Ashford Hospitality Trust Annual Report 2016

FY2016 Annual Report · Ashford Hospitality Trust

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Annual Report & Accounts 2016

GENERATING STRONG
RESULTS THROUGH
DIVERSITY

At Ashtead we provide our customers with more
than just equipment rental. We provide solutions.

From multinational businesses to individual do-it-
yourselfers – our experts are dedicated to delivering
the best service.

From everyday things that matter, to mission-critical
events where experience counts – we are there to
supply what is needed.

Our objectives are to:

1. deliver sustainable value and above-average
performance across the economic cycle,
thereby extending our industry-leading
position and delivering superior total
returns for shareholders; and

2. deliver the very best levels of
customer service throughout
our networks to enable that
growth every day.

Ashtead Group plc Annual Report & Accounts 2016

STRATEGIC REPORT
2 Our group at a glance
4 Chairman’s statement
5 Highlights of the year
8 Strategic review
12 Our markets
16 Our business model
22 Our strategy
28 Key performance indicators
30 Principal risks and uncertainties
33 Financial review
40 Responsible business report

DIRECTORS’ REPORT
52 Our Board of directors
54 Corporate governance report
59 Audit Committee report
62 Nomination Committee report
63 Remuneration report
83 Other statutory disclosures
85 Statement of directors’

responsibilities

OUR
DIVERSE
PORTFOLIO
STRATEGIC
REPORT
P.2

STRONG
CORPORATE
GOVERNANCE
DIRECTORS’
REPORT
P.50

FINANCIAL STATEMENTS
88 Independent auditor’s report to the
members of Ashtead Group plc
91 Consolidated income statement
Consolidated statement of
91
comprehensive income
92 Consolidated balance sheet
Consolidated statement of
93
changes in equity
Consolidated cash flow statement
Notes to the consolidated
financial statements

94
95

A HEALTHY
BALANCE
SHEET
FINANCIAL
STATEMENTS
P.86

ADDITIONAL INFORMATION

125 Ten-year history
125 Additional information

Forward looking statements
This report contains forward looking statements. These have been made by the directors in good faith using information
available up to the date on which they approved this report. The directors can give no assurance that these expectations
will prove to be correct. Due to the inherent uncertainties, including both business and economic risk factors underlying
such forward looking statements, actual results may differ materially from those expressed or implied by these forward
looking statements. Except as required by law or regulation, the directors undertake no obligation to update any forward
looking statements whether as a result of new information, future events or otherwise.

Ashtead Group plc Annual Report & Accounts 2016

OUR GROUP AT A GLANCE

Ashtead is an international
equipment rental company
with national networks in the
US and the UK, and a small
presence in Canada. We rent
a full range of construction and
industrial equipment across
a wide variety of applications
to a diverse customer base.

NORTH AMERICA: SUNBELT

HAWAII

The second largest equipment rental company
in North America with 546 stores in 45 states
in the US and 13 stores in Canada.

GROUP

REVENUE BY BUSINESS

UK: A-PLANT

Sunbelt

A-Plant

86%

14%

The largest equipment rental company
in the UK with 156 stores.

NORTH AMERICA: SUNBELT

US MARKET SHARE

US FLEET COMPOSITION

United Rentals

10%

Aerial work platforms 35%

Sunbelt

Herc Rentals

Home Depot

BlueLine Rentals

Sunstate

Top 7–10

Top 11–100

Others

c.16%

c.57%

Forklifts

Earth moving

Pump and power

Scaffold

Other

17%

16%

19%

Source: Management estimate based on
IHS Global Insight market estimates.

Source: Management information.

UK: A-PLANT

UK MARKET SHARE

UK FLEET COMPOSITION

A-Plant

HSS

Speedy

GAP

Lavendon

Hewden

Others

73%

Aerial work platforms 11%

Forklifts

Earth moving

Accommodation

Pump and power

Acrow

Traffic

Panels, fencing
& barriers

Other

10%

20%

15%

25%

Source: Management estimate based on
IHS Global Insight market estimates.

Source: Management information.

Ashtead Group plc Annual Report & Accounts 2016

534*

Full service stores

Sunbelt at Lowes stores

10,125

$3,277m

$1,014m

Employees

Revenue

Profits

24% Return on investment**

Includes 13 stores in Canada.

*
** Excluding goodwill and intangible assets.

156

2,968

£365m

£67m

15%

Stores

Employees

Revenue

Profits

Return on investment*

* Excluding goodwill and intangible assets.

STRATEGIC REPORT4

Ashtead Group plc Annual Report & Accounts 2016

CHAIRMAN’S STATEMENT

CHRIS COLE
Chairman

CONTINUED
GROWTH AND A
STABLE OUTLOOK
22.5p

THE BOARD RECOMMENDS A FINAL
DIVIDEND OF 18.5P PER SHARE,
MAKING 22.5P FOR THE YEAR

I am pleased to report that the Group delivered
strong growth again last year with excellent results
in both North America and the UK. Both Sunbelt and
A-Plant continue to set records in terms of revenue,
margins and profit.

We continue to operate in good markets and we are seeing the
benefit from growth in demand for our services and our expansion
into new territories. Full-year revenue was £2,546m compared
to £2,039m the previous year. Underlying pre-tax profit rose 24%
year-on-year to £645m at constant exchange rates and our EBITDA
margin rose to 46% (2015: 45%). Top-line growth continues to
be the main driver of our profitability, and total rental revenue
increased by 17% at constant exchange rates. Total rental revenue
grew 18% at Sunbelt and 9% at A-Plant.

We have continued to invest responsibly in both the fleet and bolt-on
acquisitions and are mindful of the flexibility that a young fleet age
and low leverage provides. Group RoI for the year was a healthy
19% and despite continued significant investment in our fleet, our
leverage reduced to 1.7 times EBITDA. This is towards the middle
of the one and a half to two times leverage range, within which we
believe the Group can operate comfortably. Our continued success
demonstrates the strength of our strategy of organic growth,
greenfield openings and bolt-on acquisitions, combined with
geographic and sector diversity in generally good markets.

Maintaining a balanced and diverse board that reflects the breadth
of our business remains our priority and I believe we continue to
achieve this which provides good governance. We recently welcomed
Lucinda Riches to the Board. I look forward to her contribution to
the Group’s continued growth and development. I would like to
extend the Board’s good wishes and thanks to Michael Burrow
and Bruce Edwards who retire at the Annual General Meeting.
They have witnessed significant growth in the business and
supported us well over the last nine years.

On behalf of the Board I also extend my usual debt of gratitude to
our employees. Ashtead would not be the enormously successful
business nor the great place to work that it is without their
continued dedication. Their attention to providing the very best
customer service supports our year-on-year growth.

Our dividend policy remains a progressive one while always taking
into account our aim to make dividends sustainable whatever stage
we are at in our business cycle. In line with that objective and our
excellent performance, the Board is recommending a final dividend
of 18.5p per share making 22.5p for the year compared to 15.25p
in 2015, an increase of 48%. Assuming the final dividend is approved
at the Annual General Meeting, it will be paid on 9 September 2016
to shareholders on the register on 12 August 2016.

Reflecting the strength and cash generating potential of the
business, we are now in a position to consider additional returns
to shareholders while balancing capital efficiency with financial
flexibility in a cyclical business and their impact on shareholder
value. Accordingly, taking account of these factors, we intend to
commence a share buyback of up to £200m in 2016/17.

Looking forward, we continue to see encouraging growth
opportunities and expect further growth in 2016/17. Our end markets
remain strong, the structural drivers are still in place and we have
a strong balance sheet which allows us to execute our plans
responsibly. As a consequence, the Board looks forward to the
medium term with confidence.

CHRIS COLE
Chairman
13 June 2016

HIGHLIGHTS OF THE YEAR

REVENUE (£m)

2016

2015

2014

2013

2012

1,362

1,135

2,546

2,039

1,635

UNDERLYING OPERATING PROFIT (£m)

728

557

2016

2015

2014

2013

2012

181

409

290

UNDERLYING PROFIT BEFORE TAXATION (£m)

645

490

2016

2015

2014

2013

2012 131

362

245

PROFIT BEFORE TAXATION (£m)

617

474

357

2016

2015

2014

2013

2012

135

214

Ashtead Group plc Annual Report & Accounts 2016

Group rental revenue up 17%1

Group EBITA margins up to 29%
(2015: 27%)

Group underlying pre-tax profit of £645m,
up 24% at constant exchange rates

£65m spent on bolt-on acquisitions
and 69 greenfield locations opened

£1.2bn invested in the business

(2015: £1.1bn)

Group RoI of 19% (2015: 19%)

Net debt to EBITDA leverage1 of 1.7 times
(2015: 1.8 times)

Proposed final dividend of 18.5p,

making 22.5p for the full year, up 48%
(2015: 15.25p)

Commencing share buyback
of up to £200m

1 At constant exchange rates.

Underlying profit and earnings per share are stated before exceptional items and amortisation of intangibles.
The definition of exceptional items is set out in Note 2 to the financial statements.

WE ACQUIRED 68 NEW SITES IN NORTH AMERICA:
ALABAMA ALBERTA BRITISH COLUMBIA
CALIFORNIA COLORADO CONNECTICUT
DELAWARE FLORIDA GEORGIA ILLINOIS
INDIANA IOWA KENTUCKY LOUISIANA

MARYLAND MICHIGAN MINNESOTA

MISSISSIPPI MISSOURI NEBRASKA

NEW YORK NORTH CAROLINA OHIO

OKLAHOMA OREGON PENNSYLVANIA
SASKATCHEWAN TENNESSEE TEXAS

UTAH VIRGINIA WISCONSIN

STRATEGIC REPORT6

Ashtead Group plc Annual Report & Accounts 2016

MAKING THINGS
HAPPEN

Our equipment can be used to lift, power, generate,
light, move, dig, compact, drill, support, access, scrub,
pump, direct, heat and ventilate – whatever is required.

