informal meetings.
The chairman ensures that all directors are briefed properly to enable
them to discharge their duties effectively. All newly appointed directors
undertake an induction to all parts of the Group’s business. Additionally,
detailed management accounts are sent monthly to all Board members
and, in advance of all Board meetings, an agenda and appropriate
documentation in respect of each item to be discussed is circulated.
The chairman facilitates effective communication with shareholders
through both the Annual General Meeting and by individual meetings
with major shareholders, to develop an understanding of the views of the
investors in the business. He also ensures that shareholders have access
to other directors, including non-executive directors, as appropriate.
The chief executive’s role is to provide entrepreneurial leadership of
the Group within a framework of prudent and effective controls, which
enables risk to be assessed and managed. The chief executive undertakes
the leadership and responsibility for the direction and management of
the day-to-day business and conduct of the Group. In doing so, the chief
executive’s role includes, but is not restricted to, implementing Board
decisions, delegating responsibility, and reporting to the Board regarding
the conduct, activities and performance of the Group. The chief executive
chairs the Sunbelt and A-Plant board meetings and sets policies and
direction to maximise returns to shareholders.
All directors are responsible under the law for the proper conduct of the
Company’s affairs. The directors are also responsible for ensuring that the
strategies proposed by the executive directors are discussed in detail and
assessed critically to ensure they are aligned with the long-term interests
of shareholders and are compatible with the interests of employees,
customers and suppliers. The Board has reserved to itself those matters
which reinforce its control of the Company. These include treasury policy,
acquisitions and disposals, appointment and removal of directors or the
company secretary, appointment and removal of the auditors and
approval of the annual accounts.
Regular reports and briefi ngs are provided to the Board, by the executive
directors and the company secretary, to ensure the directors are suitably
briefed to fulfi l their roles. The Board normally meets six times a year and
there is contact between meetings to advance the Company’s activities.
It is the Board’s usual practice to meet at least annually with the boards
In accordance with the Company’s Articles of Association, Michael Burrow,
Bruce Edwards and Hugh Etheridge will offer themselves for re-election
to the Board at the next Annual General Meeting. As this will be the fi rst
Annual General Meeting since his appointment to the Board, Joe Phelan
will also offer himself for election.
New Sunbelt chief executive
Joe Phelan’s appointment as the new chief executive of Sunbelt was
announced on 7 April 2009 and he was appointed as a director of Ashtead
Group plc on 23 April 2009. Prior to his appointment the Nomination
Committee led an extensive search, considering both internal and external
candidates for the role. The search was supported by an external search
fi rm and resulted in the conclusion that Joe Phelan was the candidate best
suited for the position.
Non-executive directors
In the recruitment of non-executive directors, it is the Company’s
practice to utilise the services of an external search consultancy. Before
appointment, non-executive directors are required to assure the Board
that they can give the time commitment necessary to fulfi l properly
their duties, both in terms of availability to attend meetings and discuss
matters on the telephone and meeting preparation time. The non-
executives’ letters of appointment are available for inspection at the
Annual General Meeting.
The non-executive directors (including the chairman) meet as and when
required in the absence of the executive directors to discuss and appraise
the performance of the Board as a whole and the performance of the
executive directors. In accordance with the 2006 FRC Code, the non-
executive directors, led by the senior independent non-executive director,
also meet at least annually in the absence of the chairman to discuss
and appraise his performance.
Performance evaluation
The performance of the chairman, the chief executive, the Board and its
committees is evaluated, amongst other things, against their respective
role profi les and terms of reference. The executive directors are evaluated
additionally against the agreed budget for the generation of revenue,
profi t and value to shareholders.
The evaluation of the chairman, the Board and its committees was
conducted by way of a questionnaire completed by all of the directors,
the results of which were collated by the company secretary and
presented to the entire Board. Based on this evaluation, the Board
concluded that performance in the past year had been satisfactory.
Board committees
Audit Committee
The Audit Committee comprises Hugh Etheridge (chairman), who
has relevant fi nancial experience, Gary Iceton and Michael Burrow.
By invitation, the Group’s fi nance director, Ian Robson, and its director
of fi nancial reporting, Michael Pratt, normally attend the Committee’s
meetings, as do representatives of our internal and external auditors.
Other directors are usually also invited to be present if available.
39
The Audit Committee met on fi ve occasions during the year. The principal
areas considered by the Committee since the last annual report included:
•
•
•
•
•
•
•
•
•
the results for the periods ended 31 July 2008, 31 October 2008 and
31 January 2009 and the results for the year ended 30 April 2009;
the external audit plan and key areas of audit focus for the year ended
30 April 2009;
reports from the external auditor, Deloitte, related to the results for
the six months ended 31 October 2008 and the year ended 30 April
2009. The Committee considered the work done and the key accounting
estimates and principal judgemental accounting and reporting issues;
the independence, objectivity and effectiveness of Deloitte and, in
that context, the level of audit and non-audit fees paid to them. The
Committee was satisfi ed as to their independence, objectivity and
effectiveness;
the internal audit plan for the year ended 30 April 2009 and the
reports on the results of that work;
audit plans and reports from the internal operational auditors
responsible for auditing detailed operational controls at a profi t
centre level;
the Group risk register and reports from the chief executive on the
work of the Group Risk Committee;
the effectiveness of the Group’s internal controls and fi nancial
reporting policies; and
reports on matters referred through the Group’s whistle blowing
procedures and any actions taken following appropriate investigation.
The principal non-audit fees paid to the Company’s auditors, Deloitte LLP,
for the year relate to their review of the Company’s interim results and
a working capital report prepared in connection with the disposal of
Ashtead Technology. The Audit Committee is satisfi ed that the nature
of work undertaken and the level of non-audit fees did not impair their
independence.
The Audit Committee’s terms of reference which were reviewed and
updated on 23 October 2008 will be available for inspection at the Annual
General Meeting.
Remuneration Committee
The Remuneration Committee comprises Gary Iceton (chairman),
Hugh Etheridge and Michael Burrow.
The Remuneration Committee meets as and when required during the
year to set the compensation packages for the executive directors, to
establish the terms and conditions of the executive directors’ employment
and to set remuneration policy generally. Chris Cole and Geoff Drabble
normally attend the meetings of the Committee to assist it in its work.
The Committee also engages remuneration consultants to advise it in its
work as and when required.
None of the members of the Remuneration Committee is currently or
has been at any time one of the Company’s executive directors or an
employee. None of the executive directors currently serves, or has served,
as a member of the board of directors of any other company which has
one or more of its executive directors serving on the Company’s Board
or Remuneration Committee.
The Remuneration Committee’s terms of reference will be available
for inspection at the Annual General Meeting.
Nomination Committee
The current members of the Nomination Committee are Chris Cole
(chairman), Geoff Drabble, Hugh Etheridge, Gary Iceton, Michael Burrow
and Bruce Edwards (appointed 26 February 2009). The Nomination
Committee meets as and when required to consider the structure,
the size and composition of the Board of directors.
The Nomination Committee’s terms of reference which were reviewed
and updated on 23 October 2008 will be available for inspection at the
Annual General Meeting.
Attendance at Board and Committee meetings held between
1 May 2008 and 30 April 2009
Number of meetings held
Board
6
Audit
5
Remuneration
5
Nomination
1
Chris Cole
Sat Dhaiwal
Geoff Drabble
Cliff Miller *
Joe Phelan **
Ian Robson
Michael Burrow
Hugh Etheridge
Bruce Edwards
Gary Iceton
6
6
6
5
1
6
6
6
6
6
–
–
–
–
–
–
5
5
–
5
–
–
–
–
–
–
5
5
–
5
1
–
1
–
–
–
1
1
1
1
* Cliff Miller’s appointment as a director terminated on 6 April 2009
** Joe Phelan was appointed a director by the Board on 23 April 2009
Finance and Administration Committee
The Finance and Administration Committee comprises Chris Cole, Geoff
Drabble and Ian Robson and is chaired by Geoff Drabble. The Board of
directors has delegated authority to this Committee to deal with routine
fi nancial and administrative matters between Board meetings. The
Committee meets as necessary to perform its role and has a quorum
requirement of two members with certain matters requiring the
participation of Chris Cole, non-executive chairman, including, for example,
the approval of material announcements to the London Stock Exchange.
Internal control
The directors acknowledge their responsibility for the Group’s system
of internal control and confi rm they have reviewed its effectiveness.
In doing so, the Group has taken note of the relevant guidance for
directors, namely Internal Control: Guidance for Directors on the
Combined Code (the Turnbull Guidance).
The Board confi rms that there is a process for identifying, evaluating
and managing signifi cant risks faced by the Group. This process has been
in place for the full fi nancial year and is ongoing. During the year, this
process was strengthened through the formation of a formal Group Risk
Management Committee with the objective of encouraging best risk
management practice across the Group and a culture of regulatory
compliance and ethical behaviour. The Group Risk Management
Committee reports annually to the Audit Committee. These processes
accord with the Turnbull Guidance.
The Board considers that the Group’s internal control system is designed
appropriately to manage, rather than eliminate, the risk of failure to
achieve business objectives. Any such control system, however, can
only provide reasonable and not absolute assurance against material
mis-statement or loss.
The Group reviews the risks it faces in its business and how these risks
are managed. These reviews are conducted in conjunction with the
management teams of each of the Group’s businesses and are documented
in an annual report. The reviews consider whether any matters have arisen
since the last report was prepared which might indicate omissions or
inadequacies in that assessment. It also considers whether, as a result of
changes in either the internal or external environment, any new signifi cant
risks have arisen. The executive directors reviewed the draft report for
2009, which was then presented to, discussed and approved by the Audit
Committee on 12 May 2009 and by the Group Board on 15 June 2009.
Ashtead Group plc Annual Report & Accounts 2009
corporate governance report continued
Before producing the statement on internal control for the Annual Report
and Accounts for the year ended 30 April 2009, the Board reconsidered
the operational effectiveness of the Group’s internal control systems.
In particular, through the Audit Committee, it received reports from the
operational audit teams and considered the status of implementation
of internal control improvement recommendations made by the Group’s
internal auditors and its external auditors. The control system includes
written policies and control procedures, clearly drawn lines of
accountability and delegation of authority, and comprehensive reporting
and analysis against budgets and latest forecasts.
In a group of the size, complexity and geographical diversity of Ashtead,
minor breakdowns in established control procedures can occur. There are
supporting policies and procedures for investigation and management
of control breakdowns at any of the Group’s profi t centres or elsewhere.
The Audit Committee also meets regularly with the external auditors
to discuss their work.
a fair presentation will be achieved by compliance with all applicable
International Financial Reporting Standards. Directors are also required to:
•
•
•
properly select and apply accounting policies;
present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
and
provide additional disclosures when compliance with the specifi c
requirements in IFRS is insuffi cient to enable users to understand
the impact of particular transactions, other events and conditions
on the entity’s fi nancial position and fi nancial performance.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the fi nancial position of the
Company, for safeguarding the assets, for taking reasonable steps for the
prevention and detection of fraud and other irregularities and for the
preparation of a directors’ report and directors’ remuneration report
which comply with the requirements of the Companies Act.
In relation to internal fi nancial control, the Group’s control and monitoring
procedures include:
The Board confi rms to the best of its knowledge:
•
•
•
•
•
•
•
•
the maintenance and production of accurate and timely fi nancial
management information, including a monthly profi t and loss account
and selected balance sheet data for each profi t centre;
the control of key fi nancial risks through clearly laid down authority
levels and proper segregation of accounting duties at the Group’s
accounting support centres;
the preparation of a monthly fi nancial report to the Board, including
income statements for the Group and each subsidiary, balance sheet
and cash fl ow statement;
the preparation of an annual budget and periodic update forecasts
which are reviewed by the executive directors and then by the Board;
a programme of rental equipment inventories and full inventory counts
conducted at each profi t centre by equipment type independently
checked on a sample basis by our operational auditors and external
auditors;
detailed internal audits at the Group’s major accounting centres
undertaken by internal audit specialists from a major international
accounting fi rm;
comprehensive audits at the profi t centres generally carried out
annually by internal operational audit. A summary of this work is
provided annually to the Audit Committee; and
a review of arrangements by which staff may, in confi dence, raise
concerns about possible improprieties in matters of fi nancial reporting
or other matters.
Statement of directors’ responsibilities
The directors are responsible for preparing the Annual Report and the
fi nancial statements. The directors are required to prepare fi nancial
statements for the Group in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union and
have also elected to prepare fi nancial statements for the Company
in accordance with IFRS. Company law requires the directors to prepare
such fi nancial statements in accordance with IFRS, the Companies Act
and Article 4 of the IAS Regulations.
IAS 1 – Presentation of Financial Statements, requires that fi nancial
statements present fairly for each fi nancial year the Company’s
fi nancial position, fi nancial performance and cash fl ows. This requires
the representation of the effects of transactions, as well as other events
and conditions, in accordance with the defi nitions and recognition criteria
for assets, liabilities, income and expenses set out in the International
Accounting Standards Board’s Framework for the Preparation and
Presentation of Financial Statements. In virtually all circumstances,
•
•
the consolidated fi nancial statements, prepared in accordance with
IFRS as issued by the International Accounting Standards Board and IFRS
as adopted by the EU, give a true and fair view of the assets, liabilities,
fi nancial position and profi t of the Group; and
the Directors’ Report includes a fair review of the development and
performance of the business and the position of the Group, together
with a description of the principal risks and uncertainties that it faces.
Legislation in the UK governing the preparation and dissemination of
fi nancial statements may differ from legislation in other jurisdictions.
Going concern
The Group’s operations and fi nancial condition, together with factors likely
to affect its future development, performance and condition are set out
in the Business and Financial Review on pages 7 to 33. In particular,
the Group’s fi nancial management and cash fl ow, including details of
the Group’s banking facilities are set out on pages 30 to 32. In addition,
note 25 to the fi nancial statements describes the Group’s fi nancial risk
management policies and processes, including its exposure to interest
rate risk, currency exchange risk, credit risk and liquidity risk.
The Group’s debt facilities are committed for a weighted average period
of 4.6 years with the earliest signifi cant maturity being the ABL facility
which matures in August 2011. The Group fi nances its day to day activity
via the ABL facility under which available unused borrowings totalled
$550m at 30 April 2009. Taking account of reasonably possible changes
in trading performance and used equipment values and recognising the
risks generated by the uncertain economic outlook, the Group expects
to maintain signifi cant headroom under the ABL facility until its maturity.
As a consequence, the directors believe the Group is well placed to
manage its fi nancing risks successfully.
After making enquiries, the directors therefore have a reasonable expectation
that the Company and the Group have adequate resources to continue in
operation for the foreseeable future and consequently that it is appropriate
to adopt the going concern basis in preparing the fi nancial statements.
By order of the Board
Eric Watkins
Company secretary
17 June 2009
directors’ remuneration report
41
Introduction
This report has been prepared in accordance with Schedule 8 of the
Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 (the ‘Regulations’). The report also meets the relevant
requirements of the Listing Rules of the Financial Services Authority and
describes how the Board has applied the Principles of Good Governance
relating to directors’ remuneration. As required by the Regulations,
a resolution to approve the report will be proposed at the forthcoming
Annual General Meeting of the Company.
The Regulations require the auditors to report to the Company’s members
on elements of the Directors’ Remuneration Report and to state whether,
in their opinion, that part of the report has been properly prepared in
accordance with the Accounting Regulations. The report has therefore
been divided into separate sections for audited and unaudited information.
Unaudited information
Remuneration Committee
The Company has established a Remuneration Committee (‘the
Committee’) in accordance with the recommendations of the Combined
Code. The members of the Committee are Gary Iceton (chairman), Hugh
Etheridge and Michael Burrow. None of the Committee members has any
personal fi nancial interests, other than as shareholders, in the matters to
be decided.
The Group’s chief executive, Geoff Drabble, normally attends the meetings
of the Committee to advise on operational aspects of the implementation
of existing policies and policy proposals, except where his own
remuneration is concerned, as does the non-executive chairman, Chris
Cole. The company secretary acts as secretary to the Committee. Under
Gary Iceton’s direction, the company secretary and Geoff Drabble have
responsibility for ensuring the Committee has the information relevant to
its deliberations. In formulating its policies, the Committee has access to
professional advice from outside the Company, as required, and to publicly
available reports and statistics. External professional advice was obtained
in the year from Hewitt New Bridge Street (HNBS) which assisted the
Company with the amendment to the rules of the Company’s Performance
Share Plan which was approved by shareholders at the 2008 Annual
General Meeting. HNBS did not provide any other services to the Company.
Remuneration policy for executive directors
Executive remuneration packages are designed to attract, motivate
and retain directors of the high calibre needed to achieve the Group’s
objectives and to reward them for enhancing value to shareholders.
The main elements of the remuneration package for executive directors
and senior management are:
•
•
•
•
basic annual salary and benefi ts in kind;
annual performance related bonus plan;
Performance Share Plan awards; and
pension arrangements.
In assessing all aspects of pay and benefi ts, the Company compares
packages offered by similar companies, which are chosen having regard to:
•
•
•
•
the size of the company (enterprise value, revenues, profi ts and number
of employees);
the diversity and complexity of its businesses;
the geographical spread of its businesses; and
their growth, expansion and change profi le.
In making the comparisons, the Company also takes into consideration
the Group’s signifi cant operations in the US where the Company has a
number of large, successful competitors who compete with it for top
management talent.
The Committee implements its remuneration policies by the design of
reward packages for executive directors comprising the appropriate mix
of salary, performance related annual cash incentive bonuses and share
related incentives. A signifi cant proportion of the overall package
comprises performance related elements.
None of the executive directors hold any outside appointments.
Basic salary
An executive director’s basic salary is normally determined by the
Committee before the start of the year and when an individual changes
position or responsibility. In deciding appropriate levels, the Committee
considers the experience and performance of individuals and relationships
across the board and seeks to be competitive, but fair, using information
drawn from both internal and external sources and taking account of pay
and conditions elsewhere in the Company. Refl ecting the current market
environment and focus on operating costs, salaries for 2009/10 have been
held at their 2008/9 level. Joe Phelan’s salary of $520,000 per annum is
also slightly lower than the fi nal salary of his predecessor.
Annual performance related bonus plan
Under the annual performance related bonus plan for executive directors,
payouts for the year to 30 April 2009 were related directly to profi tability
and cash fl ow and were subject to a cap of 100% of salary. The
Committee establishes the objectives that must be met for each fi nancial
year if a cash incentive bonus for that year is to be paid. In determining
bonus parameters, the Committee’s objective is to set targets that refl ect
appropriately challenging fi nancial performance.
The target for Geoff Drabble and Ian Robson relating to profi tability was
not achieved but the target relating to cash fl ow was fully achieved. As a
result they earned 25% of their maximum bonus entitlement for the year.
The fi nancial targets relevant to Sat Dhaiwal and Cliff Miller were not
achieved and accordingly they received no bonus.
For the year to 30 April 2010, executive directors’ performance related
bonuses will be subject to a cap of 100% of salary with 50% of bonus
potential based on a profi tability target and 50% on a cash fl ow target.
Share-based incentives
Details of the Company’s share-based incentives are set out below.
Previous plans
A. Executive share option plans
Until 2002, it was the Committee’s policy to make regular awards under
the Company’s executive share option plans to senior staff. No awards
have been granted under this plan since February 2002. Shareholder
approval for this plan had been granted in 1996 and accordingly the plan
formally lapsed in October 2006.
B. Investment Incentive Plan
The Committee has not made any awards under this plan since 2004/5
and the Company does not intend to make further awards under this plan,
which lapses in 2011.
