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building
on strong
foundations
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
2010
Annual Report & Accounts
what we do
Ashtead is a global leader in the equipment
rental industry.
We provide all types of equipment in a wide
variety of scenarios, 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. We have
nationwide networks in the US and UK.
It is the quality of our people which enables us
to deliver the excellence demanded by our varied
customer base.
Contents
01 Our performance
02 Our Group
04 Chairman’s statement
06 Business and fi nancial review:
06 Introduction
07 Our building blocks
for growth
12 Positioning for recovery
14 Our strategy
18 Key performance indicators
20 Our markets
23 Principal risks and
uncertainties
26 Financial review
32 Our directors
34 Directors’ report
36 Corporate governance report
39 Directors’ remuneration report
44 Corporate responsibility report
46 Auditors’ report
48 Consolidated income statement
48 Consolidated statement of
comprehensive income
49 Consolidated balance sheet
50 Consolidated statement of
changes in equity
51 Consolidated cash fl ow statement
52 Notes to the consolidated
fi nancial statements
78 Ten year history
79 Additional information
additional information
Future dates
Quarter 1 results
Quarter 2 results
Quarter 3 results
2010 Annual General Meeting
7 Septemb
er 2010
9 D
8 Marc
7 September 2010
ecember 2010
h 2011
Quarter 4 and year end results
16 June 2011
Registrars & Transfer Offi ce
Advisers
Auditors
Deloitte LLP
London
EC4A 3BZ
2 New Street Square
Equiniti
The Causeway
Worthing
West Sussex
BN99 6DA
Financial PR Advisers
Maitland
Orion House
London
WC2H 9EA
5 Upper St Martin’s Lane
Solicitors
Travers Smith LLP
10 Snow Hill
London
EC1A 2AL
Skadden, Arps, Slate, Meagher & Flom LLP
155 North Wacker Drive
Chicago, IL 60606
Parker, Poe, Adams & Bernstein LLP
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
Printed in the UK by Beacon Pre ss
our performance
1
Strong full year EBITDA margin of 30.5% (2009: 33.2%)
Profit of £5m (2009: £87m) in difficult market conditions
l
l
l
Encouraging early signs of improvement in Q4, particularly in the US
l £191m (2009: £157m) of cash generated from operations in the year
l
Net debt reduced to £829m (2009: £1,036m); net debt to EBITDA
leverage of 3.1 times
l
l
$1.3bn ABL facility refinanced successfully in the year providing:
– long average debt maturity of five years at year end
– with $537m of year end availability, all our debt continues to
be effectively covenant free
Final dividend of 2.0p (2009: 1.675p) per share proposed making
2.9p for the year (2009: 2.575p)
Underlying revenue
Underlying operating profit
Underlying profit before taxation
Profit/(loss) before taxation
£836.8m
£68.5m
£5.0m
£4.8m
.
5
3
7
0
1
,
.
8
7
4
0
1
,
.
1
6
9
8
.
0
8
3
6
.
8
6
3
8
.
1
7
8
1
.
5
0
5
1
.
0
5
5
1
.
1
1
1
1
.
5
8
6
.
3
2
1
1
.
4
7
8
.
4
1
8
.
5
7
6
.
7
9
0
1
.
7
1
8
06
07
08
09 10
06
07
08
09 10
06
07
08
09 10
06
07
08
09 10
0
5
.
.
5
6
3
-
8
4
.
8
0
.
The figures for 2008, 2009 and 2010 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 flows) included within
the 2008 ‘Improvements to IFRSs’. Prior years have not been restated.
Underlying revenue, profit 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 definition of exceptional items is set out in note 1 to the financial statements.
Ashtead Group plc Annual Report & Accounts 2010
our group
at a glance
Ashtead Group provides 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 105 stores
throughout England,
Scotland and Wales
105
No. of stores
1,900
Employees
£162m
Revenues
£2m
Profits
0.7%
Return on investment*
what we do
We rent equipment on flexible 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 efficiently.
Our stores 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
fit-out and
ongoing
maintenance for
office blocks.
Providing an
on-site hire depot
and contractors’
village for a
long-term hospital
construction
project.
On-site
tool hire and
maintenance for
new residential
construction site.
Replacing
worn out
sewage
infrastructure.
Designing and
implementing
traffic
management
systems.
Advising on
health and
safety aspects
of equipment in
use at new
sports stadium.
3
US:
Sunbelt
The second largest
equipment rental
business in the US
with 393 stores in
35 US states
393
No. of stores
5,300
Employees
$1,081m
Revenues
$117m
Profits
5.9%
Return on investment*
* Return on investment is defined as underlying operating profit divided by the weighted average cost of capital employed (shareholders’ funds plus net debt and net
tax liabilities, minus/plus the pension fund surplus/deficit and less other financial assets – derivatives).
Equipment types
A broad range of construction and industrial equipment
including earth moving 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 traffic management equipment.
Customer base
Construction industry, facilities management, disaster relief
agencies, sport and music event organisers, governments,
local authorities, homeowners.
Renting
generators,
powered access
equipment, lighting
and temporary
accommodation
units for an outdoor
music festival.
Providing
equipment for
facilities
management at
new shopping
centre complex.
Designing,
erecting and
dismantling
scaffolding
systems.
Tracking our
equipment for
customers using
mobile tracking
systems.
Drying out
and cleaning up
after a flash flood
at an industrial
warehouse.
Ashtead Group plc Annual Report & Accounts 2010
chairman’s statement
Chris Cole,
Chairman
It has been a tough year for our industry but
nevertheless, I am pleased to report that the
actions we took before the recession became
entrenched and the tight business we have
run during the past year, mean that we are
one of very few large rental companies to
have remained profitable.
This has taken a lot of hard work from all our staff and some difficult
decisions but we have continued to deliver good EBITDA margins
even with significantly lower construction industry volumes. The
diversification of our service offering has, to some extent, acted as
a buffer to the sharp decline in new construction. We have maintained
our operational performance in line with our expectations and believe
we have performed well relative to both our UK and US peers, which
is testament to the high-quality service we offer our customers.
We have also focused this year on positioning the Group to take full
advantage of the upturn when it comes.
Trading
Our results reflect the prevailing market conditions with rental revenues
declining in Sunbelt by 25% to $989m and in A-Plant by 21% to £152m.
Our underlying profit before taxation was £5m compared with £87m in
2009 and underlying revenue was £837m (2009 £1.1bn). The rightsizing
measures we took in winter 2008/9 and our ongoing efforts to maximise
productivity meant that operating costs before depreciation and used
equipment sold were down 23% at Sunbelt and 16% at A-Plant. As a
result, our EBITDA margin remained strong at 31% (2009: 33%).
Underlying earnings per share for the year were 0.2p (2009: 11.9p).
We also managed the business so as to maximise cash generation with
£191m generated in the year, 93% of which was applied to reduce
outstanding debt with £13m of dividends paid to shareholders.
Strategy
Our strategy has always been to manage the business prudently through
the economic cycles to which our industry is subject. While the most
recent downward phase of the cycle has been deeper than most could
have imagined, we have continued to practise the tried and tested
management principles that we have learned and which have enabled
Ashtead to expand securely in good markets and to trade well relative
to our peers when markets are weaker.
The early actions we took more than a year ago to reduce fleet size
when the recession was just beginning allowed us to continue to trade
profitably while positioning us to expand once again when the upturn
comes. The reduction in fleet and also, sadly, in manpower, has not been
to the detriment of our ability to serve all our main markets. We have
maintained the store infrastructure required to offer a nationwide service
in both the UK and also broadly the US and to continue to be able to
respond with the speed and efficiency for which we are known.
As expected, some of our smaller competitors less well financed than
ourselves have not survived the recession and that, combined with the
superior customer service we can deliver, has resulted in us gaining market
share in both the US and the UK. We provide more detail on pages 12
and 13 of this report on how our strategy changes over the phases of the
economic cycle and where we are now in this process.
Funding
A critical backbone to our strong operational performance is our balance
sheet strength. In recent years we have devoted considerable effort to
ensuring that our financial structure, as well as our business model, is
suited to our cyclical business. This focus has paid off in the past year
as, unlike many others, we have not had to manage our operations under
balance sheet stress.
Our debt facilities continue to be committed for the long term, with
an average remaining maturity of five years. This year we extended the
maturity of a $1.3bn tranche of our senior debt by more than two years
until November 2013. Based on February 2010 asset values, availability
at 30 April was $537m and remains well above $150m, the level at which
the entire debt package is covenant free. Therefore, we continue to enjoy
significant headroom on our debt package, providing the flexibility and
5
“ In preparation for the next phase
of the cycle, we have started a fleet
reinvestment programme, funded
from operating cash flow.” Chris Cole
strength to enable our businesses to succeed and prosper in the years
ahead. It also means that we have the funding in place to capitalise on
the opportunities which will arise in future. We are well prepared and
ready to resume growth when trading conditions change.
Outlook
Fleet on rent and revenue continued to be encouraging in both our
markets during May, supporting our view that the winter of 2010 was
the bottom of the cycle.
Dividend
Despite our reduced profitability, in light of our strong cash generation the
Board is recommending a final dividend of 2.0p per share (2009: 1.675p)
making 2.9p for the year (2009: 2.575p). Payment of the 2009/10
dividend will cost £14.5m (2009: £12.8m) and, whilst not covered by
2009/10 earnings, is in the Board’s view justifiable given the Group’s very
strong cash generation. If the proposed final dividend is approved at the
forthcoming Annual General Meeting, it will be paid on 10 September
2010 to shareholders on the register on 20 August 2010. Moving forward,
the Board will aim to provide a progressive dividend having regard to
both profit and cash generation, whilst seeking to keep to levels that
are sustainable over the cycle.
In the US we continue to believe that we will see stabilisation in markets
in the current year with improving trends through 2011. In the UK, whilst
current markets are also stabilising, uncertainty around the impact of
public sector spending cuts makes the medium term less certain.
In preparation for the next phase of the cycle, we have started a fleet
reinvestment programme, funded from operating cash flow. Our well-
structured debt facility means that we can react quickly if markets differ
materially from those we anticipate.
Having strengthened our market position in the year just ended and with
the flexibility provided by our strong balance sheet, the Board believes
that the Group is well positioned for the future.
Employees
As the recession took hold and we reduced our cost base there was
unfortunately the need to reduce our employee numbers. Being forced
to make cuts to the workforce was hard for everyone involved. I and my
management colleagues are therefore very grateful for the loyalty and
conscientious hard work of the Ashtead team in both the US and the UK
and the substantial commitment from our staff this year. A difficult job is
made easier by knowing the quality and dedication of the team providing
the support. It is a testament to our team that we have remained focused
on servicing the customer through all the uncertainty.
Board
There were no changes in the composition of the Board during the year
but Gary Iceton will be standing down at the 2010 Annual General
Meeting having completed two full terms as a non-executive director.
I would like to record our gratitude to Gary for his contribution
to the Board’s deliberations over the last six years and for his work
since 2007 as chairman of the Remuneration Committee. A separate
announcement regarding Gary’s successor will be made in due course.
Chris Cole
16 June 2010
Ashtead Group plc Annual Report & Accounts 2010
business and financial review
introduction
Right:
Geoff Drabble,
Chief executive
Far right:
Ian Robson,
Finance director
Ashtead is the second largest equipment rental group in the world with our operations
split between the US where we operate as Sunbelt Rentals or Sunbelt and in the UK
where we trade as A-Plant. We provide rental equipment in all manner of scenarios and
across a wide variety of industries. We aim to create a highly flexible business model
both in terms of the overall speed of responsiveness to market conditions and the variety
of markets we serve.
The largest end market for our services continues to be new-build, non-residential
construction but we also serve a wide range of other markets such as facilities
management, repair and renewal, disaster relief, event management and traffic control,
as well as also being involved in residential construction. This diversification serves to
limit our exposure to a downturn in any one market. However, given the extent of the
recent recession, we have still been substantially impacted over the last two years.
We recognise the cyclical nature of the construction markets we serve and have always
managed the business accordingly. In the past year this has enabled us to deliver good
operational performance in a difficult climate relative to both our US and UK peers.
Over the next few pages we set out our principal building blocks for growth; our people,
our infrastructure, our fleet and our balance sheet strength. We also demonstrate the
strategic management principles in place during each phase of the economic cycle and
where we consider ourselves to be within the current cycle.
our building blocks for growth
7
our
people
our
infrastructure
our
fleet
our balance
sheet strength
Ashtead Group plc Annual Report & Accounts 2010
1our
people
We are a service business and we differentiate ourselves by the strength of our
service offering. Central to our service offering are our people. We have a highly
experienced team which numbered 7,200 at 30 April 2010.
The nature of our business is such that we require skilled individuals working
within a highly devolved structure, in small focused teams. Local delivery of
a consistent service offering is central to our business model. We take pride
in the fact that we have a high proportion of long-serving staff and that many
of our senior staff have been able to work their way up the organisation from
shop floor to senior management.
We work hard, whatever the economic climate, to preserve these cultural
strengths and maintain what we consider to be a key competitive advantage.
2
9
Our network of rental stores is one of the largest in
the industry and enables us to provide nationwide
coverage in the UK and now across most of the US.
While we have taken steps to rightsize the business
during the recession, we believe we have maintained
the local infrastructure and network required to retain
and enhance our leading position in both our markets.
We have retained our ability to access a wide range
of geographies at speed with the required equipment
and accompanying operational expertise. We expect
to use this network to once again deliver good
growth in our profits and strong returns when the
recovery begins.
our
infra-
structure
UK: A-Plant
US: Sunbelt
Ashtead Group plc Annual Report & Accounts 2010
3
Fleet composition by product category
Sunbelt
A-Plant
Aerial work platforms
Forklifts
Earth moving
Accommodation
Pump and power
Acrow
Traffic management
Scaffold
Other
17%
4%
7%
18%
36%
18%
22%
14%
10%
5%
5%
5%
11%
Aerial work platforms
Forklifts
Earth moving
Accommodation
28%
Pump and power
Acrow
Traffic management
Scaffold
Other
4%
7%
17%
18%
17%
4%
7%
18%
22%
36%
14%
18%
5%
5%
10%
5%
22%
14%
10%
22%
14%
36%
5%
5%
10%
5%
11%
28%
11%
28%
18%
5%
5%
5%
11%
28%
Aerial work platforms
Forklifts
Earth moving
Accommodation
Pump and power
Acrow
Traffic management
Scaffold
Other
4%
7%
17%
Aerial work platforms
Forklifts
Earth moving
Accommodation
Pump and power
Acrow
Traffic management
Scaffold
Other
18%
36%
18%
Our very broad fleet mix ranges from large earth moving vehicles,
aerial work platforms, power generation and scaffolding to smaller
equipment types which offer the potential for higher returns.
This enables us to ensure a balanced mix of business throughout
the cycle, hence allowing us to mitigate the extremes of particular
sectors. For example, we are currently experiencing greatest demand
from government and infrastructure projects where stimulus
spending is sustaining activity levels. Traditionally, our strength
is in smaller local commercial and residential projects and we are
focused on retaining this exposure as we believe this segment
of the market will recover first.
Despite the recession, we have deliberately maintained the overall
quality of our fleet and have not aged it as much as in previous
downward cycles. The fleet is therefore still in good shape and
we expect to be able quickly to reduce fleet age and expand it
as economies recover. This recession, we have also been able to
take advantage of the opportunity created by distressed asset
sales to acquire a small amount of nearly new equipment at
advantageous prices.
our
fleet
11
4 our
balance
sheet
strength
We maintain a conservative balance sheet structure throughout the economic
cycle, pacing our investment in the good years to ensure we hold leverage
within our two to three times net debt to EBITDA target leverage range. During
the most recent cycle, our balance sheet has been reinforced by the manner in
which we lowered investment levels rapidly from 2008 to ensure we generated
significant free cash flow and lowered net debt throughout the recession.
In November 2009 we took advantage of our strong operational performance
and relatively low leverage to extend the maturity of $1.3bn of our senior debt
until November 2013. We decided last summer to undertake this refinancing
nearly a year before it was required in order to gain certainty over the committed
term, size and cost of our senior debt facility – both so that we were well
positioned to invest and take advantage when markets recovered and also
to provide protection in the event that recovery was delayed.
Our capital structure therefore has, by design, the flexibility and strength required
to enable our businesses to succeed and prosper in the years ahead.
Debt maturity
£m
1,000
800
600
400
200
0
2010
ABL
2011
2012
ABL
2013
2014
Drawn Undrawn
2015
$250m
bond
2016
$550m
bond
Ashtead Group plc Annual Report & Accounts 2010
positioning for recovery
2004
US rental revenue ($bn)
2005
2006
2007
2008
2003–2006
Phase 1
Optimisation of strong market
Ashtead Group
revenue (£m)
500
Cash flow* (£m)
54
Fleet age
(months)
46
524
54
45
2007
Phase 2
Strong market
Preparation for
downturn
2008
Phase 3
Rightsizing
896
1,048
-376
31
-1
31
638
-70
37
Critical underpin is appropriate debt structure
* Total cash generated before returns to shareholders
Managing the cycle
Our strategy and business model are structured to
cope with changing economic cycles. This diagram
summarises the phases we go through. While the
timing of recovery is still not fully clear, our planning
is focused on preparing to capitalise on the upturn
as soon as it comes.
Phase 1
When the economy is expanding, we utilise free cash flow to increase
investment in our rental fleet to support revenue, EBITDA and earnings
growth and reduce the age of our rental fleet. We are also able to take
advantage of the many growth opportunities available. We enjoy high
utilisation at good rates thereby generating strong margins. Capital
expenditure will be strong and debt broadly flat whilst leverage will
tend to reduce as earnings grow.
Phase 2
In this phase markets are still strong but we recognise this will not
last forever. We begin to make preparations for the coming downturn,
in particular preparing the balance sheet for the lower levels of income
expected when the cycle turns. All debt is committed for the long
term and structured to remain covenant free, enabling us to get on
with running the business unimpeded through the cycle. We start to
reduce the rate at which we invest in new equipment and begin gently
increasing the age of our rental fleet. This in turn increases cash flow.
13
2009
2010
2011
2012
2008
Phase 3
Rightsizing
2009
Phase 4
Running tight
business
2010
Phase 5
Prepare for
inflection
point
2011–2012
Phase 1
Optimisation of
strong market
1,073
246
35
837
190
44
Critical underpin is appropriate debt structure
Phase 3
At the beginning of the downturn we may also rightsize the business
to ensure that it is best positioned to withstand the worsening economy.
In this way we have, in the latest cycle, sustained our EBITDA margin
above 30%.
Phase 4
Once in recession we focus on running a tight business, reducing capital
expenditure to around half the level of depreciation, further reducing
the fleet if required and, as a result, entering our most cash generative
phase. Typically, we apply this cash to pay down debt, sustaining our
leverage at close to our target despite lower earnings. At all times,
however, we take care to maintain the optimal flexibility to ensure that
we can bounce back aggressively once the upturn arrives. The focus is
on cost efficiency while at the same time positioning the business for
the recovery to come.
Phase 5
Once the recovery is under way, we look for our preparations to pay off.
Rental rates begin to recover as does our utilisation and consequently
we can anticipate strong earnings growth. Capital expenditure necessarily
increases as the business expands again. Leverage decreases as earnings
recover and, once again, we start to invest for organic growth. At the
same time we may look for opportunities amongst those in the industry
who have struggled to survive the recession and are in a weaker
position than ourselves. Again the flexibility of our business model
enables us to upgrade and expand quickly to service increased demand.
Ashtead Group plc Annual Report & Accounts 2010
business and financial review continued
our strategy
“ We are confident that the actions
we have taken over the last two years
make us amongst the best positioned
of our peer group to benefit when
the cycle turns.”
Geoff Drabble
Ashtead’s core objectives are to be a leader in the global equipment rental
business and deliver good returns for our investors. We aim to build strong
relationships with our customers through efficiently delivering the services
they require. Our strategy centres around maintaining flexibility through
efficient management of an inherently cyclical business, differentiating our
service offering across market sectors to avoid undue exposure to any one
area, achieving operational excellence through our business model and the
exceptional commitment of our staff and on delivering an average return
on investment across the economic cycle well ahead of our cost of capital.
In good market conditions we achieve our objectives by generating strong
organic growth combined with selective growth through acquisition if
profitable opportunities arise, as well as delivering high levels of customer
satisfaction. In weaker markets, we cease growth investment and utilise
our cash flow to manage debt levels and thereby keep our capital structure
solid through all parts of the cycle. We carefully monitor a number of key
performance indicators which we track over time. Details of these can be
found on pages 18 and 19.
Our strategy is summarised in the actions opposite.
Our strategy is designed also to manage risk. A full review of the risks
which influence our business decisions can be found on pages 23 to 25.
Managing the cycle
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 a change in economic conditions. This means
that we have a good degree of visibility on when we are likely to be
affected, as the signs will have been visible in other parts of the economy
for some time. We are therefore able to plan accordingly and to react in
a timely manner when necessary.