Here’s how we helped make things
happen in 2015/16:

7,000,000+

kW OF POWER

1,000+

APPLICATIONS FOR APPRENTICESHIPS

Ashtead Group plc Annual Report & Accounts 2016

1,000,000+

550,000

METRES OF BARRIERS ASSEMBLED

SMALL TOOLS RENTED

125 MILLION+

MILES TRAVELLED FOR DELIVERY AND SERVICE

15 BILLION+

BTU/hr IN THE HEATING FLEET

500,000+

RENTAL ASSETS

2,700,000

RENTAL CONTRACTS WRITTEN

200+

570,000

ENTERTAINMENT EVENTS SUPPORTED

CUSTOMERS

STRATEGIC REPORT8

Ashtead Group plc Annual Report & Accounts 2016

STRATEGIC REVIEW

In the following pages we explain
how our business has performed,
our market opportunities and how
we have capitalised on them and
how we create value:

12 Our markets
16 Our business model
22 Our strategy
28 Key performance indicators
30 Principal risks and
uncertainties
33 Financial review
40 Responsible business report

FROM: PROTECTING
ATHLETES’ LEGS

27°F

REDUCTION IN OUTSIDE
TEMPERATURE

Ashtead Group plc Annual Report & Accounts 2016

TO: SAVING
IOWA’S EGGS

The diversity of our fleet and service means we may
be providing cooling units for southern sports teams
one month and helping eradicate avian flu the next.
Colleges rely on our Power Breezer cooling units
to stop their football players overheating.

The US Department of Agriculture’s emergency
protocol required our industrial indirect-fired heater
fleet to provide heat sustained at 110–120°F to
eradicate avian flu at a chicken farm in Iowa.

350+

UNITS OF INDUSTRIAL
INDIRECT-FIRED HEATER
FLEET MOBILISED

STRATEGIC REPORT10

Ashtead Group plc Annual Report & Accounts 2016

STRATEGIC REVIEW CONTINUED

GEOFF DRABBLE
Chief executive

We have had another excellent year and
we do not expect either our performance
or markets to change any time soon.
The diversity of our fleet and the range
of both small and large applications
for which it can be used give us strength
and stability no matter the economic
environment. Our strategy remains
unchanged, with continued growth
being driven by same-store growth,
supplemented by greenfield openings
and bolt-on acquisitions.

The principal driver of this performance is Sunbelt where rental
revenue growth continues to benefit from cyclical and structural
trends. We are planning for double-digit volume and revenue
growth at Sunbelt in 2016/17, around twice the pace anticipated
for the market as a whole. A-Plant also continues to perform well,
as we continue to diversify the business, take market share and
improve returns.

STRENGTH AND
STABILITY THROUGH
DIVERSITY OF FLEET
AND APPLICATION

In the US we continue to capitalise on the opportunity presented by
our markets where the rental market grew 6% last year. Sunbelt’s
rental revenue growth was 18% in strong end markets, despite
the effect of the slow-down in oil and gas markets. Our Oil & Gas
business now accounts for only 2% of revenue compared with 6%
last year, but at only 2% now, the drag on the business is at its
maximum. Our same-store growth of 12% shows that we continue
to take market share as we grow more rapidly than the market.
In addition, bolt-ons and greenfields have contributed another 7%
growth as we execute our long-term structural growth strategy of
expanding our geographic footprint and our specialty businesses.
A-Plant also generated strong rental revenue growth of 9% and
we continue to increase market share, with further potential ahead.

This year we focused more on new greenfield sites in North
America with 58 opened compared with 31 in the previous year.
Our mix of greenfields and acquisitions changes depending on the
opportunities we see in any market at a particular time. We spent
$81m (2015: $365m) on bolt-on acquisitions, which added a further
10 locations. Of this total of 68 new locations, 40% were specialty
businesses, demonstrating the growing significance of specialty
services within our portfolio. Specialty is currently 22% of our
business and this year we opened almost as many specialty stores
as general tool stores. So relative to the size of the business, there
has been a greater focus on specialty. We added to our portfolio of
climate control locations this year and this continues to be a fast
growing and highly profitable business for us. We have gone from
being a tiny regional player to being the largest ‘spot’ climate
control business in North America.

Our priority for Ashtead has always been a highly stable balance
sheet and as a consequence, we have continued to reduce leverage
and invest in having a very young fleet age. We have reached a point
where leverage is well within our target range of one and a half
to two times EBITDA and our fleet age does not need to get any
younger. As we enter a very cash-generative phase, we have given
thought to how we will manage that cash.

Our priorities remain continued growth through same-store organic
fleet investment, greenfield openings and bolt-on acquisitions as we
continue to broaden and diversify the business, and the continuation
of a progressive dividend policy which is sustainable through the
cycle. If after achieving these, there are further funds available,

Ashtead Group plc Annual Report & Accounts 2016

SUZANNE WOOD
Finance director

we will look at the relative merits at the time of either growth
opportunities or additional returns to shareholders through share
buybacks. We will remain conservative with a view to maintaining
performance through the cycle as always and we are also mindful
of the need to remain watchful in current markets.

Over the long term, we believe this growth strategy is fundamental
to enhancing shareholder value as we seek to take advantage of
the structural opportunity in the market. However, if there is a
disconnect between the value of our business, versus the value of
acquisitions, we will take advantage of that imbalance and buyback
shares to enhance shareholder value. We will review the best
options on a regular basis.

CREATING A WELL-BALANCED BUSINESS

SEE HOW WE CAPITALISE ON
THE MARKET OPPORTUNITY
We are building market share through
same-store organic growth, new
greenfield investments and selected
bolt-on acquisitions.

DISCOVER MORE ABOUT
HOW WE CREATE
SUSTAINABLE VALUE
Our equipment rental business model,
and the management of that over the
economic cycle, enable us to create
long-term sustainable value.

LEARN ABOUT OUR
STRATEGY FOR GROWTH
We focus on building market share,
maintaining flexibility in our finances
and operations and being the best we
can be every day.

US MARKET SHARE

19%

2016 ROI

P12

P16

P22

FIND OUT ABOUT OUR RISKS
Our main risks relate to economic
conditions, competition, financing,
business continuity, people, health
and safety, the environment and laws
and regulations.

SEE HOW WE PERFORMED
IN 2016
We had another year of strong
financial performance, improved
operational efficiency and excellent
service metrics.

LEARN ABOUT HOW WE
ENSURE WE ARE A
RESPONSIBLE BUSINESS
We report on responsible business
through the Group Risk Committee.
We focus on health and safety, our
people, the environment, community
investment and ensuring the highest
ethical standards across the Group.

£645m

P30

UNDERLYING PROFIT BEFORE TAX

P33

P40

STRATEGIC REPORT12

Ashtead Group plc Annual Report & Accounts 2016

OUR MARKETS

CAPITALISING ON
MARKET OPPORTUNITY

Most of our business and growth
comes from the US which is a much
larger rental market than the UK and
less mature. The US rental market is
potentially five times bigger than the
UK and we continue to capitalise on the
structural changes in that market as
customers increasingly want to rent
rather than buy their own equipment.

We also have a small presence in Canada which we will seek
to develop over time, as and when the opportunities for growth
present themselves. The US market is currently very strong, the
UK market is showing resilience and we continue to increase our
market share in both markets. Our aim is to grow the business
wherever we are in the economic cycle. A strong market in the
US and a good one in the UK mean we are performing particularly
well currently.

THE US
Economic strength
Our core US markets are very strong. We have been impacted
by difficulties in energy sectors, but oil and gas was only a small
part of our business, so the negative impact has been relatively
limited. In fact, the problems in the oil and gas sector served
to demonstrate the robust and diverse nature of our business.
Construction markets remain strong but we also continue to see
growing employment, the benefits of lower energy prices and
increased disposable income which is positive for our broader
markets like event work and residential remodelling. In the US in
particular, people are generally spending more money which has
a knock-on effect in our non-construction markets. We continue to
see very encouraging short-term trends and the consensus is that
the market will experience steady longer term growth. Commercial
and industrial starts continue to grow well and we expect this to
continue at least until 2018.

With the obvious exception of energy, the markets we serve are
strong, as both structural and cyclical trends remain favourable.
Chart 02 shows the last three construction cycles. These have
followed one of two patterns. From 1975 to 1982 and from 1982 to
1991 the initial recovery was very aggressive but the overall cycle
was relatively short. We believe we remain mid-cycle and whilst
the pace of growth may moderate, we should have multiple years
of structural and cyclical opportunity ahead.

Market share in the US
We continue to grow our market share in the US and even though
we are the second largest equipment rental company, there
remains plenty of room to grow as chart 03 shows. Our major
large competitors are United Rentals and Herc Rentals with 10%
and 3% respectively. Home Depot, BlueLine and Sunstate have
shares of 2% or less. Most of the remainder of the market is made
up of small, local, independent tool shops.

Much of our market share gains come from these small independents
when we set up new stores or acquire them. Ours is a capital-
intensive industry where size matters. Scale brings cost benefits
and sophistication in areas like IT and other services, and this leads
ultimately to further consolidation. The industry has evolved over
the last five years such that the proportion of the market enjoyed
by the larger players has increased by 25%. We have clearly been
a major beneficiary of this trend. Whilst there will always be a place
for strong local players, the market enjoyed by the larger players
is likely to grow by a further 30 to 40% in the medium term.

We are confident that as the market grows, our share will also
increase. We have a good track record of success, having almost
doubled our market share in the last six years. We continue to set
ambitious targets for continuing to double our market share and
market demand allows for this. The speed with which we increase
our market share is a function of how quickly we can get new
locations up and running and generating profit.