Current Plan – Performance Share Plan
Under the Performance Share Plan executive directors and other members
of the senior management team may annually be awarded a conditional
right to acquire shares (‘performance shares’) the vesting of which
depends on the satisfaction of demanding performance conditions.
Performance conditions are based on Total Shareholder Return (‘TSR’)
and/or earnings per share (‘EPS’).
In recent years, the policy has been to grant awards of shares with a
market value at the date of grant equal to between 20% and 100% of the
participant’s base salary with the executive directors typically receiving
the upper end of this range. Following approval of the amendment to the
Performance Share Plan Rules at the 2008 Annual General Meeting, Geoff
Drabble’s 2008 award was based on 150% of his base salary as at the date
of grant but the awards for the other executive directors remained at
100% of base salary.
Ashtead Group plc Annual Report & Accounts 2009
directors’ remuneration report continued
The performance criteria vary by year of award and are as follows:
Performance criteria (measured over three years)
Award date
17/8/05
Financial year
2005/6
12/10/06
30/7/07
14/10/08
2006/7
2007/8
2008/9
EPS (% of award)
Status
2007/8 EPS between 7.7p (12.5% vested)
EPS target met in full and 50% of the
to 9.1p (50% vested)
award vested. The remaining 50% lapsed
2008/9 EPS – 16.2p (12.5% vested) – 19p (100% vested)
Lapsed
Not completed
2009/10 EPS – RPI + 4% p.a. (30% vested) – RPI + 10% p.a. (100% vested)
2010/11 EPS – RPI + 0%p.a. (12.5% vested) From date of grant versus FTSE 250 Index Not completed
– RPI + 5%p.a. (50% vested)
TSR (% of award)
From date of grant versus FTSE 250 Index
(12.5% at median; 50% at upper quartile)
(12.5% median; 50% at upper quartile)
For performance between the lower and upper EPS ranges and, where applicable, also the lower and upper TSR ranges, vesting of the award is scaled
on a straight-line basis.
EPS for the purpose of the awards was based on the profi t before tax, exceptional items and amortisation of acquired intangibles less a notional 30% tax
charge for awards made for years up to 2006/7. Thereafter awards have been based on EPS computed using the same profi t defi nition less the actual
tax charge included in the accounts. The Remuneration Committee considers it most appropriate to measure TSR performance relative to the FTSE 250
(excluding investment trusts) rather than a specifi c comparator group of companies because there are few direct comparators to the Company listed
in London and because the Company is a FTSE 250 company.
Following consultation with the Company’s major shareholders in 2008, the Committee reintroduced a TSR performance target for its 2008/9 PSP
awards in addition to an EPS target. Given the cyclical nature of our business the Committee intends to vary the proportion of the performance criteria
represented by EPS and TSR over the cycle between 50%/50%, 75%/25% and 25%/75%. For the forthcoming 2009/10 PSP awards, the Committee
intends that vesting will be based as to 75% on TSR and 25% on EPS.
As agreed by the Nomination and Remuneration Committees prior to Joe Phelan joining the Group, Joe’s 2009/10 PSP award will be enhanced by
around 15% ($80,000) above the award of 100% of base salary awarded to other executive directors at his level to compensate him for incentives
lost when he left his previous employment.
Shareholding guidelines
Executive directors are required to retain no fewer than 50% of shares
that vest under the Performance Share Plan (net of taxes) until such
time as a shareholding equivalent to 100% of salary is achieved and
thereafter maintained.
Employee Share Ownership Trust
The Group has established an Employee Share Ownership Trust (ESOT) to
acquire and hold shares in the Company to satisfy potential awards under
the Performance Share Plan. At 30 April 2009, the ESOT held a benefi cial
interest in 5,752,818 shares.
Relative performance
The following graph compares the Company’s TSR performance with the
FTSE 250 Index (excluding investment trusts) over the fi ve years ended
30 April 2009. The FTSE 250 is the Stock Exchange index the Committee
considers to be the most appropriate to the size and scale of the
Company’s operations.
900
800
700
600
500
400
300
200
100
0
Apr
04
Apr
05
Apr
06
Apr
07
Apr
08
Apr
09
Ashtead Group plc
FTSE 250 Index (excluding Investment Trusts)
Source: Thomson Financial
This graph shows the value, by 30 April 2009, of £100 invested in Ashtead
Group plc on 30 April 2004 compared with the value of £100 invested in
the FTSE 250 Index (excluding Investment Trusts). The other points
plotted are the values at intervening fi nancial year-ends.
Directors’ pension arrangements
The Company makes a payment of 40% of his base salary to Geoff Drabble
in lieu of providing him with any pension arrangements.
Under the terms of his contract, Ian Robson is entitled to retire at age 60
on a pension equal to one-thirtieth of his fi nal salary for each year of
pensionable service. His pension is provided through the Company’s
Retirement Benefi ts Plan, which is a defi ned benefi ts scheme. Ian Robson’s
contract also contains early retirement provisions allowing him to retire
and draw a pension based on actual years of service, but without
deduction for early payment. This takes effect in May 2010 once he has
completed 10 years service with the Company (or at any time after age 50
if there is a change of control). Ian Robson pays contributions equal to
7.5% of his salary to the Retirement Benefi ts Plan.
Sat Dhaiwal’s pension benefi ts are also provided entirely through the
Ashtead Group plc Retirement Benefi ts Plan. His pension rights accrue at
the rate of one-sixtieth of salary (as defi ned) for each year of pensionable
service and his normal retirement date is at age 65. Sat Dhaiwal pays
contributions equal to 7.5% of his salary to the Retirement Benefi ts Plan.
The Retirement Benefi ts Plan also provides for:
•
•
•
•
in the event of death in service or death between leaving service and
retirement while retaining membership of the plan, a spouse’s pension
equal to 50% of the member’s deferred pension, calculated at the date
of death plus a return of his contributions;
in the event of death in retirement, a spouse’s pension equal to 50%
of the member’s pension at the date of death;
an option to retire at any time after age 50 with the Company’s
consent. Early retirement benefi ts are reduced by an amount agreed
between the actuary and the trustees as refl ecting the cost to the plan
of the early retirement. In 2010, government regulations raise the
minimum early retirement age to 55; and
pension increases in line with the increase in retail price infl ation up
to a limit of currently 5% a year in respect of service since 1997.
Joe Phelan receives a payment of 15% of his base salary during his fi rst
year of employment in lieu of providing him with any pension
arrangements. This reduces to 14% of base salary thereafter.
43
Executive directors’ service agreements
The service agreements between the Company and Geoff Drabble (dated 6 July 2006), Ian Robson (dated 4 August 2000), Sat Dhaiwal (dated 8 July 2002)
and between Sunbelt and Joe Phelan (dated 20 April 2009) are all terminable by either party giving the other 12 months’ notice. The service agreements
for each of the executive directors all contain non-compete provisions appropriate to their roles.
Remuneration policy for non-executive directors
The remuneration of the non-executive directors is determined by the Board within limits set out in the Articles of Association. None of the
non-executive directors has a service contract with the Company and their appointment is therefore terminable by the Board at any time.
An ordinary resolution concerning the Group’s remuneration policies will be put to shareholders at the forthcoming Annual General Meeting.
Audited information
Directors’ remuneration
The total amount of directors’ remuneration was £2,309,000 (2008: £3,691,000) and consisted of emoluments of £2,140,000 (2008: £2,740,000),
gains on exercise of shares options of £45,000 (2008: £20,000) and £124,000 (2008: £931,000) receivable under long-term incentive plans.
The emoluments of the directors, excluding pension benefi ts, which are included in staff costs in note 3 to the fi nancial statements, were as follows:
Name
Executive:
Sat Dhaiwal
Geoff Drabble
Joe Phelan(iii)
Ian Robson
Non-executive:
Chris Cole
Michael Burrow
Bruce Edwards
Hugh Etheridge
Gary Iceton
Former director:
Cliff Miller(iv)
2008
Salary
£’000
220
456
6
328
–
–
–
–
–
305
1,315
1,215
Fees
£’000
–
–
–
–
110
40
40
55
45
–
290
252
Performance
related
bonus
£’000
Benefi ts
in
kind(i)
£’000
Other
allowances(ii)
£’000
Total
emoluments
2009
£’000
Total
emoluments
2008
£’000
–
114
–
82
–
–
–
–
–
–
196
944
2
31
–
1
–
–
–
–
–
10
44
42
13
225
1
11
–
–
–
–
–
45
295
287
235
826
7
422
110
40
40
55
45
360
2,140
431
1,061
–
635
100
35
32
45
40
361
2,740
2,740
i Benefi ts in kind comprise the taxable benefi t of company owned cars, private medical insurance and subscriptions.
ii Other allowances include car allowances, travel and accommodation allowances and the payment of 40% of salary in lieu of pension contributions for Geoff Drabble and 15% for Joe Phelan.
iii From date of appointment.
iv In accordance with the terms and conditions of his service contract and the Company having received an executed severance and release agreement and conditional on his observing the non-compete
and non-solicit provisions in his service contract, Cliff Miller will continue to be paid his base salary for a period of 12 months from the termination of his employment. With the exception of his right under
the Sunbelt deferred compensation plan (into which he had elected to defer a portion of his prior period salary and annual bonuses) to draw the outstanding balance from that plan due to him at times and
in amounts of his choosing, no other payments are due with respect to Cliff Miller’s departure. He remains a participant in the Performance Share Plan in respect of previous awards on a pro rata basis up
to his date of departure.
Key management
In accordance with IAS 24 – Related Party Disclosures, key management personnel are those persons having authority and responsibility for planning,
directing and controlling the activities of the Group, directly or indirectly. The Group’s key management comprise the Company’s executive and
non-executive directors.
Compensation for key management was as follows:
Salaries and short-term employee benefi ts
Post-employment benefi ts
National insurance and social security
Share-based payments
2009
£’000
2,140
93
288
(938)
1,583
2008
£’000
2,740
52
328
725
3,845
Ashtead Group plc Annual Report & Accounts 2009
directors’ remuneration report continued
Directors’ pension benefi ts
Sat Dhaiwal
Ian Robson
Age at
30 April
2009
Years
40
50
Accrued
pensionable
service at
30 April 2009
Years
15
9
Contributions
paid by the
director
£’000
17
25
Accrued
annual
pension at
30 April 2009
£’000
52
93
Increase in annual
pension during the year
Total
increase
£’000
7
13
Excluding
infl ation
£’000
4
9
Transfer
value of
accrued
pension at
30 April 2009
£’000
357
1,392
Transfer
value of
accrued
pension at
30 April 2008
£’000
208
953
Increase
in transfer
value over
the year
£’000
132
414
Notes:
(1) The transfer values represent the amount which would have been paid to another pension scheme had the director elected to take a transfer of his accrued pension entitlement at that date and have been calculated
by the scheme’s actuaries in accordance with Actuarial Guidance Note GN11 published by the Institute of Actuaries and the Faculty of Actuaries. They are not sums paid or due to the directors concerned.
(2) The increase in transfer value in the year is stated net of the members’ contributions.
Until his departure on 6 April 2009, Cliff Miller deferred $10,271 of his annual salary and $32,813 of his 2007/8 bonus in the Sunbelt deferred
compensation plan and consequently Sunbelt allocated $25,271 by way of its co-match contribution. During the year, his account was also charged
with a negative annual investment return of $111,225 and he withdrew $127,685. At 30 April 2009, the outstanding balance in the plan due to Cliff
was $145,570 or £98,239.
Directors’ interests in shares
The directors of the Company are shown below together with their benefi cial interests in the share capital of the Company.
Michael Burrow
Chris Cole
Sat Dhaiwal
Geoff Drabble
Bruce Edwards
Hugh Etheridge
Gary Iceton
Ian Robson
The directors had no non-benefi cial interests in the share capital of the Company.
Performance Share Plan awards
Shares held by executive directors under the PSP are shown in the table below:
Sat Dhaiwal
Geoff Drabble
Cliff Miller
Ian Robson
Year of grant
2005/6
2006/7
2007/8
2008/9
2006/7
2007/8
2008/9
2005/6
2006/7
2007/8
2008/9
2005/6
2006/7
2007/8
2008/9
Held at
30 April 2008
120,349
90,468
116,418
–
264,943
320,896
–
155,198
174,047
192,243
–
173,837
193,861
235,075
–
30 April 2009
Number of
ordinary shares
of 10p each
100,000
77,082
365,849
361,357
40,000
20,000
49,082
1,480,092
30 April 2008
Number of
ordinary shares
of 10p each
60,000
52,082
330,346
261,357
40,000
20,000
49,082
1,024,540
Exercised Granted/(lapsed)
during the year
(60,174)
–
–
384,279
–
–
Held at
30 April 2009
–
90,468*
116,418
384,279
264,943*
320,896
1,194,760 1,194,760
–
(77,599)
(30,040)
(84,270)
528,869
(86,918)
–
–
572,052
144,007*+
107,973+
83,557+
–
193,861*
235,075
572,052
during year
(60,175)
–
–
–
–
–
–
(77,599)
–
–
–
(86,919)
–
–
–
* Subsequent to 30 April 2009, the Remuneration Committee determined that the performance conditions attaching to the 2006/7 PSP grant had not been achieved and these grants have now also lapsed
in their entirety.
+ In the case of Cliff Miller, at the date of termination of employment on 6 April 2009. The PSP awards have been pro rated in accordance with the PSP rules.
45
Directors’ interests in share options
Discretionary schemes
Sat Dhaiwal
Ian Robson
SAYE scheme
Sat Dhaiwal
Ian Robson
Options at
1 May
2008
54,202
37,941
31,979
211,932
249,332
325,216
Exercised
during
year
–
–
–
–
–
325,216
Lapsed
during
year
Options at
30 April
2009
Exercise
price
Earliest normal
exercise
date
Expiry
54,202
–
–
–
–
–
–
37,941
31,979
211,932
249,332
–
159.12p
115.31p
93.79p
94.55p
115.31p
38.28p
Feb 2009
Feb 2002
Feb 2011
Feb 2004
Aug 2003
Aug 2010
Aug 2003 Aug 2010
Feb 2011
Feb 2004
Feb 2012
Feb 2005
4,960
43,417
–
43,417
–
–
4,960
–
122.13p
Feb 2010
Sep 2009
22.39p May 2008 Oct 2008
Details of share plans and SAYE options exercised by the executive directors in the year are as follows:
Performance Share Plan
Sat Dhaiwal
Cliff Miller
Ian Robson
Discretionary schemes
Ian Robson
SAYE scheme
Ian Robson
Number
exercised
60,175
77,599
86,919
Exercise
date
Option Market price at
date of exercise
price
Gain
£’000
1 October 2008
14 October 2008
16 October 2008
–
–
–
67p
56.5p
45.5p
325,216
16 October 2008
38.28p
45.5p
43,417
4 June 2008
22.39p
72.75p
40
44
40
23
22
Following the partial vesting of the PSP awards made in 2005, on 1 October 2008, Sat Dhaiwal exercised his entitlement to 60,175 shares and sold
24,672 shares at 67p per share to settle his tax liability in respect of the exercise. The shares sold by Sat Dhaiwal were acquired by the Company’s
Employee Share Option Trust. Sat Dhaiwal retained the balance of 35,303 shares.
The performance conditions attaching to the Performance Share Plan referred to above are detailed on pages 41 and 42.
Cash Incentive Scheme
Sat Dhaiwal holds 54,202 units in the Company’s Cash Incentive Scheme which were granted to him on 22 February 2000 when he was not a director.
The performance criteria related to this award have been satisfi ed and accordingly he may exercise the award in whole or in part at any time prior to
22 February 2010. When the award is exercised Sat will be paid in cash an amount equal to the difference between the mid market price of Ashtead
Group plc shares on the day of exercise and 94.09p multiplied by the number of units exercised. The resultant sum will be paid to him in cash less
applicable taxes.
The market price of the Company’s shares at the end of the fi nancial year was 63.0p and the highest and lowest closing prices during the fi nancial year
were 85.0p and 29.3p respectively.
This report has been approved by the Remuneration Committee and is signed on its behalf by:
Gary Iceton
Chairman, Remuneration Committee
17 June 2009
Ashtead Group plc Annual Report & Accounts 2009
corporate responsibility report
Objectives and management structure
The Group is committed to operating in a safe, ethical and responsible
manner. We place high priority on compliance with our legislative and
regulatory obligations and on maintaining the safety of our workforce
across the Group.
This year we have introduced a new Group Risk Committee which is
charged with overseeing the Group’s environmental, health and safety
and risk management processes and ensuring that the separate efforts
of Sunbelt and A-Plant in this area are co-ordinated so that experiences
in one business are shared with the other. The Group Risk Committee
reports to the Group chief executive and the Audit Committee.
It is chaired by an executive director of Ashtead Group plc, currently
Ian Robson, with its other members being:
•
•
•
the heads of Sunbelt’s and A-Plant’s risk and safety teams;
UK and US legal counsel; and
the heads of Sunbelt’s and A-Plant’s performance standards (internal
operational audit) teams.
The Group Risk Committee provided the Audit Committee, and through
them the Board, with a comprehensive report on its activities including
details of the areas identifi ed in the year as requiring improvement and
the status of the actions being taken to make the necessary improvements.
In this way we now are able to ensure that there is an effective ‘chain
of command’ within the business in relation to environmental, health
and safety and risk management issues.
Health and safety
We have extensive programmes to develop and maintain safe working
practices across the Group and to remind our employees of the need to
be safe at all times. We also spend signifi cant time drawing our customers’
attention to the importance of these issues for their own employees.
A copy of the relevant formal statement of the Group’s policy on health
and safety is required to be displayed at profi t centres in both the UK and
the US. We make a considerable annual investment in ensuring that our
rental equipment meets or exceeds the latest safety standards, as well
as providing health and safety advice and materials, as required, to
accompany each rental.
Evidence of this commitment was given when shortly prior to year end,
A-Plant was advised by the British Standards Institute that it had achieved
ISO 14001 (Environmental management) and OHSAS 18001 (Occupational
Health & Safety management) accreditation. This completes a process
begun in 2008 some eight months ahead of schedule. The certifi cation
gives us confi dence that we have in place the appropriate policies, training
programmes and auditing and monitoring processes to minimise our
impact on the environment and ensure the safety of our workforce.
We maintain sizeable internal health and safety teams to ensure that
the correct health and safety precautions are in place throughout our
business. We track and analyse any incidents which occur to enable us
to identify recurrent issues and implement preventative improvements
across our UK and US networks.
Over the last year, Sunbelt had 492 reported incidents relative to a
workforce of 6,700 (2008: 535 incidents relative to a workforce of 7,300)
whilst the UK had 367 incidents relative to a workforce of 2,300 (2008:
384 incidents relative to a workforce of 2,500). It should be understood
that an incident for this purpose does not necessarily mean that an
employee was hurt or injured. Rather it represents an event that, under
our health and safety management policies, we want to track and report
for monitoring and learning purposes.
Legislation in the US and UK defi nes reportable accidents under rules
which make the data non-comparable between the two countries but
comparable within each country relative to other businesses. Under these
defi nitions which generally encompass more accidents in the US than in
the UK, Sunbelt had 298 OSHA recordable accidents in 2008/9 which,
relative to total employee hours worked, gave a Total Incident Rate (‘TIR’)
of 3.41 (2007/8: 2.96). In the UK, A-Plant had 42 RIDDOR reportable
incidents which again, relative to total employee hours worked, gave
a RIDDOR reportable rate of 1.04 (2007/8: 0.64). Relative to national
average statistics for the construction industry in their respective markets,
both Sunbelt and A-Plant performed well.