We have outlined on pages 12 and 13 the actions we take at each stage
of the economic cycle. On pages 10 and 11, we describe how careful
balance sheet and fleet management fit within our cyclical strategy.
We are confident that the actions we have taken over the last two years
make us amongst the best positioned of our peer group to benefit when
the cycle turns. Key to the execution of our strategy is the planning we
have undertaken to capitalise on the opportunities presented by the cycle
for both organic growth from winning market share from less well-
positioned competitors and positioning ourselves to be able to fund
acquisitive growth if suitably attractive, well-priced opportunities arise.
In addition to economic cycles, our business is also subject to significant
fluctuations in performance from quarter to quarter as a result of seasonal
effects. Commercial construction activity tends to increase in the summer
and during extended periods of mild weather and to decrease in the
winter and during extended periods of inclement weather. Furthermore,
due to the incidence of public holidays in the US and the UK, there are
more billing days in the first half of our financial year than the second
half leading to our revenue normally being higher in the first half. On
a quarterly basis, the second quarter is typically our strongest quarter,
followed by the first and then the third and fourth quarters. We manage
the business to accommodate this natural seasonal cycle.
Differentiating our service and fleet
As discussed on page 16, our differentiation of service and fleet means
that we are able to work in many different sectors and as such are less
exposed to a downturn in any one of them. While private non-residential
construction activity continues to be subdued, major infrastructure and
government projects are continuing and we are benefiting from these.
It will take a sustained return to GDP growth before growth returns to
the private non-residential construction market but a consequence of the
rapid slowdown in the US is the large number of projects that are ready
to recommence as soon as developers and financiers gain the necessary
confidence to resume development. Meanwhile, the flexibility of our
equipment offering means we are actively involved in numerous
government and infrastructure projects where activity levels are
being sustained deliberately.
Our customers range in size and scale from multinational businesses,
through strong local contractors to individual do-it-yourselfers. In the UK,
we have focused in recent years on building deeper relationships with our
larger customers, with the top 150 customers comprising 53% of A-Plant’s
2009/10 revenue whilst in the US our managed accounts comprised 20%
of Sunbelt’s 2009/10 revenue.
15
our strategy
Managing
the cycle:
• Planning ahead
• Careful balance sheet management
• Adapting our fleet and cash position
• Taking advantage of opportunities
Differentiating
our service
and fleet:
• Diversified customer base
• Wide variety of applications
• Broad fleet mix
Ensuring
operational
excellence:
• Nationwide networks in the US and UK
• Long-term partnerships with leading equipment manufacturers
• Focused service-driven approach
• Strong customer relationships
• ISO accreditation
• Industry-leading application of technology
Investing in
our people:
• Highly skilled team empowered to operate in a devolved structure
• Maintaining significant levels of experience
• Strong focus on recruitment, training and incentivisation
Maximising
our return on
investment:
• Effective management and monitoring of our fleet investment
• Optimisation of utilisation rates and returns
• Flexibility in local pricing structures
Ashtead Group plc Annual Report & Accounts 2010
business and financial review continued
our strategy
Broad range of fleet
Sunbelt
Broad range of fleet
Diversified customer base
Sunbelt
Sunbelt
Fleet composition
Sunbelt
A-Plant
A-Plant
A-Plant
Fleet composition
Fleet composition
Sunbelt
Sunbelt
A-Plant
A-Plant
32% 10%
Broad range of fleet
Sunbelt
6%
32% 10%
9%
Commercial construction
6%
Government and institutional
Industrial, manufacturing
and agriculture
Infrastructure
Non-construction services
6%
Residential construction
15%
5%
Small contractor
9%
Speciality trade contractors
10%
32% 10%
13%
Fleet composition
Sunbelt
9%
A-Plant
Fleet composition
Sunbelt
13%
A-Plant
6%
11%
17%
9%
17%
Aerial work platforms
Forklifts
Earth moving
Accommodation
Pump and power
13%
Acrow
Traffic management
50%
18%
Scaffold
Other
36%
4%
7%
18%
6%
2%9%
11%
A-Plant
22%
A-Plant
14%
10%
22%
28%
14%
10%
5%
5%
5%
11%
5%
5%
5%
11%
28%
22%
10%
5%
5%
14%
Aerial work platforms
Forklifts
Earth moving
Accommodation
Pump and power
Aerial work platforms
Acrow
5%
A-Plant
Traffic management
Forklifts
11%
28%
Scaffold
Earth moving
Other
Accommodation
22%
Pump and power
Acrow
Traffic management
Scaffold
5%
Other
Broad range of fleet
Sunbelt
13%
9%
10%
5%
15%
32% 10%
13%
6%
9%
10%
13%
5%
15%
13%
18%
11%
2%9%
4%
7%
17%
Commercial construction
Government and institutional
6%
Industrial, manufacturing
and agriculture
Infrastructure
36%
Commercial construction
Non-construction services
Residential construction
Government and institutional
50%
18%
Small contractor
4%
Industrial, manufacturing
Speciality trade contractors
7%
and agriculture
13%
Infrastructure
Non-construction services
Residential construction
11%
Small contractor
Speciality trade contractors
36%
18%
6%
9%
18%
2%9%
50%
17%
5%
15%
Commercial construction
10%
Government and institutional
Industrial, manufacturing
and agriculture
Infrastructure
Non-construction services
Residential construction
Small contractor
Speciality trade contractors
4%
7%
18%
The Group’s diversified customer base includes construction, industrial
and homeowner customers, as well as government entities and specialist
contractors and is analysed by Standard Industry Classification in the
charts above.
Our fleet composition is broadly similar to that of our peers. However, we
differentiate our business by emphasising smaller equipment types which
we believe offer the potential for higher returns. It is the needs of our
customers and overall demand that drive the composition of our equipment
fleet, with the size, age and mix of our equipment rental fleet driven by
the needs of our diversified 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 an extended period at each
distinct stage of a project’s development.
The breadth of our fleet 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, repair and
maintenance and facilities management. We also continue to develop
our portfolio of larger national and regional accounts, utilising the scale
and geographical footprint of our network.
Over the past year the investment we have made in our fleet has been
for replacement rather than growth.
Ensuring operational excellence
Our operating model is key to the way we deliver operational excellence
and encompasses the following elements:
• In the US we achieve scale through a ‘clustered market’ approach
of grouping general tool and specialist rental locations in each of our
developed markets. Sunbelt has rental operations in 43 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
sufficient stores to allow us to offer a full range of equipment on a
nationwide basis. We have invested heavily in recent years in migrating
our network towards fewer, larger locations which are able to address
all the needs of our customers in their respective markets.
18%
5%
5%
50%
10%
14%
Aerial work platforms
36%
Forklifts
9%
Earth moving
2%9%
Accommodation
Pump and power
Acrow
Traffic management
Scaffold
Other
or two suppliers in each product range and to limit the number of model
types of each product. We believe that having a standardised fleet
results in lower costs because we obtain greater discounts by purchasing
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 stores which helps to minimise
the risk of over-stocking and to easily transfer fleet between locations
which helps us achieve leading levels of fleet utilisation.
• Across our rental fleet, we generally seek to carry equipment from one
28%
11%
• 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 we have sufficient alternative sources of supply
for the equipment we purchase in each product category.
• 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 traffic management systems, which involve
providing service expertise as well as equipment.
• Our focused and dedicated approach to equipment rental improves
the effectiveness of our sales force by encouraging them to build and
reinforce relationships with customers and to concentrate on strong,
whole-life returns from our rental fleet, rather than on short-term
returns from sales of equipment. Our large and experienced sales
force works closely with our customers to ensure we meet their needs.
Our sales staff are equipped with real-time access to fleet availability
and pricing information through their iPhones, enabling them to
respond rapidly to changing dynamics in these critical areas.
• We guarantee our service standards in both our businesses and
voluntarily accept financial penalties if we fail to meet our commitments
to our customers. We believe that our focus on customer service and
the guarantees we offer help distinguish our businesses from competitors
and assist us in delivering superior financial returns. 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 local management teams are experienced and incentivised to
produce superior financial returns and high quality standards.
17
Improved staff retention
Return on investment ahead of cost of capital across the cycle
Sunbelt
%
%
20
35
A-Plant
%%
35
15
25
10
15
5
5
0
05/6
4
4
0
0
r
p
A
u
J
l
06/7
4
5
0
0
n
t
c
a
O
J
25
15
5
7
0
n
a
J
7
0
r
p
A
7
0
l
u
J
05/6
7
8
0
0
n
t
c
a
O
J
06/7
8
8
0
0
r
p
A
u
J
l
07/8 08/9 09/10
9
8
0
0
0
1
n
t
c
a
O
J
9
0
t
c
O
9
0
r
p
A
9
0
n
a
J
u
J
l
0
1
r
p
A
5
0
07/8 08/9 09/10
6
6
5
0
0
0
n
r
p
a
A
J
6
0
r
p
A
5
0
t
c
O
u
J
u
J
l
l
6
0
t
c
O
Reducing staff turnover
%
35
25
15
5
05/06
06/07
07/08
08/09
09/10
Sunbelt
A-Plant
• We invest heavily in our computerised point of sale and service systems
as well as the software and online capabilities required to deliver
efficient service as well as high returns. We 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.
through our commission plans which are based on sales volume and
a broad measure of return on investment determined by reference
to equipment type and discount level.
We flex our incentive plans to reflect the stage of the cycle in which
we operate which we believe has been an important element in retaining
the confidence of our workforce through the recent difficult times.
Investing in our people
On page 45 we discuss the importance of our staff and corporate culture.
We aim to recruit good people and then invest in them throughout their
careers. For example, A-Plant’s three year apprenticeship scheme is the
largest in the rental industry and is always heavily oversubscribed.
In general, the rental industry suffers from high staff turnover, particularly
within certain job categories such as mechanics and delivery truck drivers,
with turnover being particularly high within the first year of employment.
We have made generally good progress in improving our staff retention
in recent years as shown in the staff turnover chart above.
Maximising our 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. In the past two years
the recession has adversely impacted our returns as shown by the
chart above.
As and when cyclical recovery becomes established, we expect to see
strong recovery in our RoI and we continue to believe that, averaged
through the cycle, our business model can offer attractive rates of return
well ahead of our cost of capital.
Both Sunbelt and A-Plant have extensive programmes in place to
ensure the:
• recruitment of appropriate personnel to fulfil 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.
The Group maximises its RoI through encouraging effective management
of invested capital by:
• maintaining a concentration of higher-return (often specialised)
equipment within the overall rental equipment fleet;
• 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 stores; 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 fleet.
We motivate and reward our people through a combination of
competitive fixed pay and attractive incentive programmes which drive
our profits and return on investment. Our sales force is also incentivised
Ashtead Group plc Annual Report & Accounts 2010
business and financial review continued
key performance indicators
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 as shown in the charts below.
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.
Physical utilisation (%)
Physical utilisation (%)
71
68
69
67
66
64
08
Sunbelt
09
10
A-Plant
Fleet on rent ($/£m)
Fleet on rent (£m)
1,548
1,515
1,368
245
245
221
08
Sunbelt
09
10
A-Plant
Change in yield (%)
Change in yield (%)
+19
+11
-5
-8
-12
-16
08
Sunbelt
09
10
A-Plant
Physical utilisation is measured as the daily average of the amount of itemised fleet at cost on
rent as a percentage of the total fleet at cost and for Sunbelt is measured only for equipment whose
cost is over $7,500 (which comprised 90% of its serialised fleet at 30 April 2010).
It is important to sustain annual average physical utilisation at between 60% and 70% through
the cycle. If utilisation falls below 60% then yield will tend to suffer, whilst above 70% we may
not have enough fleet in certain stores to meet our customers’ needs.
Aided by winter 2008/9’s fleet downsizing (around 10% in each business) and subsequent
adjustments, average 2009/10 physical utilisation remained healthy all year despite difficult markets.
Fleet on rent is measured as the daily average of the original cost of our itemised equipment on
rent. Original cost, rather than net book value, is used because it correlates more directly with
rental income as rental rates vary only slightly with the age of the item being rented.
Fleet on rent measures the activity within our business and also provides an indication of market
share. In 2009/10, fleet on rent declined 10% in both businesses which is a smaller reduction than
the reported decline in US and UK construction volume. Our decline in fleet on rent is also smaller
than that reported by our major US peers. Accordingly, we believe we continued to gain market
share in the past year.
Yield is measured as the change in our rental revenues which is not explained by the change in
volume of fleet on rent. Yield is therefore an all encompassing measure which captures changes in
rental rates, changes in delivery charges and other ancillary rental revenues, together with changes
in both the customer mix (larger customers generally pay lower rates) and the mix of equipment.
Yield declined 16% at Sunbelt and by 12% at A-Plant in the past year reflecting cost pressures in the
recession and the actions of certain, financially distressed, competitors. Recently these pressures eased
somewhat, particularly in the US where the yield decline was 5% in the fourth quarter.
Underlying EBITDA margins (%)
Underlying EBITDA margins (%)
36.8
34.5
30.8
32.5
30.2
25.9
08
Sunbelt
09
10
A-Plant
Underlying EBITDA margins are measured before exceptional costs. Underlying EBITDA correlates
closely in our business with our top line cash flow and is therefore an important measure of our
financial health. Given the cyclicality of our revenues, it is also important that we adjust our cost
base as far as practicable to limit any reduction in our underlying EBITDA margin when revenues
are declining.
We view our margin performance in 2009/10 as very strong with the margin decline limited
to 2% in Sunbelt and 4% in A-Plant, despite the substantial revenue reductions we suffered.
The rightsizing programme we effected in winter 2008/9 meant that both businesses were
well prepared for the challenges of the recession.
19
Underlying Eps (p)
Underlying EPS (p)
14.8
11.9
0.2
08
09
10
Return on investment (%)
Return on investment (%)
13.8
13.2 13.6
10.7
11.5
9.7
4.6
04
05
06
07
08
09
10
Underlying EPS is a key measure of short-term financial performance for the Group as a whole.
It is measured before exceptional costs, amortisation of acquired intangibles and fair value
remeasurements. The decline from 2008 reflects the effects of the severe recession experienced
over the last two years. The cyclical nature of the markets we serve and our balance sheet
structure, which involves us carrying a significant interest cost, mean that underlying EPS varies
substantially through the cycle.
In a capital intensive business, profitability is not the only measure of performance as it is possible
to generate good margins but poor value for shareholders if assets are not deployed efficiently.
Return on investment (RoI) measures both profitability and capital efficiency and is calculated
as underlying operating profit divided by net tangible and intangible assets employed (excluding
net debt, deferred tax and fair value remeasurements).
Averaged across the economic cycle we look to deliver RoI well ahead of our cost of capital. However, in
the past two years the recession has adversely impacted our returns. Our returns in the strong markets
of 2006 and 2007 were also limited by our acquisition in August 2006 of NationsRent whose RoI,
when acquired, was significantly below that of Sunbelt which necessarily took us some time to correct.
Net debt and leverage at constant exchange rates
Net debt and leverage (£m)
1,199 1,193 1,230
3.3
1,003
3.1
2.9
2.6
2.6
829
Aug
06
Apr
07
Apr
08
Apr
09
Apr
10
Staff turnover (%)
Staff turnover (%)
29
25
21
16
18
14
08
Sunbelt
09
10
A-Plant
Safety (%)
Safety
3.0
3.4
3.2
0.6
1.0
1.5
08
Sunbelt
09
10
A-Plant
Net debt (£m)
Leverage
We seek to maintain a conservative balance sheet structure with a target range for net debt to
underlying EBITDA through the cycle of 2–3 times. At 30 April 2010, at constant exchange rates,
leverage at 3.1 times was just outside our target range as we had always anticipated could be the
case at the bottom of a deep recession. Our debt leverage is substantially lower than that of all
our major US peers, affording us good flexibility for the future.
We also aim to sustain significant availability (the difference between the amount we are able
to borrow under our asset-based facility at any time and the amount drawn) through the cycle.
Availability at 30 April 2010 was $537m which both ensures all our debt remains effectively
covenant free and also provides us with substantial headroom for future investment.
We are a service business that differentiates itself by the strength of our service offering.
Central to this service offering are our people. Staff retention is a reasonable indicator of how
our employees feel about our Company. While it is not unexpected that employee turnover
declines in a recession, we are nonetheless pleased with the ongoing reduction given the
pressure our people are under to deliver in difficult market conditions.
Staff turnover is calculated as the number of leavers in a year (excluding redundancies) divided
by the average headcount during the year.
Our business involves frequent movement and maintenance of large and heavy pieces of
equipment, often in confined spaces. Rigorous safety processes are essential if we are to avoid
accidents which could cause injury to our people and damage our reputation.
In the chart we have plotted the OSHA reportable incident rate for Sunbelt and the RIDDOR
reportable incident rate for A-Plant, in each of the past three years. While increased pressure
on our businesses during the recession resulted in an increase in A-Plant this year, we believe
our continued focus on health and safety will reduce incident rates in the future.
Ashtead Group plc Annual Report & Accounts 2010
business and financial review continued
our markets
Ashtead’s markets are the US where we trade as
Sunbelt and the UK where we trade as A-Plant.
Diversified end markets
US construction put in place
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 operates 393 stores grouped into
39 Districts and three Territories. We have
a nationwide network and a broad and highly
diversified construction and general industrial
customer base.
Last year Sunbelt dealt with over 550,000 customers and conducted 1.6m
rentals. 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 broadly as shown in the chart above.
This year has been difficult as our main market, non-residential construction,
declined in the recession by c.16% in the year to 30 April 2010 as
illustrated by the calendar year construction data above.
Early signs of recovery are beginning to be seen by economic forecasters
with most expecting a reduced rate of decline in non-residential
construction for the remainder of 2010 followed by a return to growth
in 2011. Forecasts from Citi Investment Research and Analysis are
included in the chart above.
The US Department of Commerce divides non-residential construction
into the following categories:
Lodging
Office
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
2003 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E
Source: US Census Bureau, Citi Investment Research and Analysis
Sunbelt serves all of these end markets and accordingly is able to adapt
to wherever demand is greatest. In 2010/11 we expect that 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, will perform better
than commercial work, aided by President Obama’s stimulus package.
This is being driven in large part by the need for increased infrastructure
investment in the US following the significant population growth in
recent years (up from 280m in 2000 to 309m currently according to
the US Census Bureau). The US population also has one of the fastest
annual growth rates amongst developed economies at 0.97% per annum
(compared to 0.28% in the UK and 0.10% 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.
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 the impact on us of the substantial volume decline
in our end markets.
Rental penetration
Rental penetration continues to increase as shown by the chart opposite.
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
• removing the need to manage and service a non-core activity.
• removing the balance sheet financing requirement that comes
task at hand.
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 appreciate fully the benefit of not
needing to own and service their own equipment.
21
Increasing rental penetration
US equipment rental market
%
70
60
50
40
30
20
10
0
$bn
40
35
30
25
20
15
10
5
0
1995 2000
US
2005
US
2013E
UK
2010
Japan
2008E
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Source: Dan Kaplan Associates and Ashtead estimates
Source: IHS Global Insight
during the downturn benefiting the larger, better financed players
such as ourselves. This is evidenced by the American Rental Association
commenting that in January 2010 it had 8% fewer members than
a year earlier. As a result we have gained market share and we expect
this to continue.
Future market trends
As stated above, we do not expect construction markets in the US to
improve materially until 2011. However, in the medium term we remain
confident in our end markets and our increased share of those 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 confident that the equipment will be of recent
manufacture and maintained by an experienced, specialist workforce.
As we detail elsewhere in this report, the extensive work we have done in
positioning the business to capitalise on opportunities once the recession
is over will benefit us once the upturn comes.
The American Rental Association commissions an annual survey into
the size of the US rental market and its expected future growth which
is summarised in the chart above.
This chart shows how, despite the downturn of the past two years, the
rental market has exhibited a compound annual growth rate of 4.2%,
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. Once the US recession concludes, the American
Rental Association and its consultants, IHS Global Insight, expect that the
US rental market will return to at least historical rates of growth.
Competitors and market share
There are four large national equipment rental companies in the US as
shown in the table below:
United Rentals
Sunbelt Rentals
RSC
Hertz Equipment Rental Co
No. of
stores
485
393
443
226
US revenue
($bn)
1.9
1.1
1.1
0.8
Approx.
market share
7%
4%
4%
3%
Source: Based on company filings, 12 months to 31 March 2010
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 financial structures and
are therefore well positioned for the cycle relative to smaller, less
well-funded competitors.
As we suggested last year, a combination of financial constraint and
uncertain order books has resulted in contractors, particularly in the US,
increasingly choosing the rental option. The established trend towards
increased outsourcing of equipment supply in the US has accelerated
through the cycle. The fragmentation of the US industry, due to a large
number of smaller operators, has also been reduced as some of these have
gone out of business. As we expected, the rental market has consolidated
Ashtead Group plc Annual Report & Accounts 2010
business and financial review continued
our markets
UK equipment rental market
£bn
5
4.5
4
3.5
3
2.5
2
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10E
Source: AMA Research Limited
The UK
A-Plant, our UK business, rents a similar range
of equipment to Sunbelt, to a similar profile
of general industrial and construction oriented
customers. A-Plant operated 105 stores at
April 2010, dealt with approximately 26,000
customers and conducted approximately 0.4m
rentals 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 has resulted in 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. As in the US, we believe we have continued to increase our share
of the market in the UK over the last year. 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 currently remains 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 the pressures
on the government budget.