We believe that our model is a differentiator and explains in part our
strong performance relative to some of our larger peers. We take
share from our larger competitors because we have the right fleet
in the right place and because we offer better service. However, we
take more market share from the smaller operators than our bigger
competitors where our advantage is greater. We remain committed
to a very broad product offering in segments with low rental
penetration and high returns. The diversity of both our fleet and its
application gives us enormous competitive advantage. You can read
more about our business model on pages 16 to 21.

The combination of our business model, the strong economy and
the long-term trend to rental, which we discuss further on page 14,
provides the perfect environment for us to achieve our goals.
In addition, our market share gains accelerate as we make the
most of our scale advantages. In the longer term, we believe that
US market share in the order of 20% is a reasonable goal.

As we increase our market share and grow our specialty
businesses, they necessarily become a greater proportion of the
mix. The acquisitions we make are often to expand into a new
specialty area or to develop an existing one and then we supplement
them with greenfield openings. For example, last year we made an
acquisition to expand our climate control business to the Pacific
Northwest and opened eight greenfield locations to expand further
this highly profitable specialty business.

SPECIALTY FLOORING SOLUTIONS
In July last year we set up our first specialty flooring
solutions business. We are already the single largest
rental provider of surface maintenance equipment
focused on the commercial cleaning industry. We provide
long and short-term rental options, battery, electric,
LPG and diesel powered units, walk-behind and ride-on
sweepers and scrubbers, floor burnishers and single
disc machines (polish, scrub, grind), carpet extractors
and specialty cleaning equipment. We serve the
education, hospitality, events, retail and healthcare
industries as well as stadiums, industrial plants
and warehouses.

Ashtead Group plc Annual Report & Accounts 2016

United Rentals

10%

Sunbelt

Herc Rentals

Home Depot

BlueLine Rentals

Sunstate

Top 7–10

Top 11–100

Others

c.16%

c.57%

Source: Management estimate based on IHS Global Insight market estimates.
Note: Restated to reflect latest IHS Global Insight market size data.

04 US MARKET SHARE DEVELOPMENT

2002

2007

2013

2016

Target

Source: Management estimates.

15%

Over the last five years we
have consistently grown at
two to three times the market
growth rate.

03 US MARKET SHARE

01 US MARKET OUTLOOK

Total building starts
(Millions of square feet)
Total building
Commercial and industrial
Institutional
Residential

Source: Dodge Data & Analytics (March 2016).

2016
+11%
+6%
+8%
+12%

2017
+14%
+9%
+14%
+16%

2018
+0%
+5%
+11%
-3%

02 CONSTRUCTION ACTIVITY BY CYCLE

200

180

160

140

120

100

T T
+
2

T
+
4

T
+
6

T
+
8

T
+
1
0

T
+
1
2

T
+
1
4

T
+
1
6

T
+
1
8

T
+
2
0

1975–1982
Current cycle

1982–1991
Forecast

(T=100 based on constant dollars)

Source: Dodge Data & Analytics.

1991–2011

STRATEGIC REPORT
14

Ashtead Group plc Annual Report & Accounts 2016

OUR MARKETS CONTINUED

FROM: SHINING THE LIGHT
FOR A LOCAL CRAFT FESTIVAL

In celebration of harvest time, Florida’s largest strawberry
festival held in Plant City, Florida, asked Sunbelt to provide a
variety of equipment support. We supplied towable generators
to power food and craft stalls, light towers to increase visibility
during the evening hours and scissor lifts to set up the
festival and take it down at the end.

The trend to rental
Rental penetration continues to be a positive trend for the industry
in the US as our customers have become accustomed to the
flexibility of an outsourced model. Between 2010 and 2016,
increased rental penetration effectively grew our end market by
20 to 25%. We see this trend continuing which will provide similar
levels of market growth over the coming years. Rental still only
makes up around 50% of the US market compared with 75% in the
UK. We see the potential market penetration for rental equipment
to be well over 60% in the US. The short-term drivers of this
evolution are the significant cost inflation in recent years associated
with the replacement of equipment, technical changes to equipment
requirements that make rental more attractive, and health, safety
and environmental issues which make rental more economical
and just easier. In addition, our customers are ever more used
to renting equipment rather than owning it themselves.

The diversity of our fleet helps us take advantage of the increasing
trend to rental. We remain committed to a broad product offering
in segments with low rental penetration and high returns. If your
fleet consists of very large highly specialised equipment like
telehandlers and large booms, you are not necessarily benefitting
from increased rental penetration as it is probably as high as it is
likely to get. If however you have a broader mix of fleet, then there
is significant further upside to come from rental penetration.

The environmental regulations resulting in the more
environmentally friendly Tier 4 engines produce significant inflation
in equipment replacement costs. This has driven further rental
penetration through the reduction in fleet size by those customers
who previously may have chosen to own some, if not all, of their
larger equipment needs. Customers and smaller competitors
with older fleets are faced with heavier replacement spend. The
difficulties of getting to grips with the new technology and its
maintenance requirements have also caused more operators to
decide to rent. Therefore we continue to invest in keeping our fleet
in the best condition it can be to take advantage of the increased
demand for rental.

CANADA
Canada is a long-term growth opportunity for us. There is plenty of
scope to develop market share in Canada in the same way as in the
US. The business there is now twice the size of the previous year
but it is still very small. We are focusing first on the southwest
corner of Canada where, following our acquisition of GWG Rentals
last year, we have opened a series of greenfields and made a

number of small bolt-on acquisitions to expand the business. In the
long term, our goal is to achieve market share of 5% and for Canada
to make up between 15 to 20% of the North American business.

However, we are mindful that the potential impact on the broader
economy of lower oil prices is likely to be greater in Canada than in
the US. So we are waiting to see how that situation evolves before
we get overly ambitious anywhere else in the country. In the long
term, we will need to go into a broader geography in Canada and
to increase the quantity of fleet on the ground and the location
footprint. Any concerns about oil and gas are short-term ones
and do not change our long-term strategy in Canada.

THE UK
Economic resilience
The UK market continues to improve and we expect it to continue
to grow at a gentle pace for the foreseeable future. Growth
opportunities are more difficult to come by because of an already
high level of rental penetration. Nonetheless, A-Plant continues to
grow and is also taking market share. Chart 05 shows the outlook
for UK construction which shows continuing growth. Given high
levels of total construction, 40% still being public and infrastructure,
even with residential performing well, we will continue to invest
responsibly in the UK market.

Our fleet size continues to expand and when there was a degree of
oversupply in the UK market at the beginning of this financial year,
we acted quickly to pull back our fleet investment, demonstrating
the flexibility of our model.

Market share
We are the largest equipment rental company in the UK, and we
increased our market share this year organically and through four
small bolt-on acquisitions. There are a greater number of major
players in the UK market and, as the largest, we only have a 6%
market share. Chart 06 shows our key competitors and their share
of the market. We believe we continue to be well positioned in the
market with our strong customer service, young relative fleet age
and strong balance sheet. We continue to broaden our customer
base and have focused our investment on specialty sectors within
the market. This has proven very successful in growing both our
market share and returns.

Ashtead Group plc Annual Report & Accounts 2016

TO: SETTING THE STAGE
FOR 20+ ROCK MARATHONS

Sunbelt is the primary source for lifts, material handling and
power generation at more than 20 North American Rock n Roll
Marathons. Each mile of the half and full marathon features a
stage with lights and sound, all powered by Sunbelt. Our team
manages every aspect from design, set-up and maintenance,
before, during and after the event. Sunbelt provides the
equipment, service and support needed to execute one of
the most widely recognised, musically themed races.

05 UK CONSTRUCTION INDUSTRY FORECASTS

£m constant 2012 prices
Residential

Private commercial

Public and infrastructure

Total

2014
actual
38,603

38,092

49,991

126,686

2015
actual
40,430
+4.7%
38,551
+1.2%
51,995
+4.0%
130,976
+3.4%

2016
forecast
41,714
+3.2%
40,025
+3.8%
53,163
+2.2%
134,902
+3.0%

2017
forecast
43,042
+3.2%
41,536
+3.8%
55,204
+3.8%
139,782
+3.6%

2018
projection
44,077
+2.4%
42,728
+2.9%
58,640
+6.2%
145,445
+4.1%

2019
projection
45,137
+2.4%
43,933
2.8%
62,123
+5.9%
151,193
+4.0%

% of
total
30%

30%

40%

100%

Source: Construction Products Association (Spring 2016).

We are the largest equipment
rental company in the UK, and
continued to increase our market
share this year organically.

06 UK MARKET SHARE

A-Plant

HSS

Speedy

GAP

Lavendon

Hewden

Others

73%

Source: Management estimate based on IHS Global Insight market estimates.

UK MARKET SHARE

STRATEGIC REPORT16

Ashtead Group plc Annual Report & Accounts 2016

OUR BUSINESS MODEL

CREATING
SUSTAINABLE VALUE

WHAT WE DO

HOW WE DO IT

PURCHASE
We purchase equipment from leading
manufacturers and maintain it through
its useful life.

RENT
We rent on a short-term basis, a full range
of construction and industrial equipment
to a diverse range of customers.

SELL
We sell old equipment in the second-hand
market and buy new.