In order to compare accident rates between the US and UK, for the fi rst
time this year, A-Plant also applied the US OSHA defi nitions to its
accident population which gave a fi gure of 96 OSHA recordable accidents
in the UK. On a like-for-like basis in the year ended April 2009, Sunbelt
therefore had 44 OSHA recordable incidents for every 1,000 employees
whilst A-Plant’s equivalent incident rate was 42. Whilst we view any
incident as a potential issue, this benchmarking provides comfort that
our safety efforts in both businesses are delivering comparable results.
Regular employee education and awareness training is probably the most
effective way of improving and sustaining safety standards across our
businesses. The Group is at the forefront of the drive to promote higher
standards and to educate our employees and our customers about new and
improved methods of ensuring employees operate in a safe environment.
Safeguarding the environment
The Group is committed to taking reasonable actions to minimise the risk
of adverse impact on the environment from our business. We achieve this
by a policy of investing in:
•
•
•
the regular renewal of our rental fl eets to ensure that the equipment we
provide to our customers mostly incorporates the latest environmental
management thinking available from our chosen manufacturers.
At 30 April 2009 the average age of our fl eet was approximately 3 years;
our network of profi t centres to ensure that they are adequately
equipped to operate in a safe and secure way, protective of the
environment. Key matters which are addressed in this programme are:
wash-down bays to collect and safely dispose of materials released
when we inspect and clean equipment returned from rent; enclosed
paint booths and spray shops to ensure that repainting of equipment
can be conducted safely and securely; bunded fuel tanks and designated
spill areas to ensure secure fuelling of our fl eet and, where relevant,
vehicles; and proper arrangements to ensure the collection and secure
disposal of waste fuels and oils, tyres and other old or broken parts
released as we service and maintain our rental fl eets;
a modern and effi cient delivery truck fl eet to ensure that our vehicles
are purchased with the latest available emissions management and fuel
effi ciency available from our chosen suppliers.
47
We also support the initiatives of the Carbon Trust in the management of
harmful carbon dioxide emissions. We participate in its annual survey and
are committed in future to reporting on our carbon dioxide consumption
in our annual report. Across the Group our estimated total CO2 emissions
in the year to 30 April 2009 were 220,000 tonnes (2008: 220,000 tonnes)
This comprised 192,000 tonnes at Sunbelt (2008: 189,000 tonnes) and
28,000 tonnes for A-Plant (2008: 31,000 tonnes).
Whilst these emission levels are low relative to our revenues and employee
numbers, we recognise that most of our emissions are generated by our
delivery truck fl eet in transporting our equipment to customers’ job sites.
Our customers expect and pay for this delivery but we are working on
a number of initiatives to enable our customers to help us reduce our
emission levels and the delivery charges we make to them. For example,
on big, long term construction sites, we are increasingly placing pools of
our equipment at the job site enabling equipment to be sourced on-site
and therefore reducing the site’s overall transportation needs.
Employees
Our employees are our greatest asset and we place enormous value
on the welfare of our employees, as well as the superior level of service
they provide for our customers. At 30 April 2009, we had approximately
8,200 employees across the Group. Our employees benefi t from extensive
on-the-job training schemes and are incentivised to deliver superior
performance and customer service.
We pride ourselves on many of our staff remaining with us throughout
their careers, something which is increasingly uncommon. Several of our
most senior staff started out at entry level within our profi t centres and
their continuity of employment is testament to our focus on employee
development. We are committed to ensuring equal opportunities for
all our staff, as well as to prioritising local employment, such that our
businesses predominantly recruit from the areas immediately around
our facilities. We make every reasonable effort to give disabled applicants
and existing employees becoming disabled, opportunities for work, training
and career development in keeping with their aptitudes and abilities.
Contributing to the community
The Board supports giving back to the communities where we do
business as well as further afi eld. We have a number of such community
programmes across both the US and the UK. In the US, we continued our
support for a programme that combines our local and national resources
to provide consistent support to charitable organisations and leverages our
decentralised business structure. Through this partnership, Sunbelt provides
an annual contribution of equipment and services to community projects
undertaken by the national charitable organisation, Habitat for Humanity.
A-Plant’s community support programmes in the past year included
involvement in the Junior Citizen Scheme in Hounslow, London. This
scheme consisted of a number of borough based events organised by the
local youth and community sections of the Metropolitan Police. A-Plant
supported this initiative by providing accommodation units and other
equipment. A-Plant is also supporting Constructionarium events across
the country with equipment. Constructionarium is a construction industry
programme supported by universities across the country which is
designed to give students hands-on experience of the industry to enable
them to better understand and appreciate the attractions of making their
careers in construction.
Geoff Drabble
Chief executive
17 June 2009
Ashtead Group plc Annual Report & Accounts 2009
independent auditors’ report to the
members of Ashtead Group plc
Opinion on other matters prescribed by
the Companies Act 2006
In our opinion:
•
•
the part of the Directors’ Remuneration Report to be audited has been
properly prepared in accordance with the Companies Act 2006; and
the information given in the Directors’ Report for the fi nancial year
for which the fi nancial statements are prepared is consistent with the
fi nancial statements.
Matters on which we are required to report
by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
•
•
•
•
adequate accounting records have not been kept by the Company, or
returns adequate for our audit have not been received from branches
not visited by us; or
the Company fi nancial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with the
accounting records and returns; or
certain disclosures of directors’ remuneration specifi ed by law are
not made; or
we have not received all the information and explanations we require
for our audit.
Under the Listing Rules we are required to review:
•
•
the directors’ statement contained within the Corporate Governance
Report in relation to going concern; and
the part of the Corporate Governance Report relating to the Company’s
compliance with the nine provisions of the 2006 Combined Code
specifi ed for our review.
Ian Waller (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditors
London
17 June 2009
We have audited the fi nancial statements of Ashtead Group plc for
the year ended 30 April 2009 which comprise the Consolidated Income
Statement, the Consolidated and Company Balance Sheets, the
Consolidated and Company Cash Flow Statements, the Consolidated
Statement of Recognised Income and Expense and the related notes
1 to 33. The fi nancial reporting framework that has been applied in
their preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
This report is made solely to the Company’s members, as a body, in
accordance with sections 495, 496 and 497 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them
in an auditors’ 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 and the Company’s members as a body, for
our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors
and auditors
As explained more fully in the Directors’ Responsibilities Statement, the
directors are responsible for the preparation of the fi nancial statements
and for being satisfi ed that they give a true and fair view. Our
responsibility is to audit the fi nancial statements in accordance with
applicable law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing Practices Board’s
(APB’s) Ethical Standards for Auditors.
Scope of the audit of the fi nancial statements
An audit involves obtaining evidence about the amounts and disclosures
in the fi nancial statements suffi cient to give reasonable assurance that the
fi nancial statements are free from material misstatement, whether caused
by fraud or error. This includes an assessment of: whether the accounting
policies are appropriate to the Group’s and the Company’s circumstances
and have been consistently applied and adequately disclosed; the
reasonableness of signifi cant accounting estimates made by the directors;
and the overall presentation of the fi nancial statements.
Opinion on fi nancial statements
In our opinion:
•
•
•
the fi nancial statements give a true and fair view of the state of
the Group’s and of the Company’s affairs as at 30 April 2009 and
of the Group’s profi t for the year then ended;
the fi nancial statements have been properly prepared in accordance
with IFRSs as adopted by the European Union; and
the fi nancial statements have been prepared in accordance with the
requirements of the Companies Act 2006 and, as regards the Group
fi nancial statements, Article 4 of the IAS Regulation.
Separate opinion in relation to IFRSs as issued
by the IASB
As explained in note 1 to the fi nancial statements, the Group in addition
to complying with its legal obligation to apply IFRSs as adopted by the
European Union, has also applied IFRSs as issued by the International
Accounting Standards Board (IASB).
In our opinion the fi nancial statements comply with IFRSs as issued
by the IASB.
49
our financial statements
2009
Contents
50 Consolidated income statement
51 Consolidated statement of
recognised income and expense
51 Consolidated statement of changes
in equity
52 Consolidated balance sheet
53 Consolidated cash fl ow statement
54 Notes to the consolidated
fi nancial statements
84 Ten year history
85 Future dates
85 Advisers
www.ashtead-group.com
Ashtead Group plc Annual Report & Accounts 2009
consolidated
income statement
For the year ended 30 April 2009
Before
exceptional
items and
amortisation
£m
Exceptional
items and
amortisation
£m
Notes
2009
Total
£m
Before
exceptional
items and
amortisation
(restated)
£m
Exceptional
items and
amortisation
£m
Continuing operations
Revenue
Rental revenue
Sale of new equipment, merchandise and consumables
Sale of used rental equipment
Operating costs
Staff costs
Used rental equipment sold
Other operating costs
Other income
EBITDA*
Depreciation
Amortisation
Operating profi t
Net fi nancing costs
Profi t on ordinary activities before taxation
Taxation:
– current
– deferred
Profi t from continuing operations
Profi t from discontinued operations
Profi t attributable to equity holders of the Company
Continuing operations
Basic earnings per share
Diluted earnings per share
Total continuing and discontinued operations
Basic earnings per share
Diluted earnings per share
3
3
3
3
3
3
2, 3
5
6
6,19
7
9
9
9
9
974.0
55.6
43.9
1,073.5
(313.4)
(37.3)
(367.6)
0.9
(717.4)
356.1
(201.1)
–
155.0
(67.6)
87.4
(2.7)
(26.9)
(29.6)
57.8
–
–
50.5
50.5
(4.5)
(50.3)
(35.7)
0.7
(89.8)
(39.3)
(43.9)
(3.4)
(86.6)
–
(86.6)
2.6
28.2
30.8
(55.8)
2.0
59.0
59.8
3.2
11.5p
11.4p
(11.1p)
(11.0p)
974.0
55.6
94.4
1,124.0
917.3
58.8
71.7
1,047.8
(298.9)
(63.4)
(323.2)
1.4
(684.1)
363.7
(176.6)
–
187.1
(74.8)
112.3
(5.7)
(33.4)
(39.1)
73.2
7.6
80.8
(317.9)
(87.6)
(403.3)
1.6
(807.2)
316.8
(245.0)
(3.4)
68.4
(67.6)
0.8
(0.1)
1.3
1.2
2.0
61.0
63.0
0.4p
0.4p
2008
Total
(restated)
£m
917.3
58.8
71.7
1,047.8
(298.9)
(63.4)
(323.2)
1.4
(684.1)
363.7
(176.6)
(2.6)
184.5
(74.8)
109.7
(5.7)
(34.0)
(39.7)
70.0
–
–
–
–
–
–
–
–
–
–
–
(2.6)
(2.6)
–
(2.6)
–
(0.6)
(0.6)
(3.2)
–
7.6
(3.2)
77.6
13.4p
13.3p
(0.6p)
(0.6p)
12.8p
12.7p
* EBITDA is presented here as an additional performance measure as it is commonly used by investors and lenders.
11.9p
11.8p
0.6p
0.7p
12.5p
12.5p
14.8p
14.7p
(0.6p)
(0.6p)
14.2p
14.1p
consolidated statement of
recognised income and expense
51
For the year ended 30 April 2009
Profi t for the fi nancial year
Actuarial loss on defi ned benefi t pension scheme
Tax on items taken directly to equity
Foreign currency translation differences
Total recognised income and expense for the year
consolidated statement of
changes in equity
For the year ended 30 April 2009
Total recognised income and expense for the year
Issue of ordinary shares, net of expenses
Re-issue of ordinary shares from treasury
Dividends paid
Share-based payments
Own shares purchased by the Company
Own shares purchased by the ESOT
Realisation of foreign exchange translation differences on Technology disposal
Net increase in equity in the year
Opening equity as reported
Restatement on application of IFRIC 14
Closing equity
2009
£m
63.0
(7.4)
(1.3)
59.8
114.1
2008
£m
(restated)
77.6
(0.6)
(3.0)
2.0
76.0
2009
£m
114.1
–
0.2
(12.9)
(0.8)
(15.7)
(0.4)
1.2
85.7
436.1
4.2
526.0
2008
£m
(restated)
76.0
0.5
–
(10.5)
2.5
(23.3)
(1.6)
–
43.6
396.7
–
440.3
Ashtead Group plc Annual Report & Accounts 2009
consolidated
balance sheet
At 30 April 2009
Current assets
Inventories
Trade and other receivables
Current tax asset
Cash and cash equivalents
Assets held for sale
Non-current assets
Property, plant and equipment
– rental equipment
– other assets
Intangible assets – brand names and other acquired intangibles
Goodwill
Deferred tax asset
Defi ned benefi t pension fund surplus
Total assets
Current liabilities
Trade and other payables
Debt due within one year
Provisions
Liabilities directly associated with assets classifi ed as assets held for sale
Non-current liabilities
Debt due after more than one year
Provisions
Deferred tax liabilities
Total liabilities
Equity
Share capital
Share premium account
Capital redemption reserve
Non-distributable reserve
Own shares held by the Company
Own shares held through the ESOT
Cumulative foreign exchange translation differences
Retained reserves
Equity attributable to equity holders of the Company
Total liabilities and equity
These fi nancial statements were approved by the Board on 17 June 2009.
Geoff Drabble
Chief executive
Ian Robson
Finance director
notes
10
11
12
13
13
14
14
19
24
15
16
18
16
18
19
20
21
21
21
21
21
21
21
2009
£m
10.4
148.3
1.5
1.7
161.9
1.6
163.5
1,140.5
153.5
1,294.0
5.9
385.4
12.3
0.3
1,697.9
1,861.4
106.7
6.9
17.4
131.0
–
131.0
2008
£m
(restated)
22.6
159.9
2.2
1.8
186.5
26.8
213.3
994.0
136.1
1,130.1
8.0
291.9
18.0
5.8
1,453.8
1,667.1
129.1
7.6
9.1
145.8
6.5
152.3
1,030.7
36.8
136.9
1,204.4
1,335.4
957.4
18.8
98.3
1,074.5
1,226.8
55.3
3.6
0.9
90.7
(33.1)
(6.3)
29.1
385.8
526.0
56.2
3.6
–
90.7
(23.3)
(7.0)
(28.2)
348.3
440.3
1,861.4
1,667.1
consolidated
cash flow statement
For the year ended 30 April 2009
Cash fl ows from operating activities
Cash generated from operations before exceptional items and changes in rental fl eet
Exceptional costs
Payments for rental property, plant and equipment
Proceeds from disposal of rental property, plant and equipment before exceptional disposals
Exceptional proceeds from disposal of rental property, plant and equipment
Cash generated from operations
Financing costs paid
Tax received/(paid)
Net cash from operating activities
Cash fl ows from investing activities
Acquisition of businesses
Disposal of businesses
Payments for non-rental property, plant and equipment
Proceeds on sale of non-rental property, plant and equipment
Net cash from/(used in) investing activities
Cash fl ows from fi nancing activities
Drawdown of loans
Redemption of loans
Capital element of fi nance lease payments
Purchase of own shares by the Company
Purchase of own shares by the ESOT
Dividends paid
Proceeds from issue of ordinary shares
Net cash (used in)/from fi nancing activities
(Decrease)/increase in cash and cash equivalents
Opening cash and cash equivalents
Effect of exchange rate differences
Closing cash and cash equivalents
53
2008
£m
(restated)
356.4
(9.5)
(315.7)
87.1
–
118.3
(76.4)
(6.4)
35.5
(5.9)
–
(35.8)
5.6
(36.1)
186.7
(143.9)
(7.0)
(22.9)
(1.6)
(10.5)
0.5
1.3
0.7
1.1
–
1.8
notes
26 (a)
26(d), 27
7
2009
£m
373.6
(9.4)
(208.5)
39.2
46.1
241.0
(64.7)
0.8
177.1
(0.3)
89.3
(27.1)
6.6
68.5
147.8
(353.4)
(11.6)
(15.7)
(0.4)
(12.9)
0.2
(246.0)
(0.4)
1.8
0.3
1.7
Ashtead Group plc Annual Report & Accounts 2009
notes to the consolidated
financial statements
1 Accounting policies
The principal accounting policies adopted in the preparation of these
fi nancial statements are set out below. These policies have been applied
consistently to all the years presented, unless otherwise stated.
Basis of preparation
These fi nancial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) and with those parts
of the Companies Act 2006 applicable to companies reporting under IFRS.
Accordingly, the Group complies with all IFRS, including those adopted for
use in the European Union. The fi nancial statements have been prepared
under the historical cost convention, modifi ed for certain items carried
at fair value, as stated in the accounting policies. A summary of the more
important accounting policies is set out below.
During the year, the Group adopted the following interpretations and
amendments to standards:
•
•
•
‘Improvements to IFRSs’ (May 2008) comprising a number of
amendments to IFRS has been adopted early in its entirety. The only
change affecting the Group is the amendment to ‘IAS 16 – Property,
plant and equipment’ (and consequential amendment to ‘IAS 7 –
Statement of cash fl ows’), relating to the sale of rental assets. This has
increased the Group’s reported revenues and operating costs although
there has been no impact on the profi t attributable to equity
shareholders reported in the ‘Consolidated income statement’. In
addition, cash fl ows relating to the sale and purchase of rental assets
have been reclassifi ed from investing activities to operating activities.
The remaining amendments to IFRS have had no impact on the
consolidated results or fi nancial position of the Group.
‘IFRIC 14 – IAS 19 – The limit on a defi ned benefi t asset, minimum
funding requirements and their interaction’. The adoption of IFRIC 14
has increased the Group’s total assets and shareholders’ funds due to
the inclusion of the pension scheme surplus as an asset. Comparative
amounts have been restated for the impact of adopting this new
interpretation.
The adoption of the remaining interpretations and amendments to
standards noted below has had no material impact on the consolidated
results or fi nancial position of the Group:
–
‘Amendments to IAS 32 – Financial instruments: presentation and IAS
1 – Presentation of fi nancial statements – puttable fi nancial instruments
and obligations arising on liquidation’ has been adopted early;
–
‘Amendments to IAS 39 – Financial instruments: recognition and
measurement and IFRS 7 – Financial instruments: disclosures and IFRS
7 – Reclassifi cation of fi nancial assets’;
–
‘Amendments to IFRS 1 and IAS 27 – Cost of investment in subsidiary,
jointly controlled entity or associate’ has been adopted early;
–
‘Amendment to IFRS 2 – Share-based payment: vesting conditions and
cancellations’ has been adopted early;
–
‘IAS 23 (Revised) – Borrowing costs’ has been adopted early;
–
‘IFRIC 12 – Service concession arrangements’;
–
‘IFRIC 13 – Customer loyalty programmes’ has been adopted early.
The preparation of fi nancial statements in conformity with generally
accepted accounting principles requires management to use estimates
and assumptions that affect the reported amounts of assets and liabilities
at the date of the fi nancial statements and the reported amount of
revenue and expenses during the reporting period. A more detailed
discussion of the principal accounting policies and management estimates
and assumptions is included in the Business and Financial Review on page
33 and forms part of these fi nancial statements. Actual results could differ
from these estimates.
Basis of consolidation
The Group fi nancial statements incorporate the fi nancial statements of
the Company and all its subsidiaries for the year to 30 April each year. The
results of businesses acquired or sold during the year are incorporated for
the periods from or to the date on which control passed and acquisitions
are accounted for under the acquisition method. Control is achieved when
the Group has the power to govern the fi nancial and operating policies of
an entity so as to obtain the benefi ts from its activities.