The UK plant and tool market is not well researched but AMA Research
Limited’s most recent market survey is shown above.
This chart shows that whilst the rental market has exhibited good
long-term growth with a compound annual growth rate of 1.7%, it is
inevitably slower growth than the immature rental market in the US.
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
HSS
Hewden
Source: International Rental News
No. of
stores
370
105
250
63
Revenue
(£m)
351
162
151
141
Approx.
market share
9%
4%
4%
4%
Future market trends
We do not expect to see a significant upturn in the UK market as we
move forward. Whilst housing construction now seems to have reached
the bottom of its cycle, and should grow gently in 2010, most commercial
sectors will remain weak. Infrastructure renewal and major projects such
as the Olympics will continue through 2011 to be a large part of the
construction market as public sector rather than private investment is
now the main driver of demand. However, it is inevitable that public
investment in new projects will be cut back from the second half of 2010
which we expect will mean lower levels of public work from 2012 once
current projects have concluded.
These factors make it likely that the UK market will remain difficult for
some years ahead until resumed GDP growth ultimately drives a recovery
in commercial construction. However, we expect A-Plant to continue to
gain market share as a number of its less well-financed competitors either
exit the market or downsize their operations.
business and financial review continued
principal risks and uncertainties
The Group inevitably faces certain risks and uncertainties in its day-to-day operations and it is management’s
role to mitigate and manage these risks. The Board has established a formal risk management process which has
identified the following principal risks and uncertainties which could affect employees, operations, revenues,
profits, cash flows and assets of the Group.
23
Risk description
Potential impact
Mitigation
Economic conditions
Competition
Exchange rates
Supply chain
The construction industry, from 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 may suffer a protracted reduction
in demand for our products and services if the
construction industry takes longer than expected
to come out of the downward phase of the industry
cycle or has a weaker than anticipated recovery.
• Prudent management through the different phases of
the cycle.
• Flexibility in the business model maintained to ensure
adaptability whatever the economic environment.
• Capital structure and financing arranged in recognition
of the cyclical nature of our industry.
The already competitive market becomes
even more competitive and we suffer increased
competition from large national competitors
or small companies operating at a local
level resulting in reduced market share and
lower revenue.
• Create commercial advantage by providing the highest level
of service, consistently and at a price which offers value.
• Excel in the areas that provide barriers to entry to newcomers:
industry-leading application of IT, experienced personnel and
a broad network and equipment fleet.
• Regularly estimate and monitor our market share and track
the performance of our competitors to ensure that we are
performing effectively.
Exchange rate exposure arises from translation
risk due to the majority of our assets, liabilities,
revenues and costs being denominated in US
dollars. The relative value of pound sterling and
the US dollar can fluctuate widely and could
have a material effect on our financial condition
and results of operations.
• Financing arranged so that virtually all our debt is denominated
in US dollars providing a partial, but substantial, hedge against
the translation effects of changes in the dollar exchange rate.
• Dollar interest payable on this debt also limits the impact
of changes in the dollar exchange rate on our earnings.
We source equipment and parts from a small
number of principal suppliers. If we are unable
to obtain the right equipment and parts at
the right time for a reasonable cost from our
suppliers, this could have an adverse impact
on the Group’s financial performance.
• Partnering relationships with suppliers that have a strong
reputation for product quality and reliability and good
after-sales service and support.
• Sufficient alternative sources of supply for the equipment
we purchase in each product category.
• Size and scale of our business and of our rental fleets enables
us to negotiate favourable delivery, pricing, warranty and
other terms with our suppliers.
Ashtead Group plc Annual Report & Accounts 2010
business and financial review continued
principal risks and uncertainties
Risk description
Potential impact
Mitigation
Financing
Acquisitions
Accounting/fraud
IT systems
People
Debt facilities are provided for a finite period of
time and we could fail to renew facilities prior
to their maturity. Such renewal could be affected
by any structural issues in the credit markets.
Alternatively, our debt facilities might become
unavailable by virtue of non-compliance with
their terms. If we fail to renew required debt
facilities, we might be unable to meet our
obligations as they fall due.
• The weighted average remaining life of our debt facilities
is five years with the first significant maturity being the
asset-based senior bank debt facility which now extends
until November 2013.
• Our facilities have no quarterly monitored financial covenants
provided availability on the asset-based senior bank debt
exceeds $150m. At 30 April 2010 availability was $537m.
• If they are ever required to be calculated, covenants are computed
at constant exchange rates and before exceptional items.
Acquisitions may not deliver the expected
benefits through overpaying, acquiring
unforeseen liabilities or failure to
integrate effectively.
• Detailed operational and financial due diligence to ensure
particularly that operational and financial risks are identified
and appropriately factored into our valuation of the target.
• Development of a rigorous post-acquisition integration plan
with close management and monitoring to ensure synergies
are realised fully.
Accounting or fraud discrepancies could occur if
our financial and operational control framework
is inadequate resulting in a loss and/or misstatement
of the Group’s financial performance.
• Maintain a robust internal financial control framework.
• A strong internal financial and operational audit function
reviews the operation of the control framework and reports
regularly to management and the Audit Committee.
We own over 250,000 units of rental equipment
and in the past year entered into approximately
2.0m rental contracts which are tracked and
controlled using fully integrated computer
systems in the US and UK. A serious uncured
failure in this area would have an immediate
impact on our business, rendering us unable to
record and track our high volume of relatively
low-value transactions.
• Robust and well-protected data centres with multiple data
links to protect against the risk of failure.
• Detailed business recovery plans which are tested periodically.
• 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.
Retaining and attracting good people is key to
delivering superior performance and customer
service. Excessive staff turnover is likely to impact
on our ability to maintain the appropriate quality
of service to our customers and would ultimately
impact our financial performance adversely.
• Provide well-structured and competitive reward and benefit
packages that ensure our ability to attract and retain the
employees we need.
• Ensure that our staff have the right working environment and
equipment to enable them to do the best job possible and
maximise their satisfaction and fulfilment at work.
• Invest in opportunities for our people to enhance their skills
and develop their careers to the mutual benefit of both
themselves and the Company.
25
Risk description
Potential impact
Mitigation
Health and safety
Accidents happen which might result in injury
to an individual, claims against the Group and
damage to our reputation.
• Maintain appropriate health and safety policies and procedures
to reasonably guard our employees against the risk of injury.
• Induction and training programmes reinforce health and safety
policies and procedures.
• Programmes to support our customers exercising their
responsibility to their own workforces when using our equipment.
Compliance with laws and regulations
Failure to comply with the frequently changing
regulatory environment could result in
reputational damage or financial penalty.
Environmental
We could fail to comply with the 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. This potentially
creates hazards to our employees, damage
to our reputation and exposes the Group to,
amongst 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 fines and penalties for non-compliance.
• Maintaining a legal function to oversee management of these
risks and to achieve compliance with relevant legislation.
• Group-wide ethics policy and ‘whistle-blowing’ arrangements,
by which employees may, in confidence, raise concerns about
any alleged improprieties.
• Policies and practices evolve to take account of changes in
legal obligations.
• Training and induction programmes ensure our staff receive
appropriate training and briefing on the relevant policies.
• Stringent policies and procedures in place at all our stores.
• Procurement policies reflect the need for the latest available
emissions management and fuel efficiency tools.
• Monitoring and reporting of carbon emissions.
Ashtead Group plc Annual Report & Accounts 2010
business and financial review continued
financial review
Trading
Sunbelt in $m
Sunbelt in £m
A-Plant
Group central costs
Continuing operations
Net financing costs
Profit before tax, exceptionals and amortisation
from continuing operations
Ashtead Technology
Exceptional items (net)
Amortisation
Total Group profit before taxation
Taxation
Profit attributable to equity holders of the Company
Margins
Sunbelt
A-Plant
Group
2010
1,080.5
674.5
162.3
–
836.8
Revenue
2009
1,450.0
865.5
208.0
–
1,073.5
2010
350.8
219.0
42.0
(5.9)
255.1
EBITDA
2009
500.4
298.7
62.8
(5.4)
356.1
Operating profit
2009
241.8
2010
116.6
72.7
1.8
(6.0)
68.5
(63.5)
5.0
–
3.3
(2.5)
5.8
(3.7)
2.1
144.4
16.1
(5.5)
155.0
(67.6)
87.4
2.8
(17.1)
(3.4)
69.7
(6.7)
63.0
32.5%
25.9%
30.5%
34.5%
30.2%
33.2%
10.8%
1.1%
8.2%
16.7%
7.7%
14.4%
The year’s results reflect the impact of the global recession which
produced a significant reduction in construction volumes in both the US
and the UK and hence a period of lower demand for our rental services.
As a result, underlying Group revenue reduced to £837m (2009: £1.07bn)
whilst the underlying pre-tax profit was £5m (2009: £87m). Measured
at constant exchange rates, to eliminate currency translation effects,
underlying revenue declined 25% to £837m, underlying EBITDA by 31%
to £255m and underlying operating profit by 58% to £69m.
Rental revenues declined 25% in Sunbelt to $989m and by 21% in A-Plant
to £152m reflecting 10% less fleet on rent in both markets and average
yield declines of 16% in Sunbelt and 12% in A-Plant. Fleet size remained
broadly flat all year in both businesses at $2.1bn and £320m respectively
whilst physical utilisation remained comparatively strong.
Fourth quarter trends were encouraging with Sunbelt returning to
operating profit growth in the quarter on rental revenues down 8%.
The prompt action we took in the winter of 2008/9 to rightsize the cost
base to the lower activity levels and the tight cost control we maintained
all year ensured that operating costs before depreciation and used
equipment sold reduced by $204m (23%) in Sunbelt and by £21m (16%)
in A-Plant. For the Group as a whole, operating costs (before depreciation
and used equipment sold) were reduced by £148m or 21%, at constant
exchange rates, compared to the previous year and by £191m compared
to the 12 months ended 31 October 2008, the period immediately before
we implemented the rightsizing programme. As a result, despite the
revenue reductions, full year EBITDA margins declined by only 2% in
Sunbelt and 4% in A-Plant and remained above 30% for the Group as
a whole.
Depreciation expense declined 7% reflecting the smaller average fleet size
to give an underlying operating profit for the year of $117m (2009: $242m)
in Sunbelt and £2m in A-Plant (2009: £16m).
Group results
Reflecting the operating results discussed above and a US dollar exchange
rate that was on average 5% stronger against the pound sterling ($1.60
in 2009/10 v $1.68 in 2008/9), Group EBITDA before exceptional items
declined £101m to £255m whilst the underlying operating profit reduced
from £155m to £69m.
Lower average interest rates and significantly lower underlying average
debt levels partly offset by the higher margin payable from November
on the extended senior debt resulted in a lower net financing cost of
£64m (2009: £68m), despite an adverse translation effect from the
stronger dollar in which all our debt is now denominated.
Pre-tax profit and exceptional items
Exceptional items this year comprised the £3m non-cash write-off of
the remaining deferred financing costs on the 2006 senior debt facility
following its renewal in November 2009, a credit of £5m relating to the
remeasurement at fair value of the embedded call options in the Group’s
senior secured notes, and a £1m credit for the release of a provision for
potential warranty claims on the June 2008 sale of Ashtead Technology
which proved not to be required. After amortisation of acquired intangibles
of £2m, the reported profit before tax for the year was £5m (2009: £1m).
Taxation
The current year effective tax rate was stable at 35% (2009: 34%).
In addition, there was an adjustment of £2m to prior year tax. Moving
forward, once the economies in the UK and US recover from the current
recession, we expect the Group’s effective tax rate for accounting
purposes to remain around 35% whilst the cash tax rate should
continue to be substantially lower.
Earnings per share
Underlying earnings per share for the year decreased to 0.2p (2009: 11.9p)
whilst basic earnings per share from continuing activities for the year was
0.2p (2009: 0.4p).
27
Dividends
In accordance with our policy of setting dividend levels in light of both
profitability and cash generation at a level that is sustainable across
the cycle, the Board is recommending a final dividend of 2.0p per share
(2009: 1.675p) making 2.9p for the year (2009: 2.575p). Payment of
the 2009/10 dividend will cost £14.5m and, whilst not covered by
2009/10 earnings is, in the Board’s view, appropriate.
If approved at the forthcoming Annual General Meeting, the final
dividend will be paid on 10 September 2010 to shareholders on the
register on 20 August 2010.
Current trading and outlook
Fleet on rent and revenue continued to be encouraging in both of our
markets during May, supporting our view that the winter of 2010 was
the bottom of the cycle.
In the US we continue to believe that we will see stabilisation in markets
in the current year with improving trends through 2011. In the UK, whilst
current markets are also stabilising, uncertainty around the impact of
public sector spending cuts makes the medium term less certain.
In preparation for the next phase of the cycle, we have started a fleet
reinvestment programme, funded from operating cash flow. Our
well-structured debt facility means that we can react quickly if
markets differ materially from those we anticipate.
Having strengthened our market position in the year just ended and with
the flexibility provided by our strong balance sheet, the Board believes
that the Group is well positioned for the future.
Balance sheet
Fixed assets
Capital expenditure in the year was £63m (2009: £238m) of which £56m
was invested in the rental fleet (2009: £208m). Disposal proceeds totalled
£32m (2009: £100m) giving net expenditure at £31m (2009: £138m).
Expenditure on rental equipment was 88% of total capital expenditure,
with the balance relating to the delivery vehicle fleet, property improvements
and to computer equipment. Capital expenditure by division was as follows:
Sunbelt in $m
Sunbelt in £m
A-Plant
Total rental equipment
Delivery vehicles, property improvements & computers
Total additions
2010
69.6
45.5
10.1
55.6
7.8
63.4
2009
221.0
149.1
58.4
207.5
30.8
238.3
Reflecting the recession, all this year’s capital expenditure was entirely for
replacement as was the case in 2008/9.
The average age of the Group’s serialised rental equipment, which
constitutes the substantial majority of our fleet, at 30 April 2010 was
44 months (2009: 35 months) on a net book value basis. Sunbelt’s fleet
had an average age of 46 months (2009: 38 months) whilst A-Plant’s
fleet had an average age of 36 months (2009: 27 months).
As we start to prepare for the next phase of the cycle, next year’s
capital expenditure will increase as we begin cyclical fleet reinvestment.
Accordingly, we anticipate investing around £225m gross (slightly ahead
of depreciation) and £175m net of disposal proceeds which will be mostly
for replacement rather than growth. With equipment lead times still quite
short for now, we retain the ability to flex expenditure levels in response
to market conditions.
The original cost of the Group’s rental fleet and the dollar and physical utilisation for the year ended 30 April 2010 is shown below:
Sunbelt in $m
Sunbelt in £m
A-Plant
30 April 2010
2,094
Rental fleet at original cost
LTM average
2,124
30 April 2009
2,136
LTM rental
revenue
989
LTM dollar
utilisation
47%
LTM physical
utilisation
64%
1,368
321
1,689
1,442
321
1,763
1,388
319
1,707
618
152
770
47%
48%
64%
69%
Dollar utilisation is defined as rental revenues divided by average fleet at original (or ‘first’) cost and, in the year ended 30 April 2010, was 47% at Sunbelt
(2009: 57%) and 48% at A-Plant (2009: 52%). 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 fleet at the measurement date and, in the year ended 30 April 2010, was 64%
at Sunbelt (2009: 66%) and 69% at A-Plant (2009: 67%). At Sunbelt, physical utilisation is measured only for equipment with an original cost in excess
of $7,500 which comprised 90% of its fleet at 30 April 2010.
Ashtead Group plc Annual Report & Accounts 2010
business and financial review continued
financial review
Trade receivables
Receivable days at 30 April were 45 days (2009: 47 days). The bad debt
charge for the year ended 30 April 2010 as a percentage of total revenue
was 1.2% (2009: 1.6%). Trade receivables at 30 April 2010 of £114m
(2009: £124m) are stated net of provisions for bad debts and credit
notes of £16m (2009: £18m) with the provision representing 12.0%
(2009: 12.4%) of gross receivables.
Trade and other payables
Group payable days were 88 days in 2010 (2009: 53 days) with capital
expenditure-related payables, which have longer payment terms totalling
£28m (2009: £9m). 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 £41m (2009: £54m) relate to the provision for self-insured
retained risk under the Group’s self-insurance policies, as well as to 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 sufficient 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 either $500,000 or $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. In the UK
our self-insured excess per claim is much lower than in the US and is
typically £100,000 per claim or less.
Our insured liability coverage is limited in total to a maximum of
£150m per claim.
Pensions
The Group operates a number of pension plans for the benefit of employees,
for which the overall charge included in the financial statements was £1m
(2009: £6m). Amongst these, the Group now has just one defined benefit
pension plan which covers approximately 150 employees in the UK and
which was closed to new members in 2001. All our other pension plans
are defined contribution plans.
The Group’s defined benefit pension plan was measured in accordance
with the accounting standard IAS 19 – Employee Benefits, £8m in deficit
at 30 April 2010 (2009: £0.3m in surplus). During the year, asset values
exceeded the expected return on plan assets of £3m included in the
income statement by £9m. However, offsetting this was the impact of
changes in the required market-linked discount rate which normalised to
5.5% in 2010 from the exceptionally high 7.0% in 2009 which reflected
market uncertainties regarding the value of bonds issued, particularly by
the financial sector, at that time. In addition, we adopted the S1 ‘CMI
2009’ mortality tables which we believe to be more appropriate to the
Group as they are based on a study of life expectancy for members of
pension schemes rather than purchasers of life assurance policies which
was the basis for PA00 mortality tables used last year. This reduced
pension liabilities by around 4%. Accordingly there was a net actuarial
loss of £9m in the year which, in accordance with our accounting policy
of immediate recognition, was taken to the statement of
comprehensive income.
The next triennial review of the plan’s funding position by the trustees
and the actuary is due as at 30 April 2010. The Company anticipates
that it will reach agreement with the plan’s trustees in the coming year
on a suitable recovery plan to address any funding deficit shown by
that review.
Contingent liabilities
The Group is also subject to periodic legal claims and tax audits in the
ordinary course of its business, none of which is expected to have a
significant impact on the Group’s financial position.
Cash flow
EBITDA before exceptional items
2010
£m
255.1
Year to 30 April
2009
£m
358.9
Cash inflow from operations before exceptional
costs and changes in rental equipment
Cash conversion ratio*
265.6
104.1%
373.6
104.1%
Maintenance rental capital expenditure paid
Payments for non-rental capital expenditure
Rental equipment disposal proceeds
Other property, plant and equipment disposal proceeds
Tax received (net)
Financing costs paid (net)
Cash flow before payment of exceptional costs
Exceptional costs paid
Total cash generated from operations
Business (acquisitions)/disposals
Total cash generated
Dividends paid
Share buybacks & other equity transactions (net)
Decrease in net debt
(36.1)
(6.7)
26.8
4.0
0.3
(54.7)
199.2
(8.2)
191.0
(0.7)
190.3
(12.8)
–
177.5
(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
* Cash inflow from operations before exceptional items and changes in rental equipment as
a percentage of EBITDA before exceptional items.
Cash inflow from operations before exceptional costs and changes in
rental equipment decreased 29% to £266m reflecting lower EBITDA in
2010, whilst the cash conversion ratio was 104% (2009: 104%) reflecting
reduced working capital in the recession. Total payments for capital
expenditure (rental equipment and other PPE) were £43m whilst total
disposal proceeds received totalled £31m. Net cash capital expenditure
was therefore £12m in the year (2009: £144m).
There were again no net tax payments as a result of the reduced profitability
in the recession. Financing costs paid differ 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 significantly due to the impact
of both lower average interest rates and lower average debt levels, partially
offset by the higher margin payable on the extended tranche of the ABL
facility from November. Exceptional costs paid of £8m represented mostly
staff severance and vacant property costs, all of which were provided for
at 30 April 2009.
Accordingly the Group generated £190m (2009: £246m) of net cash
inflow in the year. This reflected net cash generation of £191m from
operations (2009: £157m) while in 2008/9 a further £89m was generated
from the June 2008 sale of Ashtead Technology. £13m of this net inflow
was returned to equity shareholders by way of dividends with the balance
of £178m applied to reduce outstanding debt.
Over the past two years, a total of £436m of cash has been generated
with £42m returned to shareholders in dividends and buy-backs and
£394m applied to reduce net outstanding debt.