P L A NNING AHEAD

NITIES

U
T
R
O
P
P
O
F
O
E
G
A
T
N
A
V

DIFFERENTIATING
OUR FLEET
AND SERVICE

ENSURING
OPERATIONAL
EXCELLENCE

OUR
CUSTOMERS

MAXIMISING
OUR RETURN ON
INVESTMENT

INVESTING IN
OUR PEOPLE

L
A
N
C
E
S
H
E
E
T
M
A
N
A
G
E

MENT

PTING OUR FLEET AND C O S T P O S I T I O

P18

DISCOVER MORE ABOUT HOW WE MANAGE THE CYCLE

P19

Ashtead Group plc Annual Report & Accounts 2016

We create value through the short-term rental
of equipment that is used for a wide variety
of applications to a diverse customer base.
Our rental fleet ranges from small hand-held
tools to the largest construction equipment
and is available through a network of stores
in North America and the UK.

HOW WE DO IT

VALUE CREATION

The provision of cost-effective
rental solutions to a diverse
customer base.

Developing long-term
relationships with customers
and suppliers.

Enhancing the communities
in which we operate, through
employment, opportunity
and community involvement.

Generating sustainable
returns for shareholders
through the cycle.

P19

P21

P46

P16

DIFFERENTIATING OUR FLEET AND SERVICE

Broad fleet mix
Highly responsive (no job too small)
Scale to meet size and range of requirement

ENSURING OPERATIONAL EXCELLENCE

Optimal fleet age
Nationwide networks in US and UK
Long-term partnerships with leading
equipment manufacturers
Focused, service-driven approach
Strong customer relationships
Industry-leading application of technology

INVESTING IN OUR PEOPLE

Highly skilled team
Devolved structure
Maintaining significant staff continuity
Strong focus on recruitment, training
and incentivisation

MAXIMISING OUR RETURN ON INVESTMENT
Effective management and monitoring
of fleet investment
Optimisation of utilisation rates and returns
Flexibility in local pricing structures
Focus on higher-return equipment
Appropriate incentive plans consistent
with improved returns

P19

P20

P21

STRATEGIC REPORT18

Ashtead Group plc Annual Report & Accounts 2016

OUR BUSINESS MODEL CONTINUED

WHAT WE DO
IS SIMPLE.
HOW WE DO IT
IS NOT.

On-site hire depot and
contractors’ village for
long-term maintenance
and construction projects.

Providing temporary
climate control
solutions for retail
premises, office
buildings and
construction sites.

Renting generators,
access equipment,
lighting, barriers and
temporary trakway to an
outdoor music festival.

At its most basic, our model is simple –
we purchase an asset, we rent it to
customers and generate a revenue
stream each year we own it (on average,
seven years). Then we sell it in the
second-hand market and receive a
proportion of the original purchase
price in disposal proceeds.

Assuming we purchase an asset for $100, generate revenue of
$60 each year (equivalent to 60% dollar utilisation) and receive 35%
of the original purchase price as disposal proceeds, we generate
a return of $455 on an initial outlay of $100 over an average
seven-year useful life. We incur costs in providing this service,
principally employee, property and transportation costs and fleet
depreciation. However, this simple overview encompasses a
significant number of moving parts and activities. Our ability to
excel in these areas enables us to generate strong margins and
deliver long-term, sustainable shareholder value, whilst managing
the risks inherent in our business (refer to pages 30 to 32).

07 MANAGING THE CYCLE – SUNBELT

2007
Strong
market
Preparation
for downturn

2008
Rightsizing
of the
business

2009
Running
tight
business

2010
Benefitting
from
structural
change

2013
Improving
market

Revenue ($m)

1,308

1,626

1,450

1,081

1,225

1,507

1,820

2,189

2,742

3,277

Fleet age (months)

Fleet size ($m)

2,147

2,314

2,136

2,094

2,151

EBITDA margin (%)

Return on investment* (%)

* Excluding goodwill and intangible assets.

2,453

2,868

3,596

4,733

5,663

Ashtead Group plc Annual Report & Accounts 2016

Designing bespoke lifting
solutions for complex problems,
including lifting the façade onto
multistorey buildings.

Managing the flow for sewer
bypasses to enable the
refurbishment of ageing
infrastructure in a dry
environment.

Designing, erecting
and dismantling
scaffolding systems.

Rapid response to natural
disasters such as floods,
tornadoes and hurricanes,
including pumps and power
generation equipment.

Providing traffic
management solutions
for engineering projects
or clean-up after
an accident.

Managing the cycle is key
to our strategy.

IN SPECIALTY BUSINESSES

22%
<50%

RELIANT ON CONSTRUCTION

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 react in a timely manner
when necessary. Key to the execution of our model is the planning
we undertake to capitalise on the opportunities presented by the
cycle. The opportunities are for both organic growth, through
winning market share from less well positioned competitors, and
positioning ourselves to be able to fund acquisitive growth if suitable
opportunities arise (see content on our strategy on pages 22 to 27).

DIFFERENTIATING OUR FLEET AND SERVICE
The differentiation in our fleet and service means that we provide
equipment to many different sectors. Construction continues to
be our largest market but now represents around 45% as we have
deliberately reduced our reliance on construction. An increasing
proportion of our North American business (22%) is in specialty
areas such as Pump & Power, Climate Control, Scaffolding,
Oil & Gas and Industrial Services. Residential construction is
a small proportion of our business (5%) as it is not a heavy user
of equipment.

Our customers range in size and scale from multinational
businesses, through strong local contractors to individual do-it-
yourselfers. Our diversified customer base includes construction,
industrial and homeowner customers, as well as government
entities and specialist contractors. Our core market is the small
to mid-sized local contractor. The nature of the business is such
that it consists of a high number of low-value transactions. In the
year to April 2016, Sunbelt dealt with over 540,000 customers,
who generated average revenue of $5,600.

STRATEGIC REPORT20

Ashtead Group plc Annual Report & Accounts 2016

OUR BUSINESS MODEL CONTINUED

The breadth and depth of
our fleet differentiates us
from our competitors.

The individual components of our fleet are similar to our peers.
However, it is the breadth and depth of our fleet that differentiates
us from them and provides the potential for higher returns. The
size, age and mix of our rental fleet is driven by the needs of our
customers, market conditions and overall demand. The equipment
we provide to each customer is diverse and we are often involved
in supplying various types of equipment over an extended period
at each distinct stage of a project’s development. Our equipment is
also used in a wide range of other applications including industrial,
events, repair and maintenance and facilities management.

HOW WE OPERATE
Our operating model is key to the way we deliver operational
excellence:

• 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. 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. When combined with our purchasing power, this creates
a virtuous circle of scale. You can find out more on our cluster
strategy on pages 24 and 25.

• In 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 migrated our network towards fewer, larger
locations which are able to address all the needs of our
customers in their respective markets. This difference in
approach from the US reflects the nature of the customer base
(more national accounts) and the smaller geography of the UK.
• Across our rental fleet, we seek generally to carry equipment

from one or two suppliers in each product range and to limit the
number of model types of each product. We believe that having

FROM: A BURST PIPE
IN A BAKERY

Freezing temperatures caused a water pipe to burst in a
St. Louis bakery. The burst pipe forced the entire building
to close and business to cease. We provided portable
dehumidifiers and air movers to combat water damage
and restore a healthy, safe environment for workers
and customers alike, enabling business as usual,
to everyone’s relief.

Ashtead Group plc Annual Report & Accounts 2016

70%

OF ORDERS FOR DELIVERY
IN 24 HOURS

a standardised fleet results in lower costs. This is because
we obtain greater discounts by purchasing in bulk and reduce
maintenance costs through more focused and, therefore,
reduced training requirements for our staff. We are also able
to share spare parts between stores which helps minimise the
risk of over-stocking. Furthermore, we can easily transfer fleet
between locations which helps us achieve leading levels of
physical utilisation, one of our key performance indicators (‘KPIs’).

• We purchase equipment from well-known manufacturers with

strong reputations for product quality and reliability and
maintain close relationships with them to ensure certainty of
supply and good after-purchase service and support. We work
with vendors to provide early visibility of our equipment needs
which enables them to plan their production schedules and
ensures we receive the fleet when we need it. 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

in all scenarios. Our specialty product range includes equipment
types such as pumps, power generation, heating, cooling,
scaffolding, traffic management and lifting services, which
involve providing service expertise as well as equipment.

• Our large and experienced sales force is encouraged to build
and reinforce customer relationships and to concentrate on
generating strong, whole-life returns from our rental fleet.
Our sales force works closely with our customers to ensure
we meet their needs. Through the application of technology,
it is equipped with real-time access to fleet availability and
pricing information enabling it to respond rapidly to the needs
of a customer while optimising returns.

• We guarantee our service standards and 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. Our responsiveness to customer
needs is critical in a business where around 70% of orders are
placed for delivery within 24 hours. We have worked with a lot
of our customers for many years. Our customer retention is high
due to the scale and quality of our fleet, our speed of response
and our customer service.

• Our local management teams are experienced and incentivised
to produce strong financial returns and high quality standards.
We believe that the autonomy given to management teams to take
decisions locally ensures that, despite our size, we retain the feel
of a small, local business for our employees.

• 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 the location and usage of large equipment.

INVESTING IN OUR PEOPLE
Our people enable us to provide the exceptional customer service
that keeps our customers coming back. Our exceptional staff and
focus on service give us a huge competitive advantage in what
we do. On pages 43 to 46 we discuss the importance of our staff
and corporate culture in more detail. We aim to recruit good
people and then invest in them throughout their careers.

TO: MAINTAINING A
CITY’S SEWER NETWORK

We also supplied all the necessary pumping equipment
to enable in-place repair of three miles of the Indianapolis
sewer. This pipe-lining project crossed railroad tracks,
a water canal feeding into a potable water plant and a school
yard. The sewer conveys 30 million gallons of raw sewage
a day and with our help, the flow was redirected through
a bypass without major interruption, so that the pipes
in need of repair remained dry.

STRATEGIC REPORT22

Ashtead Group plc Annual Report & Accounts 2016

OUR STRATEGY

We continue to deliver on our well-established
strategy of organic growth, supplemented
by bolt-on acquisitions.