Foreign currency translation
Assets and liabilities in foreign currencies are translated into sterling at
rates of exchange ruling at the balance sheet date. Income statements and
cash fl ows of overseas subsidiary undertakings are translated into sterling
at average rates of exchange for the year. The exchange rates used in
respect of the US dollar are:
Average for year
Year end
2009
1.68
1.48
2008
2.01
1.98
Exchange differences arising from the retranslation of the opening net
investment of overseas subsidiaries and the difference between the
inclusion of their profi ts at average rates of exchange in the Group income
statement and the closing rate used for the balance sheet are recognised
directly in a separate component of equity. Other exchange differences
are dealt with in the income statement.
Revenue
Revenue represents the total amount receivable for the provision of goods and
services including the sale of used rental plant and equipment to customers
net of returns and value added tax. Rental revenue, including loss damage
waiver and environmental fees, is recognised on a straight-line basis over the
period of the rental contract. Because the terms and conditions of a rental
contract can extend across fi nancial reporting period ends, the Group records
unbilled rental revenue and deferred revenue at the end of the reporting
periods so rental revenue is appropriately stated in the fi nancial statements.
Revenue from rental equipment delivery and collection is recognised when
delivery or collection has occurred and is reported as rental revenue.
Revenue from the sale of rental equipment, new equipment, parts and
supplies, retail merchandise and fuel is recognised at the time of delivery
to, or collection by, the customer and when all obligations under the sales
contract have been fulfi lled.
Revenue from sales of rental equipment in connection with trade-in
arrangements with certain manufacturers from whom the Group
purchases new equipment are accounted for at the lower of transaction
value or fair value based on independent appraisals. If the trade-in price
of a unit of equipment exceeds the fair market value of that unit, the
excess is accounted for as a reduction of the cost of the related purchase
of new rental equipment.
Current/non-current distinction
Current assets include assets held primarily for trading purposes, cash and
cash equivalents and assets expected to be realised in, or intended for sale
or consumption in, the course of the Group’s operating cycle and those
assets receivable within one year from the reporting date. All other assets
are classifi ed as non-current assets.
Current liabilities include liabilities held primarily for trading purposes,
liabilities expected to be settled in the course of the Group’s operating
cycle and those liabilities due within one year from the reporting date.
All other liabilities are classifi ed as non-current liabilities.
55
Property, plant and equipment
Owned assets
Property, plant and equipment is stated at cost (including transportation
costs from the manufacturer to the initial rental location) less accumulated
depreciation and any provisions for impairment. In respect of aerial work
platforms, cost includes rebuild costs when the rebuild extends the asset’s
useful economic life and it is probable that incremental economic benefi ts
will accrue to the Group. Rebuild costs include the cost of transporting the
equipment to and from the rebuild supplier. Additionally, depreciation is
not charged while the asset is not in use during the rebuild period.
Leased assets
Finance leases are those leases which transfer substantially all the risks
and rewards of ownership to the lessee. Assets held under fi nance leases
are capitalised within property, plant and equipment at the fair value of
the leased assets at inception of the lease and depreciated in accordance
with the Group’s depreciation policy. Outstanding fi nance lease obligations
are included within debt. The fi nance element of the agreements is charged
to the income statement on a systematic basis over the term of the lease.
All other leases are operating leases, the rentals on which are charged to
the income statement on a straight-line basis over the lease term.
Depreciation
Leasehold properties are depreciated on a straight-line basis over the life
of each lease. Other fi xed assets, including those held under fi nance
leases, are depreciated on a straight-line basis applied to the opening cost
to write down each asset to its residual value over its useful economic life.
The rates in use are as follows:
Freehold property
Motor vehicles
Rental equipment
Offi ce and workshop equipment
Per annum
2%
16% to 25%
5% to 33%
20%
Residual values are estimated at 10% of cost in respect of most types
of rental equipment, although the range of residual values used varies
between zero and 30%.
Repairs and maintenance
Costs incurred in the repair and maintenance of rental and other
equipment are charged to the income statement as incurred.
Intangible assets
Business combinations and goodwill
Acquisitions are accounted for using the purchase method. Goodwill represents
the difference between the cost of the acquisition and the fair value of the
net identifi able assets acquired, including any intangible assets other than
goodwill. Adjustments to the fair values of assets acquired made within 12
months of acquisition date are accounted for from the date of acquisition.
Goodwill is stated at cost less any accumulated impairment losses and is
allocated to the Group’s two reporting units, Sunbelt and A-Plant.
The profi t or loss on the disposal of a previously acquired business includes
the attributable amount of any purchased goodwill relating to that business.
Other intangible assets
Other intangible assets acquired as part of a business combination are
capitalised at fair value as at the date of acquisition. Internally generated
intangible assets are not capitalised. Amortisation is charged on a
straight-line basis over the expected useful life of each asset. Contract
related intangible assets are amortised over the life of the contract.
Amortisation rates for other intangible assets are as follows:
Brand names
Customer lists
Per annum
8.3%
10% to 20%
Impairment of assets
Goodwill is not amortised but is tested annually for impairment as at
30 April each year. Assets that are subject to amortisation or depreciation
are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment
loss is recognised in the income statement for the amount by which the
asset’s carrying amount exceeds its recoverable amount. For the purposes
of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifi able and independent cash fl ows for the asset
being tested for impairment. In the case of goodwill, impairment is
assessed at the level of the Group’s two reporting units.
The recoverable amount is the higher of an asset’s fair value less costs
to sell and value in use. In assessing value in use, estimated future cash
fl ows are discounted to their present value using a pre-tax discount rate
that refl ects current market assessments of the time value of money
and the risks specifi c to the asset.
In respect of assets other than goodwill, an impairment loss is reversed
if there has been a change in the estimates used to determine the
recoverable amount. An impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the carrying amount
that would have been determined, net of depreciation or amortisation,
if no impairment loss had been recognised. Impairment losses in respect
of goodwill are not reversed.
Taxation
The tax charge for the period comprises both current and deferred tax.
Taxation is recognised in the income statement except to the extent that
it relates to items recognised directly in equity, in which case the related
tax is also recognised in equity.
Current tax is the expected tax payable on the taxable income for the year
and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method on
any temporary differences between the carrying amounts for fi nancial
reporting purposes and those for taxation purposes. Deferred tax liabilities
are generally recognised for all taxable temporary differences and deferred
tax assets are recognised to the extent that it is probable that taxable
profi ts will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the
temporary differences arise from the initial recognition of goodwill.
Deferred tax liabilities are not recognised for temporary differences arising
on investment in subsidiaries where the Group is able to control the
reversal of the temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future. Deferred tax is
calculated at the tax rates that are expected to apply in the period when
the liability is settled or the asset is realised. Deferred tax assets and
liabilities are offset when they relate to income taxes levied by the same
taxation authority and the Group intends to settle its current tax assets
and liabilities on a net basis.
Inventories
Inventories, which comprise new equipment, fuel, merchandise and spare
parts, are valued at the lower of cost and net realisable value.
Employee benefi ts
Defi ned contribution pension plans
Obligations under the Group’s defi ned contribution plans are recognised
as an expense in the income statement as incurred.
Ashtead Group plc Annual Report & Accounts 2009
notes to the consolidated
financial statements continued
1 Accounting policies continued
Defi ned benefi t pension plans
The Group’s obligation in respect of defi ned benefi t pension plans is
calculated by estimating the amount of future benefi t that employees
have earned in return for their service in the current and prior periods; that
benefi t is discounted to determine its present value and the fair value of
plan assets is deducted. The discount rate used is the yield at the balance
sheet date on AA rated corporate bonds. The calculation is performed by
a qualifi ed actuary using the projected unit credit method.
Actuarial gains and losses are recognised in full in the period in which
they arise through the statement of recognised income and expense.
The increase in the present value of plan liabilities arising from employee
service during the period is charged to operating profi t. The expected
return on plan assets and the expected increase during the period in the
present value of plan liabilities due to unwind of the discount are included
in investment income and interest expense, respectively.
The defi ned pension surplus or defi cit recognised in the balance sheet
represents the fair value of the scheme assets less the present value of
the defi ned benefi t obligation. A surplus is recognised in the balance sheet
to the extent that the Group has a conditional right to the surplus, either
through a refund or reduction in future contributions. A defi cit is
recognised in full.
Share-based compensation
The fair value of awards made under share-based compensation plans
is measured at grant date and spread over the vesting period through the
income statement with a corresponding increase in equity. The fair value
of share options and awards is measured using an appropriate valuation
model taking into account the terms and conditions of the individual
scheme. The amount recognised as an expense is adjusted to refl ect the
actual awards vesting except where any change in the awards vesting
relates only to market based criteria not being achieved.
Insurance
Insurance costs include insurance premiums which are written off to the
income statement over the period to which they relate and an estimate
of the discounted liability for uninsured retained risks on unpaid claims
incurred up to the balance sheet date. The estimate includes events
incurred but not reported at the balance sheet date. This estimate is
discounted and included in provisions in the balance sheet.
Investment income and interest expense
Investment income comprises interest receivable on funds invested, fair
value gains on derivative fi nancial instruments and the expected return
on plan assets in respect of defi ned benefi t pension plans.
Interest expense comprises interest payable on borrowings, amortisation
of deferred fi nance costs, fair value losses on derivative fi nancial
instruments and the expected increase in plan liabilities in respect of
defi ned benefi t pension schemes.
Financial liabilities and equity
Equity instruments
An equity instrument is any contract that evidences a residual interest
in the assets of the Group after deducting all of its liabilities. Equity
instruments issued by the Group are recorded at the proceeds received,
net of direct issue costs.
Trade payables
Trade payables are not interest bearing and are stated at nominal value.
Borrowings
Interest bearing bank loans and overdrafts are recorded at the proceeds
received, net of direct transaction costs. Finance charges, including
amortisation of direct transaction costs, are charged to the income
statement using the effective interest rate method.
Revolving tranches of borrowings and overdrafts which mature on a regular
basis are classifi ed as current or non-current liabilities based on the maturity
of the relevant facility.
Derivative fi nancial instruments
The Group uses a limited number of derivative fi nancial instruments to
hedge its exposure to fl uctuations in interest and foreign exchange rates.
These are principally swap agreements used to manage the balance
between fi xed and fl oating rate fi nance on long-term debt and forward
contracts for known future foreign currency cash fl ows. The Group does
not hold or issue derivative instruments for speculative purposes.
All derivatives are held at fair value in the balance sheet within trade and
other receivables or trade and other payables. Changes in the fair value of
derivative fi nancial instruments that are designated and effective as hedges
of future cash fl ows are recognised directly in equity. The gain or loss
relating to any ineffective portion is recognised immediately in the income
statement. Amounts deferred in equity are recognised in the income
statement in the same period in which the hedged item affects profi t or
loss. Changes in the fair value of any derivative instruments that are not
hedge accounted are recognised immediately in the income statement.
Secured notes
The Group’s secured notes contain early prepayment options, which
constitute embedded derivatives in accordance with IAS 39, Financial
Instruments: Recognition and Measurement. At the date of issue the
liability component of the notes is estimated using prevailing market
interest rates for similar debt with no prepayment option and is recorded
within borrowings. The difference between the proceeds of the note issue
and the fair value assigned to the liability component, representing the
embedded option to prepay the notes is included within ‘Other fi nancial
assets – derivatives’. The interest expense on the liability component is
calculated by applying the effective interest rate method. The embedded
option to prepay is fair valued using an appropriate valuation model and
fair value remeasurement gains and losses are included in investment
income and interest expense respectively.
Financial instruments
Financial assets and fi nancial liabilities are recognised in the Group’s
balance sheet when the Group becomes a party to the contractual
provisions of the instrument.
Exceptional items
Exceptional items are those items that are material and non-recurring
in nature that the Group believes should be disclosed separately to assist
in the understanding of the fi nancial performance of the Group.
Financial assets
Trade receivables
Trade receivables do not carry interest and are stated at nominal value as
reduced by appropriate allowances for estimated irrecoverable amounts.
Cash and cash equivalents
Cash and cash equivalents comprises cash balances and call deposits with
maturity of less than, or equal to, three months.
Earnings per share
Earnings per share is calculated based on the profi t for the fi nancial year
and the weighted average number of ordinary shares in issue during the
year. For this purpose the number of ordinary shares in issue excludes
shares held in treasury or by the ESOT in respect of which dividends have
been waived. Diluted earnings per share is calculated using the profi t for
the fi nancial year and the weighted average diluted number of shares
(ignoring any potential issue of ordinary shares which would be anti-
dilutive) during the year.
57
Underlying earnings per share comprises basic earnings per share adjusted
to exclude earnings relating to exceptional items, amortisation of acquired
intangibles and fair value remeasurements of embedded derivatives in
long-term debt. Cash tax earnings per share comprises underlying
earnings per share adjusted to exclude deferred taxation.
Treasury shares
The cost of treasury shares is deducted from shareholders’ funds. The
proceeds from the reissue of treasury shares are added to shareholders’
funds with any gains in excess of the average cost of the shares being
recognised in the share premium account.
Provisions
Provisions are recognised when the Group has a present obligation as a
result of a past event, and it is probable that the Group will be required
to settle that obligation. Provisions are measured at the directors’ best
estimate of the expenditure required to settle the obligation at the
balance sheet date and are discounted to present value where the effect
is material.
Employee Share Ownership Trust
Shares in the Company acquired by the Employee Share Ownership Trust
in the open market for use in connection with employee share plans are
presented as a deduction from shareholders’ funds. When the shares vest
to satisfy share based payments, a transfer is made from own shares held
through the ESOT to retained earnings.
Assets held for sale
Non-current assets held for sale and disposal groups are measured
at the lower of carrying amount and fair value less costs to sell. Such
assets are classifi ed as held for sale if their carrying amount will be
recovered through a sale transaction rather than through continuing use.
Such assets are not depreciated. Assets are regarded as held for sale only
when the sale is highly probable and the asset is available for sale in its
present condition. Management must be committed to the sale which
must be expected to qualify for recognition as a completed sale within
one year from the date of classifi cation.
2 Segmental analysis
Business segments
The Group operates one class of business: rental of equipment. Operationally, the Group is split into two business units, Sunbelt and A-Plant which
separately report to, and are managed by, the chief executive and align with the geographies in which they operate, being the US and UK, respectively.
The Group also owned Ashtead Technology, which was sold during the year and therefore has been classifi ed as a disposal group (refer note 7).
These business units are the basis on which the Group reports its segment information. The Group manages debt and taxation centrally, rather than
by business unit. Accordingly, segmental results are stated before interest and taxation which are reported as central Group items. This is consistent
with the way the chief executive reviews the business.
Year ended 30 April 2009
Revenue
Operating costs
EBITDA
Depreciation
Segment result before exceptional items and amortisation
Exceptional items
Amortisation
Segment result
Net fi nancing costs
Profi t before taxation
Taxation
Profi t attributable to equity shareholders
Segment assets
Cash
Taxation assets
Total assets
Segment liabilities
Corporate borrowings and accrued interest
Deferred taxation liabilities
Total liabilities
Other non-cash expenditure
– share-based payments
Capital expenditure
Sunbelt
£m
865.5
(566.8)
298.7
(154.3)
144.4
(51.9)
(2.9)
89.6
A-Plant
£m
208.0
(145.2)
62.8
(46.7)
16.1
(31.3)
(0.5)
(15.7)
Corporate
items
£m
–
(5.4)
(5.4)
(0.1)
(5.5)
–
–
(5.5)
Continuing
operations
£m
1,073.5
(717.4)
356.1
(201.1)
155.0
(83.2)
(3.4)
68.4
(67.6)
0.8
1.2
2.0
Discontinued
operations
£m
5.1
(2.3)
2.8
–
2.8
66.1
–
68.9
–
68.9
(7.9)
61.0
1,514.7
331.0
0.2
113.3
34.5
2.2
1,845.9
1.7
13.8
1,861.4
150.0
1,048.5
136.9
1,335.4
(0.4)
(0.1)
(0.3)
(0.8)
166.1
72.5
–
238.6
–
–
–
–
–
–
–
–
–
–
Group
£m
1,078.6
(719.7)
358.9
(201.1)
157.8
(17.1)
(3.4)
137.3
(67.6)
69.7
(6.7)
63.0
1,845.9
1.7
13.8
1,861.4
150.0
1,048.5
136.9
1,335.4
(0.8)
238.6
Ashtead Group plc Annual Report & Accounts 2009
notes to the consolidated
financial statements continued
2 Segmental analysis continued
Year ended 30 April 2008
Revenue
Operating costs
EBITDA
Depreciation
Segment result before amortisation
Amortisation
Segment result
Net fi nancing costs
Profi t before taxation
Taxation
Profi t attributable to equity shareholders
Segment assets
Cash
Taxation assets
Total assets
Segment liabilities
Corporate borrowings and accrued interest
Deferred taxation liabilities
Total liabilities
Other non-cash expenditure
– share-based payments
Capital expenditure
Sunbelt
£m
810.0
(511.6)
298.4
(133.5)
164.9
(2.1)
162.8
A-Plant
£m
237.8
(164.6)
73.2
(43.0)
30.2
(0.5)
29.7
Corporate
items
£m
–
(7.9)
(7.9)
(0.1)
(8.0)
–
(8.0)
1,254.4
362.7
1.2
97.5
45.7
4.0
Continuing
operations
£m
1,047.8
(684.1)
363.7
(176.6)
187.1
(2.6)
184.5
(74.8)
109.7
(39.7)
70.0
1,618.3
1.8
20.2
1,640.3
147.2
974.8
98.3
1,220.3
0.9
0.6
198.9
129.2
0.7
–
2.2
328.1
Discontinued
operations
£m
27.6
(11.3)
16.3
(5.7)
10.6
–
10.6
–
10.6
(3.0)
7.6
26.0
–
0.8
26.8
4.4
–
2.1
6.5
–
8.8
Group
£m
1,075.4
(695.4)
380.0
(182.3)
197.7
(2.6)
195.1
(74.8)
120.3
(42.7)
77.6
1,644.3
1.8
21.0
1,667.1
151.6
974.8
100.4
1,226.8
2.2
336.9
There are no sales between the business segments. Segment assets include property, plant and equipment, goodwill, acquired intangibles, inventory
and receivables. Segment liabilities comprise operating liabilities and exclude taxation balances, corporate borrowings and accrued interest. Capital
expenditure represents additions to property, plant and equipment and intangible assets and includes additions through the acquisition of businesses.
Segmental analysis by geography
The Group’s operations are located in North America and the United Kingdom. Until the disposal of Ashtead Technology, the Group also operated in
Singapore. The following table provides an analysis of the Group’s revenue, segment assets and capital expenditure, including acquisitions, by country
of domicile. Segment assets include property, plant and equipment and intangible assets.
North America
United Kingdom
Rest of World
2009
£m
867.7
209.9
1.0
1,078.6
Revenue
2008
£m
821.9
249.9
3.6
1,075.4
2009
£m
1,394.0
292.1
–
1,686.1
Segment assets
2008
£m
1,137.7
309.3
3.5
1,450.5
Capital expenditure
2008
£m
202.3
132.9
1.7
336.9
2009
£m
166.1
72.5
–
238.6
Revenue from the Group’s discontinued operations was derived from North America (2009: £2.2m, 2008: £11.9m), United Kingdom (2009: £1.9m,
2008: £12.1m) and the Rest of World (2009: £1.0m, 2008: £3.6m).