Net debt
The chart opposite shows how, at constant April 2010 exchange rates
for comparability, we held debt flat in 2006 and 2007 whilst investing
significantly in fleet reconfiguration and de-ageing following the
NationsRent acquisition. Through 2008 to 2010, we significantly lowered
our capital expenditure, taking advantage of our young average fleet age,
and consequently delivered significant reductions in outstanding debt,
measured at constant exchange rates as shown in the chart below:
Net debt at constant currency
£m
1,300
1,200
1,100
1,000
900
800
700
Debt
Leverage
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
Jul
09
Oct
09
Jan
10
Apr
10
Apr
11
In greater detail, closing net debt at 30 April 2010 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
2010
£m
367.5
3.5
160.2
352.6
883.8
(54.8)
829.0
2009
£m
501.1
7.9
165.1
363.5
1,037.6
(1.7)
1,035.9
Net debt at 30 April 2010 was significantly lower than last year at £829m
(2009: £1,036m). 100% of our debt at 30 April 2010 was drawn in dollars
providing a substantial but partial natural hedge against Sunbelt’s
dollar-based net assets.
Substantially all of the Group’s cash and cash equivalents at 30 April 2010
were deposited with one large UK-based financial institution which is not
expected to fail.
The ratio of net debt to underlying EBITDA at constant rates was 3.1 times
at 30 April 2010 (2009: 2.6 times), just outside our 2–3 times target range
as we had always anticipated could be the case during a severe recession.
This calculation uses Group EBITDA before exceptionals from continuing
operations for the 2009/10 year of £265m calculated at constant 30 April
2010 exchange rates. At actual rates net debt leverage was 3.2 times.
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 five years at 30 April 2010,
with the first maturity being on our asset-based senior bank facility which
extends until November 2013. The weighted average interest cost of our
debt facilities (including non-cash amortisation of deferred debt raising
costs) is approximately 7.4%.
Financial performance covenants under the two senior secured notes issues
are only measured at the time new debt is raised. There are two financial
performance covenants under the asset-based first priority senior bank facility:
• funded debt to EBITDA before exceptional items not to exceed
4.0 times; and
• a fixed charge ratio (comparing EBITDA before exceptional items less
net capital expenditure paid in cash over the sum of scheduled debt
repayments plus cash interest, cash tax payments and dividends paid)
which is required to be equal to or greater than 1.1 times.
29
These covenants do not, however, apply when availability (the difference
between the borrowing base and facility utilisation) exceeds $150m.
At 30 April 2010 excess availability under the bank facility was $537m
($550m at 30 April 2009). Consequently the Group’s entire debt package
is expected to remain effectively covenant free, as has been the case
during each of the last five years since the current debt structure was
adopted in 2004.
Although the covenants were not required to be measured at 30 April
2010, the Group was in compliance with both of them at that date, as
it had been throughout the fiscal year.
Debt facilities
The Group’s principal debt facilities are as follows:
Asset-based first priority, secured bank debt
During the year, the $1.84bn first priority asset-based senior secured loan
facility (‘ABL facility’) was amended and now consists of a $1,313m
revolving credit facility committed until November 2013 (‘the extended
tranche’) and a further $529m available on the original terms until August
2011 consisting of a $303m revolving credit facility (‘the non-extended
tranche’) and a $226m term loan. Repayment of the term loan and
amounts due to non-extending lenders will be met from the extended
tranche of the revolver commitments.
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 300bp to LIBOR plus 375bp for the extended tranche and LIBOR
plus 150bp to LIBOR plus 225bp for the non-extended tranche. The term
loan is priced at LIBOR plus 175bp. At 30 April 2010, the Group’s borrowing
rate was LIBOR plus 350bp on the extended tranche, LIBOR plus 200bp on
the non-extended tranche and LIBOR plus 175bp on the term loan.
The ABL facility carries minimal amortisation of $2.5m per annum on the
term loan but otherwise is non-amortising. 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 and was limited to $1,078m
at 30 April 2010.
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
first 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 Official List of the UK Listing Authority.
Ashtead Group plc Annual Report & Accounts 2010
business and financial review continued
financial review
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 2010 by year of expiry:
Bank and other debt
Finance leases
8.625% senior secured notes
9.0% senior secured notes
Deferred costs of raising finance
Cash at bank and in hand
Net debt
Operating leases1
Total
2011
£m
–
3.1
–
–
3.1
–
(54.8)
(51.7)
36.8
(14.9)
2012
£m
–
0.4
–
–
0.4
–
–
0.4
31.5
31.9
2013
£m
–
–
–
–
–
–
–
–
28.2
28.2
2014
£m
384.8
–
–
–
384.8
(17.3)
–
367.5
24.1
391.6
Payments due by year ended 30 April
Total
£m
384.8
3.5
163.3
359.3
910.9
(27.1)
(54.8)
829.0
224.0
1,053.0
Thereafter
£m
–
–
163.3
359.3
522.6
(9.8)
–
512.8
83.5
596.3
2015
£m
–
–
–
–
–
–
–
–
19.9
19.9
1 Represents the minimum payments to which we were committed under operating leases.
Operating leases relate principally to properties which constituted 99%
(£222m) of our total minimum operating lease commitments. There are
also a few remaining operating leases relating to the vehicle fleet which
constituted the remaining 1% (£2m) of such commitments.
Except for the off balance sheet operating leases described above, £19m
($29m) of standby letters of credit issued at 30 April 2010 under the first
priority senior debt facility relating to the Group’s insurance programmes
and $1.3m of performance bonds granted by Sunbelt, we have no material
commitments that we could be obligated to pay in the future which are
not included in the Group’s consolidated balance sheet.
Presentation of financial 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 significant impact on
our financial condition and results of operations as reported in pounds
sterling due to the majority of our assets, liabilities, revenue and costs
being denominated in US dollars.
We have arranged our financing so that 100% of our debt was denominated
in US dollars at 30 April 2010. At that date, dollar-denominated debt
represented approximately 82% 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 profits and earnings. Based on
the currency mix of our profits currently prevailing and on current dollar
debt levels and interest rates, every 1% change in the US dollar exchange
rate would impact pre-tax profit by £40,000.
Revenue
Our revenue is a function of our prices and the size, utilisation and mix of our
equipment rental fleet. 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 fleet at the measurement date. In the US, we
measure time utilisation on those items in our fleet with an original cost of
$7,500 or more which constituted 90% of our US serialised rental equipment
at 30 April 2010. In the UK, time utilisation is measured for all our serialised
rental equipment. The size, mix and relative attractiveness of our rental
equipment fleet is affected significantly by the level of our capital expenditure.
The main components of our revenue are:
• revenue from equipment rentals, including related revenue 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
• revenue from the sale of used rental equipment.
Costs
The main components of our total costs are:
• staff costs – staff costs at our stores as well as at our central support
offices represent the largest single component of our total costs. Staff
costs consist of salaries, profit share and bonuses, social security costs,
and other pension costs, and comprised 35% of our total operating
costs in the year ended 30 April 2010;
• 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 3% of our operating costs in the year ended
30 April 2010;
• other operating costs – comprised 38% of total costs in the year ended
30 April 2010. 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 fleet, which consists of our delivery trucks,
the light commercial vehicles used by our mobile workshop staff
and cars used by our sales force, store 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 24% of total costs in the year
ended 30 April 2010.
A large proportion of our costs are fixed 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 stores. 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 profits. We refer to this feature of our
business as ‘operational leverage’.
Critical accounting policies
We prepare and present our financial 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 identified 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.
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 financial
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 financial 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 fulfilled.
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.
Useful lives of property, plant and equipment
We record expenditure 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
profit 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 2010 was £187m.
31
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 identifiable and independent cash flows 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 flows within the value in use calculation as
well as determining the appropriate discount rate. Subsequent changes
to the magnitude and timing of cash flows could impact the carrying
value of the respective assets.
Self-insurance
We establish provisions at the end of each financial 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 financial 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
2010, the total provision for self-insurance recorded in our consolidated
balance sheet was £22m (2009: £27m).
Geoff Drabble
Chief executive
16 June 2010
Ian Robson
Finance director
Ashtead Group plc Annual Report & Accounts 2010
our directors
1
4
7
2
5
8
3
6
9
33
1. Chris Cole
Non-executive chairman
Aged 63, Chris Cole has been a director since January 2002 and was
appointed as non-executive chairman in 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 50, Geoff Drabble was appointed as chief executive in January
2007, having served as chief executive designate from 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 51, Ian Robson has been finance director since June 2000. Prior
to June 2000, Ian held a series of senior financial 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 officer, Sunbelt
Aged 53, Joe Phelan was appointed a director in April 2009. Joe was
formerly the chief executive officer 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 Charlotte, North Carolina.
5. Sat Dhaiwal
Chief executive officer, A-Plant
Aged 41, Sat Dhaiwal has been chief executive officer 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 stores.
Non-executive directors
6. Hugh Etheridge
Senior independent non-executive director
Aged 60, 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 in March 2007. He is chief financial officer of
the Waste and Resources Action Programme (‘WRAP’), a non-profit
organisation established by the UK Government to promote sustainable
waste management. Before joining WRAP, he was finance director of
Waste Recycling Group plc and prior to that, of Matthew Clark plc.
7. Gary Iceton
Independent non-executive director
Aged 60, Gary Iceton was appointed as a non-executive director and
a member of the Audit and Nomination Committees effective from
September 2004. Gary also became chairman of the Remuneration
Committee in 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 officer
of Amertrans. With effect from April 2008 he has also been a director
of Norfolk Education Industry & Commerce Group Limited. Having
completed two full terms as a non-executive director, Gary will be
standing down from the Board at the 2010 Annual General Meeting.
8. Michael Burrow
Independent non-executive director
Aged 57, Michael Burrow was appointed as a non-executive director
and member of the Audit, Remuneration and Nomination Committees
effective from 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 55, Bruce Edwards was appointed as a non-executive director in
June 2007 and a member of the Nomination Committee effective
from February 2009. Bruce is the global chief executive officer 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 2010
directors’ report
The directors present their report and the audited accounts for the
financial year ended 30 April 2010.
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 profit before taxation for the year was
£4.8m (2009: £0.8m). 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 23 to 25
and in note 23 to the financial 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 final
dividend of 2.0p per ordinary share, to be paid on 10 September 2010 to
those shareholders on the register at the close of business on 20 August
2010, making a total dividend for the year of 2.9p (2009: 2.575p).
Share capital and major shareholders
Details of the Company’s share capital are given in note 19 to the
financial 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 Ownership 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 Act, 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
Certified 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 office,
or any other place decided on by the directors. The transfer form must
be accompanied by the share certificate 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 certificate.
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 Uncertified Securities Regulations.
(ii) Transfers cannot be in favour of more than four joint holders.
Based on notifications received the holdings of 3% or more of the issued
share capital of the Company as at 15 June 2010 (the latest practicable
date before approval of the financial statements) are as follows:
Aegon Asset Management
Aviva plc
Artemis Investment Management
Ameriprise Financial, Inc.
BlackRock, Inc.
Legal & General
%
11
7
5
5
4
4
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 39 to 43. Details of all shares subject to option are given
in the notes to the financial statements on page 67.
Change of control provisions in loan
agreements
A change in control of the Company (defined, 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 32 and 33.
The policies related to their appointment and replacement are detailed
on pages 36 and 37. Each of the directors as at the date of approval of this
report confirms, as required by section 418 of the Companies Act 2006
that to the best of their knowledge and belief:
(1) there is no significant 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.
35
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 2010
was 88 days (30 April 2009: 53 days) which reflects 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 £138,991 in total
(2009: £55,329). No political donations were made in either year.
Auditors
Deloitte LLP has indicated its willingness to continue in office and in
accordance with section 489 of the Companies Act 2006, a resolution
concerning its reappointment and authorising the directors to fix 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,
7 September 2010. Notice of the meeting is set out in the document
accompanying this Report and Accounts.
In addition to the adoption of the 2009/10 Report and Accounts, the
declaration of a final 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 seven 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
two-thirds 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, amendments to the
Company’s Articles of Association 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
16 June 2010
Ashtead Group plc Annual Report & Accounts 2010
corporate governance report
The revised Combined Code on corporate governance was published in
June 2006 following a review by the Financial Reporting Council (‘the
Code’). The Company complied throughout the year with the provisions
of the Code.
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 Code.
The Board
The Company’s Board comprises the non-executive chairman, the chief
executive, the finance 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 33.
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 and the quarterly financial reports to shareholders.
Regular reports and briefings are provided to the Board, by the executive
directors and the company secretary, to ensure the directors are suitably
briefed to fulfil 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
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.
All directors are subject to election by shareholders at the first 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 specified 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.
In accordance with the Company’s articles of association, Chris Cole,
Sat Dhaiwal and Ian Robson will offer themselves for re-election to
the Board at the Annual General Meeting. In addition, Gary Iceton will
be standing down as a director at the Annual General Meeting, having
completed two full terms as a non-executive director.
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 fulfil 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
will be 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 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 profiles and terms of reference. The executive directors are evaluated
additionally against the agreed budget for the generation of revenue,
profit 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 financial experience, Gary Iceton and Michael Burrow.
By invitation, the Group’s finance director, Ian Robson, and its director
of financial 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.
The Audit Committee met on five 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 2009, 31 October 2009 and
31 January 2010 and the results for the year ended 30 April 2010;
• the external audit plan and key areas of audit focus for the year ended
30 April 2010;
• reports from the external auditor, Deloitte, related to the results for the
six months ended 31 October 2009 and the year ended 30 April 2010.
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 satisfied as to their independence, objectivity and effectiveness;
• arrangements for internal audit during the year ended 30 April 2010
and 2011;
• audit plans and reports from the internal operational auditors
responsible for auditing detailed operational controls at a store level;
• the Group risk register and reports on the work of the Group
Risk Committee;
• the effectiveness of the Group’s internal controls and financial
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 tax
advice. The Audit Committee is satisfied that the nature of work undertaken
and the level of non-audit fees did not impair their independence.
Deloitte LLP was appointed external auditor in 2004. In accordance with
APB Ethical Standards, which prevent the engagement partner responsible
for the audit of a public company being involved for more than five years,
the signing partner changed in 2008/9. The Committee is again
recommending to the Board that a proposal be put to shareholders at
the 2010 Annual General Meeting for the reappointment of Deloitte.
There are no contractual restrictions on the Company’s choice of external
auditor and in making its recommendation the Committee took into
account, amongst other matters, the objectivity and independence of
Deloitte, as noted above, and their continuing effectiveness and cost.
The Audit Committee’s terms of reference will be available for inspection
at the Annual General Meeting.
Remuneration Committee
The Remuneration Committee comprises Gary Iceton (chairman), Hugh
Etheridge and Michael Burrow, all of whom served throughout the year.
The 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 Nomination Committee comprises Chris Cole (chairman),
Geoff Drabble, Hugh Etheridge, Gary Iceton, Michael Burrow and
Bruce Edwards, all of whom served throughout the year. 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 will be available for
inspection at the Annual General Meeting.
37
Attendance at Board and Committee meetings held between
1 May 2009 and 30 April 2010
Number of meetings held
Chris Cole
Sat Dhaiwal
Geoff Drabble
Joe Phelan
Ian Robson
Michael Burrow
Bruce Edwards
Hugh Etheridge
Gary Iceton
Board
7
7
7
7
7
7
7
7
7
7
Audit
5
–
–
–
–
–
5
–
5
4
Remuneration
4
–
–
–
–
–
4
–
4
4
Nomination
1
1
–
1
–
–
1
1
1
1
Finance and Administration Committee
The Finance and Administration Committee comprises Chris Cole,
Geoff Drabble (chairman) and Ian Robson. The Board of directors has
delegated authority to this Committee to deal with routine financial 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 confirm 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 confirms that there is a process for identifying, evaluating and
managing significant risks faced by the Group. This process has been in
place for the full financial year and is ongoing. Under its terms of reference
the Group Risk Management Committee, which was formed last year,
meets semi-annually or more frequently if required, 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
misstatement 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 significant
risks have arisen. The executive directors reviewed the draft report for
2010, which was then presented to, discussed and approved by the Audit
Committee and by the Group Board on 14 June 2010.
Before producing the statement on internal control for the annual report
and accounts for the year ended 30 April 2010, 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
Ashtead Group plc Annual Report & Accounts 2010
corporate governance report continued
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 profit centres or elsewhere.
The Audit Committee also meets regularly with the external auditors to
discuss their work.
In relation to internal financial control, the Group’s control and monitoring
procedures include:
• the maintenance and production of accurate and timely financial
management information, including a monthly profit and loss account
and selected balance sheet data for each store;
• the control of key financial 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 financial report to the Board, including
income statements for the Group and each subsidiary, balance sheet
and cash flow 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 profit 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 periodically by internal audit specialists from a major
international accounting firm;
• comprehensive audits at the stores 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 confidence, raise
concerns about possible improprieties in matters of financial reporting
or other matters.
Statement of directors’ responsibilities
The directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for
the Group in accordance with International Financial Reporting Standards
(‘IFRS’) as adopted by the European Union and Article 4 of the IAS
Regulations and have also elected to prepare financial statements for the
Company in accordance with IFRS. Company law requires the directors
to prepare such financial statements in accordance with IFRS and the
Companies Act.
Under company law the directors must not approve the accounts unless
they are satisfied that they give a true and fair view of the state of affairs
of the Company and of the profit or loss of the Company for that period.
IAS 1, Presentation of Financial Statements, requires that financial
statements present fairly for each financial year the Company’s financial
position, financial performance and cash flows. This requires the
representation of the effects of transactions, as well as other events and
conditions, in accordance with the definitions 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,
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;
• provide additional disclosures when compliance with the specific
requirements in IFRS is insufficient to enable users to understand
the impact of particular transactions, other events and conditions
on the entity’s financial position and financial performance; and
• make an assessment of the Company’s ability to continue as a
going concern.
The directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company’s transactions and
disclose with reasonable accuracy at any time the financial position of
the Company and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible 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 2006.
The Board confirms to the best of its knowledge:
• the consolidated financial statements, prepared in accordance with
IFRS as issued by the International Accounting Standards Board and
IFRS as adopted by the EU, give a true and fair view of the assets,
liabilities, financial position and profit of the Group; 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
financial statements may differ from legislation in other jurisdictions.
Going concern
The Group’s operations and financial condition, together with factors likely
to affect its future development, performance and condition are set out
in the Business and Financial Review on pages 6 to 31. In particular, the
Group’s financial management and cash flow, including details of the Group’s
banking facilities are set out on pages 28 to 30. In addition, note 23 to the
financial statements describes the Group’s financial 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 five years as of 30 April 2010 with the earliest significant maturity being
the ABL facility which continues until November 2013. The Group finances
its day-to-day activity via the ABL facility under which excess availability
totalled $537m at year end. Taking account of reasonably possible changes
in trading performance, used equipment values and the other factors that
might impact availability, the Group expects to maintain significant
headroom under the ABL facility for the forthcoming year.
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 financial statements.
By order of the Board
Eric Watkins
Company Secretary
16 June 2010
directors’ remuneration report
39
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 Act requires 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 financial 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)
with respect to current remuneration trends in FTSE 250 companies.
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 benefits in kind;
• annual performance related bonus plan;
• Performance Share Plan awards; and
• pension arrangements.
In assessing all aspects of pay and benefits, the Company compares
packages offered by similar companies, which are chosen having regard to:
• the size of the company (enterprise value, revenues, profits and number
of employees);
• the diversity and complexity of its businesses;
• the geographical spread of its businesses; and
• their growth, expansion and change profile.
In making the comparisons, the Company also takes into consideration
the Group’s significant 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 significant 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. Reflecting the current market
environment and focus on operating costs, for the second successive year,
salaries for 2010/11 will be held at their 2008/9 level.
Annual performance related bonus plan
Under the annual performance related bonus plan for executive directors,
payouts for the year to 30 April 2010 were related directly to profitability
and cash flow and were subject to a cap of 100% of salary. The Committee
establishes the objectives that must be met for each financial 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 reflect appropriately
challenging financial performance.
The target for Geoff Drabble and Ian Robson relating to profitability was
partially achieved while the target relating to cash flow was fully achieved.
As a result they earned 75% of their maximum bonus entitlement for the
year. The financial targets relevant to Joe Phelan and Sat Dhaiwal depended
on Sunbelt’s and A-Plant’s performance respectively and were also partially
achieved with the result that they each earned 50% of their maximum bonus.
For the year to 30 April 2011, executive directors’ performance related
bonuses will be subject to a cap of 100% of salary with 50% of bonus
potential based on profitability targets and 50% on cash generation targets.
Share-based incentives and dilution limits
The Company observes an overall dilution limit of 10% in 10 years for
all Company share schemes, together with a limit of 5% in 10 years
for discretionary schemes.
Details of the Company’s share-based incentives are set out below.
Previous plans
A. Executive share option schemes
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 (‘PSP’) 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 2009 award was 150% of his base salary as at the date of grant.
As agreed by the Nomination and Remuneration Committees prior to Joe
Phelan joining the Group, Joe’s 2009 PSP award was enhanced by around
15% ($80,000) above the usual 100% of base salary to compensate him
for incentives lost when he left his previous employment. The 2009
awards for the other executive directors were at 100% of base salary.