OUR STRATEGIC PRIORITIES
We always talk about managing our business across the economic
cycle and how we expect that cycle to progress. The cycle continues
to play out exactly as we have always thought it would and as a
result our strategy remains unchanged. Our markets are full of
potential at the moment and we do not see that changing in the
short to medium term. If the situation does change we will be
well prepared. We are always conservative in our approach to
maintaining a stable and secure balance sheet throughout the
cycle and this enables us to maintain the flexibility we require
to manage changes to the business as and when they occur.

Our goal in the medium to long term is 15% market share in the
US and to grow it by 50% in the UK. We believe these are realistic
goals given the way the rental market is evolving and the way we
do business. Consistent implementation of our strategy across the
economic cycle will ensure we are in a strong position at all times
to take advantage of the opportunities presented. The risks that we
face in implementing this strategy are discussed on pages 30 to 32.

STRATEGIC PRIORITIES

KEY INITIATIVES

UPDATE

RELEVANT KPIs & RISKS

BUILD A BROAD
PLATFORM
FOR GROWTH:

• Target 15% US market share
• Take 5% Canadian market

• Increase UK market share

by 50%

Organic fleet growth
Greenfield expansion
Bolt-on M&A
Develop specialty products
Develop clusters in key areas

MAINTAIN FINANCIAL
AND OPERATIONAL
FLEXIBILITY:

• RoI above 15% for the Group

Driving improved dollar
utilisation
Maintain drop through rates
Increasing US store maturity

US market share increased from
6% to 7%
20% increase in North American
rental fleet at cost
20% increase in North American
fleet on rent
58 greenfield openings in North
America
$81m spent on North American
acquisitions
£11m spent on UK acquisitions

Strong RoI at 19% (2015: 19%)
Sunbelt dollar utilisation of 56%
(2015: 59%)
A-Plant dollar utilisation of 52%
(2015: 56%)
Drop through of 60% and 84%
in Sunbelt and A-Plant

• Maintain leverage in the

range 1.5 to 2 times net debt
to EBITDA

Maintaining financial
discipline

Sunbelt EBITDA margin improved
to 48% (2015: 47%)
A-Plant EBITDA margin improved
to 38% (2015: 34%)
Leverage of 1.7x EBITDA

• Ensure financial firepower
at bottom of cycle for next
‘step change’

OPERATIONAL
EXCELLENCE:

• Improve operational

capability and effectiveness
• Continued focus on service

Optimise fleet profile and age
during the cyclical upturn

Fleet age remains stable and
appropriate at this stage of the cycle:

• Sunbelt 25 months (2015: 26 months)
• A-Plant 27 months (2015: 29 months)

Operational improvement:

• delivery cost recovery
• fleet efficiency

Continued focus on improvement
programmes designed to deliver
improved dollar utilisation and
EBITDA margins

KPIs
Fleet on rent

Risks
Competition
People

KPIs
RoI
Dollar utilisation
Underlying EBITDA margins
Leverage
Net debt

Risks
Economic conditions
Competition
Financing

KPIs
Underlying EBITDA margins
RoI
Fleet on rent
Staff turnover
Safety

Risks
People
Health and safety

Ashtead Group plc Annual Report & Accounts 2016

08 MARKET SHARE AND GROWTH STRATEGY

APRIL 2012

APRIL 2016

HAWAII

Market share

10%

15+%

Stores – April 2012
Store growth – May 2012 to April 2016 (includes Hawaii – 2 May 2016)

09 SOURCES OF SUNBELT REVENUE GROWTH

+12%

Same-store
growth

+7%

Bolt-ons and
greenfields

+19%

Total rental only
revenue growth

+6%

End market
growth

+6%

Structural
share gains

BUILDING A BROAD PLATFORM FOR GROWTH
The first of our strategic priorities is to build a broad platform for
organic growth supplemented by small bolt-on acquisitions and
new greenfield sites. You can see from the maps above how we have
made an enormous impact on the US market since 2012 and how
much potential there still is to grow. We have added over 200 new
locations over the last four years. Anything in green on the map is
where we already have over 10% market share. Areas in dark green
are where we have over 15%. It is only a matter of time before we
achieve similar results across a broader geography because we
now have the scale, competitive advantage and balance sheet
strength to reach our targets. There are six out of the top 100
markets in the US where we have no locations and many where
our share is less than our average share. So we believe there is
significant opportunity for expansion in both existing and new
geographies, to almost double the current number of locations.

There is a drag on margins when we open new stores but they
improve quickly as they deliver more revenue and later broaden
the fleet and customer mix. The same happens with acquisitions
because we always buy businesses that we can improve, either
operationally or through additional investment, or both. However,
our focus remains on same-store growth because once a store
has been open for 12 months, it has average growth of 12% and it
generates the best returns. This is part cyclical market growth of
6% and part structural growth of 6%. So even if the market stops
growing, our stores don’t because that structural part of the growth
is independent of the market. This is why we are consistently able to
outperform both our competitors and the market. The strength of
our brand and reputation means that new greenfield sites become
profitable very quickly.

Chart 09 shows the revenue growth and mix from bolt-on
acquisitions and greenfield sites. When we add the 7% growth from
our bolt-on acquisitions and greenfield sites, total revenue growth
becomes 19%, of which two-thirds is structural and not driven by
market growth. Our strategy capitalises on both structural and
cyclical factors to drive our revenue growth.

STRATEGIC REPORT

Ashtead Group plc Annual Report & Accounts 2016

OUR STRATEGY CONTINUED

Structural growth is the market share we take because we have
the best kit in the right locations combined with the best service.
We are able to keep growing because we prioritise investment in
the fleet and have the financial security to be able to do that. Our
customers want good quality fleet, readily available to meet their
needs. Investing in a broad range of fleet and backing that up with
great service means our customers remain loyal and do not need
to look elsewhere. Prioritising higher return on investment (‘RoI’)
products further helps our growth.

We are always on the lookout for the best opportunities and the
flexibility in our model enables us to act quickly when we need to,
whether that be to open a new greenfield site or make an acquisition.
We are also flexible in the mix of greenfields and bolt-on acquisitions
depending on the opportunities we see. This year, for example, saw
a different mix in greenfields and bolt-on acquisitions with more
greenfields which showed better value as they progress up the
revenue generation curve. Further diversifying the business is also
a priority and opportunities that allow us to diversify further and
expand our specialty businesses are particularly key to our strategy
of building a broader base for growth. This year we made eight
acquisitions which grew our North American network and expanded
our specialty businesses, adding 10 locations. In addition, we added
a four-location business in Hawaii in May 2016.

Our specialty businesses are a strategic priority and have grown
from 16% of our business in 2011 to 22% in 2016. This year 40%
of our greenfield openings were specialty stores. The fastest
growing of our specialty businesses is Climate Control and we are
now the largest ‘spot’ climate control business in the US. We aim
to build specialty businesses generating $1bn of revenue in time.
We have always said we wanted to reduce our dependence on the
construction industry. The increase in our specialty businesses is
one way in which we have increased the ratio of our non-construction
business as can be seen in chart 12.

15%

TARGET US MARKET SHARE

Specialty markets are typically characterised by low rental
penetration and a predominance of small local players. We continue
to see further opportunity as we consolidate and improve the
service offering leading to market growth from increased rental
penetration as our customers become accustomed to the quality
of our offering.

Our cluster approach is also an important aspect of building a
broad platform for growth. Our greenfield sites are chosen carefully
to enhance our existing business. We focus on building clusters
of stores, as can be seen in the map opposite, because as we build
clusters, our RoI increases. Where we have a full cluster of stores,
as we have in Florida for example, our average store level RoI is
around 5% higher than for non-clustered locations.

There are many locations across the US where there is significant
opportunity for us to build-out clusters based on population,
construction already underway and construction starts. Chart 11
opposite shows the relative population figures and put in place
construction and construction starts in Charlotte, Minneapolis/
St. Paul and Denver, for example. In Charlotte which has the lowest
population, put in place construction and construction starts,
we have 14 highly profitable stores. To achieve the same market
coverage in Minneapolis/St. Paul and Denver we will need at least
10 more stores in each location to service expected demand.

FROM: BRIDGING THE GAP
BETWEEN STABLE AND PADDOCK

As part of the installation of a new utility pipeline through an
equestrian centre, Eve provided eight temporary panels to
enable safe access for the horses to and from their paddock.

Ashtead Group plc Annual Report & Accounts 2016

10 CLUSTERED MARKETS – 100 LARGEST MARKETS

HAWAII

Full cluster

Non cluster

No presence

11 UNCLUSTERED MARKET OPPORTUNITY

12 BUSINESS MIX

HICKORY

MINNEAPOLIS

BOULDER

DENVER

CHARLOTTE

INDIAN
TRAIL

ROSEMOUNT

LITTLETON

CHARLOTTE, NC

MINN/ST. PAUL, MN

DENVER, CO

Population
3m
Put in place $4.0bn
$3.9bn
Starts
14
Stores
$134m
Fleet cost

Population
4.5m
Put in place $5.9bn
$6.2bn
Starts
4
Stores
$34m
Fleet cost

Population
4.1m
Put in place $9.6bn
$9.9bn
Starts
Stores
7
$43m
Fleet cost

2007

2016

Construction
55%
Non-construction 45%

Construction
47%
Non-construction 53%

TO: TAKING THE WEIGHT
OF A MOTORWAY’S TRAFFIC

A-Plant’s specialty business Eve was contracted by
Balfour Beatty to help move a 2,000 tonne bridge up the
M56 motorway. Some 700 of Eve’s aluminium hybrid
trakway panels were used to protect the motorway
enabling part of the HS2 rail route to be moved and allow
better rail and tram connections to Manchester Airport.
The bridge was moved from its build point adjacent to the
Manchester Airport slip road to its final point on the M56.
It was the largest single load for Eve’s trakway.