3 Operating costs and other income
Staff costs:
Salaries
Social security costs
Other pension costs
Used rental equipment sold
Other operating costs:
Vehicle costs
Spares, consumables and
external repairs
Facility costs
Other external charges
Other income:
Profi t on disposal of non-rental
property, plant and equipment
Depreciation and amortisation:
Depreciation of owned assets
Depreciation of leased assets
Amortisation of acquired intangibles
59
2008
Total
£m
271.7
22.5
4.7
298.9
63.4
71.0
55.7
40.9
155.6
323.2
(1.4)
172.3
4.3
2.6
179.2
863.3
–
–
–
–
–
–
–
–
–
–
–
–
–
2.6
2.6
2.6
Before
exceptional
items and
amortisation
£m
Exceptional
items and
amortisation
£m
284.6
23.0
5.8
313.4
4.5
–
–
4.5
2009
Total
£m
289.1
23.0
5.8
317.9
Before
amortisation
£m
Amortisation
£m
271.7
22.5
4.7
298.9
37.3
50.3
87.6
63.4
84.0
0.5
84.5
71.0
61.9
47.3
174.4
367.6
1.9
25.3
8.0
35.7
63.8
72.6
182.4
403.3
55.7
40.9
155.6
323.2
(0.9)
(0.7)
(1.6)
(1.4)
197.5
3.6
–
201.1
40.6
3.3
3.4
47.3
238.1
6.9
3.4
248.4
172.3
4.3
–
176.6
918.5
137.1
1,055.6
860.7
Staff costs relating to discontinued operations are shown in note 7. Proceeds from the disposal of non-rental property, plant and equipment amounted
to £5.9m (2008: £5.9m) from continuing operations.
The costs shown in the above table include:
Operating lease rentals payable:
Plant and equipment
Property
Cost of inventories recognised as expense
Bad debt expense
Net foreign exchange losses
Before
exceptional
items and
amortisation
£m
Exceptional
items and
amortisation
£m
3.3
34.1
55.8
17.0
–
–
24.0
6.0
–
–
2009
Total
£m
3.3
58.1
61.8
17.0
–
Before
amortisation
£m
Amortisation
£m
5.8
29.2
108.9
8.0
0.2
–
–
–
–
–
2008
Total
£m
5.8
29.2
108.9
8.0
0.2
Ashtead Group plc Annual Report & Accounts 2009
notes to the consolidated
financial statements continued
3 Operating costs and other income continued
Remuneration payable to the Company’s auditors, Deloitte LLP, in the year is given below:
Audit services
Fees payable to Deloitte UK
– Group audit
– UK statutory audits of subsidiaries
Fees payable to other Deloitte fi rms
– Overseas statutory audit
– Overseas subsidiary audits
Other services
Fees payable to Deloitte UK
– Half year review
– Other assurance services
– Other non-audit services
Fees payable to other Deloitte fi rms
– Half year review
– Tax services
2009
£’000
343
14
–
292
649
73
20
135
48
–
925
Other non-audit services in 2009 relate to a review of the Group’s working capital forecasts in connection with the disposal of Ashtead Technology.
4 Exceptional items and amortisation
US cost reduction programme
UK cost reduction programme
Profi t on sale of property from closed sites
Profi t on sale of Ashtead Technology
Total exceptional items before taxation
Taxation on exceptional items
Total exceptional items
Amortisation of acquired intangibles (net of tax credit of £1.3m)
2009
£m
(52.2)
(31.7)
0.7
66.1
(17.1)
22.4
5.3
(2.1)
3.2
2008
£’000
343
29
4
258
634
63
20
–
37
83
837
2008
£m
–
–
–
–
–
(1.6)
(1.6)
(1.6)
(3.2)
The US and the UK cost reduction programmes relate to store closures, fl eet downsizing and other cost reduction measures taken in expectation of
lower demand for our equipment. The principal costs relate to impairment of rental fl eet as a result of the accelerated disposal programme and vacant
property costs and the impairment of leasehold improvements at profi t centres that will be closed. The gain on Ashtead Technology arose on the sale
of that business (refer note 7).
Exceptional items and amortisation are presented in the income statement as follows:
Sale of used rental equipment
Staff costs
Used rental equipment sold
Other operating costs
Other income
Depreciation
Amortisation
Charged in arriving at operating profi t and profi t before tax
Taxation
Profi t after taxation from discontinued operations
2009
£m
50.5
(4.5)
(50.3)
(35.7)
0.7
(43.9)
(3.4)
(86.6)
30.8
(55.8)
59.0
3.2
2008
£m
–
–
–
–
–
–
(2.6)
(2.6)
(0.6)
(3.2)
–
(3.2)
The exceptional depreciation charge of £43.9m consists of £40.6m relating to the impairment of rental equipment sold during the accelerated disposal
programme and £3.3m relating to the impairment of leasehold improvements at closed sites.
5 Net fi nancing costs
Investment income
Expected return on assets of defi ned benefi t pension plan
Interest expense
Bank interest payable
Interest payable on second priority senior secured notes
Interest payable on fi nance leases
Non-cash unwind of discount on defi ned pension plan liabilities
Non-cash unwind of discount on insurance provisions
Amortisation of deferred costs of debt raising
Total interest expense
Net fi nancing costs
6 Taxation
Analysis of (credit)/charge in period
Current tax
– UK corporation tax at 28% (2008: 29.8%)
– overseas taxation
Deferred tax
Taxation
61
2008
£m
4.3
36.1
35.4
1.2
2.9
1.1
2.4
79.1
74.8
2008
£m
–
5.7
5.7
34.0
39.7
2009
£m
4.1
21.6
42.4
0.7
3.1
1.1
2.8
71.7
67.6
2009
£m
–
0.1
0.1
(1.3)
(1.2)
The tax charge on continuing activities comprises a charge of £29.6m (2008: £39.1m) relating to tax on the profi t before exceptional items and
amortisation, together with a net credit of £30.8m (2008: £0.6m) comprising a tax credit of £1.3m (2008: £1.0m) on the amortisation expense
and a tax credit of £29.5m on exceptional items.
The tax charge for the period is higher than the standard rate of corporation tax in the UK of 28% for the year. The differences are explained below:
Profi t on ordinary activities before tax
Profi t on ordinary activities multiplied by the rate of Corporation tax in the UK of 28% (2008: 29.8%)
Effects of:
Use of foreign tax rates on overseas income
Change in rate of UK corporation tax on deferred tax asset
Other
Total taxation (credit)/charge
2009
£m
0.8
0.2
(2.5)
–
1.1
(1.2)
2008
£m
109.7
32.7
5.3
1.6
0.1
39.7
Ashtead Group plc Annual Report & Accounts 2009
notes to the consolidated
financial statements continued
7 Discontinued operations
The Group sold its Ashtead Technology division in June 2008 for a cash consideration of £96.0m. The results of the discontinued operations which have
been included in the consolidated income statement are as follows:
Revenue
Operating costs
EBITDA
Depreciation
Operating profi t
Net fi nancing costs
Profi t before taxation from operations
Taxation
Profi t after taxation from operations
Profi t on sale of Ashtead Technology net of taxation of £7.1m
Profi t after taxation from discontinued operations
Staff costs included in the above operating costs are as follows:
Salaries
Social security costs
Other pension costs
2009
£m
5.1
(2.3)
2.8
–
2.8
–
2.8
(0.8)
2.0
59.0
61.0
2009
£m
0.8
0.1
–
0.9
2008
£m
27.6
(11.3)
16.3
(5.7)
10.6
–
10.6
(3.0)
7.6
–
7.6
2008
£m
4.9
0.5
0.1
5.5
Proceeds from the disposal of property, plant and equipment amounted to £0.4m (2008: £1.1m).
The £0.8m tax charge consists of a deferred tax charge of £0.4m (2008: £1.8m) relating to the UK, a deferred tax charge of £0.3m relating to the US
(2008: £0.9m), a deferred tax charge of £nil (2008: £0.1m) and a current tax charge of £0.1m (2008: £0.2m) relating to Singapore.
The assets and liabilities of Ashtead Technology as at the date of disposal were:
Assets
Cash and cash equivalents
Inventories
Trade and other receivables
Taxation assets
Property, plant and equipment – rental equipment
– other assets
Goodwill
Total assets
Liabilities
Trade and other payables
Taxation liabilities
Total liabilities
Net assets
At 26 June 2008
£m
£m
18.9
0.3
2.8
0.1
5.8
0.8
19.2
2.0
30.7
4.6
2.5
7.1
23.6
The proceeds from the sale of Ashtead Technology which have been included in the profi t after tax from discontinued operations are as follows:
Sale of Ashtead Technology
Consideration received
Less: Costs of disposal
Net disposal consideration
Less: Carrying amounts of net assets disposed of
Less: Recycling of cumulative foreign exchange translation differences
Profi t on sale before taxation
Taxation
The results of the discontinued operations which have been included in the consolidated cash fl ow statement are as follows:
Cash fl ows attributable to discontinued operations
Cash fl ows from operating activities
Cash fl ows from investing activities
Cash fl ows from fi nancing activities
Net cash infl ow on disposal
Consideration received in cash
Less: Cash and cash equivalents balance sold
Less: Costs of disposal paid
Net consideration reported on cash fl ow statement
8 Dividends
Final dividend paid on 26 September 2008 of 1.675p (2008: 1.1p) per 10p ordinary share
Interim dividend paid on 26 February 2009 of 0.9p (2008: 0.825p) per 10p ordinary share
2009
£m
2.8
–
(0.3)
2.5
2009
£m
8.4
4.5
12.9
63
2009
£m
96.0
(5.1)
90.9
(23.6)
(1.2)
66.1
(7.1)
59.0
2008
£m
7.1
–
(7.1)
–
2009
£m
96.0
(2.8)
(3.9)
89.3
2008
£m
6.1
4.4
10.5
In addition, the directors are proposing a fi nal dividend in respect of the fi nancial year ended 30 April 2009 of 1.675p per share which will absorb £8.3m of
shareholders’ funds based on the 497.6m shares ranking for dividend at 17 June 2009. Subject to approval by shareholders, it will be paid on 11 September
2009 to shareholders who are on the register of members on 21 August 2009.
Ashtead Group plc Annual Report & Accounts 2009
notes to the consolidated
financial statements continued
9 Earnings per share
Continuing operations
Basic earnings per share
Effect of dilutive securities:
Share options and share plan awards
Diluted earnings per share
Discontinued operations
Basic earnings per share
Effect of dilutive securities:
Share options and share plan awards
Diluted earnings per share
Total group
Basic earnings per share
Effect of dilutive securities:
Share options and share plan awards
Diluted earnings per share
2009
Weighted
average no.
of shares
million
504.5
0.2
504.7
Earnings
£m
2.0
–
2.0
Per
share
amount
pence
0.4p
–
0.4p
2008
Weighted
average no.
of shares
million
Per
share
amount
pence
Earnings
£m
70.0
547.0
12.8p
–
70.0
2.2
549.2
(0.1p)
12.7p
61.0
504.5
12.1p
–
61.0
0.2
504.7
–
12.1p
7.6
–
7.6
547.0
2.2
549.2
1.4p
–
1.4p
63.0
504.5
12.5p
77.6
547.0
14.2p
–
63.0
0.2
504.7
–
12.5p
–
77.6
2.2
549.2
(0.1p)
14.1p
Underlying and cash tax earnings per share may be reconciled to the basic earnings per share as follows:
Total group
Basic earnings per share
Exceptional items and amortisation of acquired intangibles
Tax on exceptional items and amortisation
Exceptional deferred tax charge
Underlying earnings per share
Other deferred tax
Cash tax earnings per share
10 Inventories
Raw materials, consumables and spares
Goods for resale
2009
pence
12.5
4.1
(4.7)
–
11.9
5.4
17.3
2009
£m
4.2
6.2
10.4
2008
pence
14.2
0.5
(0.2)
0.3
14.8
6.6
21.4
2008
£m
11.6
11.0
22.6
11 Trade and other receivables
Trade receivables
Less: allowance for bad and doubtful receivables
Other receivables
65
2009
£m
141.6
(17.6)
124.0
24.3
148.3
2008
£m
149.7
(12.6)
137.1
22.8
159.9
The fair values of trade and other receivables are not materially different to the carrying values presented.
a) Trade receivables: credit risk
The Group’s exposure to the credit risk inherent in its trade receivables and the associated risk management techniques that the Group deploys in
order to mitigate this risk are discussed in note 25. The credit periods offered to customers vary according to the credit risk profi les of, and the invoicing
conventions established in, the Group’s markets. The contractual terms on invoices issued to customers vary between the US and the UK in that,
invoices issued by A-Plant are payable within 30-60 days whereas, invoices issued by Sunbelt are payable on receipt. Therefore, on this basis, a
signifi cant proportion of the Group’s trade receivables are contractually past due. In the US the allowance account for bad and doubtful receivables
is calculated based on prior experience refl ecting the level of uncollected receivables over the last year within each business. Accordingly, this cannot
be attributed to specifi c receivables so the aged analysis of trade receivables, including those past due, is shown gross of the allowance for bad and
doubtful receivables.
On this basis, the ageing analysis of trade receivables, including those past due, is as follows:
Carrying value at 30 April 2009
Carrying value at 30 April 2008
Current
£m
27.8
27.8
Less than
30 days
£m
55.7
69.4
30 – 60
days
£m
28.4
28.2
Trade receivables past due by:
More than
90 days
£m
21.6
16.2
60 – 90
days
£m
8.1
8.1
Total
£m
141.6
149.7
In practice, Sunbelt operates on 30 day terms and considers receivables past due if they are unpaid after 30 days. On this basis the Group’s ageing of
trade receivables, including those past due, is as follows:
Carrying value at 30 April 2009
Carrying value at 30 April 2008
b) Movement in the allowance account for bad and doubtful receivables
Current
£m
80.1
83.4
Less than
30 days
£m
28.0
37.3
30 – 60
days
£m
10.8
10.0
Trade receivables past due by:
More than
90 days
£m
17.7
13.6
60 – 90
days
£m
5.0
5.4
At 1 May
Amounts written off and recovered during the year
Increase in allowance recognised in income statement
Currency movements
Transfer to assets held for sale
At 30 April
12 Cash and cash equivalents
Cash and cash equivalents
2009
£m
12.6
(14.7)
17.0
2.7
–
17.6
2009
£m
1.7
Total
£m
141.6
149.7
2008
£m
12.4
(8.1)
8.7
0.1
(0.5)
12.6
2008
£m
1.8
Cash and cash equivalents comprise cash held by the Group. The carrying amount of cash and cash equivalents approximates their fair value.
Ashtead Group plc Annual Report & Accounts 2009
notes to the consolidated
financial statements continued
13 Property, plant and equipment
Land and
buildings
£m
Rental equipment
Held under
fi nance
leases
£m
Owned
£m
Offi ce and
workshop
equipment
£m
Motor vehicles
Held under
fi nance
leases
£m
Owned
£m
Cost or valuation
At 1 May 2007
Exchange difference
Acquisitions
Reclassifi cations
Additions
Disposals
Transfer to assets held for sale
At 30 April 2008
Exchange difference
Acquisitions
Reclassifi cations
Additions
Disposals
Transfer to assets held for sale
At 30 April 2009
Depreciation
At 1 May 2007
Exchange difference
Acquisitions
Reclassifi cations
Charge for the period
Disposals
Transfer to assets held for sale
At 30 April 2008
Exchange difference
Acquisitions
Reclassifi cations
Charge for the period
Disposals
Transfer to assets held for sale
At 30 April 2009
Net book value
At 30 April 2009
At 30 April 2008
72.1
0.3
–
(0.5)
7.5
(2.1)
–
77.3
12.6
–
–
7.2
(9.9)
(0.4)
86.8
21.9
0.1
–
(0.5)
3.5
(0.8)
(0.1)
24.1
2.2
–
–
10.2
(8.7)
(0.4)
27.4
1,433.7
11.7
4.9
(2.0)
294.8
(168.8)
(46.2)
1,528.1
393.1
0.1
(1.4)
207.5
(150.4)
(179.1)
1,797.9
513.4
6.0
2.1
(1.5)
158.7
(116.0)
(28.4)
534.3
159.7
–
(0.8)
210.8
(106.8)
(139.6)
657.6
59.4
53.2
1,140.3
993.8
0.4
–
–
(0.1)
–
–
–
0.3
0.1
–
(0.1)
–
–
–
0.3
0.1
–
–
(0.1)
0.1
–
–
0.1
–
–
–
–
–
–
0.1
0.2
0.2
47.7
0.3
–
1.2
3.3
(3.6)
(0.9)
48.0
11.1
–
1.4
2.2
(11.1)
(6.4)
45.2
35.1
0.3
–
0.6
5.0
(3.3)
(0.6)
37.1
9.3
–
0.8
5.4
(10.6)
(6.4)
35.6
73.9
0.7
–
0.1
25.3
(14.8)
(0.2)
85.0
22.8
–
22.0
19.7
(19.8)
(12.8)
116.9
31.3
0.4
–
(0.9)
10.7
(11.9)
(0.1)
29.5
9.9
–
11.3
15.0
(15.1)
(10.5)
40.1
38.1
0.3
–
(2.3)
0.1
(3.6)
–
32.6
8.4
–
(22.2)
1.7
(3.5)
–
17.0
16.1
0.1
–
(1.2)
4.3
(3.2)
–
16.1
4.1
–
(11.6)
3.6
(2.9)
–
9.3
Total
£m
1,665.9
13.3
4.9
(3.6)
331.0
(192.9)
(47.3)
1,771.3
448.1
0.1
(0.3)
238.3
(194.7)
(198.7)
2,064.1
617.9
6.9
2.1
(3.6)
182.3
(135.2)
(29.2)
641.2
185.2
–
(0.3)
245.0
(144.1)
(156.9)
770.1
9.6
10.9
76.8
55.5
7.7
16.5
1,294.0
1,130.1
The amount of rebuild costs capitalised in the year was £1.9m (2008: £3.4m). Included in depreciation for the year is an impairment charge of £43.9m.
14 Intangible assets including goodwill
Other intangible assets
Cost or valuation
At 1 May 2007
Recognised on acquisition
Adjustment to prior year acquisition
Exchange differences
Transfer to assets held for sale
At 30 April 2008
Recognised on acquisition
Disposals
Exchange differences
Transfer to assets held for sale
At 30 April 2009
Amortisation
At 1 May 2007
Charge for the period
At 30 April 2008
Charge for the period
Disposals
Exchange differences
At 30 April 2009
Net book value
At 30 April 2009
At 30 April 2008
Goodwill
£m
289.6
1.5
0.1
2.7
(2.0)
291.9
–
–
93.5
–
385.4
–
–
–
–
–
–
–
385.4
291.9
Brand
names
£m
10.7
–
–
–
–
10.7
–
–
3.0
–
13.7
9.4
0.1
9.5
0.1
–
3.0
12.6
1.1
1.2
Customer
lists
£m
Contract
related
£m
1.7
–
–
–
–
1.7
–
–
–
–
1.7
0.1
0.2
0.3
0.3
–
–
0.6
1.1
1.4
8.3
1.0
(0.1)
–
–
9.2
0.2
(1.4)
2.8
–
10.8
1.5
2.3
3.8
3.0
(1.4)
1.7
7.1
3.7
5.4
Total
£m
20.7
1.0
(0.1)
–
–
21.6
0.2
(1.4)
5.8
–
26.2
11.0
2.6
13.6
3.4
(1.4)
4.7
20.3
5.9
8.0
391.3
299.9
67
Total
£m
310.3
2.5
–
2.7
(2.0)
313.5
0.2
(1.4)
99.3
–
411.6
11.0
2.6
13.6
3.4
(1.4)
4.7
20.3
Goodwill acquired in a business combination was allocated, at acquisition, to the reporting units that benefi ted from that business combination, as follows:
Sunbelt
A-Plant
Continuing operations
Discontinued operations – Ashtead Technology
2009
£m
371.1
14.3
385.4
–
385.4
2008
£m
277.6
14.3
291.9
2.0
293.9
For the purposes of determining potential goodwill impairment, recoverable amounts are determined from value in use calculations using cash fl ow
projections based on Board approved fi nancial plans covering a three year period. These fi nancial plans were updated during the 2009/10 budgeting
cycle and refl ect the current economic environment. The growth rate assumptions used in the plans were based on past performance and management’s
expectations of market developments. The annual growth rate used to determine the cash fl ows beyond the three year period is 2% and does not
exceed the average long-term growth rates for the relevant markets. The pre-tax rate used to discount the projected cash fl ows is 9%.