Ashtead Group plc Annual Report & Accounts 2010
directors’ remuneration report continued
The performance criteria vary by year of award and are as follows:
Award date
6/10/04
Financial year
2004/5
17/8/05
2005/6
12/10/06 2006/7
2007/8
30/7/07
2008/9
14/10/08
13/7/09
2009/10
Performance criteria (measured over three years)
TSR (% of award)
From award date versus FTSE Small Cap
(12.5% at median; 50% at upper quartile)
From date of grant versus FTSE 250 Index
(12.5% at median; 50% at upper quartile)
EPS (% of award)
2006/7 EPS between 5p (12.5% vested)
and 8p (50% vested)
2007/8 EPS between 7.7p (12.5% vested)
to 9.1p (50% vested)
2008/9 EPS – 16.2p (12.5% vested) – 19p (100% vested)
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
(12.5% at median; 50% at upper quartile)
– RPI + 5% p.a. (50% vested)
From date of grant versus FTSE 250 Index
2011/12 EPS – RPI + 0% (25% vested)
(37.5% at median; 75% at upper quartile)
Status
Vested in full in October 2007
EPS target met in full and 50% of the
award vested. The remaining 50% lapsed
Lapsed
Lapsed
Not completed
Not completed
For performance between the lower and upper EPS and TSR ranges, vesting of the award is scaled on a straight-line basis.
EPS for the purpose of the awards was based on the profit 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 profit definition 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 specific 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 2010/11 PSP awards, the Committee
intends that vesting will be based 50% on TSR and 50% on EPS.
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 2010, the ESOT held a
beneficial interest in 5,669,844 shares.
Relative performance
The following graph compares the Company’s TSR performance with the
FTSE 250 Index (excluding investment trusts) over the five years ended
30 April 2010. 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.
Total shareholder return (£)
300
250
200
150
100
50
0
Apr
05
Apr
06
Apr
07
Apr
08
Apr
09
Apr
10
Ashtead Group plc
FTSE 250 Index (excluding Investment Trusts)
Source: Thomson Financial
This graph shows the value, by 30 April 2010, of £100 invested in Ashtead
plc on 30 April 2005 compared with the value of £100 invested in the FTSE
250 Index (excluding investment trusts). The other points plotted are the
values at intervening financial 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. This provision was
agreed prior to his joining the Company in 2006 and reflected the fact that
he was leaving a generous defined benefit arrangement at his previous
employer. His retirement, under his contract, is at age 60.
Under the terms of his contract, Ian Robson is entitled to retire at age 60 on
a pension equal to one-thirtieth of his final salary for each year of pensionable
service. Ian Robson’s contract also contains early retirement provisions
enabling him to retire at a date of his choosing and draw a pension based
on actual years of service, but without deduction for early payment. These
provisions became effective from May 2010 when he completed 10 years’
service with the Company. Ian Robson pays contributions equal to 7.5%
of his salary to the Retirement Benefits Plan. Both the accrual rate and
the early retirement provisions were agreed prior to Mr Robson joining the
Company in 2000 and reflected the need to be competitive with similar
arrangements he enjoyed with his previous employer.
Sat Dhaiwal’s pension benefits are also provided entirely through the
Ashtead Group plc Retirement Benefits Plan. His pension rights accrue at
the rate of one-sixtieth of salary (as defined) 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 Benefits Plan.
The Retirement Benefits 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 55 with the Company’s consent.
Early retirement benefits are reduced by an amount agreed between the
actuary and the trustees as reflecting the cost to the plan of the early
retirement; and
• pension increases in line with the increase in retail price inflation up
to a limit of currently 5% a year in respect of service since 1997.
Joe Phelan received a payment of 15% of his base salary during his
first year of employment in lieu of providing him with any pension
arrangements. This was reduced to 14% of base salary thereafter.
In line with US law no retirement age is specified under Joe’s contract.
41
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.
In accordance with best practice, none of the executive directors’ contracts provide for payment of any bonus for the period when notice has been given.
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 £2,998,000 (2009: £2,309,000) and consisted of emoluments of £2,919,000 (2009: £2,140,000),
gains on exercise of share options of £79,000 (2009: £45,000) and £nil (2009: £124,000) receivable under long-term incentive plans.
The emoluments of the directors, excluding pension benefits, which are included in staff costs in note 3 to the financial statements, were as follows:
Name
Executive:
Sat Dhaiwal
Geoff Drabble
Joe Phelan
Ian Robson
Non-executive:
Chris Cole
Michael Burrow
Bruce Edwards
Hugh Etheridge
Gary Iceton
Former director:
Cliff Miller(iii)
2009
Salary
£’000
220
456
325
328
–
–
–
–
–
–
1,329
1,315
Fees
£’000
–
–
–
–
110
40
40
55
45
–
290
290
Performance
related
bonus
£’000
Benefits
in
kind(i)
£’000
Other
allowances(ii)
£’000
Total
emoluments
2010
£’000
Total
emoluments
2009
£’000
110
342
162
246
–
–
–
–
–
–
860
196
1
31
11
1
–
–
–
–
–
–
44
44
14
208
163
11
–
–
–
–
–
–
396
295
345
1,037
661
586
110
40
40
55
45
–
2,919
235
826
7
422
110
40
40
55
45
360
2,140
2,140
(i) Benefits in kind comprise the taxable benefit 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) 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 was paid his base salary for a period of 12 months from the termination of his employment. This equated to £340,000 and, although provided in
the 2008/9 financial statements, was paid in full during the year ended 30 April 2010. No further payments are due with respect to Cliff Miller’s departure. In accordance with the rules of the plan, 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 benefits
Post-employment benefits
National insurance and social security
Share-based payments
2010
£’000
2,919
101
253
265
3,538
2009
£’000
2,140
93
288
(938)
1,583
Ashtead Group plc Annual Report & Accounts 2010
directors’ remuneration report continued
Directors’ pension benefits
Sat Dhaiwal
Ian Robson
Age at
30 April
2010
Years
41
51
Accrued
pensionable
service at
30 April 2010
Years
16
10
Contributions
paid by the
director
£’000
17
25
Accrued
annual
pension at
30 April 2010
£’000
58
103
Increase in annual
pension during the year
Total
increase
£’000
5
10
Excluding
inflation
£’000
5
10
Transfer
value of
accrued
pension at
30 April 2010
£’000
448
1,790
Transfer
value of
accrued
pension at
30 April 2009
£’000
357
1,392
Increase
in transfer
value over
the year
£’000
74
373
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.
Prior to his departure in April 2009, Cliff Miller had deferred part of his annual salary and bonus in the Sunbelt deferred compensation plan. At 30 April
2009, the outstanding balance in the plan due to Cliff was $145,570 or £98,239. During 2009/10, Cliff withdrew all the remaining balance of $145,570.
Directors’ interests in shares
The directors of the Company are shown below together with their beneficial interests in the share capital of the Company.
Michael Burrow
Chris Cole
Sat Dhaiwal
Geoff Drabble
Bruce Edwards
Hugh Etheridge
Gary Iceton
Joe Phelan
Ian Robson
The directors had no non-beneficial interests in the share capital of the Company.
Performance Share Plan awards
Shares held by executive directors and by a former director, Cliff Miller, under the PSP are shown in the table below:
30 April 2010
Number of
ordinary shares
of 10p each
100,000
77,082
365,849
361,357
40,000
20,000
49,082
– –
1,514,829
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
Sat Dhaiwal
Geoff Drabble
Joe Phelan
Ian Robson
Former director:
Cliff Miller
Year of grant
2006/7
2007/8
2008/9
2009/10
2006/7
2007/8
2008/9
2009/10
2009/10
2006/7
2007/8
2008/9
2009/10
2006/7
2007/8
2008/9
Held at
30 April 2009
90,468
116,418
384,279
–
264,943
320,896
1,194,760
–
–
193,861
235,075
572,052
–
174,047
107,973
83,557
–
–
–
during year
–
–
–
Held at
Exercised Granted/(lapsed)
30 April 2010
during the year
–
(90,468)
116,418*
–
384,279
–
405,530
405,530
–
(264,943)
320,896*
–
– 1,194,760
1,260,829 1,260,829
686,735
–
235,075*
572,052
603,687
–
686,735
(193,861)
–
–
–
–
–
–
603,687
(174,047)
–
–
–
–
–
107,973*+
83,557+
* Subsequent to 30 April 2010, the Remuneration Committee determined that the performance conditions attaching to the 2007/8 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.
The performance conditions attaching to the Performance Share Plan referred to above are detailed on pages 39 and 40.
43
Exercised
during
year
Lapsed
during
year
Options at
30 April
2010
Exercise
price
Earliest normal
exercise
date
Expiry
–
(31,979)
(211,932)
–
–
–
–
–
37,941
–
–
249,332
Feb 2004
115.3p
Feb 2011
93.8p Aug 2003 Aug 2010
94.6p Aug 2003 Aug 2010
Feb 2011
115.3p
Feb 2004
Options at
1 May
2009
37,941
31,979
211,932
249,332
4,960
–
(4,960)
–
122.1p
Sep 2009
Feb 2010
Directors’ interests in share options
Discretionary schemes
Sat Dhaiwal
Ian Robson
SAYE scheme
Sat Dhaiwal
Details of share options exercised by the executive directors in the year are as follows:
Ian Robson
Number
exercised
31,979
211,932
Exercise
date
26 April 2010
26 April 2010
Option
price
93.8p
94.6p
Market price at
date of exercise
126.8p
126.8p
Gain
£’000
11
68
On exercise on 26 April 2010 of the share options originally awarded to him in August 2000, Ian Robson sold 209,174 shares to generate net proceeds
equal to the exercise price and the income tax and national insurance on the exercise. He retained the remaining 34,737 shares.
Sat Dhaiwal’s interest in 54,202 units in the Company’s Cash Incentive Scheme granted to him in February 2000 lapsed in February 2010 with no
payment being due.
The market price of the Company’s shares at the end of the financial year was 119p and the highest and lowest closing prices during the financial year
were 125p and 48p respectively.
This report has been approved by the Remuneration Committee and is signed on its behalf by:
Gary Iceton
Chairman, Remuneration Committee
16 June 2010
Ashtead Group plc Annual Report & Accounts 2010
corporate responsibility report
Objectives and management structure
Ashtead is committed to operating in a safe, ethical and responsible
manner in all its endeavours. We place high priority on compliance with
our legislative and regulatory obligations and on maintaining the safety
of our workforce across the Group.
Our Group Risk Committee is charged with overseeing the Group’s
environmental, health and safety and risk management processes
and ensuring that the efforts of Sunbelt and A-Plant are co-ordinated
so that best practice in one business can be adopted by 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;
• the heads of Sunbelt’s and A-Plant’s performance standards (internal
operational audit) teams; and
• the Sunbelt board member to whom its legal council and safety
director report.
The Group Risk Committee provides the Audit Committee, and through
it the Board, with a comprehensive annual report on its activities including
details of the areas identified in the year as requiring improvement and the
status of actions being taken to make the necessary improvements. In this
way we 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 significant time drawing our customers’
attention to the importance of these issues for their own employees. A
copy of the relevant formal statement of Sunbelt’s and A-Plant’s policies
on health and safety is required to be displayed at each store. 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 9001 (the Quality Standard) accreditation across all its operations.
This is in addition to the ISO 14001 (Environmental management) and
OHSAS 18001 (Occupational Health & Safety management) accreditations
obtained in 2009. These certifications give confidence that we have in
place the appropriate policies, training programmes, feedback 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 414 reported incidents relative to a
workforce of 5,675 (2009: 492 incidents relative to a workforce of 6,742)
whilst the UK had 318 incidents relative to a workforce of 1,964 (2009:
367 incidents relative to a workforce of 2,336). An incident for this
purpose does not necessarily mean that an employee was hurt or injured.
Rather it represents an event that we want to track and report for
monitoring and learning purposes under our health and safety
management policies.
Legislation in the US and UK defines 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 definitions
which generally encompass more accidents in the US than in the UK, Sunbelt
had 231 OSHA (Occupational Health and Safety Administration) recordable
accidents (2009: 298 accidents) which, relative to total employee hours
worked, gave a Total Incident Rate (‘TIR’) of 3.21 (2009: 3.41). In the UK,
A-Plant had 63 RIDDOR reportable incidents (2009: 42) which again,
relative to total employee hours worked, gave a RIDDOR reportable rate
of 1.52 (2009: 1.04).
In the US, an OSHA recordable incident is one where medical attention
more extensive than simple first aid is required whereas in the UK a
RIDDOR reportable incident (as defined by the UK Health and Safety
Executive) is an incident which results in the injured employee not
returning to work for more than three days.
In order to compare accident rates between the US and UK, A-Plant also
applied the US OSHA definition to its accident population which gave
a figure of 114 (2008/9: 96) OSHA recordable accidents in the UK. On
a like-for-like basis in the year ended April 2010, Sunbelt therefore had
39 (2008/9: 44) OSHA recordable incidents for every 1,000 employees
whilst A-Plant’s equivalent incident rate was 58 (2008/9: 42).
The increase in 2009/10 in UK incidents compared to the previous year
does not reflect any lessening of focus on health and safety matters
and additionally none of the recorded incidents resulted in any major
long-term injury. A-Plant therefore anticipates its accident rate in the
coming year returning towards previous levels.
Regular employee education and awareness training is, in our view, the
most effective way of improving and sustaining safety standards across
our businesses and both businesses continue to invest in providing these
programmes. We also seek continually 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 fleets 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 2010 the average age of our fleet was approximately 44 months;
• our network of stores 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 fleet and, where relevant, vehicles. We also seek
to ensure proper arrangements are made, through the use of reputable
vendors, for the collection and disposal of waste fuels and oils, tyres and
other old or broken parts released as we service and maintain our rental
fleets. Already A-Plant works mostly with a single national supplier to
manage this centrally and Sunbelt is looking to reduce the number of
vendors it uses in the coming year to enable additional assurance to be
gained in this area; and
• a modern and efficient delivery truck fleet to ensure that our vehicles
are purchased with the latest available emissions management and fuel
efficiency available from our chosen suppliers.
We also support the initiatives of the Carbon Disclosure Project 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 2010 were 181,000 tonnes
(2009: 197,000 tonnes). This comprised 155,000 tonnes at Sunbelt (2009:
169,000 tonnes) and 26,000 tonnes for A-Plant (2009: 27,000 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 fleet 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 thereby reducing the site’s overall transportation
needs. We are also investing in building a secure container in which to
store smaller tools at the job site with an electronic access gate which
uses RFID tagging to enable automated invoicing to the customer as
the tools are used.
Employees
Our employees are our greatest asset and we place enormous value on
their welfare, as well as the superior level of service they provide for our
customers. At 30 April 2010, we had 7,200 employees across the Group.
Our employees benefit from extensive on-the-job training schemes and
are incentivised to deliver superior performance and customer service.
We continue to take action consistently through the year to maintain
and develop arrangements aimed at involving employees in the Group’s
affairs. For example, regular meetings are held at profit centres to discuss
performance and enable employees to input into ways of improving
performance and service levels.
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 stores 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.
More information on our employees can be found on pages 17 and 24.
Geoff Drabble
Chief executive
16 June 2010
45
Ashtead Group plc Annual Report & Accounts 2010
independent auditors’ report to the
members of Ashtead Group plc
We have audited the financial statements of Ashtead Group plc for
the year ended 30 April 2010 which comprise the Consolidated Income
Statement, the Consolidated Statement of Comprehensive Income,
the Consolidated and Company Balance Sheets, the Consolidated and
Company Cash Flow Statements, the Consolidated Statement of
Changes in Equity and the related notes 1 to 30. The financial reporting
framework that has been applied in their preparation is applicable law
and International Financial Reporting Standards (IFRSs) as adopted by the
European Union and, as regards the parent Company financial statements,
as applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the Company’s members, as a body, in
accordance with Chapter 3 of Part 16 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 financial
statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit the financial 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 financial statements
An audit involves obtaining evidence about the amounts and disclosures
in the financial statements sufficient to give reasonable assurance that the
financial 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 significant accounting estimates made by the directors;
and the overall presentation of the financial statements.
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the
Group’s and of the parent Company’s affairs as at 30 April 2010 and
of the Group’s profit for the year then ended;
• the consolidated financial statements have been properly prepared
in accordance with IFRSs as adopted by the European Union;
• the Company financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union and as applied
in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006 and, as regards the Group
financial 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 financial 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 financial statements comply with IFRSs as issued by
the IASB.
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 financial year
for which the financial statements are prepared is consistent with the
financial 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 financial 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 specified 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 June 2008 Combined Code
specified for our review.
Ian Waller (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditors
London
16 June 2010
47
our financial statements
2010
Contents
48 Consolidated income statement
48 Consolidated statement of
comprehensive income
49 Consolidated balance sheet
50 Consolidated statement of changes
in equity
51 Consolidated cash flow statement
52 Notes to the consolidated
financial statements
78 Ten year history
79 Additional Information
www.ashtead-group.com
Ashtead Group plc Annual Report & Accounts 2010
consolidated
income statement
For the year ended 30 April 2010
Before
exceptionals,
Exceptionals,
amortisation and amortisation and
remeasurements
£m
remeasurements
£m
Notes
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
EBITDA*
Depreciation
Amortisation
Operating profit
Net financing costs
Profit on ordinary activities before taxation
Taxation
– current
– deferred
Profit from continuing operations
Profit from discontinued operations
Profit 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
2, 3
5
6
6, 18
8
8
8
8
769.6
40.6
26.6
836.8
(266.3)
(24.6)
(290.8)
(581.7)
255.1
(186.6)
–
68.5
(63.5)
5.0
(2.2)
(1.7)
(3.9)
1.1
–
1.1
0.2p
0.2p
0.2p
0.2p
* EBITDA is presented here as an additional performance measure as it is commonly used by investors and lenders.
–
–
1.6
1.6
–
(1.6)
–
(1.6)
–
–
(2.5)
(2.5)
2.3
(0.2)
–
0.2
0.2
–
1.0
1.0
–
–
0.2p
0.2p
2010
Total
£m
769.6
40.6
28.2
838.4
(266.3)
(26.2)
(290.8)
(583.3)
255.1
(186.6)
(2.5)
66.0
(61.2)
4.8
(2.2)
(1.5)
(3.7)
1.1
1.0
2.1
0.2p
0.2p
0.4p
0.4p
consolidated statement of
comprehensive income
For the year ended 30 April 2010
Profit attributable to equity holders of the Company for the financial year
Foreign currency translation differences
Actuarial loss on defined benefit pension scheme
Tax on foreign currency translation differences
Tax on defined benefit pension scheme
Tax on share-based payments
Total comprehensive income for the year
Before
exceptional
items and
amortisation
£m
Exceptional
items and
amortisation
£m
974.0
55.6
43.9
1,073.5
(313.4)
(37.3)
(366.7)
(717.4)
356.1
(201.1)
–
155.0
(67.6)
87.4
(2.7)
(26.9)
(29.6)
57.8
2.0
59.8
11.5p
11.4p
11.9p
11.8p
2009
Total
£m
974.0
55.6
94.4
1,124.0
(317.9)
(87.6)
(401.7)
(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
–
–
50.5
50.5
(4.5)
(50.3)
(35.0)
(89.8)
(39.3)
(43.9)
(3.4)
(86.6)
–
(86.6)
2.6
28.2
30.8
(55.8)
59.0
3.2
(11.1p)
(11.0p)
0.6p
0.7p
12.5p
12.5p
2010
£m
2.1
(9.0)
(9.2)
–
2.6
0.1
(13.4)
2009
£m
63.0
59.8
(7.4)
(3.7)
2.0
0.4
114.1
consolidated
balance sheet
At 30 April 2010
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
Other financial assets – derivatives
Defined benefit pension fund surplus
Total assets
Current liabilities
Trade and other payables
Current tax liability
Debt due within one year
Provisions
Non-current liabilities
Debt due after more than one year
Provisions
Deferred tax liabilities
Defined benefit pension fund deficit
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
49
Notes
9
10
11
12
12
13
13
18
23
22
14
15
17
15
17
18
22
19
2010
£m
9.9
134.7
1.1
54.8
200.5
–
200.5
2009
£m
10.4
148.3
1.5
1.7
161.9
1.6
163.5
969.7
131.9
1,101.6
3.3
373.6
7.8
5.7 –
–
1,492.0
1,140.5
153.5
1,294.0
5.9
385.4
12.3
0.3
1,697.9
1,692.5
1,861.4
130.6
2.1 –
3.1
12.0
147.8
880.7
29.4
126.6
7.7
1,044.4
1,192.2
55.3
3.6
0.9
90.7
(33.1)
(6.3)
20.1
369.1
500.3
106.7
6.9
17.4
131.0
1,030.7
36.8
136.9
–
1,204.4
1,335.4
55.3
3.6
0.9
90.7
(33.1)
(6.3)
29.1
385.8
526.0
Total liabilities and equity
1,692.5
1,861.4
These financial statements were approved by the Board on 16 June 2010.