STRATEGIC REPORT2008
14
35
174
115

Number

Operating margin*

2016
108
129
159
85

2008
37%
35%
30%
24%

2016
41%
39%
32%
25%

2008
26%
25%
22%
19%

RoI*

2016
27%
26%
22%
18%

Strong drop through generated
record EBITDA margins.

Ashtead Group plc Annual Report & Accounts 2016

OUR STRATEGY CONTINUED

13 SUNBELT STORE MATURITY PROFILE

Fleet size
Extra large > $15m
Large > $10m
Medium > $5m
Small < $5m

* Based on store level operating profit and excludes corporate costs.
Note: 2008 reflects prior cycle peak performance.

FINANCIAL AND OPERATIONAL FLEXIBILITY
Maintaining financial and operational flexibility enables us to flex
our business and operational models through the economic cycle.
As we have said elsewhere, this enables us to react quickly to both
negative changes in the market and opportunities of which we want
to take advantage. The more growth we experience and plan for,
the more financial and operational flexibility we need. A key element
of our strategy is ensuring we have the financial strength to enable
growth when appropriate and make our returns sustainable. Having
a strong balance sheet is fundamental to our success at all stages
in the cycle.

A core element of our financial stability comes from our strategy
of ensuring that, averaged across the economic cycle, we always
deliver RoI well ahead of our cost of capital. RoI through the cycle is
the key measure for any rental company and the best medium-term
indicator of the strength of the business. We do this in a variety of
ways at different stages of the cycle, all focused on the effective
management of invested capital and maintaining financial discipline.

We continue to be focused on optimising dollar utilisation (the
rental revenue return over the original cost of any of our equipment)
and driving improvement in margins through strong drop through
(the proportion of incremental rental revenue that drops through
to EBITDA). This year our drop through rate at Sunbelt was 60%
overall and 67% on a same-store basis, and 84% at A-Plant. This
is how we measure the efficiency of our growth, reflecting the
inherent strength in our margins.

The maturity of our stores also has a big impact on RoI. This is
because as stores mature and get bigger and broaden their fleet
range there is natural margin progression. Stores that were
greenfield sites only two years ago are now already adding
same-store growth. We are always focused on moving new and
young stores up the maturity curve as there is scope for higher
returns as they do so. This also means that we are now at a very
different stage in our evolution relative to the current economic
cycle to where we were in the last. We have more stores overall
and they are larger than at the peak of the last cycle, so we are
much better placed to weather the next downturn when it comes,
as we know it will. Chart 13 shows how our strategic focus on
store evolution is driving our strong margins and returns.

Ashtead Group plc Annual Report & Accounts 2016

60%

SUNBELT DROP THROUGH

As mentioned elsewhere, we have over recent years been
consistent in our commitment to both low leverage and a young
fleet age and we are now benefitting from the options that this
strategy has provided. As our fleet replacement expenditure
naturally moderates, we enter a phase of the cycle where we
anticipate both good earnings growth and significant cash
generation. Traditionally, rental companies have only generated
cash in a downturn when they reduce capital expenditure and
age their fleet. In the upturn, they consume cash as they replace
their fleets and then seek to grow. We are entering a highly
cash-generative phase as we continue to grow the business in a
cyclical upturn. As a consequence our leverage will trend towards
the lower end of our range of one and a half to two times net debt
to EBITDA which provides the Group with an even higher degree
of flexibility and security.

The typical fleet age profile of our customers and some of our
smaller competitors means that a greater proportion of their fleet
needs to be replaced in the near future at much higher prices.
We get significant competitive advantage from our young fleet
and our purchasing power. Our strong balance sheet allows us
to capitalise on this advantage in both North America and the UK.

From this position of strength in the up-cycle, we can ensure we
have sufficient financial resources at the bottom of the cycle to
prepare for the next ‘step change’ in the market and capitalise
on growth opportunities in the early stages of the next recovery.

In terms of fleet investment, we have recently been replacing our
peak spend years of 2006, 2007 and 2008. As a consequence,
replacement spend and disposals have been historically high.
However, we are now entering a period where we will be replacing
2009, 2010 and 2011 spend which were low spend years at the
bottom of the last cycle. Therefore, total replacement capital
expenditure is due to fall over the next two or three years and we
will enter a very cash-generative period. While we will flex short-
term spend to reflect market conditions, we are still committed to
our long-term structural growth. So once again we will be opening
around 60 new locations by way of greenfield and bolt-ons next year
and expect to continue to do so in the medium term. We anticipate
market-leading growth in both divisions but with the added benefit
of significant cash generation as replacement capital expenditure
reduces over the coming years.

In 2008 and 2009 our financial and operational flexibility enabled
us to adjust our fleet spend more quickly and aggressively than the
rest of the market as we entered a downturn in the cycle. Our model
is very flexible and has proven itself to be adjustable very quickly,
when market conditions require. We are very conscious that we
have to know both when to spend and when not to.

OPERATIONAL EXCELLENCE
The third of our strategic priorities is constantly improving our
operational capability and effectiveness, doing what we do to the
very best of our ability. Customer service is a crucial element of this
and we continue to build market share because we are in the right
locations and providing better equipment with a higher quality of
service than our competitors. Our reputation for good service is
now such that when we open a new location, that store moves
quickly up the revenue curve because we are already well known
for what we do and how we do it.

We have three main categories of customers whose service needs
vary depending on their size. Our smallest customers have rental
revenue spend with us of less than $20,000 a year but represent
97% of our customers by number. These smaller customers tend to
require higher levels of service but can incur a higher transactional
cost. Our medium-sized customers often need equipment for longer
periods of time and can command a discounted service. Our largest
customers are our national accounts who have large-scale and
often very sophisticated requirements. We have gained significant
market share in all types of customer due, in part, to the strength
of the relationships we build.

Our focus on operational excellence across the board drives
our financial performance. Improving operational efficiency is an
ongoing focus and we constantly strive to maintain high levels of
fleet on rent, improve the organisation of our stores, analyse how
we load our delivery trucks, optimise our delivery and pick-up
routes and how we spend time at the customer location, for
example. As with any multi-location business, all locations are
good at some of this, some locations are good at all of it – our
goal is for all locations to be good at all of it.

Sunbelt continues to focus on operational efficiency, dollar
utilisation and driving improving margins, with 60% of revenue
growth dropping through to EBITDA. Drop through reflects the
drag effect of greenfield openings, acquisitions and oil and gas.
Excluding oil and gas, stores open for more than one year saw
67% of revenue growth drop through to EBITDA. Sustaining and
improving our EBITDA margins is key to our success. The annual
drop through of 60% is a testament to the benefits of being selective
in the business we take and our stable and efficient business model.
The fact that, despite the drag from oil and gas and a significant
investment in greenfields, our margins improved demonstrates
the potential for further margin improvement. A-Plant’s focus
is the same, with 84% of revenue growth dropping through to
EBITDA driving an improvement in margin to 38% (2015: 34%).

Maintaining low staff turnover and high staff safety levels are
also crucial to our strategy for operational excellence and you
can read more about these in our Responsible business report
on pages 43 to 46.

STRATEGIC REPORT
28

Ashtead Group plc Annual Report & Accounts 2016

KEY PERFORMANCE INDICATORS

MEASURING OUR PERFORMANCE

At Group level, we measure the performance of the business using a number
of key performance indicators (‘KPIs’).

These help to ensure that we are delivering against our strategic priorities as set out on page 22. Several of these KPIs (underlying EPS,
return on investment and leverage) influence the remuneration of our executive team (see page 63).

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.

UNDERLYING EPS (p)

Calculation
Underlying Group profit after
taxation divided by the weighted
average number of shares in
issue (excluding shares held
by the Company and the ESOT).

Target
As a cyclical business,
underlying EPS varies
substantially through the cycle.

Strategic
priority

2016 performance
Underlying EPS
improved
significantly to 85p
per share in
2015/16.

RETURN ON INVESTMENT (‘RoI’) (%)

Calculation
Underlying operating profit
divided by the sum of net
tangible and intangible fixed
assets, plus net working
capital but excluding net debt,
deferred tax and fair value
remeasurements.

Target
Averaged across the economic
cycle we look to deliver RoI
well ahead of our cost of
capital, as discussed in our
strategic review.

2016 performance
Our RoI was 19%
for the year ended
30 April 2016.

Strategic
priority

2012 2013 2014 2015 2016

NET DEBT AND LEVERAGE AT CONSTANT EXCHANGE RATES

Calculation
Net debt is total debt less cash
balances, as reported, and
leverage is net debt divided by
underlying EBITDA, calculated
at constant exchange rates
(balance sheet rate).

Target
We seek to maintain a
conservative balance sheet
structure with a target for net
debt to underlying EBITDA of
1.5 to 2 times.

2012 2013 2014 2015 2016

Strategic
priority

2016 performance
Net debt at 30 April
2016 was £2,002m
and leverage was
1.7 times.

1,313

1,078

3.2

2.9

869

885

949

2.3

2,002

1,766

PHYSICAL UTILISATION (%)

Calculation
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 85% of
its itemised fleet at 30 April 2016).

Target
It is important to sustain annual
average physical utilisation at
between 60% and 70% through
the cycle. If utilisation falls
below 60%, yield will tend to
suffer, whilst above 70% we
may not have enough fleet
in certain stores to meet
our customers’ needs.

Strategic
priority

2016 performance
Sunbelt utilisation
at 70% was the
same as 2014/15,
while A-Plant
utilisation was 68%
(2014/15: 70%).