A sensitivity analysis has been undertaken by changing the key assumptions used for both Sunbelt and A-Plant. Based on this sensitivity analysis,
no reasonably possible change in the assumptions resulted in the carrying value of the goodwill in Sunbelt or A-Plant being reduced to the
recoverable amount.
15 Trade and other payables
Trade payables
Other taxes and social security
Accruals and deferred income
2009
£m
25.6
14.0
67.1
106.7
2008
£m
43.8
12.9
72.4
129.1
Trade and other payables include amounts relating to the purchase of fi xed assets of £9.4m (2008: £24.1m). The fair values of trade and other payables
are not materially different from the carrying values presented.
Ashtead Group plc Annual Report & Accounts 2009
notes to the consolidated
financial statements continued
16 Borrowings
Current
First priority senior secured bank debt
Finance lease obligations
Non-current
First priority senior secured bank debt
Finance lease obligations
8.625% second priority senior secured notes, due 2015
9% second priority senior secured notes, due 2016
Loan notes
2009
£m
1.7
5.2
6.9
499.4
2.7
165.1
363.5
–
1,030.7
2008
£m
1.3
6.3
7.6
554.8
8.9
122.2
271.4
0.1
957.4
Senior secured bank debt and the senior secured notes are secured by way of, respectively, fi rst and second priority fi xed and fl oating charges over
substantially all the Group’s property, plant and equipment, inventory and trade receivables.
First priority senior secured credit facility
The $1.75bn fi rst priority asset-based senior secured loan facility (‘ABL facility’) consists of a $1.5bn revolving credit facility and a $250m term loan and
is secured by a fi rst priority interest in substantially all of the Group’s assets. Pricing for the revolver loan is based on the ratio of funded debt to EBITDA
before exceptional items according to a grid which varies, depending on leverage, from LIBOR plus 225bp to LIBOR plus 150bp. At 30 April 2009 the
Group’s borrowing rate was LIBOR plus 175bp. The term loan is priced at LIBOR plus 175bp.
The ABL facility carries minimal amortisation of 1% per annum ($2.5m) on the term loan and is committed until August 2011. The ABL facility includes
a springing covenant package under which quarterly fi nancial performance covenants are tested only if available liquidity is less than $125m. Available
liquidity at 30 April 2009 was £371m ($550m) refl ecting drawings under the facility at that date together with outstanding letters of credit of £21m
($32m). As the ABL facility is asset-based, the maximum amount available to be borrowed (which includes drawings in the form of standby letters
of credit) depends on asset values (receivables, inventory, rental equipment and real estate) which are subject to periodic independent appraisal.
The maximum amount which could be drawn at 30 April 2009 was £899m ($1,332m).
8.625% second priority senior secured notes due 2015 having a nominal value of $250m
On 3 August 2005 the Group, through its wholly owned subsidiary Ashtead Holdings plc, issued $250m of 8.625% second priority senior secured notes
due 1 August 2015. The notes are secured by second priority security interests over substantially the same assets as the ABL facility and are also
guaranteed by Ashtead Group plc.
9% second priority senior secured notes due 2016 having a nominal value of $550m
On 15 August 2006 the Group, through its wholly owned subsidiary Ashtead Capital, Inc., issued $550m of 9% second priority senior secured notes
due 15 August 2016. The notes are secured by second priority interests over substantially the same assets as the ABL facility and are also guaranteed
by Ashtead Group plc. Both note issues rank pari passu on a second lien basis.
Under the terms of both the 8.625% and 9% notes the Group is, subject to important exceptions, restricted in its ability to incur additional debt,
pay dividends, make investments, sell assets, enter into sale and leaseback transactions and merge or consolidate with another company.
The effective rates of interest at the balance sheet dates were as follows:
First priority senior secured bank debt – revolving advances in dollars
– term loan advances in dollars
– revolving advances in sterling
– $250m nominal value
– $550m nominal value
Secured notes
Finance leases
2009
2.19%
2.25%
2.7%
8.625%
9.0%
7.0%
2008
4.25%
4.5%
7.0%
8.625%
9.0%
7.0%
17 Obligations under fi nance leases
Amounts payable under fi nance leases:
Less than one year
Later than one year but not more than fi ve
Future fi nance charges
69
Minimum
lease payments
2008
£m
2009
£m
Present value of
minimum lease payments
2008
£m
2009
£m
5.5
2.9
8.4
(0.5)
7.9
7.1
9.5
16.6
(1.4)
15.2
5.2
2.7
7.9
6.3
8.9
15.2
The Group’s obligations under fi nance leases are secured by the lessor’s rights over the leased assets disclosed in note 13.
18 Provisions
At 1 May 2008
Exchange differences
Utilised
Charged in the year
Amortisation of discount
At 30 April 2009
Included in current liabilities
Included in non-current liabilities
Self-
insurance
£m
21.7
6.7
(15.2)
13.0
1.1
27.3
Vacant
property
£m
6.2
2.0
(5.1)
23.8
–
26.9
2009
£m
17.4
36.8
54.2
Total
£m
27.9
8.7
(20.3)
36.8
1.1
54.2
2008
£m
9.1
18.8
27.9
Self-insurance provisions relate to the discounted estimated liability in respect of claims excesses to be incurred under the Group’s self-insured
programmes for events occurring up to the year end and are expected to be utilised over a period of approximately eight years. The provision is
established based on advice received from independent actuaries of the estimated total cost of the self-insured retained risk based on historical
claims experience. The amount charged in the year is stated net of a £3.9m adjustment to reduce the provision held at 1 May 2008.
The provision for vacant property costs is expected to be utilised over a period of up to fi ve years.
Ashtead Group plc Annual Report & Accounts 2009
notes to the consolidated
financial statements continued
19 Deferred tax
Deferred tax assets
At 1 May 2008 (as originally reported)
Restatement on application of IFRIC 14
At 1 May 2008 (restated)
Offset against deferred tax liability at 1 May 2008
Gross deferred tax assets at 1 May 2008
Exchange differences
Credit/(charge) to income statement
Charge to equity
Charge on Ashtead Technology disposal
Less offset against deferred tax liability
At 30 April 2009
Deferred tax liabilities
Net deferred tax liability at 1 May 2008
Deferred tax assets offset at 1 May 2008
Gross deferred tax liability at 1 May 2008
Exchange differences
Charge to income statement
Less offset of deferred tax assets
– benefi t of tax losses
– other temporary differences
At 30 April 2009
Tax losses
£m
–
–
–
10.4
10.4
3.7
35.5
–
(7.1)
(42.5)
–
Accelerated tax
depreciation
£m
133.6
10.4
144.0
52.4
27.6
224.0
Other
temporary
differences
£m
19.6
(1.6)
18.0
36.4
54.4
11.7
(7.9)
(0.9)
(0.4)
(44.6)
12.3
Other
temporary
differences
£m
(35.3)
36.4
1.1
0.2
(1.3)
–
Total
£m
19.6
(1.6)
18.0
46.8
64.8
15.4
27.6
(0.9)
(7.5)
(87.1)
12.3
Total
£m
98.3
46.8
145.1
52.6
26.3
224.0
(42.5)
(44.6)
136.9
The Group has an unrecognised UK deferred tax asset of £1.6m (2008: £2.0m) in respect of losses in a non-trading UK company, as it is not considered
probable this deferred tax asset will be utilised.
At the balance sheet date, the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries for which deferred tax
liabilities have not been recognised was £nil (2008: £15.5m). No liability has been recognised in respect of these differences because the Group is in a
position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future.
20 Called up share capital
Ordinary shares of 10p each
Authorised
Issued and fully paid:
At 1 May
Allotted under share option schemes
Cancellation of shares
At 30 April
2009
Number
2008
Number
2009
£m
900,000,000 900,000,000
90.0
561,572,726 559,898,348
1,674,378
–
(8,247,172)
–
553,325,554 561,572,726
56.2
–
(0.9)
55.3
2008
£m
90.0
56.0
0.2
–
56.2
In the year ended 30 April 2009, 675,559 ordinary shares of 10p each were re-issued out of treasury at an average price of 23p per share under share
option plans raising £0.2m. In addition, during the year the Company purchased 27,288,283 shares at a total cost of £15.7m, which are held in treasury,
the ESOT purchased 491,513 shares at a total cost of £0.4m and 8,247,172 shares held in treasury were cancelled.
At 30 April 2009, 50m shares were held in treasury, acquired at an average cost of 66p.
21 Reconciliation of changes in equity
At 1 May 2007
Total recognised
income and expense
Shares issued
Dividends paid
Share-based payments
Vesting of share awards
Own shares purchased
At 30 April 2008 as restated
Total recognised
income and expense
Shares issued/re-issued
Dividends paid
Share-based payments
Vesting of share awards
Own shares purchased
Cancellation of shares held
in treasury by the Company
Realisation of foreign exchange
translation differences
At 30 April 2009
Share
capital
£m
56.0
–
0.2
–
–
–
–
56.2
–
–
–
–
–
–
(0.9)
–
55.3
Share
premium
account
£m
3.3
Capital
redemption
reserve
£m
–
Non–
distributable
reserve
£m
90.7
–
–
–
–
–
–
90.7
–
–
–
–
–
–
–
–
0.3
–
–
–
–
3.6
–
–
–
–
–
–
–
–
3.6
–
–
–
–
–
–
–
–
–
–
–
–
–
0.9
–
0.9
Own
shares
held by
ESOT
£m
(8.7)
Cumulative
foreign
exchange
translation
differences
£m
(30.2)
Distributable
reserves
£m
285.6
–
–
–
–
3.3
(1.6)
(7.0)
–
–
–
–
1.1
(0.4)
–
2.0
–
–
–
–
–
(28.2)
56.1
–
–
–
–
–
74.0
–
(10.5)
2.5
(3.3)
–
348.3
58.0
(0.3)
(12.9)
(0.8)
(1.1)
–
(5.4)
Treasury
stock
£m
–
–
–
–
–
–
(23.3)
(23.3)
–
0.5
–
–
–
(15.7)
5.4
–
90.7
–
(33.1)
–
(6.3)
1.2
29.1
–
385.8
71
Total
£m
396.7
76.0
0.5
(10.5)
2.5
–
(24.9)
440.3
114.1
0.2
(12.9)
(0.8)
–
(16.1)
–
1.2
526.0
22 Share-based payments
The Employee Share Option Trust (ESOT) facilitates the provision of shares under certain of the Group’s share-based remuneration plans. It holds a
benefi cial interest in 5,752,818 ordinary shares of the Company acquired at an average cost of 108.7p per share. The shares had a market value of £3.6m
at 30 April 2009. The ESOT has waived the right to receive dividends on the shares it holds. The costs of operating the ESOT are borne by the Group but
are not signifi cant.
The Group has recognised the fair value of share-based payments to employees based on grants of shares since 7 November 2002 (the transitional date
for IFRS 2, Share-based payments).
Cash Incentive Plan
The Cash Incentive Plan (‘CIP’) is an award of units which are subject to the same performance conditions as apply to the Company’s unapproved
share option scheme. Awards were granted under this plan in 2000 and 2001 and are exercisable up to February 2010 and 2011, respectively, as all
performance conditions have been satisfi ed. On exercise by the option holder, the difference between the mid-market price of Ashtead Group plc shares
on that day and the grant prices of 94.09p and 115.31p, for the 2000 and 2001 awards respectively, multiplied by the number of units held will be paid
by way of a cash award to the holder, net of applicable taxes.
In 2009 the charge in respect of the CIP was £nil (2008: £179,000 credit). The fair value of the awards at 30 April 2009 was based on the share price
on that date.
Performance Share Plan
Details of the Performance Share Plan (‘PSP’) are given on pages 41 and 42. The costs of this scheme are charged to the income statement over the
vesting period, based on the fair value of the award at the grant date and the likelihood of allocations vesting under the scheme. In 2009, there was a
net credit in respect of the PSP of £907,000 (2008: charge of £2,070,000). This refl ected the Company’s assessment that it was unlikely that the 2006
or 2007 PSP awards would vest due to the economic downturn. The performance criteria related to these awards were non-market performance
measures and the amounts charged in prior years in relation to these awards have therefore been reversed.
The fair value of awards granted during the year is estimated using a Black-Scholes option pricing model with the following assumptions: share price
at grant date of 56.5p, nil exercise price, a dividend yield of 4.42% volatility of 39.85%, a risk free rate of 4.16% and an expected life of three years.
Expected volatility was determined by calculating the historical volatility over the previous three years. The expected life used in the model is based
on the terms of the plan.
Discretionary share option schemes
Details of the discretionary share option schemes are given on page 41. In accordance with the transitional provisions of IFRS 2, Share-based payments,
the Group has not recognised any expense for these schemes as they were all granted prior to 7 November 2002.
Ashtead Group plc Annual Report & Accounts 2009
notes to the consolidated
financial statements continued
22 Share-based payments continued
Save-As-You-Earn (SAYE) schemes
The costs of SAYE schemes are charged to the income statement over the vesting period based upon the fair value of the award at the grant date.
In 2009 the charge in respect of SAYE schemes was £110,000 (2008: £292,000). No awards were granted during 2008/9.
2005/6
Outstanding at 1 May 2005
Granted
Forfeited
Exercised
Expired
Outstanding at 30 April 2006
Exercisable at 30 April 2006
2006/7
Outstanding at 1 May 2006
Granted
Rights issue uplift
Forfeited
Exercised
Expired
Outstanding at 30 April 2007
Exercisable at 30 April 2007
2007/8
Outstanding at 1 May 2007
Granted
Forfeited
Exercised
Expired
Outstanding at 30 April 2008
Exercisable at 30 April 2008
2008/9
Outstanding at 1 May 2008
Granted
Forfeited
Exercised
Expired
Outstanding at 30 April 2009
Exercisable at 30 April 2009
Options outstanding at 30 April 2009:
Year of grant
1999/2000
2000/1
2001/2
2005/6
2006/7
11,809,692
–
(507,234)
(4,815,598)
–
6,486,860
6,486,860
6,486,860
–
505,874
(32,077)
(1,993,853)
(4,336)
4,962,468
4,962,468
4,962,468
–
–
(23,578)
(1,346,487)
3,592,403
3,592,403
3,592,403
–
–
(327,384)
(1,328,967)
1,936,052
1,936,052
Weighted
average
exercise
price (p)
94.364
115.267
38.282
–
–
Discretionary schemes
Weighted
average
exercise
price (p)
Number
SAYE
Weighted
average
exercise
price (p)
28.413
115.430
32.369
48.774
37.403
35.637
31.233
35.637
132.400
–
80.408
25.385
88.572
48.911
23.246
48.911
–
63.928
28.220
109.423
65.705
22.388
65.705
–
112.411
22.388
94.762
115.299
107.318
Number
4,243,507
398,777
(124,396)
(93,188)
(197,774)
4,226,926
33,674
4,226,926
555,938
287,945
(77,270)
(1,330,414)
(183,483)
3,479,642
81,380
3,479,642
–
(189,694)
(1,772,448)
(190,467)
1,327,033
43,417
1,327,033
–
(14,137)
(673,391)
(156,121)
483,384
222,993
IIP
Number
PSP
Number
1,163,970
–
–
(176,469)
–
987,501
–
987,501
–
83,045
–
–
–
1,070,546
–
1,831,500
1,899,399
(88,453)
–
–
3,642,446
–
3,642,446
1,759,087
296,891
(210,252)
–
–
5,488,172
–
1,070,546
–
–
5,488,172
2,252,237
(139,068)
(1,070,546) (2,100,781)
–
5,500,560
–
–
–
–
5,500,560
–
7,031,707
–
–
–
(786,861)
–
–
(1,586,055)
– 10,159,351
–
–
105.797
–
120.544
80.813
–
123.191
123.191
123.191
–
–
107.541
90.741
124.223
123.876
123.876
123.876
–
–
44.442
170.384
106.965
106.965
106.965
–
–
38.282
134.277
99.832
99.832
Discretionary schemes
SAYE
Number
of shares
Latest
exercise
date
472,476 08 Mar 10
16 Aug 10
26 Feb 12
–
–
1,203,701
259,875
–
–
1,936,052
Weighted
average
exercise
price (p)
–
–
–
106.480
122.134
Number
of shares
–
–
–
Latest
exercise
date
–
–
–
211,056 31 May 09
272,328
28 Feb 10
483,384
The weighted average exercise price during the period for options exercised over the year was 38.282p (2008: 44.442p) for discretionary schemes
and 22.388p (2008: 28.220p) for SAYE schemes.
There was a net credit for the year relating to employee share-based payment plans of £0.8m (2008: charge of £2.2m), related to equity-settled
share-based payment transactions. After deferred tax, the total charge was £0.7m (2008: £1.6m).
23 Operating leases
Minimum annual commitments under existing operating leases may be analysed by date of expiry of the lease as follows:
Land and buildings:
Expiring in one year
Expiring between two and fi ve years
Expiring in more than fi ve years
Other:
Expiring in one year
Expiring between two and fi ve years
Total
73
2008
£m
4.3
13.1
18.1
35.5
0.5
1.3
1.8
2009
£m
2.8
22.0
17.0
41.8
0.2
0.9
1.1
42.9
37.3
Total minimum commitments under existing operating leases at 30 April 2009 through to the end of their respective term by year are as follows:
Financial year
2010
2011
2012
2013
2014
Thereafter
Land and
buildings
£m
41.8
32.2
28.5
26.1
22.3
96.0
246.9
Other
£m
1.1
0.8
0.6
–
–
–
2.5
Total
£m
42.9
33.0
29.1
26.1
22.3
96.0
249.4
£26.9m of the total minimum operating lease commitments of £246.9m relating to vacant properties have been provided within the fi nancial
statements and included within provisions in the balance sheet.
24 Pensions
The Group operates pension plans for the benefi t of qualifying employees. The major plans for new employees throughout the Group are all defi ned
contribution plans following the introduction of the stakeholder pension plan for UK employees in May 2002. Pension costs for defi ned contribution
plans were £5.1m (2008: £3.9m).
The Group also has a defi ned benefi t plan for UK employees which was closed to new members in 2001. This plan is a funded defi ned benefi t plan
with trustee administered assets held separately from those of the Group. A full actuarial valuation was carried out as at 30 April 2007 and updated
to 30 April 2009 by a qualifi ed independent actuary. The actuary is engaged by the Company to perform a valuation in accordance with IAS 19.