Geoff Drabble
Chief executive
Ian Robson
Finance director
Ashtead Group plc Annual Report & Accounts 2010
consolidated statement of
changes in equity
For the year ended 30 April 2010
At 1 May 2008
Total comprehensive income for the year
Shares issued
Dividends paid
Share-based payments
Vesting of share awards
Own shares purchased
Cancellation of shares held by the Company
Realisation of foreign exchange
translation differences
At 30 April 2009
Total comprehensive income for the year
Dividends paid
Share-based payments
At 30 April 2010
Share
capital
£m
56.2
–
–
–
–
–
–
(0.9)
–
55.3
–
–
–
55.3
Share
premium
account
£m
3.6
–
–
–
–
–
–
–
–
3.6
–
–
–
3.6
Capital
redemption
reserve
£m
–
–
–
–
–
–
–
0.9
Non-
distributable
reserve
£m
90.7
–
–
–
–
–
–
–
–
0.9
–
–
–
0.9
–
90.7
–
–
–
90.7
Treasury
stock
£m
(23.3)
–
0.5
–
–
–
(15.7)
5.4
–
(33.1)
–
–
–
(33.1)
Own
shares
held by
ESOT
£m
(7.0)
–
–
–
–
1.1
(0.4)
–
–
(6.3)
–
–
–
(6.3)
Cumulative
foreign
exchange
translation
differences
£m
(28.2)
56.1
–
–
–
–
–
–
1.2
29.1
(9.0)
–
–
20.1
Retained
reserves
£m
348.3
58.0
(0.3)
(12.9)
(0.8)
(1.1)
–
(5.4)
–
385.8
(4.4)
(12.8)
0.5
369.1
Total
£m
440.3
114.1
0.2
(12.9)
(0.8)
–
(16.1)
–
1.2
526.0
(13.4)
(12.8)
0.5
500.3
consolidated
cash flow statement
For the year ended 30 April 2010
Cash flows from operating activities
Cash generated from operations before exceptional items and changes in rental fleet
Exceptional costs paid
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 (net)
Tax received (net)
Net cash from operating activities
Cash flows from investing activities
Acquisition of businesses
Disposal of business (costs)/proceeds
Payments for non-rental property, plant and equipment
Proceeds from disposal of non-rental property, plant and equipment
Net cash (used in)/from investing activities
Cash flows from financing activities
Drawdown of loans
Redemption of loans
Capital element of finance 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 financing activities
Increase/(decrease) in cash and cash equivalents
Opening cash and cash equivalents
Effect of exchange rate differences
Closing cash and cash equivalents
Notes
24(a)
24(d)
51
2010
£m
2009
£m
265.6
(8.2)
(36.1)
25.2
1.6
248.1
(54.7)
0.3
193.7
(0.2)
(0.5)
(6.7)
4.0
(3.4)
290.7
(410.8)
(4.3)
–
–
(12.8)
–
(137.2)
53.1
1.7
–
54.8
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 2010
notes to the consolidated
financial statements
1 Accounting policies
The principal accounting policies adopted in the preparation of these
financial statements are set out below. These policies have been applied
consistently to all the years presented, unless otherwise stated.
Basis of preparation
These financial 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 financial statements have been prepared
under the historical cost convention, modified 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:
• IAS 1 (revised) Presentation of financial instruments has been adopted
and has resulted in the ‘Consolidated statement of changes in equity’
being presented as a primary statement (previously disclosed as a note
titled ‘Reconciliation of changes in equity’). In addition, the Group has
continued to present a separate ‘Income statement’ and ‘Statement
of comprehensive income’ (previously titled ‘Statement of recognised
income and expense’). The adoption of IAS 1 (revised) has had no impact
on the consolidated results or financial position of the Group.
• The following new standards, amendments to standards or interpretations
are effective for the Group’s accounting period beginning on 1 May 2009
and, where relevant, have been adopted. They have not had a material
impact on the consolidated results or financial position of the Group:
–
–
–
IFRS 1 (revised) First time adoption of IFRS;
IFRS 3 (revised) Business combinations;
Amendments to IFRS 2 Group cash-settled share-based payment
transactions;
Amendment to IFRS 7 Improving disclosures about financial
instruments;
Amendments to IAS 27 Consolidated and separate financial
statements;
Amendment to IAS 32 Financial instruments: presentation:
classification of rights issues;
Amendment to IAS 39 Reclassification of financial assets: effective
date and transition;
Amendment to IAS 39 Financial instruments: recognition and
measurement: eligible hedged items;
Amendment to IFRIC 9 and IAS 39 Embedded derivatives;
IFRIC 15 Agreements for the construction of real estate;
IFRIC 16 Hedges of a net investment in a foreign operation;
IFRIC 17 Distributions of non-cash assets to owners;
IFRIC 18 Transfers of assets from customers;
Improvements to IFRS (April 2009).
–
–
–
–
–
–
–
–
–
–
–
The preparation of financial 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 financial 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
31 and forms part of these financial statements. Actual results could
differ from these estimates.
Basis of consolidation
The Group financial statements incorporate the financial 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 financial and operating policies of
an entity so as to obtain the benefits from its activities.
Foreign currency translation
Assets and liabilities in foreign currencies are translated into pounds
sterling at rates of exchange ruling at the balance sheet date. Income
statements and cash flows of overseas subsidiary undertakings are
translated into pounds 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
2010
1.60
1.53
2009
1.68
1.48
Exchange differences arising from the retranslation of the opening net
investment of overseas subsidiaries and the difference between the
inclusion of their profits 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 financial reporting period
ends, the Group records unbilled rental revenue and deferred revenue at
the beginning and end of each reporting period so that rental revenue is
appropriately stated in the financial 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 fulfilled.
Revenue from sales of rental equipment in connection with trade-in
arrangements with certain manufacturers from whom the Group purchases
new equipment is 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 classified 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 classified as non-current liabilities.
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
53
platforms, cost includes rebuild costs when the rebuild extends the asset’s
useful economic life and it is probable that incremental economic benefits
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 finance 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 finance lease obligations
are included within debt. The finance 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 fixed assets, including those held under finance 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
Office 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 identifiable 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 profit 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 identifiable and independent cash flows 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 flows
are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the
risks specific 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 financial
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
profits 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 benefits
Defined contribution pension plans
Obligations under the Group’s defined contribution plans are recognised
as an expense in the income statement as incurred.
Ashtead Group plc Annual Report & Accounts 2010
notes to the consolidated
financial statements continued
1 Accounting policies continued
Defined benefit pension plans
The Group’s obligation in respect of defined benefit pension plans is
calculated by estimating the amount of future benefit that employees
have earned in return for their service in the current and prior periods; that
benefit 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 qualified 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 profit. 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 defined pension surplus or deficit represents the fair value of the
scheme assets less the present value of the defined benefit obligation.
A surplus is recognised in the balance sheet to the extent that the Group
has an unconditional right to the surplus, either through a refund or
reduction in future contributions. A deficit 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 reflect 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 financial instruments and the expected return
on plan assets in respect of defined benefit pension plans.
Interest expense comprises interest payable on borrowings, amortisation
of deferred finance costs, fair value losses on derivative financial
instruments and the expected increase in plan liabilities in respect of
defined benefit pension schemes.
Financial instruments
Financial assets and financial liabilities are recognised in the Group’s
balance sheet when the Group becomes a party to the contractual
provisions of the instrument.
Financial assets
Trade receivables
Trade receivables do not carry interest and are stated at face 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.
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 face 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.
Tranches of borrowings and overdrafts which mature on a regular basis
are classified as current or non-current liabilities based on the maturity
of the facility so long as the committed facility exceeds the drawn debt.
Derivative financial instruments
The Group uses a limited number of derivative financial instruments to
hedge its exposure to fluctuations in interest and foreign exchange rates.
These are principally swap agreements used to manage the balance
between fixed and floating rate finance on long-term debt and forward
contracts for known future foreign currency cash flows. 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 financial instruments that are designated and effective
as hedges of future cash flows 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 profit 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, net of direct transaction costs. 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 financial 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.
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 financial performance of the Group.
Earnings per share
Earnings per share is calculated based on the profit for the financial 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 profit for
the financial year and the weighted average diluted number of shares
55
(ignoring any potential issue of ordinary shares which would be anti-
dilutive) during the year.
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.
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.
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.
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 classified 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 classification.
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 in the prior year and therefore classified as a disposal group. 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 2010
Revenue
Operating costs
EBITDA
Depreciation
Segment result before exceptional items and amortisation
Exceptional items
Amortisation
Segment result
Net financing costs
Profit before taxation
Taxation
Profit attributable to equity shareholders
Segment assets
Cash
Taxation assets
Other financial assets – derivatives
Total assets
Segment liabilities
Corporate borrowings and accrued interest
Taxation liabilities
Total liabilities
Other non-cash expenditure
– share-based payments
Capital expenditure
Sunbelt
£m
674.5
(455.5)
219.0
(146.3)
72.7
–
(1.9)
70.8
A-Plant
£m
162.3
(120.3)
42.0
(40.2)
1.8
–
(0.6)
1.2
Corporate
items
£m
–
(5.9)
(5.9)
(0.1)
(6.0)
–
–
(6.0)
Continuing Discontinued
operations
operations
£m
£m
–
836.8
–
(581.7)
–
255.1
–
(186.6)
–
68.5
1.0
–
–
(2.5)
1.0
66.0
–
(61.2)
1.0
4.8
–
(3.7)
1.0
1.1
1,332.0
290.9
0.2
119.6
44.5
1.7
1,623.1
54.8
8.9
5.7
1,692.5
165.8
897.7
128.7
1,192.2
0.2
0.1
48.3
15.3
0.2
–
0.5
63.6
–
–
–
–
–
–
–
–
–
–
–
Group
£m
836.8
(581.7)
255.1
(186.6)
68.5
1.0
(2.5)
67.0
(61.2)
5.8
(3.7)
2.1
1,623.1
54.8
8.9
5.7
1,692.5
165.8
897.7
128.7
1,192.2
0.5
63.6
Ashtead Group plc Annual Report & Accounts 2010
notes to the consolidated
financial statements continued
2 Segmental analysis continued
Year ended 30 April 2009
Revenue
Operating costs
EBITDA
Depreciation
Segment result before exceptional items and amortisation
Exceptional items
Amortisation
Segment result
Net financing costs
Profit before taxation
Taxation
Profit 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)
1,514.7
331.0
0.2
113.3
34.5
2.2
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
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
Discontinued
operations
£m
5.1
(2.3)
2.8
–
2.8
66.1
–
68.9
–
68.9
(7.9)
61.0
–
–
–
–
–
–
–
–
–
–
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
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. 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
2010
£m
674.5
162.3
–
836.8
Revenue
2009
£m
867.7
209.9
1.0
1,078.6
2010
£m
1,222.1
256.4
–
1,478.5
Segment assets
2009
£m
1,394.0
292.1
–
1,686.1
Capital expenditure
2009
£m
166.1
72.5
–
238.6
2010
£m
48.3
15.3
–
63.6
3 Operating costs and other income
Staff costs:
Salaries
Social security costs
Other pension costs
Before
exceptional
items and
amortisation
£m
Exceptional
items and
amortisation
£m
244.7
20.2
1.4
266.3
–
–
–
–
2010
Total
£m
244.7
20.2
1.4
266.3
Before
exceptional
items and
amortisation
£m
Exceptional
items and
amortisation
£m
284.6
23.0
5.8
313.4
4.5
–
–
4.5
57
2009
Total
£m
289.1
23.0
5.8
317.9
Used rental equipment sold
24.6
1.6
26.2
37.3
50.3
87.6
Other operating costs:
Vehicle costs
Spares, consumables and external repairs
Facility costs
Other external charges
Depreciation and amortisation:
Depreciation of owned assets
Depreciation of leased assets
Amortisation of acquired intangibles
66.2
48.9
44.9
130.8
290.8
184.9
1.7
–
186.6
768.3
–
–
–
–
–
–
–
2.5
2.5
4.1
66.2
48.9
44.9
130.8
290.8
184.9
1.7
2.5
189.1
84.0
61.9
47.3
173.5
366.7
197.5
3.6
–
201.1
0.5
1.9
25.3
7.3
35.0
40.6
3.3
3.4
47.3
84.5
63.8
72.6
180.8
401.7
238.1
6.9
3.4
248.4
772.4
918.5
137.1
1,055.6
Proceeds from the disposal of non-rental property, plant and equipment amounted to £4.0m (2009: £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
£m
Exceptional
items
£m
1.7
33.9
37.6
9.7
0.1
–
–
–
–
–
2010
Total
£m
1.7
33.9
37.6
9.7
0.1
Before
exceptional
items
£m
Exceptional
items
£m
3.3
34.1
55.8
17.0
–
–
24.0
6.0
–
–
2009
Total
£m
3.3
58.1
61.8
17.0
–
Ashtead Group plc Annual Report & Accounts 2010
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 firms
– 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 firms
– half year review
– tax services
4 Exceptional items, amortisation and fair value remeasurements
US cost reduction programme
UK cost reduction programme
Profit on sale of property from closed sites
Write-off of deferred financing costs
Fair value remeasurements of embedded derivatives
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 £0.9m)
2010
£’000
2009
£’000
291
13
303
607
47
10
–
14
44
722
2010
£m
–
–
–
(3.2)
5.5 –
1.0
3.3
(0.7)
2.6
(1.6)
1.0
343
14
292
649
73
20
135
48
–
925
2009
£m
(52.2)
(31.7)
0.7
–
66.1
(17.1)
22.4
5.3
(2.1)
3.2
The write-off of deferred financing costs consists of the unamortised balance of costs related to the 2006 ABL facility refinanced in November 2009.
Fair value remeasurements relate to the changes in the fair value of the embedded prepayment options in our second priority senior secured notes.
The income from the sale of Ashtead Technology relates to the release of a provision, established at the time of the disposal, against potential
warranty claims.
Exceptional items, amortisation and fair value remeasurements are presented in the income statement as follows:
Sale of used rental equipment
Staff costs
Used rental equipment sold
Other operating costs
Depreciation
Amortisation
Charged in arriving at operating profit
Net financing income
Charged in arriving at profit before tax
Taxation
Profit after taxation from discontinued operations
2010
£m
1.6
–
(1.6)
–
–
(2.5)
(2.5)
2.3
(0.2)
0.2
–
1.0
1.0
2009
£m
50.5
(4.5)
(50.3)
(35.0)
(43.9)
(3.4)
(86.6)
–
(86.6)
30.8
(55.8)
59.0
3.2
5 Net financing costs
Investment income
Expected return on assets of defined benefit pension plan
Interest expense
Bank interest payable
Interest payable on second priority senior secured notes
Interest payable on finance leases
Non-cash unwind of discount on defined pension plan liabilities
Non-cash unwind of discount on insurance provisions
Amortisation of deferred costs of debt raising
Total interest expense
Net financing costs before exceptional items
Exceptional items
Fair value remeasurements
Net financing costs
6 Taxation
Analysis of charge/(credit) in period
Current tax
– current tax on income for the year
– adjustments to prior year
Deferred tax
– origination and reversal of temporary differences
– adjustments to prior year
Total taxation
Comprising:
– UK tax
– overseas taxation
59
2009
£m
(4.1)
21.6
42.4
0.7
3.1
1.1
2.8
71.7
67.6
–
67.6
2010
£m
(3.2)
13.4
44.4
0.3
3.0
1.5
4.1
66.7
63.5
3.2 –
(5.5)
61.2
2010
£m
2009
£m
3.9
(1.7)
2.2
(2.3)
3.8
1.5
3.7
10.2
(6.5)
3.7
0.1
–
0.1
(1.3)
–
(1.3)
(1.2)
4.5
(5.7)
(1.2)
The tax charge on continuing activities comprises a charge of £3.9m (2009: £29.6m) relating to tax on the profit before exceptional items, amortisation
and fair value remeasurements, together with a net credit of £0.2m (2009: £30.8m) comprising a tax credit of £0.9m (2009: £1.3m) on the amortisation
expense and a tax charge of £0.7m on exceptional items and fair value remeasurements.
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:
Profit on ordinary activities before tax
Profit on ordinary activities multiplied by the rate of corporation tax in the UK of 28% (2009: 28%)
Effects of:
Use of foreign tax rates on overseas income
Other
Adjustments to prior year
Total taxation charge/(credit)
2010
£m
4.8
1.3
(0.8)
1.1
2.1
3.7
2009
£m
0.8
0.2
(2.5)
1.1
–
(1.2)
Ashtead Group plc Annual Report & Accounts 2010
notes to the consolidated
financial statements continued
7 Dividends
Final dividend paid on 11 September 2009 of 1.675p (2009: 1.675p) per 10p ordinary share
Interim dividend paid on 3 February 2010 of 0.9p (2009: 0.9p) per 10p ordinary share
2010
£m
8.3
4.5
12.8
2009
£m
8.4
4.5
12.9
In addition, the directors are proposing a final dividend in respect of the financial year ended 30 April 2010 of 2.0p per share which will absorb £10.0m
of shareholders’ funds based on the 497.7m shares ranking for dividend at 16 June 2010. Subject to approval by shareholders, it will be paid on
10 September 2010 to shareholders who are on the register of members on 20 August 2010.
8 Earnings per share
Continuing operations
Basic earnings per share
Share options and share plan awards
Diluted earnings per share
Discontinued operations
Basic earnings per share
Share options and share plan awards
Diluted earnings per share
Total group
Basic earnings per share
Share options and share plan awards
Diluted earnings per share
Weighted
average no.
of shares
million
Earnings
£m
2010
Per
share
amount
pence
Weighted
average no.
of shares
million
Earnings
£m
2009
Per
share
amount
pence
1.1
–
1.1
1.0
–
1.0
2.1
–
2.1
497.6
3.8
501.4
497.6
3.8
501.4
497.6
3.8
501.4
0.2
–
0.2
0.2
–
0.2
0.4
–
0.4
2.0
–
2.0
61.0
–
61.0
63.0
–
63.0
504.5
0.2
504.7
504.5
0.2
504.7
504.5
0.2
504.7
2010
pence
0.4
(0.2)
–
0.2
0.4
0.6
2010
£m
5.7
4.2
9.9
0.4
–
0.4
12.1
–
12.1
12.5
–
12.5
2009
pence
12.5
4.1
(4.7)
11.9
5.4
17.3
2009
£m
4.2
6.2
10.4
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
Underlying earnings per share
Other deferred tax
Cash tax earnings per share
9 Inventories
Raw materials, consumables and spares
Goods for resale
10 Trade and other receivables
Trade receivables
Less: allowance for bad and doubtful receivables
Other receivables
61
2010
£m
129.8
(15.6)
114.2
20.5
134.7
2009
£m
141.6
(17.6)
124.0
24.3
148.3
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 23. The credit periods offered to customers vary according to the credit risk profiles 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
significant proportion of the Group’s trade receivables are contractually past due. The allowance account for bad and doubtful receivables is calculated
based on prior experience reflecting the level of uncollected receivables over the last year within each business. Accordingly, this cannot be attributed to
specific 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 2010
Carrying value at 30 April 2009
Current
£m
17.8
27.8
Less than
30 days
£m
63.0
55.7
30 – 60
days
£m
26.7
28.4
Trade receivables past due by:
More than
90 days
£m
14.5
21.6
60 – 90
days
£m
7.8
8.1
Total
£m
129.8
141.6
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 2010
Carrying value at 30 April 2009
b) Movement in the allowance account for bad and doubtful receivables
Current
£m
69.4
80.1
Less than
30 days
£m
35.1
28.0
30 – 60
days
£m
9.3
10.8
Trade receivables past due by:
More than
90 days
£m
11.7
17.7
60 – 90
days
£m
4.3
5.0
At 1 May
Amounts written off and recovered during the year
Increase in allowance recognised in income statement
Currency movements
At 30 April
11 Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents comprise principally cash held by the Group with a major UK financial institution. The carrying amount of cash and cash
equivalents approximates their fair value.