2.0

1.8

1.7

Apr
2010

Apr
2011

Apr
2012

Apr
2013

Apr
2014

Apr
2015

Apr
2016

Net debt (£m)

Leverage (x)

2014

2015

2016

Sunbelt

A-Plant

Ashtead Group plc Annual Report & Accounts 2016

FLEET ON RENT ($m/£m)

Calculation
Fleet on rent is measured
as the daily average of the
original cost of our itemised
equipment on rent.

Target
To achieve growth rates
in Sunbelt and A-Plant
in excess of the growth
in our markets and that
of our competitors.

2016 performance
In Sunbelt, fleet on rent
grew 20% in 2015/16,
whilst in A-Plant it grew
10%. The US market grew
6% and the UK market
by 2%.

Strategic
priority

3465

2,894

2,298

3,465

298

342

376

2014

2015

2016

Sunbelt

A-Plant

2014

2015

2016

Sunbelt

A-Plant

DOLLAR UTILISATION (%)

Calculation
Dollar utilisation is rental
revenue divided by average
fleet at original (or ‘first’)
cost measured over a
12-month period.

Target
Improve dollar
utilisation to drive
improving returns
in the business.

Strategic
priority

2016 performance
Dollar utilisation decreased
to 56% in Sunbelt, reflecting
the drag effect of greenfield
openings and acquisitions
and the increased cost of
fleet. In A-Plant it decreased
to 52%, principally due to
lower physical utilisation.

UNDERLYING EBITDA MARGINS (%)

Calculation
Underlying EBITDA as a
percentage of total revenue.

Target
To improve margins
and achieve peak
EBITDA margins of
45 to 50% in Sunbelt
during this cycle and
35 to 40% in A-Plant.

2016 performance
Margins improved in
2015/16 to 48% in Sunbelt
and to 38% in A-Plant.

Strategic
priority

STAFF TURNOVER (%)

Calculation
Staff turnover is calculated as
the number of leavers in a
year (excluding redundancies)
divided by the average
headcount during the year.

Target
Our aim is to keep
employee turnover
below historical levels
to enable us to build on
the skill base we have
established.

2016 performance
Turnover levels are similar
to 2015. As economies have
improved, our well-trained,
knowledgeable staff have
become targets for our
competitors.

Strategic
priority

2014

2015

2016

Sunbelt

A-Plant

SAFETY

Calculation
The RIDDOR (Reporting of
Injuries, Diseases and
Dangerous Occurrences
Regulations) reportable rate is
the number of major injuries
or over seven-day injuries
per 100,000 hours worked.

Target
Continued reduction
in accident rates.

2016 performance
The RIDDOR reportable
rate decreased to 0.26 in
Sunbelt and 0.42 in A-Plant.
More detail is included in
our Responsible business
report on page 41.

2014

2015

2016

Sunbelt

A-Plant

0.55

0.52

0.45

0.55

Strategic
priority

0.42

0.26

0.00

2014

2015

2016

Sunbelt

A-Plant

STRATEGIC REPORT

Ashtead Group plc Annual Report & Accounts 2016

PRINCIPAL RISKS AND UNCERTAINTIES

MANAGING OUR RISK

The Group recognises the importance of identifying
and managing financial and non-financial risks
faced by the business. In response to the risks faced
by the business, it has developed a rigorous risk
management framework designed to identify and
assess the likelihood and consequences of risk
and to manage the actions necessary to mitigate
their impact.

Our risk identification processes seek to identify risks from both
a top-down strategic perspective and a bottom-up business
perspective. The Board has overall responsibility for risk
management, setting of risk appetite and implementation of the
risk management policy. This is designed to enable our employees
to take advantage of attractive opportunities, yet to do so within
the risk appetite set by the Board.

The Group Risk Register is the core of the Group’s risk management
process. It contains an overall assessment of the risks faced by the
Group and is maintained by the Group Risk Committee. The Group
Risk Register is based on detailed risk registers maintained by
Sunbelt and A-Plant, which are reviewed and monitored through
local risk committees. The operation and effectiveness of the local

risk committees, which meet at least quarterly, continues to be
enhanced. The Group Risk Committee meets twice a year, 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 Committee
reports annually through the Audit Committee to the Board. As part
of this process, it reviews the results of the local risk committee
assessments. It produces an annual report and updated Group
Risk Register which is reviewed by the Audit Committee to assess
whether the appropriate risks have been identified and to ensure
adequate assurance is obtained over those risks and then it is
presented formally to the Board for discussion, approval and,
if appropriate, re-rating of risks. Our risk appetite is reflected in
our rating of risks and ensures the appropriate focus is placed
on the correct risks. Further detail on our risk management
framework and priorities during the year is provided on pages 40
and 41. Set out below are the principal business risks that could
impact the Group’s business model, future performance, solvency
or liquidity and information on how we mitigate them. This year
we have reintroduced laws and regulations as a principal
risk reflecting our focus on seeking to comply with all relevant
legislation. Our risk profile evolves as we move through the
economic cycle and commentary on how risks have changed
is included below.

Increased risk

Constant risk

Decreased risk

FOR MORE INFORMATION ON OUR STRATEGIC PRIORITIES.

P22

ECONOMIC CONDITIONS

Potential impact
In the longer term, there is a link between demand for our services and levels
of economic activity. The construction industry, which affects our business,
is cyclical and typically lags the general economic cycle by between 12 and
24 months.

Mitigation
• Prudent management through the different phases of the cycle.
• Flexibility in the business model.
• Capital structure and debt facilities arranged in recognition of the cyclical

nature of our market and able to withstand market shocks.

Change
Our performance is benefitting from
the economic cycle and we expect to
see further upside as the economic
recovery continues. However, our
longer-term planning is focused on the
next downturn to ensure we have the
financial firepower at the bottom of the
cycle to achieve the next ‘step-change’
in business performance.

Strategic
priority

COMPETITION

Potential impact
The already competitive market could become even more competitive and we
could suffer increased competition from large national competitors or small
companies operating at a local level resulting in reduced market share and
lower revenue.

Mitigation
• Create commercial advantage by providing the highest level of service,

consistently and at a price which offers value.

• Differentiation of service.
• Excel in the areas that provide barriers to entry to newcomers: industry-

leading IT, experienced personnel and a broad network and equipment fleet.
• Regularly estimate and monitor our market share and track the performance

of our competitors.

Strategic
priority

Change
Our competitive position continues to
improve. We are growing faster than
our larger competitors and the market,
and continue to take market share
from our smaller, less well-financed
competitors. We have increased our
market share to 7% in the US and it
is 6% in the UK.

Ashtead Group plc Annual Report & Accounts 2016

Change
At 30 April 2016, our facilities were
committed for an average of six years,
leverage was at 1.7 times and
availability under the senior debt
facility was $1,126m.

Strategic
priority

Change
Our business continuity plans were
reviewed and updated during the year
and our disaster recovery plans were
tested successfully.

Strategic
priority

FINANCING

Potential impact
Debt facilities are only ever committed for a finite period of time and we need
to plan to renew our facilities before they mature and guard against default.
Our loan agreements also contain conditions (known as covenants) with which
we must comply.

Mitigation
• Maintain conservative (1.5 to 2 times) net debt to EBITDA leverage which helps

minimise our refinancing risk.
• Maintain long debt maturities.
• Use of an asset-based senior facility means none of our debt contains quarterly

financial covenants when availability under the facility exceeds $260m.

BUSINESS CONTINUITY

Potential impact
We are heavily dependent on technology for the smooth running of our
business given the large number of both units of equipment we rent and our
customers. A serious uncured failure in our point of sale IT platforms would
have an immediate impact, rendering us unable to record and track our high
volume, low transaction value operations.

Mitigation
• 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.

PEOPLE

Potential impact
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.

Mitigation
• 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
at work.

• Invest in training and career development opportunities for our people to

support them in their careers.

Change
Our compensation and incentive
programmes have continued to evolve
to reflect market conditions and the
economic environment.

Staff turnover was at a similar level
to the prior year as our well-trained,
knowledgeable staff have become
targets for our competitors.

We continue to invest in training
and career development with over
250 courses offered across both
businesses.

Strategic
priority

HEALTH AND SAFETY

Potential impact
We need to comply with laws and regulations governing occupational health
and safety matters. Furthermore, accidents could happen which might
result in injury to an individual, claims against the Group and damage to
our reputation.

Mitigation
• Maintain appropriate health and safety policies and procedures regarding
the need to comply with laws and regulations and to reasonably guard
our employees against the risk of injury.

• Induction and training programmes reinforce health and safety policies.
• Programmes to support our customers exercising their responsibility

to their own workforces when using our equipment.

• Maintain appropriate insurance coverage. Further details are provided

on page 35.

Change
The overall incident rate continued
to decrease in Sunbelt and A-Plant.
In terms of reportable incidents, the
RIDDOR reportable rate decreased
to 0.26 (2015: 0.45) in Sunbelt and
0.42 in A-Plant (2015: 0.55).

Strategic
priority

STRATEGIC REPORT
32

Ashtead Group plc Annual Report & Accounts 2016

PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED

ENVIRONMENTAL

Potential impact
We need to comply with the numerous laws governing environmental protection
matters. These laws regulate such issues as waste water, storm water, solid
and hazardous wastes and materials, and air quality. Breaches potentially
create hazards to our employees, damage to our reputation and expose the
Group to, amongst other things, the cost of investigating and remediating
contamination and also fines and penalties for non-compliance.

Mitigation
• Policies and procedures in place at all our stores regarding the need to

adhere to local laws and regulations.

• Procurement policies reflect the need for the latest available emissions

management and fuel efficiency tools in our fleet.

• Monitoring and reporting of carbon emissions.