The principal assumptions made by the actuary were as follows:
Rate of increase in salaries
Rate of increase in pensions in payment
Discount rate
Infl ation assumption
Weighted average expected return on plan assets
2009
4.10%
3.10%
7.00%
3.10%
7.20%
2008
4.50%
3.50%
6.25%
3.50%
7.50%
Pensioner life expectancy assumed in the 30 April 2009 update is based on the PA00 ‘medium cohort’ mortality tables adjusted so as to apply a minimum
annual rate of improvement of 1.5% a year. Samples of the ages to which pensioners are assumed to live are as follows:
Pensioner aged 65 in 2009
Pensioner aged 65 in 2020
The amounts recognised in the income statement are as follows:
Current service cost
Interest cost
Expected return on plan assets
Past service cost
Gains on curtailments and settlements
Total income
Male
88.0
91.0
2009
£m
0.7
3.1
(4.1)
0.2
(0.1)
(0.2)
Female
90.6
93.5
2008
£m
0.9
2.9
(4.3)
–
–
(0.5)
Ashtead Group plc Annual Report & Accounts 2009
notes to the consolidated
financial statements continued
24 Pensions continued
The amounts recognised in the balance sheet are determined as follows:
Fair value of plan assets
Present value of defi ned benefi t obligation
Net asset recognised in the balance sheet
Movements in the present value of defi ned benefi t obligations were as follows:
At 1 May
Current service cost
Interest cost
National Insurance rebates received
Contributions from members
Actuarial gain
Benefi ts paid
Past service cost
Curtailments and settlements
2009
£m
44.0
(43.7)
0.3
2009
£m
49.5
0.7
3.1
0.2
0.5
(9.3)
(1.1)
0.2
(0.1)
43.7
The actuarial gain in the year ended 30 April 2009 refl ects the increase in the required discount rate (that for AA rated corporate bonds) in the year
from 6.25% to 7.0% which reduced the discounted value of accrued defi ned benefi t obligations.
Movements in the fair value of plan assets were as follows:
At 1 May
Expected return on plan assets
Actual return on plan assets below expected return
Contributions from sponsoring companies
National Insurance rebates received
Contributions from members
Benefi ts paid
The analysis of the scheme assets and the expected rate of return at the balance sheet date was as follows:
Equity instruments
Bonds
Property
Cash
2009
£m
55.3
4.1
(16.7)
1.7
0.2
0.5
(1.1)
44.0
2009
£m
24.2
15.8
3.9
0.1
44.0
Expected return
2008
%
8.0
6.0
8.0
–
7.5
2009
%
8.0
5.8
8.0
–
7.2
The overall expected return on assets is calculated as the weighted average of the expected returns on each individual asset class. The expected return
on equities is the sum of infl ation, the dividend yield, economic growth and investment expenses. The return on gilts and bonds is the current market
yield on long-term gilts and bonds.
2008
£m
(restated)
55.3
(49.5)
5.8
2008
£m
52.4
0.9
2.9
0.4
0.5
(6.6)
(1.0)
–
–
49.5
2008
£m
57.6
4.3
(7.2)
0.7
0.4
0.5
(1.0)
55.3
Fair value
2008
£m
36.5
13.0
5.4
0.4
55.3
The history of experience adjustments is as follows:
Fair value of scheme assets
Present value of defi ned benefi t obligations
Surplus/(defi cit) in the scheme
Experience adjustments on scheme liabilities
Gain/(loss) (£m)
Percentage of closing scheme liabilities
Experience adjustments on scheme assets
(Loss)/gain (£m)
Percentage of closing scheme assets
2009
£m
44.0
(43.7)
0.3
2008
£m
55.3
(49.5)
5.8
9.3
21%
6.6
13%
(16.7)
(38%)
(7.2)
(13%)
2007
£m
57.6
(52.4)
5.2
1.6
3%
0.9
2%
2006
£m
52.2
(50.5)
1.7
(5.1)
(10%)
5.3
10%
75
2005
£m
34.5
(50.7)
(16.2)
(4.2)
(8%)
0.5
1%
The cumulative actuarial losses recognised in the statement of recognised income and expense since the adoption of IFRS are £9.0m.
The estimated amount of contributions expected to be paid by the Company to the plan during the current fi nancial year is £1.0m.
25 Financial risk management
The Group’s trading and fi nancing activities expose it to various fi nancial risks that, if left unmanaged, could adversely impact on current or future
earnings. Although not necessarily mutually exclusive, these fi nancial risks are categorised separately according to their different generic risk
characteristics and include market risk (foreign currency risk and interest rate risk), credit risk and liquidity risk.
It is the role of the Group treasury function to manage and monitor the Group’s fi nancial risks and internal and external funding requirements in support
of the Group’s corporate objectives. Treasury activities are governed by policies and procedures approved by the Board and monitored by the Finance
and Administration Committee. In particular, the Board of directors or, through delegated authority, the Finance and Administration Committee, approves
any derivative transactions. Derivative transactions are only undertaken for the purposes of managing interest rate risk and currency risk. The Group
does not trade in fi nancial instruments. The Group maintains treasury control systems and procedures to monitor liquidity, currency, credit and fi nancial
risks. The Group reports in sterling and pays dividends in sterling.
Market risk
The Group’s activities expose it primarily to interest rate and currency risk. Interest rate risk is monitored on a continuous basis and managed, where
appropriate, through the use of interest rate swaps whereas, the use of forward foreign exchange contracts to manage currency risk is considered on
an individual non-trading transaction basis. The Group is not exposed to commodity price risk or equity price risk as defi ned in IFRS 7.
Interest rate risk
Management of fi xed and variable rate debt
The Group has fi xed and variable rate debt in issue with 52% of the drawn debt at a fi xed rate. The Group’s accounting policy requires all borrowings
to be held at amortised cost. As a result the carrying value of fi xed rate debt is unaffected by changes in credit conditions in the debt markets and there
is therefore no exposure to fair value interest rate risk. The Group’s debt that bears interest at a variable rate comprises all outstanding borrowings under
the senior secured credit facility. The interest rates currently applicable to this variable rate debt are LIBOR as applicable to the currency borrowed
(US dollars or pounds) plus 175bp for revolver borrowings and term borrowings. The Group periodically utilises interest rate swap agreements to manage
and mitigate its exposure to changes in interest rates. However, during the year ended and as at 30 April 2009, the Group had no such outstanding swap
agreements. The Group also may at times hold cash and cash equivalents which earn interest at a variable rate.
Net variable rate debt sensitivity
At 30 April 2009, based upon the amount of variable rate debt outstanding, the Group’s pre-tax profi ts would change by approximately £5m for each
one percentage point change in interest rates applicable to the variable rate debt and, after tax effects, equity would change by approximately £3m.
The amount of the Group’s variable rate debt may fl uctuate as a result of changes in the amount of debt outstanding under the revolving tranches
of the senior secured credit facility.
Currency exchange risk
Currency exchange risk is limited to translation risk as there are no transactions in the ordinary course of business that take place between foreign
entities. The Group’s reporting currency is the pound sterling. However, a majority of our assets, liabilities, revenue and costs is denominated in US
dollars. The Group has arranged its fi nancing such that approximately 99% of its debt is also denominated in US 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.
The Group’s exposure to exchange rate movements on trading transactions is relatively limited. All Group companies invoice revenues in their respective
local currency and generally incur expense and purchase assets in their local currency. Consequently, the Group does not routinely hedge either forecast
foreign exchange exposures or the impact of exchange rate movements on the translation of overseas profi ts into sterling. Where the Group does
hedge, it maintains appropriate hedging documentation. Foreign exchange risk on signifi cant non-trading transactions (e.g. acquisitions) is considered
on an individual basis.
Resultant impacts of reasonably possible changes to foreign exchange rates
Based upon the level of US operations and of the US dollar-denominated debt balance and US interest rates at 30 April 2009, a 1% change in the
US dollar-pound exchange rate would have impacted our pre-tax profi ts by approximately £0.3m and equity by approximately £2.4m. At 30 April 2009,
the Group had no outstanding foreign exchange contracts.
Ashtead Group plc Annual Report & Accounts 2009
notes to the consolidated
financial statements continued
25 Financial risk management continued
Credit risk
The Group’s principal fi nancial assets are cash and bank balances and trade and other receivables. The Group’s credit risk is primarily attributable to
its trade receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables. The credit risk on liquid funds and
derivative fi nancial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.
The Group’s maximum exposure to credit risk is presented in the following table.
Cash and cash equivalents
Trade and other receivables
2009
£m
1.7
148.3
150.0
2008
£m
1.8
159.9
161.7
The Group has a large number of unrelated customers, serving over 680,000 during the fi nancial year, and does not have any signifi cant credit exposure
to any particular customer. Each business segment manages its own exposure to credit risk according to the economic circumstances and characteristics
of the markets they serve. The Group believes that management of credit risk on a devolved basis enables it to assess and manage credit risk more
effectively. However, broad principles of credit risk management practice are observed across the Group, such as the use of credit reference agencies
and the maintenance of credit control functions.
Liquidity risk
Liquidity risk is the risk that the Group could experience diffi culties in meeting its commitments to creditors as fi nancial liabilities fall due for payment.
The Group generates signifi cant free cash fl ow (defi ned as cash fl ow from operations less replacement capital expenditure net of proceeds of asset
disposals, interest paid and tax paid). This free cash fl ow is available to the Group to invest in growth capital expenditure, acquisitions and dividend
payments or to reduce debt.
In addition to the strong free cash fl ow from normal trading activities, additional liquidity is available through the Group’s ABL facility. At 30 April 2009,
availability under this facility was $550m (£371m).
Contractual maturity analysis
Trade receivables, the principal class of non-derivative fi nancial asset held by the Group, are settled gross by customers.
The following table presents the Group’s outstanding contractual maturity profi le for its non-derivative fi nancial liabilities, excluding trade and other
payables which fall due within one year. The analysis presented is based on the undiscounted contractual maturities of the Group’s fi nancial liabilities,
including any interest that will accrue, except where the Group is entitled and intends to repay a fi nancial liability, or part of a fi nancial liability, before
its contractual maturity.
At 30 April 2009
Bank and other debt
Finance leases
8.625% senior secured notes
9.0% senior secured notes
Interest payments
At 30 April 2008
Bank and other debt
Finance leases
8.625% senior secured notes
9.0% senior secured notes
Interest payments
2010
£m
1.7
5.2
–
–
6.9
60.7
67.6
2009
£m
1.3
6.3
–
–
7.6
55.7
63.3
2011
£m
1.7
2.4
–
–
4.1
61.8
65.9
2010
£m
1.3
5.7
–
–
7.0
57.9
64.9
2012
£m
502.3
0.3
–
–
502.6
51.9
554.5
2011
£m
1.3
3.0
–
–
4.3
58.7
63.0
2013
£m
–
–
–
–
–
48.0
48.0
2012
£m
557.3
0.2
–
–
557.5
41.6
599.1
Undiscounted cash fl ows – year to 30 April
Total
2014
£m
£m
505.7
–
–
7.9
168.7
–
371.2
–
1,053.5
–
365.1
48.0
1,418.6
48.0
Thereafter
£m
–
–
168.7
371.2
539.9
94.7
634.6
Undiscounted cash fl ows – year to 30 April
Total
2013
£m
£m
561.2
–
15.2
–
126.2
–
277.7
–
980.3
–
355.5
35.9
1,335.8
35.9
Thereafter
£m
–
–
126.2
277.7
403.9
105.7
509.6
77
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for
shareholders and benefi ts for other stakeholders and, with cognisance of forecast future market conditions, to maintain an optimal capital structure.
In order to manage the short and long-term capital structure, the Group adjusts the amount of ordinary dividends paid to shareholders, returns capital
to shareholders (for example, share buy-backs) and arranges appropriate fi nancing to fund business investment and mergers and acquisitions.
The Group seeks to maintain leverage of between 2 to 3 times net debt to EBITDA over the economic cycle.
Fair value of fi nancial instruments
Net fair values of derivative fi nancial instruments
At 30 April 2009, the Group’s embedded prepayment options included within its secured loan notes had a combined fair value of £nil (2008: £nil).
At 30 April 2009, the Group had no other derivative fi nancial instruments.
Fair value of non-derivative fi nancial assets and liabilities
The table below provides a comparison, by category of the carrying amounts and the fair values of the Group’s non-derivative fi nancial assets and
liabilities at 30 April 2009. Fair value is the amount at which a fi nancial instrument could be exchanged in an arm’s length transaction between informed
and willing parties and includes accrued interest. Where available, market values have been used to determine fair values of fi nancial assets and
liabilities. Where market values are not available, fair values of fi nancial assets and liabilities have been calculated by discounting expected future cash
fl ows at prevailing interest and exchange rates.
Fair value of non-current borrowings:
Long-term borrowings
– fi rst priority senior secured bank debt
– fi nance lease obligations
– 8.625% senior secured notes
– 9% senior secured notes
– other loan notes
Deferred costs of raising fi nance
Fair value of other fi nancial instruments held or issued to fi nance the Group’s operations:
Short-term borrowings
Finance lease obligations due within one year
Trade and other payables
Trade and other receivables
Cash at bank and in hand
Book value
£m
At 30 April 2009
Fair value
£m
Book value
£m
At 30 April 2008
Fair value
£m
504.0
2.7
168.7
371.2
–
1,046.6
(15.9)
1,030.7
484.0
2.7
109.7
241.3
–
837.7
–
837.7
559.8
8.9
126.2
277.7
0.1
972.7
(15.3)
957.4
551.1
9.0
107.9
238.8
0.1
906.9
–
906.9
Book value
£m
At 30 April 2009
Fair value
£m
Book value
£m
At 30 April 2008
Fair value
£m
1.7
5.2
106.7
(148.3)
(1.7)
1.7
5.2
106.7
(148.3)
(1.7)
1.3
6.3
129.2
(159.9)
(1.8)
1.3
6.4
129.2
(159.9)
(1.8)
Ashtead Group plc Annual Report & Accounts 2009
notes to the consolidated
financial statements continued
26 Notes to the cash fl ow statement
a) Cash fl ow from operating activities
Operating profi t before exceptional items and amortisation:
– continuing operations
– discontinued operations
Depreciation
– continuing operations
– discontinued operations
EBITDA before exceptional items
Profi t on disposal of rental equipment
Profi t on disposal of other property, plant and equipment
Decrease in inventories
Decrease/(increase) in trade and other receivables
Decrease in trade and other payables
Exchange differences
Other non-cash movements
Cash generated from operations before exceptional items
and changes in rental equipment
b) Reconciliation to net debt
Decrease/(increase) in cash in the period
(Decrease)/increase in debt through cash fl ow
Change in net debt from cash fl ows
Exchange differences
Non-cash movements:
– deferred costs of debt raising
– capital element of new fi nance leases
Movement in net debt in the period
Net debt at 1 May
Net debt at 30 April
c) Analysis of net debt
Cash and cash equivalents
Debt due within one year
Debt due after one year
Total net debt
2009
£m
155.0
2.8
157.8
201.1
–
358.9
(6.6)
(0.9)
10.5
47.1
(34.5)
0.1
(1.0)
2008
£m
187.1
10.6
197.7
176.6
5.7
380.0
(9.0)
(1.1)
1.7
(16.1)
(2.5)
1.0
2.4
373.6
356.4
2009
£m
0.4
(217.2)
(216.8)
285.0
2.8
1.7
72.7
963.2
1,035.9
2008
£m
(0.7)
35.8
35.1
9.8
2.4
–
47.3
915.9
963.2
1 May
2008
£m
(1.8)
7.6
957.4
963.2
Exchange
movement
£m
(0.3)
1.9
283.4
285.0
Cash
fl ow
£m
0.4
(4.5)
(212.7)
(216.8)
Non-cash
movements
£m
–
1.9
2.6
4.5
30 April
2009
£m
(1.7)
6.9
1,030.7
1,035.9
Non-cash movements relate to the amortisation of prepaid fees relating to debt facilities and the addition of new fi nance leases in the year.
d) Acquisitions
Cash consideration
2009
£m
0.3
2008
£m
5.9
79
27 Acquisitions
In February 2009, A-Plant acquired an additional £0.3m of site accommodation units from one of its customers under a sole supply agreement.
28 Contingent liabilities
Sunbelt Rentals is subject to a class action lawsuit in Florida alleging, inter alia, that NationsRent (prior to its acquisition by Sunbelt in 2006) improperly
charged its customers an environmental fee. In February 2009 the court certifi ed a class of all persons charged an environmental fee by NationsRent
in the period between June 2003 and August 2006. The plaintiffs are asking that the environmental fee be returned to class members (an estimated
$20m), plus interest and legal costs. The plaintiff’s claim is based on the theory that because NationsRent did not place the environmental fee revenue
into an escrow account, it spent no money on ‘environmental related’ expenses and the fee was ‘pure profi t’. Sunbelt’s legal advisers believe that the
merits of the lawsuit are weak because there is no legal obligation to place the environmental fee into a segregated account. Moreover, NationsRent
never indicated to its customers the environmental fee was hypothecated to any particular expenditure and, regardless, NationsRent incurred
substantial ‘environmental related’ costs. On 28 May 2009, a similar case was fi led in the North Carolina Court against Sunbelt by a plaintiff
represented by the same plaintiff attorneys acting in the Florida case.
The Group is also subject to periodic legal claims and tax audits in the ordinary course of its business, none of which, including the NationsRent
environmental matter, is expected to have a signifi cant impact on the Group’s fi nancial position.
The Company has guaranteed the borrowings of its subsidiary undertakings under the Group’s senior secured credit and overdraft facilities. At 30 April
2009 the amount borrowed under these facilities was £505.7m (2008: £561.1m). Additionally, subsidiary undertakings are able to obtain letters of
credit under these facilities which are also guaranteed by the Company and, at 30 April 2009, letters of credit issued under these arrangements totalled
£21.3m ($31.6m). Additionally the Company has guaranteed the 8.625% second priority senior secured notes with a par value of $250m (£169m) and
9% second priority senior secured notes with a par value of $550m (£371m), issued by Ashtead Holdings plc and Ashtead Capital, Inc., respectively.
The Company has guaranteed operating and fi nance lease commitments of subsidiary undertakings where the minimum lease commitment at 30 April
2009 totalled £76.6m (2008: £66.6m) in respect of land and buildings and £5.2m (2008: £8.2m) in respect of other lease rentals of which £7.1m and
£3.4m respectively is payable by subsidiary undertakings in the year ending 30 April 2010. The Company has guaranteed the performance by
subsidiaries of certain other obligations up to £1.0m (2008: £1.4m).
29 Capital commitments
At 30 April 2009 capital commitments in respect of purchases of rental and other equipment totalled £11.3m (2008: £108.1m), all of which had been
ordered. There were no other material capital commitments at the year end.
30 Related party transactions
The Group’s key management comprise the Company’s executive and non-executive directors. Details of their remuneration together with their share
interests and share option awards are given in the Directors’ Remuneration Report and form part of these fi nancial statements.
During the period until his employment terminated on 6 April 2009, Sunbelt reimbursed Cliff Miller accommodation costs of £13,580 (2008: £10,460).
This related to an apartment leased on an arms length basis from CE Property Management, a partnership in which Cliff Miller is a partner.
31 Employees
The average number of employees, including directors, during the year was as follows:
North America
United Kingdom
Rest of World
2009
6,742
2,318
–
9,060
2008
7,324
2,462
12
9,798
Ashtead Group plc Annual Report & Accounts 2009
notes to the consolidated
financial statements continued
32 New accounting standards
The Group has not adopted early the following pronouncements, which have been issued by the IASB or the International Financial Reporting
Interpretations Committee (‘IFRIC’), but have not yet been endorsed for use in the EU with the exception of ‘IAS 1 (Revised) – Presentation of Financial
Statements’ and ‘IFRIC 16 – Hedges of a net investment in foreign operation’.