Ashtead Group plc Annual Report & Accounts 2010
Total
£m
129.8
141.6
2009
£m
12.6
(14.7)
17.0
2.7
17.6
2010
£m
17.6
(11.3)
9.7
(0.4)
15.6
2010
£m
54.8
2009
£m
1.7
notes to the consolidated
financial statements continued
12 Property, plant and equipment
Land and
buildings
£m
Rental equipment
Held under
finance
leases
£m
Owned
£m
Office and
workshop
equipment
£m
Motor vehicles
Held under
finance
leases
£m
Owned
£m
Cost or valuation
At 1 May 2008
Exchange difference
Acquisitions
Reclassifications
Additions
Disposals
Transfer to assets held for sale
At 30 April 2009
Exchange difference
Acquisitions
Reclassifications
Additions
Disposals
At 30 April 2010
Depreciation
At 1 May 2008
Exchange difference
Reclassifications
Charge for the period
Disposals
Transfer to assets held for sale
At 30 April 2009
Exchange difference
Reclassifications
Charge for the period
Disposals
At 30 April 2010
Net book value
At 30 April 2010
At 30 April 2009
77.3
12.6
–
–
7.2
(9.9)
(0.4)
86.8
(1.6)
–
0.4
3.5
(4.5)
84.6
24.1
2.2
–
10.2
(8.7)
(0.4)
27.4
(0.3)
0.4
3.8
(2.4)
28.9
1,528.1
393.1
0.1
(1.4)
207.5
(150.4)
(179.1)
1,797.9
(46.1)
0.1
(19.8)
55.6
(86.6)
1,701.1
534.3
159.7
(0.8)
210.8
(106.8)
(139.6)
657.6
(11.1)
(16.2)
162.7
(61.5)
731.5
55.7
59.4
969.6
1,140.3
0.3
0.1
–
(0.1)
–
–
–
0.3
–
–
(0.1)
–
–
0.2
0.1
–
–
–
–
–
0.1
–
–
–
–
0.1
0.1
0.2
The amount of rebuild costs capitalised in the year was £nil (2009: £1.9m).
48.0
11.1
–
1.4
2.2
(11.1)
(6.4)
45.2
(1.1)
–
7.1
0.6
(6.8)
45.0
37.1
9.3
0.8
5.4
(10.6)
(6.4)
35.6
(0.9)
6.6
3.9
(6.6)
38.6
85.0
22.8
–
22.0
19.7
(19.8)
(12.8)
116.9
(3.4)
–
16.8
3.5
(7.1)
126.7
29.5
9.9
11.3
15.0
(15.1)
(10.5)
40.1
(0.8)
12.2
14.5
(5.4)
60.6
32.6
8.4
–
(22.2)
1.7
(3.5)
–
17.0
(0.4)
–
(4.4)
0.2
(3.0)
9.4
16.1
4.1
(11.6)
3.6
(2.9)
–
9.3
(0.2)
(2.9)
1.7
(2.2)
5.7
Total
£m
1,771.3
448.1
0.1
(0.3)
238.3
(194.7)
(198.7)
2,064.1
(52.6)
0.1
–
63.4
(108.0)
1,967.0
641.2
185.2
(0.3)
245.0
(144.1)
(156.9)
770.1
(13.3)
0.1
186.6
(78.1)
865.4
6.4
9.6
66.1
76.8
3.7
7.7
1,101.6
1,294.0
13 Intangible assets including goodwill
Other intangible assets
Cost or valuation
At 1 May 2008
Recognised on acquisition
Disposals
Exchange differences
At 30 April 2009
Recognised on acquisition
Exchange differences
At 30 April 2010
Amortisation
At 1 May 2008
Charge for the period
Disposals
Exchange differences
At 30 April 2009
Charge for the period
Exchange differences
At 30 April 2010
Net book value
At 30 April 2010
At 30 April 2009
Goodwill
£m
291.9
–
–
93.5
385.4
–
(11.8)
373.6
–
–
–
–
–
–
–
–
Brand
names
£m
10.7
–
–
3.0
13.7
–
(0.4)
13.3
9.5
0.1
–
3.0
12.6
0.1
(0.4)
12.3
373.6
385.4
1.0
1.1
Customer
lists
£m
Contract
related
£m
1.7
–
–
–
1.7
–
–
1.7
0.3
0.3
–
–
0.6
0.2
–
0.8
0.9
1.1
9.2
0.2
(1.4)
2.8
10.8
0.1
(0.3)
10.6
3.8
3.0
(1.4)
1.7
7.1
2.2
(0.1)
9.2
1.4
3.7
Total
£m
21.6
0.2
(1.4)
5.8
26.2
0.1
(0.7)
25.6
13.6
3.4
(1.4)
4.7
20.3
2.5
(0.5)
22.3
3.3
5.9
376.9
391.3
63
Total
£m
313.5
0.2
(1.4)
99.3
411.6
0.1
(12.5)
399.2
13.6
3.4
(1.4)
4.7
20.3
2.5
(0.5)
22.3
Goodwill acquired in a business combination was allocated, at acquisition, to the reporting units that benefited from that business combination, as follows:
Sunbelt
A-Plant
2010
£m
359.3
14.3
373.6
2009
£m
371.1
14.3
385.4
For the purposes of determining potential goodwill impairment, recoverable amounts are determined from value in use calculations using cash flow
projections based on financial plans covering a three year period which were adopted and approved by the Board in April 2010. The growth rate
assumptions used in the plans reflect management’s expectations of market developments and take account of past performance. The annual growth
rate used to determine the cash flows 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 flows 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.
14 Trade and other payables
Trade payables
Other taxes and social security
Accruals and deferred income
2010
£m
48.7
12.6
69.3
130.6
2009
£m
25.6
14.0
67.1
106.7
Trade and other payables include amounts relating to the purchase of fixed assets of £27.6m (2009: £9.4m). The fair values of trade and other payables
are not materially different from the carrying values presented.
Ashtead Group plc Annual Report & Accounts 2010
notes to the consolidated
financial statements continued
15 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
2010
£m
–
3.1
3.1
367.5
0.4
160.2
352.6
880.7
2009
£m
1.7
5.2
6.9
499.4
2.7
165.1
363.5
1,030.7
Senior secured bank debt and the senior secured notes are secured by way of, respectively, first and second priority fixed and floating charges over
substantially all the Group’s property, plant and equipment, inventory and trade receivables.
First priority senior secured credit facility
During the year, the $1.84bn first priority asset based senior secured loan facility (‘ABL facility’) was amended and now consists of a $1,313m revolving
credit facility committed until November 2013 and a further $529m available on the original terms until August 2011 consisting of a $303m revolving
credit facility and a $226m term loan. The ABL facility is secured by a first 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 300bp to LIBOR plus 375bp for the extended tranche and LIBOR plus 150bp to LIBOR plus 225bp for the non-extended tranche. At 30 April
2010 the Group’s borrowing rate was LIBOR plus 350bp on the extended facility and LIBOR plus 200bp on the non-extended facility. The term loan is
priced at LIBOR plus 175bp.
The ABL facility carries minimal amortisation of $2.5m per annum on the term loan which will be met out of drawings from the committed revolver
facility. The ABL facility includes a springing covenant package under which quarterly financial performance covenants are tested only if available
liquidity is less than $150m. Available liquidity at 30 April 2010 was £351m ($537m) reflecting drawings under the facility at that date together with
outstanding letters of credit of £19m ($29m). 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 2010 was £704m ($1,078m).
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 (extended tranche)
– revolving advances in dollars (non-extended tranche)
– term loan advances in dollars
– revolving advances in pounds sterling
– $250m nominal value
– $550m nominal value
Secured notes
Finance leases
2010
3.81%
2.31%
2.06%
–
8.625%
9.0%
7.0%
2009
2.19%
2.19%
2.25%
2.7%
8.625%
9.0%
7.0%
16 Obligations under finance leases
Amounts payable under finance leases:
Less than one year
Later than one year but not more than five
Future finance charges
65
Minimum
lease payments
2009
£m
2010
£m
Present value of
minimum lease payments
2009
£m
2010
£m
3.2
0.4
3.6
(0.1)
3.5
5.5
2.9
8.4
(0.5)
7.9
3.1
0.4
3.5
5.2
2.7
7.9
The Group’s obligations under finance leases are secured by the lessor’s rights over the leased assets disclosed in note 12.
17 Provisions
At 1 May 2009
Exchange differences
Utilised
Charged in the year
Amortisation of discount
At 30 April 2010
Included in current liabilities
Included in non-current liabilities
Self-
insurance
£m
27.3
(1.0)
(15.1)
9.5
1.5
22.2
Vacant
property
£m
26.9
(0.6)
(8.0)
0.9
–
19.2
2010
£m
12.0
29.4
41.4
Total
£m
54.2
(1.6)
(23.1)
10.4
1.5
41.4
2009
£m
17.4
36.8
54.2
Self-insurance provisions relate to the discounted estimated liability in respect of claims excesses to be incurred under the Group’s insurance
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 £4.4m adjustment to reduce the provision held at 1 May 2009.
The majority of the provision for vacant property costs is expected to be utilised over a period of up to five years.
Ashtead Group plc Annual Report & Accounts 2010
notes to the consolidated
financial statements continued
18 Deferred tax
Deferred tax assets
At 1 May 2009
Offset against deferred tax liability at 1 May 2009
Gross deferred tax assets at 1 May 2009
Exchange differences
Credit/(charge) to income statement
Credit to equity
Less offset against deferred tax liability
At 30 April 2010
Deferred tax liabilities
Net deferred tax liability at 1 May 2009
Deferred tax assets offset at 1 May 2009
Gross deferred tax liability at 1 May 2009
Exchange differences
Credit to income statement
Less offset of deferred tax assets
– benefit of tax losses
– other temporary differences
At 30 April 2010
Tax losses
£m
–
42.5
42.5
(1.2)
4.9
–
(46.2)
–
Accelerated tax
depreciation
£m
181.5
42.5
224.0
(7.3)
(2.0)
214.7
Other
temporary
differences
£m
12.3
44.6
56.9
(1.5)
(8.4)
2.7
(41.9)
7.8
Other
temporary
differences
£m
(44.6)
44.6
–
–
–
–
Total
£m
12.3
87.1
99.4
(2.7)
(3.5)
2.7
(88.1)
7.8
Total
£m
136.9
87.1
224.0
(7.3)
(2.0)
214.7
(46.2)
(41.9)
126.6
The Group has an unrecognised UK deferred tax asset of £1.6m (2009: £1.6m) 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, no temporary differences associated with undistributed earnings of subsidiaries have been recognised. 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.
19 Called up share capital
Ordinary shares of 10p each
Authorised
Issued and fully paid:
At 1 May
Cancellation of shares
At 30 April
2010
Number
2009
Number
2010
£m
2009
£m
900,000,000 900,000,000
90.0
90.0
553,325,554 561,572,726
(8,247,172)
553,325,554 553,325,554
–
55.3
–
55.3
56.2
(0.9)
55.3
There were no movements in shares authorised or allotted during the period. At 30 April 2010, 50m shares were held by the Company, acquired at an
average cost of 67p and a further 5.7m shares were held by the Company’s Employee Share Ownership Trust.
67
20 Share-based payments
The Employee Share Ownership Trust (ESOT) facilitates the provision of shares under certain of the Group’s share-based remuneration plans. It holds a
beneficial interest in 5,669,844 ordinary shares of the Company acquired at an average cost of 110.2p per share. The shares had a market value of £6.7m
at 30 April 2010. 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 significant.
Performance Share Plan
Details of the Performance Share Plan (‘PSP’) are given on pages 39 and 40. 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 2010, there was
a net charge in respect of the PSP of £0.5m (2009: credit of £0.9m). After deferred tax, the total charge was £0.2m (2009: credit of £0.7m).
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 55.5p, nil exercise price, a dividend yield of 4.64%, volatility of 60.0%, a risk free rate of 2.20% 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 39. 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.
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 2010 the charge in respect of SAYE schemes was £31,000 (2009: £0.1m). All SAYE schemes have now expired.
2008/9
Outstanding at 1 May 2008
Granted
Forfeited
Exercised
Expired
Outstanding at 30 April 2009
Exercisable at 30 April 2009
2009/10
Outstanding at 1 May 2009
Granted
Forfeited
Exercised
Expired
Outstanding at 30 April 2010
Exercisable at 30 April 2010
Options outstanding at 30 April 2010 under discretionary schemes:
Year of grant
1999/2000
2000/1
2001/2
Discretionary schemes
Weighted
average
exercise
price (p)
Number
3,592,403
–
–
(327,384)
(1,328,967)
1,936,052
1,936,052
1,936,052
–
–
(303,057)
(262,721)
1,370,274
1,370,274
107.0
–
–
38.3
134.3
99.8
99.8
99.8
–
–
86.2
97.6
103.3
103.3
Number
1,327,033
–
(14,137)
(673,391)
(156,121)
483,384
222,993
483,384
–
(17,749)
–
(465,635)
–
–
Weighted
average
exercise
price (p)
94.6
115.3
38.3
SAYE
Weighted
average
exercise
price (p)
PSP
Number
65.7 5,500,560
7,031,707
–
–
112.4
(786,861)
22.4
94.8
(1,586,055)
115.3 10,159,351
–
107.3
115.3 10,159,351
– 6,454,947
–
–
(1,764,002)
– 14,850,296
–
–
122.1
–
115.0
Number
of shares
Latest
exercise
date
108,405 08 Aug 10
26 Feb 11
26 Feb 12
1,077,400
184,469
1,370,274
The weighted average exercise price during the period for options exercised over the year was 86.2p (2009: 38.3p) for discretionary schemes.
No options relating to the SAYE scheme were exercised during the year.
Ashtead Group plc Annual Report & Accounts 2010
notes to the consolidated
financial statements continued
21 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 five years
Expiring in more than five years
Other:
Expiring in one year
Expiring between two and five years
Total
2010
£m
4.1
14.6
16.8
35.5
0.4
0.9
1.3
2009
£m
2.8
22.0
17.0
41.8
0.2
0.9
1.1
36.8
42.9
Total minimum commitments under existing operating leases at 30 April 2010 through to the end of their respective term by year are as follows:
Financial year
2011
2012
2013
2014
2015
Thereafter
Land and
buildings
£m
35.5
30.9
28.2
24.1
19.9
83.5
222.1
Other
£m
Total
£m
1.3
0.6
–
–
–
–
1.9
36.8
31.5
28.2
24.1
19.9
83.5
224.0
£13.0m of the total minimum operating lease commitments of £222.1m relating to vacant properties has been provided within the financial statements
and included within provisions in the balance sheet.
22 Pensions
The Group operates pension plans for the benefit of qualifying employees. The major plans for new employees throughout the Group are all defined
contribution plans following the introduction of the stakeholder pension plan for UK employees in May 2002. Pension costs for defined contribution
plans were £1.0m (2009: £5.1m).
The Group also has a defined benefit plan for UK employees which was closed to new members in 2001. This plan is a funded defined benefit 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 2010 by a qualified 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
Inflation assumption
Weighted average expected return on plan assets
2010
4.60%
3.60%
5.50%
3.60%
6.60%
2009
4.10%
3.10%
7.00%
3.10%
7.20%
Pensioner life expectancy assumed in the 30 April 2010 update is based on the S1 ‘CMI 2009’ projection model 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 2010
Pensioner aged 65 in 2030
Male
87.1
89.5
Female
89.5
91.9
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 cost/(income)
The amounts recognised in the balance sheet are determined as follows:
Fair value of plan assets
Present value of defined benefit obligation
Net (liability)/asset recognised in the balance sheet
Movements in the present value of defined benefit obligations were as follows:
At 1 May
Current service cost
Interest cost
National Insurance rebates received
Contributions from members
Actuarial loss/(gain)
– experience gain
– change in assumptions
Benefits paid
Past service cost
Curtailments and settlements
69
2009
£m
0.7
3.1
(4.1)
0.2
(0.1)
(0.2)
2009
£m
44.0
(43.7)
0.3
2009
£m
49.5
0.7
3.1
0.2
0.5
(0.2)
(9.1)
(1.1)
0.2
(0.1)
43.7
2010
£m
0.3
3.0
(3.2)
–
–
0.1
2010
£m
55.9
(63.6)
(7.7)
2010
£m
43.7
0.3
3.0
0.4
0.3
(2.4)
20.1
(1.8)
–
–
63.6
The actuarial loss in the year ended 30 April 2010 reflects the decrease in the required market discount rate (that for AA rated corporate bonds) in the
year from 7.0% to 5.5% which increased the discounted value of accrued defined benefit obligations, partially offset by the adoption of slightly reduced
pensioner life expectancy based on the S1 ‘CMI 2009’ projection model mortality tables.
Movements in the fair value of plan assets were as follows:
At 1 May
Expected return on plan assets
Actual return on plan assets above/(below) expected return
Contributions from sponsoring companies
National Insurance rebates received
Contributions from members
Benefits 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
2010
£m
44.0
3.2
8.5
1.3
0.4
0.3
(1.8)
55.9
2010
£m
32.6
18.7
4.4
0.2
55.9
2009
£m
55.3
4.1
(16.7)
1.7
0.2
0.5
(1.1)
44.0
Fair value
2009
£m
24.2
15.8
3.9
0.1
44.0
Expected return
2009
%
8.0
5.8
8.0
–
7.2
2010
%
7.5
5.0
7.5
–
6.6
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 inflation, the dividend yield and economic growth net of investment expenses. The return on gilts and bonds is the current
market yield on long-term gilts and bonds.
Ashtead Group plc Annual Report & Accounts 2010
notes to the consolidated
financial statements continued
22 Pensions continued
The history of experience adjustments is as follows:
Fair value of scheme assets
Present value of defined benefit obligations
(Deficit)/surplus in the scheme
Experience adjustments on scheme liabilities
Gain/(loss) (£m)
Percentage of closing scheme liabilities
Experience adjustments on scheme assets
Gain/(loss) (£m)
Percentage of closing scheme assets
2010
£m
55.9
(63.6)
(7.7)
2009
£m
44.0
(43.7)
0.3
2008
£m
55.3
(49.5)
5.8
2.4
4%
0.2
–
2.2
5%
8.5
15%
(16.7)
(38%)
(7.2)
(13%)
2007
£m
57.6
(52.4)
5.2
(0.2)
–
0.9
2%
2006
£m
52.2
(50.5)
1.7
(0.2)
–
5.3
10%
The cumulative actuarial losses recognised in the statement of comprehensive income since the adoption of IFRS are £18.2m.
The estimated amount of contributions currently expected to be paid by the Company to the plan during the current financial year is £0.8m although
this may rise following the completion of the triennial actuarial valuation of the plan at 30 April 2010.
23 Financial risk management
The Group’s trading and financing activities expose it to various financial risks that, if left unmanaged, could adversely impact on current or future
earnings. Although not necessarily mutually exclusive, these financial risks are categorised separately according to their different generic risk
characteristics and include market risk (foreign currency risk and interest rate risk), credit risk and liquidity risk.
It is the role of the Group treasury function to manage and monitor the Group’s financial 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 financial instruments. The Group maintains treasury control systems and procedures to monitor liquidity, currency, credit
and financial risks. The Group reports in pounds sterling and pays dividends in pounds 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 defined in IFRS 7.
Interest rate risk
Management of fixed and variable rate debt
The Group has fixed and variable rate debt in issue with 58% of the drawn debt at a fixed rate as at 30 April 2010. The Group’s accounting policy
requires all borrowings to be held at amortised cost. As a result the carrying value of fixed rate debt is unaffected by changes in credit conditions in
the debt markets and there is therefore no exposure to fair value interest rate risk. The Group’s debt that bears interest at a variable rate comprises all
outstanding borrowings under the senior secured credit facility. The interest rates currently applicable to this variable rate debt are LIBOR as applicable
to the currency borrowed (US dollars or pounds sterling) plus 350bp on the extended revolver borrowings, LIBOR plus 200bp on the non-extended
revolver borrowings and LIBOR plus 175bp on the 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 2010, 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 2010, based upon the amount of variable rate debt outstanding, the Group’s pre-tax profits would change by approximately £4m for each
one percentage point change in interest rates applicable to the variable rate debt and, after tax effects, equity would change by approximately £2m.
The amount of the Group’s variable rate debt may fluctuate 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 financing such that, at 30 April 2010, virtually all of its debt was 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 profits into pounds sterling. Where the Group does
hedge, it maintains appropriate hedging documentation. Foreign exchange risk on significant non-trading transactions (e.g. acquisitions) is considered
on an individual basis.
71
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 2010, a 1% change in the
US dollar-pound sterling exchange rate would have impacted our pre-tax profits by approximately £40,000 and equity by approximately £2.0m.
At 30 April 2010, the Group had no outstanding foreign exchange contracts.
Credit risk
The Group’s principal financial assets are cash and bank balances and trade and other receivables. The Group’s credit risk is primarily attributable to
its trade receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables. The credit risk on liquid funds and
derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.
The Group’s maximum exposure to credit risk is presented in the following table:
Cash and cash equivalents
Trade and other receivables
2010
£m
54.8
134.7
189.5
2009
£m
1.7
148.3
150.0
Substantially all of the Group’s cash and cash equivalents at 30 April 2010 are deposited with one large UK-based financial institution which is not
expected to fail.
The Group has a large number of unrelated customers, serving over 580,000 during the financial year, and does not have any significant credit exposure
to any particular customer. Each business segment manages its own exposure to credit risk according to the economic circumstances and characteristics
of the markets they serve. The Group believes that management of credit risk on a devolved basis enables it to assess and manage credit risk more
effectively. However, broad principles of credit risk management practice are observed across the Group, such as the use of credit reference agencies
and the maintenance of credit control functions.
Liquidity risk
Liquidity risk is the risk that the Group could experience difficulties in meeting its commitments to creditors as financial liabilities fall due for payment.