‘IAS 1 (Revised) – Presentation of Financial Statements’ was issued in September 2007 and will be effective for annual periods beginning on or after
1 January 2009. The revised standard introduces the concept of a statement of comprehensive income, which enables users of the fi nancial statements
to analyse changes in a company’s equity resulting from transactions with owners separately from non-owner changes. The revised standard provides
the option of presenting items of income and expense and components of other comprehensive income either as a single statement of comprehensive
income or in two separate statements. The Group does not believe the adoption of this revised standard will have a material impact on the consolidated
results or fi nancial position of the Group.
‘IFRIC 16 – Hedges of a net investment in foreign operation’ was issued on 3 July 2008 and is effective for annual periods beginning on or after
1 October 2008. This interpretation clarifi es that in respect of net investment hedges that relate to differences in functional currency and not
presentation currency, hedging instruments may be held anywhere in the group and that the requirements of IAS 21 ‘The effects of changes in foreign
exchange rates’ do apply to the hedged items. The Group does not believe the adoption of this pronouncement will have a material impact on the
consolidated results or fi nancial position of the Group.
‘IFRS 3 (Revised) – Business combinations’ was issued on 10 January 2008 and will apply to business combinations occurring on or after 1 April 2010.
The revised standard introduces a number of changes in the accounting for business combinations that will impact the amount of goodwill recognised,
the reported results in the period that a business acquisition occurs and future reported results. Assets and liabilities arising from business combinations
before 1 April 2010 will not be restated and thus there will be no effect on the Group’s results or fi nancial position on adoption. However, this standard
is likely to have a signifi cant impact on the accounting for business acquisitions post adoption.
‘Amendments to IAS 27 – Consolidated and separate fi nancial statements’ was issued on 10 January 2008 and is effective for annual periods beginning
on or after 1 July 2009. The amendment requires that when a transaction occurs with non-controlling interests in Group entities that does not result in
a change in control, the difference between the consideration paid or received and the recorded non-controlling interest should be recognised in equity.
In cases where control is lost, any retained interest should be remeasured to fair value with the difference between fair value and the previous carrying
value being recognised immediately in the income statement. Transactions occurring before 1 April 2010 will not be restated and thus there will be no
effect on the Group’s results or fi nancial position on adoption.
‘IFRIC 15 – Agreements for the construction of real estate’ was issued on 3 July 2008 and is effective for annual periods beginning on or after 1 January
2009. This interpretation clarifi es whether a real estate sale agreement is within the scope of ‘IAS 18 – Revenue’ or ‘IAS 11 – Construction contracts’.
In accordance with IAS 18, revenue is recognised when property is transferred to the customer, but under IAS 11, revenue is recognised over the period
of construction. The Group does not believe the adoption of this pronouncement will have a material impact on the consolidated results or fi nancial
position of the Group.
‘Amendment to IAS 39 – Financial instruments: recognition and measurement: eligible hedged items’ was issued on 31 July 2008 and is effective for
annual periods beginning on or after 1 July 2009 and must be applied retrospectively in accordance with IAS 8 ‘Accounting policies’. The amendment
prohibits designating infl ation as a hedgeable component of fi xed rate debt and also prohibits including time value in the one-sided hedged risk when
designating options as hedges. The Group does not believe the adoption of this pronouncement will have a material impact on the consolidated results
or fi nancial position of the Group.
‘IFRIC 17 – Distributions of non-cash assets to owners’ was issued on 27 November 2008 and is effective for annual periods beginning on or after 1 July
2009. This interpretation clarifi es how an entity should measure distributions of assets, other than cash, when it pays dividends to its owners. The
Group does not believe the adoption of this pronouncement will have a material impact on the consolidated results or fi nancial position of the Group.
‘IFRS 1 (Revised) – First time adoption of IFRS’ was issued on 27 November 2008 and is effective for annual periods beginning on or after 1 January
2009. The revised standard does not contain any technical changes but there is an improvement to its structure, which had become complex due
to the numerous amendments in recent years. As the Group has already adopted IFRS, there will be no effect on the Group’s results or fi nancial position
on adoption.
‘Amendment to IAS 39 – Reclassifi cation of fi nancial assets: effective date and transition’ was issued on 27 November 2008 and is effective on adoption
of original amendment to ‘IAS 39 – Financial Instruments: Recognition and Measurement’ (refer to page 54 under ‘Note 1: Accounting policies’). The
original amendment that has now been reworded to clarify the effective date and transition requirements of adoption will have no effect on the Group’s
results or fi nancial position on adoption.
‘IFRIC 18 – Transfer of assets from customers’ was issued on 29 January 2009 and is effective for annual periods beginning on or after 1 July 2009.
The interpretation addresses the diversity in practice that arises when entities account for assets received from a customer in return for connection to
a network or ongoing access to goods or services. The Group does not believe the adoption of this pronouncement will have a material impact on the
consolidated results or fi nancial position of the Group.
‘Amendment to IFRS 7 – Improving disclosures about fi nancial instruments’ was issued on 5 March 2009 and is effective for annual periods beginning
on or after 1 January 2009. The amendment increases disclosure requirements by introducing a three-level hierarchy for fair value measurement
disclosures and requires some specifi c quantitative disclosures for fi nancial instruments where fair value is not determined using observable market data.
The amendment also requires enhanced liquidity risk disclosure, including a separate maturity analysis for derivative fi nancial liabilities and fi nancial
assets. The Group currently determines the fair value of its fi nancial instruments using observable market data and therefore believes that the adoption
of this amendment will have a limited impact on the disclosures in its consolidated fi nancial statements.
81
‘Amendments to IFRIC 9 and IAS 39 – Embedded derivatives’ were issued on 12 March 2009 and are effective for annual periods ending on or after
30 June 2009. The amendment applies to entities that reclassifi ed fi nancial assets out of the ‘at fair value through profi t and loss’ category under the
original amendment to IAS 39 (refer to page 54 under ‘Note 1: Accounting policies’) and clarifi es that on reclassifi cation of these fi nancial assets all
embedded derivatives should be reassessed and if necessary, accounted for separately. The Group does not believe the adoption of this pronouncement
will have a material impact on the consolidated results or fi nancial position of the Group.
‘Improvement to IFRSs’ (2009) was issued in April 2009 and its requirements are effective over a range of dates, with the earliest effective date being
for annual periods beginning on or after 1 July 2009. This comprises a number of amendments to IFRSs, which resulted from the IASB’s annual
improvements project. The Group does not believe the adoption of these amendments will have a material impact on the consolidated results or
fi nancial position of the Group.
33 Parent company information
a) Balance sheet of the Company
Current assets
Prepayments and accrued income
Non-current assets
Investments in Group companies
Total assets
Current liabilities
Amounts due to subsidiary undertakings
Accruals and deferred income
Non-current liabilities
Loan notes
Total liabilities
Equity
Share capital
Share premium account
Capital redemption reserve
Non-distributable reserve
Own shares held by the Company
Own shares held through the ESOT
Distributable reserves
Equity attributable to equity holders of the Company
Total liabilities and equity
These fi nancial statements were approved by the Board on 17 June 2009.
Geoff Drabble
Chief executive
Ian Robson
Finance director
Note
2009
£m
0.1
2008
£m
1.1
(e)
363.7
363.8
363.7
364.8
72.0
1.2
73.2
–
–
40.0
3.5
43.5
0.1
0.1
73.2
43.6
55.3
3.6
0.9
90.7
(33.1)
(6.3)
179.5
290.6
56.2
3.6
–
90.7
(23.3)
(7.0)
201.0
321.2
363.8
364.8
(g)
(g)
(g)
(g)
(g)
(g)
Ashtead Group plc Annual Report & Accounts 2009
notes to the consolidated
financial statements continued
33 Parent company information continued
b) Cash fl ow statement of the Company
Cash fl ows from operating activities
Cash generated from operations
before exceptional items
Exceptional items
Net cash from operating activities
Cash fl ows from fi nancing activities
Redemption of loans
Purchase of own shares by the Company
Purchase of own shares by the ESOT
Proceeds from issue of ordinary shares
Dividends paid
Net cash used in fi nancing activities
Decrease in cash and cash equivalents
Note
(h)
2009
£m
28.9
–
28.9
(0.1)
(15.7)
(0.4)
0.2
(12.9)
(28.9)
–
2008
£m
34.6
–
34.6
(0.1)
(22.9)
(1.6)
0.5
(10.5)
(34.6)
–
c) Accounting policies
The Company fi nancial statements have been prepared on the basis of the accounting policies set out in note 1 above, supplemented by the policy
on investments set out below.
Investments in subsidiary undertakings are stated at cost less any necessary provision for impairment in the parent company balance sheet. Where
an investment in a subsidiary is transferred to another subsidiary, any uplift in the value at which it is transferred over its carrying value is treated as
a revaluation of the investment prior to the transfer and is credited to the revaluation reserve.
d) Income statement
Ashtead Group plc has not presented its own profi t and loss account as permitted by section 408 of the Companies Act 2006. The amount of the loss
for the fi nancial year dealt with in the accounts of Ashtead Group plc is £1.0m (2008: profi t of £1.4m).
e) Investments
At 30 April 2008 and 2009
The Company’s principal subsidiaries are:
Name
Ashtead Holdings plc
Sunbelt Rentals, Inc.
Ashtead Plant Hire Company Limited
Ashtead Capital, Inc.
Shares in Group companies
£m
363.7
Country of
incorporation
England
USA
England
USA
Principal country in which
subsidiary undertaking operates
United Kingdom
USA
United Kingdom
USA
The issued share capital (all of which comprises ordinary shares) of subsidiaries is 100% owned by the Company or by subsidiary undertakings and all
subsidiaries are consolidated. The principal activity of Ashtead Holdings plc is an investment holding company while Ashtead Capital, Inc. is a fi nance
company. The principal activity of each other subsidiary undertaking listed above is equipment rental. Ashtead Group plc owns all the issued share
capital of Ashtead Holdings plc which in turn holds all of the other subsidiaries listed above except for Sunbelt Rentals, Inc. which Ashtead Holdings plc
owns indirectly through another subsidiary undertaking.
f) Financial instruments
The book value and fair value of the Company’s fi nancial instruments are equal.
The Company’s fi nancial liabilities mature between 2 and 5 years.
Share
capital
£m
56.0
–
0.2
–
–
–
–
56.2
–
–
–
–
–
–
Share
premium
account
£m
3.3
–
0.3
–
–
–
–
3.6
–
–
–
–
–
–
Capital
redemption
reserve
£m
–
–
–
–
–
–
–
–
Non–
distributable
reserve
£m
90.7
–
–
–
–
–
–
90.7
–
–
–
–
–
–
–
–
–
–
–
–
(0.9)
55.3
–
3.6
0.9
0.9
–
90.7
Treasury
stock
£m
–
–
–
–
–
–
(23.3)
(23.3)
–
0.5
–
–
–
(15.7)
5.4
(33.1)
Own
shares
held by
ESOT
£m
(8.7)
–
–
–
–
3.3
(1.6)
(7.0)
–
–
–
–
1.1
(0.4)
–
(6.3)
g) Reconciliation of changes in equity
At 30 April 2007
Total recognised income and expense
Shares issued
Dividends paid
Share-based payments
Vesting of share awards
Own shares purchased
At 30 April 2008
Total recognised income and expense
Shares issued/re-issued
Dividends paid
Share-based payments
Vesting of share awards
Own shares purchased
Cancellation of shares held
in treasury by the Company
At 30 April 2009
h) Notes to the Company cash fl ow statement
Cash fl ow from operating activities
Operating loss
Depreciation
EBITDA
Decrease/(increase) in receivables
(Decrease)/increase in payables
Increase in intercompany payable
Other non-cash movement
Net cash infl ow from operations before exceptional items
Reconciliation to net debt
Net debt at 1 May
Decrease in debt through cash fl ow
Net debt at 30 April
83
Total
£m
352.2
1.4
0.5
(10.5)
2.5
–
(24.9)
321.2
(1.0)
0.2
(12.9)
(0.8)
–
(16.1)
Distributable
reserves
£m
210.9
1.4
–
(10.5)
2.5
(3.3)
–
201.0
(1.0)
(0.3)
(12.9)
(0.8)
(1.1)
–
(5.4)
179.5
–
290.6
2009
£m
–
0.1
0.1
1.0
(2.3)
31.1
(1.0)
28.9
2009
£m
0.1
(0.1)
–
2008
£m
–
0.1
0.1
(0.9)
0.2
32.8
2.4
34.6
2008
£m
0.2
(0.1)
0.1
Ashtead Group plc Annual Report & Accounts 2009
ten year history
2009
2008
(restated)
2007
2006
In £m
Revenue +
Operating costs +•
EBITDA +•
Depreciation +•
Operating profi t +•
Interest +•
Pre-tax profi t/(loss)+•
1,073.5
717.4
356.1
201.1
155.0
(67.6)
87.4
68.4
0.8
177.1
238.3
1,798.2
526.0
Operating profi t •
Pre-tax profi t/(loss)
Net cash fl ow from
operating activities
Capital expenditure •
Book cost of
rental equipment •
Shareholders’ funds •*
In pence
2.575p
Dividend per share
Earnings per share
12.5p
Underlying earnings per share 11.9p
In percent
EBITDA margin +•
33.2%
Operating profi t margin +•
14.4%
Pre-tax profi t/(loss) margin +• 8.1%
People
Employees at year end
Locations
Profi t Centres at year end
8,162
520
IFRS
2005
523.7
354.2
169.5
102.4
67.1
(44.7)
22.4
67.1
32.2
128.3
138.4
800.2
109.9
Nil
5.2p
3.2p
2004
2003
2002
2001
500.3
353.3
147.0
102.8
44.2
(36.6)
7.6
16.2
(33.1)
126.7
72.3
813.9
131.8
Nil
(9.9p)
(0.7p)
539.5
389.4
150.1
111.0
39.1
(40.9)
(1.8)
0.6
(42.2)
210.3
85.5
945.8
159.4
Nil
(9.5p)
(0.4p)
583.7
398.6
185.1
117.8
67.3
(49.1)
18.2
72.5
(15.5)
202.0
113.8
971.9
192.9
3.50p
1.1p
13.7p
552.0
345.3
206.7
117.6
89.1
(50.7)
38.4
68.2
11.1
173.0
237.7
962.8
202.1
3.50p
6.5p
9.2p
638.0
413.3
224.7
113.6
111.1
(43.6)
67.5
124.5
81.7
154.4
220.2
921.9
258.3
1.50p
13.5p
11.3p
35.2%
17.4%
10.6%
32.4%
12.9%
4.8%
29.4%
8.8%
1.5%
27.8%
7.2%
(0.3%)
31.7%
11.5%
3.1%
37.4%
16.1%
7.0%
UK GAAP
2000
302.4
181.4
121.0
66.8
54.2
(10.9)
43.3
57.1
46.2
111.4
158.2
629.5
236.8
3.16p
11.8p
11.8p
40.0%
17.9%
14.3%
1,047.8
684.1
363.7
176.6
187.1
(74.8)
112.3
184.5
109.7
35.5
331.0
896.1
585.8
310.3
159.8
150.5
(69.1)
81.4
101.1
(36.5)
181.3
290.2
1,528.4
440.3
1,434.1
396.7
2.5p
14.2p
14.8p
34.7%
17.9%
10.7%
1.65p
0.8p
10.3p
34.6%
16.8%
9.1%
9,594
10,077
6,465
5,935
5,833
6,078
6,545
6,043
3,930
635
659
413
412
428
449
463
443
352
The fi gures for 2005, 2006, 2007, 2008 and 2009 are reported in accordance with IFRS. Figures for 2004 and prior are reported under UK GAAP and have not been restated in accordance with IFRS.
2008 has been re-stated following the adoption of the amendment to IAS 16 – Property, plant and equipment (and consequential amendment to IAS 7 – Statement of cash fl ows) relating to the sale of rental
assets and IFRIC 14, IAS 19 – The limit on a defi ned benefi t asset, minimum funding requirement and their interaction.
+ Before exceptional items and goodwill amortisation. EBITDA, operating profi t and pre-tax profi t/(loss) are stated before exceptional items but have been adjusted to allocate the impact of the
US accounting issues and the change in self-insurance estimation method reported in 2003 to the years to which they relate and to refl ect the BET USA lease adjustment reported in 2002 in 2001.
The directors believe these adjustments improve comparability between periods.
• The results for the years up to 30 April 2000 were restated in 2000/1 to refl ect the adoption of new accounting policies and estimation techniques under FRS 18 in that year.
* Shareholders’ funds for the years up to 30 April 2003 were restated in 2003/4 to refl ect shares held by the Employee Share Ownership Trust as a deduction from shareholders’ funds in accordance
with UITF 38.
Making more things possible
At Ashtead we make more things possible for
individuals and businesses.
We are a global leader in the provision of hire equipment,
from hand held tools to aerial platforms to complete
on-site contractor villages. We provide solutions and
systems that support our customers and pride ourselves
in delivering excellent levels of service and care.
Above all, it is our people that really make the difference.
Contents
01 Financial highlights
02 Company overview
04 Chairman’s statement
06 Business and fi nancial review:
07
Introduction
08–13 Case studies
14 What we do
15–17 Our markets
18–20 Our strategy
21–24 Our business model
25
KPIs
26–27 Business risks
28–33 Our fi nancials
34 Our directors
36 Directors’ report
38 Corporate governance report
41 Directors’ remuneration report
46 Corporate responsibility report
48 Auditors’ report
50 Consolidated income statement
51 Consolidated statement of recognised
income and expense
52 Consolidated balance sheet
53 Consolidated cash fl ow statement
54 Notes to the consolidated
fi nancial statements
84 Ten year history
85 Additional information
additional information
Future dates
Quarter 1 results
2009 Annual General Meeting
Quarter 2 results
Quarter 3 results
Quarter 4 and year end results
8 September 2009
8 September 2009
3 December 2009
9 March 2010
17 June 2010
Advisers
Auditors
Deloitte LLP
2 New Street Square
London
EC4A 3BZ
Registrars & Transfer Offi ce
Equiniti
The Causeway
Worthing
West Sussex
BN99 6DA
Financial PR Advisers
Maitland
Orion House
5 Upper St Martin’s Lane
London
WC2H 9EA
Solicitors
Slaughter and May
One Bunhill Row
London
E1Y 8YY
Skadden, Arps, Slate, Meagher & Flom LLP
333 West Wacker Drive
Chicago, IL 60606
Parker, Poe, Adams & Bernstein LLP
Three First Union Center
401 South Tryon Street
Charlotte, NC 28202
Brokers
UBS Investment Bank Limited
1 Finsbury Avenue
London
EC2M 2PP
RBS Hoare Govett Limited
250 Bishopsgate
London
EC2M 4AA
Registered number
1807982
Registered Offi ce
Kings House
36-37 King Street
London
EC2V 8BB
Cert no. SGS-COC-O620
Printed on Revive 75 Silk, which contains
a minimum of 75% recovered fi bre
Designed and produced by
| 35 Communications
Printed in the UK by Beacon Press
A
s
h
t
e
a
d
G
r
o
u
p
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
&
A
c
c
o
u
n
t
s
2
0
0
9
managing
the cycle
Ashtead Group plc
Kings House
36-37 King Street
London
EC2V 8BB
Phone: + 44 (0) 20 7726 9700
Fax: + 44 (0) 20 7726 9705
www.ashtead-group.com
2009
Annual Report & Accounts