The Group generates significant free cash flow (defined as cash flow from operations less replacement capital expenditure net of proceeds of asset
disposals, interest paid and tax paid). This free cash flow 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 flow from normal trading activities, additional liquidity is available through the Group’s ABL facility. At 30 April 2010,
availability under this facility was $537m (£351m).
Contractual maturity analysis
Trade receivables, the principal class of non-derivative financial asset held by the Group, are settled gross by customers.
The following table presents the Group’s outstanding contractual maturity profile for its non-derivative financial 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 financial liabilities,
including any interest that will accrue, except where the Group is entitled and intends to repay a financial liability, or part of a financial liability, before
its contractual maturity.
At 30 April 2010
Bank and other debt
Finance leases
8.625% senior secured notes
9.0% senior secured notes
Interest payments
2011
£m
–
3.1
–
–
3.1
64.1
67.2
2012
£m
–
0.4
–
–
0.4
66.1
66.5
2013
£m
–
–
–
–
–
63.6
63.6
2014
£m
384.8
–
–
–
384.8
55.7
440.5
Undiscounted cash flows – year to 30 April
Total
£m
384.8
3.5
163.3
359.3
910.9
341.2
1,252.1
Thereafter
£m
–
–
163.3
359.3
522.6
45.3
567.9
2015
£m
–
–
–
–
–
46.4
46.4
Letters of credit of £19.1m (2009: £21.3m) are provided and guaranteed under the ABL facility which expires in November 2013.
At 30 April 2009
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
2011
£m
1.7
2.4
–
–
4.1
61.8
65.9
2012
£m
502.3
0.3
–
–
502.6
51.9
554.5
2013
£m
–
–
–
–
–
48.0
48.0
Undiscounted cash flows – year to 30 April
Total
£m
505.7
7.9
168.7
371.2
1,053.5
365.1
1,418.6
Thereafter
£m
–
–
168.7
371.2
539.9
94.7
634.6
2014
£m
–
–
–
–
–
48.0
48.0
Ashtead Group plc Annual Report & Accounts 2010
notes to the consolidated
financial statements continued
23 Financial risk management continued
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 benefits 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 financing to fund business investment and mergers and acquisitions.
The Group targets leverage of between 2 to 3 times net debt to EBITDA over the economic cycle.
Fair value of financial instruments
Net fair values of derivative financial instruments
At 30 April 2010, the Group’s embedded prepayment options included within its secured loan notes had a combined fair value of £5.7m (2009: £nil).
At 30 April 2010, the Group had no other derivative financial instruments.
Fair value of non-derivative financial 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 financial assets and
liabilities at 30 April 2010. Fair value is the amount at which a financial 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 financial assets and
liabilities. Where market values are not available, fair values of financial assets and liabilities have been calculated by discounting expected future cash
flows at prevailing interest and exchange rates.
Fair value of non-current borrowings:
Long-term borrowings
Fair value determined based on market value
– first priority senior secured bank debt
– 8.625% senior secured notes
– 9% senior secured notes
Fair value determined based on observable market inputs
– finance lease obligations
Total long-term borrowings
Deferred costs of raising finance
Fair value of other financial instruments held or issued to finance the Group’s operations:
Fair value determined based on market value
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 2010
Fair value
£m
Book value
£m
At 30 April 2009
Fair value
£m
384.8
163.3
359.3
907.4
0.4
907.8
(27.1)
880.7
383.3
164.6
369.2
917.1
0.4
917.5
–
917.5
504.0
168.7
371.2
1,043.9
2.7
1,046.6
(15.9)
1,030.7
484.0
109.7
241.3
835.0
2.7
837.7
–
837.7
–
3.1
130.6
(134.7)
(54.8)
–
3.1
130.6
(134.7)
(54.8)
1.7
5.2
106.7
(148.3)
(1.7)
1.7
5.2
106.7
(148.3)
(1.7)
24 Notes to the cash flow statement
a) Cash flow from operating activities
Operating profit before exceptional items and amortisation:
– continuing operations
– discontinued operations
Depreciation
EBITDA before exceptional items
Profit on disposal of rental equipment
Profit on disposal of other property, plant and equipment
Decrease in inventories
Decrease in trade and other receivables
Increase/(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
(Increase)/decrease in cash in the period
Decrease in debt through cash flow
Change in net debt from cash flows
Exchange differences
Non-cash movements:
– deferred costs of debt raising
– capital element of new finance leases
(Reduction)/increase 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
2010
£m
68.5
–
68.5
186.6
255.1
(2.0)
(0.1)
0.2
10.8
1.0
0.1
0.5
265.6
(53.1)
(124.4)
(177.5)
(36.9)
7.3
0.2
(206.9)
1,035.9
829.0
1 May
2009
£m
(1.7)
6.9
1,030.7
1,035.9
Exchange
movement
£m
–
(0.2)
(36.7)
(36.9)
Cash
flow
£m
(53.1)
(4.1)
(120.3)
(177.5)
Non-cash
movements
£m
–
0.5
7.0
7.5
73
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)
373.6
0.4
(217.2)
(216.8)
285.0
2.8
1.7
72.7
963.2
1,035.9
30 April
2010
£m
(54.8)
3.1
880.7
829.0
Non-cash movements relate to the amortisation of prepaid fees relating to debt facilities and the addition of new finance leases in the year.
d) Acquisitions
Cash consideration
2010
£m
0.2
2009
£m
0.3
25 Contingent liabilities
The Group is subject to periodic legal claims and tax audits in the ordinary course of its business, none of which is expected to have a significant impact
on the Group’s financial position.
The Company has guaranteed the borrowings of its subsidiary undertakings under the Group’s senior secured credit and overdraft facilities. At 30 April
2010 the amount borrowed under these facilities was £384.8m (2009: £505.7m). Additionally, subsidiary undertakings are able to obtain letters of credit
under these facilities which are also guaranteed by the Company and, at 30 April 2010, letters of credit issued under these arrangements totalled
£19.1m ($29.3m) (2009: £21.3m or $31.6m). Additionally the Company has guaranteed the 8.625% second priority senior secured notes with a par value
of $250m (£163m) and 9% second priority senior secured notes with a par value of $550m (£359m), issued by Ashtead Holdings PLC and Ashtead
Capital, Inc., respectively.
The Company has guaranteed operating and finance lease commitments of subsidiary undertakings where the minimum lease commitment at 30 April 2010
totalled £71.5m (2009: £76.6m) in respect of land and buildings and £2.1m (2009: £5.2m) in respect of other lease rentals of which £7.4m and £2.0m
respectively is payable by subsidiary undertakings in the year ending 30 April 2011.
The Company has guaranteed the performance by subsidiaries of certain other obligations up to £0.8m (2009: £1.0m).
Ashtead Group plc Annual Report & Accounts 2010
notes to the consolidated
financial statements continued
26 Capital commitments
At 30 April 2010 capital commitments in respect of purchases of rental and other equipment totalled £24.6m (2009: £11.3m), all of which had been
ordered. There were no other material capital commitments at the year end.
27 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 financial statements.
28 Employees
The average number of employees, including directors, during the year was as follows:
North America
United Kingdom
2010
5,675
1,976
7,651
2009
6,742
2,318
9,060
29 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.
Amendments to IFRS 1, Additional exemptions for first-time adopters was issued on 23 July 2009 and is effective for annual periods beginning on
or after 1 January 2010. The amendments exempt entities using the full cost method from retrospective application of IFRSs for oil and gas assets.
They also exempt entities with existing leasing contracts from reassessing the classification of those contracts in accordance with IFRIC 4, ‘Determining
whether an arrangement contains a lease’, when the application of local accounting requirements produced the same result. As the Group has already
adopted IFRS, there will be no effect on the Group’s results or financial position on adoption.
Amendment to IFRS 1, Limited exemption from comparative IFRS 1 disclosure for first-time adopters was issued on 28 January 2009 and is effective
for annual periods beginning on or after 1 July 2010. The amendment relieves first-time adopters of IFRSs from providing the additional disclosures
introduced by the ‘Amendment to IFRS 7 – Improving disclosures about financial instruments’ in March 2009. It thereby ensures that first-time adopters
benefit from the same transition provisions that ‘Amendments to IFRS 7’ provides to current IFRS preparers. As the Group has already adopted IFRS,
there will be no effect on the Group’s results or financial position on adoption.
IFRS 9 – Financial instruments was issued on 12 November 2009 and is effective for annual periods beginning on or after 1 January 2013 with early
adoption permitted. The IASB has issued this standard as the first step in its project to replace ‘IAS 39 – Financial instruments: recognition and
measurement’. IFRS 9 has two measurement categories being amortised cost and fair value. All equity and debt instruments are to be measured at fair
value with the exception of a debt instrument being measured at amortised cost if it is being held by the entity to collect contractual cash flows and
the cash flows represent principal and interest. The requirement to separate embedded derivatives from financial assets within hybrid contracts has
been removed with them being classified in their entirety at either amortised cost or fair value. Two of the existing three fair value option criteria being
‘loans and receivables’ and ‘held-to-maturity investments’ measured at amortised cost will become obsolete under this fair value-driven business
model. The EU has currently postponed its endorsement of this standard as its IFRS technical advisory body, the European Financial Reporting Advisory
Group (‘EFRAG’) has decided that more time should be taken to consider the output from the entire package of standards that are expected to replace
‘IAS 39 – Financial instruments’. The Group is currently assessing the impact and expected timing of adoption of this standard on the Group’s results
and financial position.
IAS 24 (revised) – Related party disclosures was issued on 12 November 2009 and is effective for annual periods beginning on or after 1 January 2011.
The standard has been revised in response to concerns that disclosure requirements and the definition of a ‘related party’ were too complex and difficult
to apply in practice. These concerns have been addressed by providing a partial exemption for government related entities and providing a revised
definition of a related party. The Group does not believe the adoption of this pronouncement will have a material impact on the consolidated results
or financial position of the Group.
Amendment to IFRIC 14 – Prepayments of a minimum funding requirement was issued on 26 November 2009 and is effective for annual periods
beginning on or after 1 January 2011. The amendment removes the unintended consequence of IFRIC 14, where it did not permit the recognition
of an asset for any surplus arising from voluntary prepayment of minimum funding contributions in respect to future years of service. This will affect
companies that have prepaid (or expect to prepay) the minimum funding requirement in respect to future employee service, leading to a pension
surplus. The Group does not believe the adoption of this pronouncement will have a material impact on the consolidated results or financial position
of the Group.
IFRIC 19 – Extinguishing financial liabilities with equity instruments was issued on 26 November 2009 and is effective for annual periods beginning on
or after 1 July 2010. This IFRIC clarifies the accounting when an entity renegotiates the terms of its debt with the result that the liability is extinguished
by the debtor issuing its own equity instruments to the creditor (referred to as a ‘debt for equity swap’). It requires a gain or loss to be recognised in
profit or loss when a liability is settled through the issuance of the entity’s own equity instruments. The Group does not believe the adoption of this
pronouncement will have a material impact on the consolidated results or financial position of the Group.
Improvements to IFRSs (2010) was issued in May 2010 and its requirements are effective over a range of dates, with the earliest effective date being
for annual periods beginning on or after 1 January 2011. This comprises a number of amendments to IFRSs, which resulted from the IASB’s annual
improvements project. The Company does not believe the adoption of these amendments will have a material impact on the results or financial position
of the Company.
30 Parent company information
a) Balance sheet of the Company
Current assets
Prepayments and accrued income
Non-current assets
Investments in Group companies
Deferred tax asset
Total assets
Current liabilities
Amounts due to subsidiary undertakings
Accruals and deferred income
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
Retained reserves
Equity attributable to equity holders of the Company
Total liabilities and equity
These financial statements were approved by the Board on 16 June 2010.
Geoff Drabble
Chief executive
Ian Robson
Finance director
75
Notes
2010
£m
0.2
2009
£m
0.1
(g)
(f)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
363.7
0.2
363.9
363.7
–
363.7
364.1
363.8
82.7
3.1
85.8
55.3
3.6
0.9
90.7
(33.1)
(6.3)
167.2
278.3
72.0
1.2
73.2
55.3
3.6
0.9
90.7
(33.1)
(6.3)
179.5
290.6
364.1
363.8
Ashtead Group plc Annual Report & Accounts 2010
notes to the consolidated
financial statements continued
30 Parent company information continued
b) Statement of changes in equity of the Company
At 30 April 2008
Total comprehensive income for the year
Shares issued
Dividends paid
Share-based payments
Vesting of share awards
Own shares purchased
Cancellation of shares held by the Company
At 30 April 2009
Total comprehensive income for the year
Dividends paid
Share-based payments
At 30 April 2010
c) Cash flow statement of the Company
Cash flows from operating activities
Cash generated from operations
Financing costs paid
Net cash from operating activities
Cash flows from financing 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 financing activities
Decrease in cash and cash equivalents
Share
capital
£m
56.2
–
–
–
–
–
–
(0.9)
55.3
–
–
–
55.3
Share
premium
account
£m
3.6
–
–
–
–
–
–
–
3.6
–
–
–
3.6
Capital
redemption
reserve
£m
–
–
–
–
–
–
–
0.9
0.9
–
–
–
0.9
Non-
distributable
reserve
£m
90.7
–
–
–
–
–
–
–
90.7
–
–
–
90.7
Treasury
stock
£m
(23.3)
–
0.5
–
–
–
(15.7)
5.4
(33.1)
–
–
–
(33.1)
Own
shares
held by
ESOT
£m
(7.0)
–
–
–
–
1.1
(0.4)
–
(6.3)
–
–
–
(6.3)
Note
(i)
Retained
reserves
£m
201.0
(1.0)
(0.3)
(12.9)
(0.8)
(1.1)
–
(5.4)
179.5
–
(12.8)
0.5
167.2
2010
£m
14.2
(1.4)
12.8
Total
£m
321.2
(1.0)
0.2
(12.9)
(0.8)
–
(16.1)
–
290.6
–
(12.8)
0.5
278.3
2009
£m
28.9
–
28.9
–
–
–
–
(12.8)
(12.8)
–
(0.1)
(15.7)
(0.4)
0.2
(12.9)
(28.9)
–
d) Accounting policies
The Company financial 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.
e) Income statement
Ashtead Group plc has not presented its own profit and loss account as permitted by section 408 of the Companies Act 2006. The amount of the loss
for the financial year dealt with in the accounts of Ashtead Group plc is £nil (2009: £1.0m).
f) Amounts due to subsidiary undertakings
Due within one year:
Ashtead Holdings PLC
Ashtead Plant Hire Company Limited
2010
£m
82.7
–
82.7
2009
£m
11.7
60.3
72.0
g) Investments
At 30 April 2009 and 2010
The Company’s principal subsidiaries are:
Name
Ashtead Holdings PLC
Sunbelt Rentals, Inc.
Ashtead Plant Hire Company Limited
Ashtead Capital, Inc.
Ashtead Financing Limited
77
Shares in Group companies
2009
£m
363.7
2010
£m
363.7
Country of
incorporation
England
USA
England
USA
England
Principal country in which
subsidiary undertaking operates
United Kingdom
USA
United Kingdom
USA
United Kingdom
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. and Ashtead
Financing Limited are finance companies. 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.
h) Financial instruments
The book value and fair value of the Company’s financial instruments are not materially different.
i) Notes to the Company cash flow statement
Cash flow from operating activities
Operating loss
Depreciation
EBITDA
(Increase)/decrease in receivables
Increase/(decrease) in payables
Increase in intercompany payable
Other non-cash movement
Net cash inflow from operations before exceptional items
–
2010
£m
–
0.1
0.1
(0.1)
0.2
13.5
0.5
14.2
2009
£m
0.1
0.1
1.0
(2.3)
31.1
(1.0)
28.9
Ashtead Group plc Annual Report & Accounts 2010
ten year history
2010
2009
2008
2007
2006
In £m
Income statement
Revenue +
Operating costs +
EBITDA +
Depreciation
Operating profit +
Interest +
Pre-tax profit/(loss) +
836.8
(581.7)
255.1
(186.6)
68.5
(63.5)
5.0
1,073.5
(717.4)
356.1
(201.1)
155.0
(67.6)
87.4
1,047.8
(684.1)
363.7
(176.6)
187.1
(74.8)
112.3
Operating profit
Pre-tax profit/(loss)
66.0
4.8
68.4
0.8
184.5
109.7
896.1
(585.8)
310.3
(159.8)
150.5
(69.1)
81.4
101.1
(36.5)
638.0
(413.3)
224.7
(113.6)
111.1
(43.6)
67.5
124.5
81.7
IFRS
2005
523.7
(354.2)
169.5
(102.4)
67.1
(44.7)
22.4
67.1
32.2
2004
2003
2002
500.3
(353.3)
147.0
(102.8)
44.2
(36.6)
7.6
16.2
(33.1)
539.5
(389.4)
150.1
(111.0)
39.1
(40.9)
(1.8)
0.6
(42.2)
583.7
(398.6)
185.1
(117.8)
67.3
(49.1)
18.2
72.5
(15.5)
UK GAAP
2001
552.0
(345.3)
206.7
(117.6)
89.1
(50.7)
38.4
68.2
11.1
63.4
1,701.3
500.3
Cash flow
Cash flow from operations
before exceptional items
and changes in rental fleet 265.6
Total cash generated before
exceptional costs and M&A 199.2
Balance sheet
Capital expenditure
Book cost of
rental equipment
Shareholders’ funds *
In pence
Dividend per share
Earnings per share
Underlying earnings
per share
In percent
EBITDA margin +
30.5%
Operating profit margin +
8.2%
Pre-tax profit/(loss) margin + 0.6%
People
Employees at year end
Locations
Stores at year end
2.9p
0.4p
7,218
0.2p
498
373.6
356.4
319.3
215.2
164.8
140.0
157.3
194.2
173.0
166.0
14.8
20.3
(5.2)
58.7
56.6
38.9
(29.4)
(26.3)
238.3
331.0
290.2
220.2
138.4
72.3
85.5
113.8
237.7
1,798.2
526.0
1,528.4
440.3
1,434.1
396.7
2.575p
12.5p
2.5p
14.2p
1.65p
0.8p
921.9
258.3
1.50p
13.5p
11.9p
14.8p
10.3p
11.3p
33.2%
14.4%
8.1%
34.7%
17.9%
10.7%
34.6%
16.8%
9.1%
35.2%
17.4%
10.6%
800.2
109.9
Nil
5.2p
3.2p
32.4%
12.9%
4.8%
813.9
131.8
Nil
(9.9p)
945.8
159.4
Nil
(9.5p)
971.9
192.9
3.50p
1.1p
962.8
202.1
3.50p
6.5p
(0.7p)
(0.4p)
13.7p
9.2p
29.4%
8.8%
1.5%
27.8%
7.2%
(0.3%)
31.7%
11.5%
3.1%
37.4%
16.1%
7.0%
8,162
9,594
10,077
6,465
5,935
5,833
6,078
6,545
6,043
520
635
659
413
412
428
449
463
443
The figures for the years ended 30 April 2005 and later 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.
+ Before exceptional items, amortisation and fair value remeasurements. EBITDA, operating profit and pre-tax profit/(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 reflect the BET USA lease adjustment reported in
2002 in 2001. The directors believe these adjustments improve comparability between periods.
* Shareholders’ funds for the years up to 30 April 2003 were restated in 2003/4 to reflect shares held by the Employee Share Ownership Trust as a deduction from shareholders’ funds in accordance
with UITF 38.
what we do
Ashtead is a global leader in the equipment
rental industry.
We provide all types of equipment in a wide
variety of scenarios, 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. We have
nationwide networks in the US and UK.
It is the quality of our people which enables us
to deliver the excellence demanded by our varied
customer base.
Contents
01 Our performance
02 Our Group
04 Chairman’s statement
36 Corporate governance report
39 Directors’ remuneration report
44 Corporate responsibility report
06 Business and fi nancial review:
46 Auditors’ report
06 Introduction
07 Our building blocks
for growth
12 Positioning for recovery
14 Our strategy
48 Consolidated income statement
48 Consolidated statement of
comprehensive income
49 Consolidated balance sheet
50 Consolidated statement of
18 Key performance indicators
changes in equity
20 Our markets
23 Principal risks and
uncertainties
26 Financial review
32 Our directors
34 Directors’ report
51 Consolidated cash fl ow statement
52 Notes to the consolidated
fi nancial statements
78 Ten year history
79 Additional information
additional information
Future dates
Quarter 1 results
2010 Annual General Meeting
Quarter 2 results
Quarter 3 results
Quarter 4 and year end results
7 Septemb
9 D
8 Marc
er 2010
7 September 2010
ecember 2010
h 2011
16 June 2011
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
Travers Smith LLP
10 Snow Hill
London
EC1A 2AL
Skadden, Arps, Slate, Meagher & Flom LLP
155 North Wacker Drive
Chicago, IL 60606
Parker, Poe, Adams & Bernstein LLP
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
Printed in the UK by Beacon Pre ss
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&
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t
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2
0
1
0
building
on strong
foundations
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
Annual Report & Accounts
2010