LAWS AND REGULATIONS

Potential impact
Failure to comply with the frequently changing regulatory environment could
result in reputational damage or financial penalty.

Mitigation
• 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.
• Evolving policies and practices to take account of changes in legal obligations.
• Training and induction programmes ensure our staff receive appropriate

training and briefing on the relevant policies.

Strategic
priority

Change
We continue to seek to reduce the
environmental impact of our business
and invest in technology to reduce
the environmental impact on our
customers’ businesses. In 2015/16 we
reduced our carbon emission intensity
ratio to 93 (2015: 111) in Sunbelt and 91
(2015: 97) in A-Plant. Further detail
is provided on pages 48 and 49.

Strategic
priority

Change
We monitor regulatory and legislation
changes to ensure our policies and
practices reflect them and we comply
with relevant legislation.

Our whistle-blowing arrangements
are well established and the Company
Secretary reports matters arising to
the Audit Committee during the course
of the year. During the year over 2,300
people in Sunbelt and 850 people in
A-Plant underwent induction training
and additional training programmes
were undertaken in safety.

VIABILITY STATEMENT
The Board has assessed the prospects of the Group and its ability
to meet its liabilities as they fall due over the medium term. This
assessment has taken account of the Group’s current position
and the principal risks facing the Group, which are set out above.
This longer-term assessment process supports the Board’s
statements on both viability, as set out below, and going concern,
made on page 84.

While the Board has no reason to believe the Group will not be
viable over a longer period, the period over which the Board
considers it possible to form a reasonable expectation as to the
Group’s longer-term viability, is the three-year period to 30 April
2019. This aligns with the duration of the business plan prepared
annually and reviewed by the Board. Furthermore, our committed
borrowing facilities do not mature before the end of this period.
We believe this provides a reasonable degree of confidence over
this longer-term outlook.

The Group prepares an annual budget and three-year business plan.
This plan considers the Group’s cash flows and is used to review
its funding arrangements and available liquidity based on expected
market conditions, capital expenditure plans, used equipment
values and other factors that might affect liquidity. It also considers
the ability of the Group to raise finance and deploy capital.

The nature of the Group’s business is such that its cash flows are
countercyclical. In times of improving markets, the Group invests
in its rental fleet, both to replace existing fleet and grow the overall
size of the fleet, which results in improving earnings but negative
cash flow from operations in times of rapid growth. However, in
more benign or declining markets, the Group invests significantly
less in its rental fleet and, as a result, generates significant cash
flow from operations. Recognising the cyclicality of the business,
we undertake scenario planning based on the timing, severity and
duration of any downturn and subsequent recovery. This scenario
planning considers the impact of the cycle on revenue, margins,
cash flows and overall debt levels. Based on this analysis, and the
Board’s regular monitoring and review of risk management and
internal control systems, we do not believe there are any reasonably
foreseeable events that could not be mitigated through the Group’s
ability to flex its capital expenditure plans, which would result in the
Group not being able to meet its liabilities as they fall due.

Based on the foregoing, the Board has a reasonable expectation
that the Group will be able to continue in operation and meet its
liabilities as they fall due over the period to April 2019.

Ashtead Group plc Annual Report & Accounts 2016

FINANCIAL REVIEW

OUR FINANCIAL PERFORMANCE

The year was one of strong performance by Sunbelt and A-Plant.

TRADING

Sunbelt in $m

Sunbelt in £m
A-Plant
Group central costs

Net financing costs
Profit before exceptionals, amortisation and tax
Exceptional items
Amortisation
Profit before taxation
Taxation
Profit attributable to equity holders of the Company

Margins
Sunbelt
A-Plant
Group

2016
3,276.6

2,180.9
364.8
–
2,545.7

Revenue

2015
2,742.3

1,715.9
323.0
–
2,038.9

2016
1,583.7

1,054.1
137.0
(13.5)
1,177.6

EBITDA

2015
1,293.2

809.2
109.5
(10.3)
908.4

Operating profit

2016
1,013.7

674.7
67.0
(13.5)
728.2
(82.9)
645.3
(6.2)
(22.4)
616.7
(209.1)
407.6

2015
832.6

520.9
46.3
(10.3)
556.9
(67.3)
489.6
–
(15.8)
473.8
(170.4)
303.4

48.3%
37.5%
46.3%

47.2%
33.9%
44.6%

30.9%
18.4%
28.6%

30.4%
14.3%
27.3%

Group revenue for the year increased 25% to £2,546m (2015: £2,039m)
with strong growth in both Sunbelt and A-Plant. This revenue
growth, combined with ongoing operational efficiency and strong
drop through, generated underlying profit before tax of £645m
(2015: £490m).

The Group’s strategy remains unchanged, with growth being driven
by strong same-store growth supplemented by greenfield openings
and bolt-on acquisitions. The principal driver of the Group’s
performance is Sunbelt where rental revenue growth continues
to benefit from cyclical and structural trends. Sunbelt’s revenue
growth can be explained as follows:

2015 rental only revenue
Same-stores (in existence at 1 May 2014)
Bolt-ons and greenfields since 1 May 2014
2016 rental only revenue
Ancillary revenue
2016 rental revenue
Sales revenue
2016 total revenue

+12%
+7%
+19%
+15%
+18%

$m
1,935
212
157
2,304
620
2,924
353
3,277

The mix of our revenue growth demonstrates the successful
execution of our long-term structural growth strategy. We continue
to capitalise on the opportunity presented by our markets with
same-store growth of 12%, as we take market share and grow

more rapidly than the market. Our markets were up circa 6% in
the US during the year and are forecast to grow again this year.
In addition, bolt-ons and greenfields have contributed another 7%
growth as we expand our geographic footprint and our specialty
businesses. During the year our focus has been on greenfields with
58 opened compared with 31 last year. In addition, we spent $81m
(2015: $365m) on bolt-on acquisitions in the US and Canada, which
added a further 10 locations.

Total rental only revenue growth was 19% in strong end markets,
despite the slowdown in oil and gas markets. This growth was
driven by increased fleet on rent.

Average physical utilisation for the year was 70% (2015: 70%).
Sunbelt’s total revenue, including new and used equipment,
merchandise and consumable sales, increased 19% to $3,277m
(2015: $2,742m) as it sold more used equipment than last year. The
higher level of used equipment sales reflects higher replacement
capital expenditure and a response to the downturn in oil and gas
markets. This offset relatively lower growth in ancillary revenue,
principally due to lower fuel prices.

A-Plant continues to perform well and delivered rental only revenue
of £264m, up 11% on the prior year (2015: £238m), in markets which
remain competitive. This reflects fleet on rent up 10% with yield up
1% year-on-year. A-Plant’s total revenue increased 13% to £365m
(2015: £323m).

We continue to focus on operational efficiency and driving improving
margins. In Sunbelt 60% of revenue growth dropped through to
EBITDA in the year. The strength of our mature stores’ incremental

STRATEGIC REPORT34

Ashtead Group plc Annual Report & Accounts 2016

FINANCIAL REVIEW CONTINUED

margin is reflected in the fact that this was achieved despite the
drag effect of greenfield openings, acquisitions and the challenging
oil and gas sector. Excluding oil and gas, stores open for more than
one year saw 67% of revenue growth drop through to EBITDA.
Despite the effect of increased lower margin used equipment sales,
the EBITDA margin increased to 48% (2015: 47%). Excluding used
equipment sales, the EBITDA margin improved to 50% (2015: 49%).
This contributed to an operating profit of $1,014m (2015: $833m).
Strong drop through of 84% drove improvement in A-Plant’s
EBITDA margin to 38% (2015: 34%) and operating profit rose to
£67m (2015: £46m). As a result, Group underlying operating profit
increased 31% to £728m (2015: £557m).

Net financing costs increased to £83m (2015: £67m), reflecting the
higher average debt during the period and the full-year impact of
the $500m senior secured notes issued in September 2014.

Group profit before exceptional items, amortisation of intangibles
and taxation was £645m (2015: £490m). The exceptional items relate
to the impairment of acquired customer lists within our Oil & Gas
business (£12m), reflecting our expectation that revenue from these
customers will be significantly lower than initially anticipated when
the businesses were acquired due to the fall in the oil price and its
impact on the oil and gas industry, and the release of a provision for
contingent consideration on acquisitions which we no longer expect
to be payable (£6m).

After a net exceptional charge of £6m (2015: £nil) and amortisation
of £22m (2015: £16m), statutory profit before taxation was £617m
(2015: £474m).

Taxation
The underlying tax charge for the year was £219m (2015: £176m),
representing an effective rate of 34% (2015: 36%) of underlying
pre-tax profit of £645m (2015: £490m). The reported tax charge was
£209m (2015: £170m). Following the announcement in late 2015 of
the continuation of accelerated tax depreciation in the US, the cash
tax charge for 2015/16 remained low at 4%. However, our brought
forward tax losses will now be utilised in 2016/17 and hence, we
expect to become a more significant cash taxpayer in the US going
forward. As a result, our cash tax rate will increase and tend
towards our overall effective tax rate over time.

The Group believes it has a corporate responsibility to act with
integrity in all tax matters. It is the Group’s policy to comply with all
relevant tax laws, regulations and obligations including claiming
available tax incentives and exemptions in the countries in which
it operates. The Group’s appetite for tax risk is considered to be
cautious and this policy has remained unchanged for a number
of years. This approach to taxation is approved by the Board.

The Group is committed to having a transparent and constructive
working relationship with the tax authorities including using tax
clearances to obtain agreement in advance from tax authorities
prior to undertaking transactions.

We continue to monitor developments in the OECD’s work on
Base Erosion and Profit Shifting (‘BEPS’) and Country-by-Country
Reporting (‘CBCR’) to ensure continued compliance in an ever
changing environment. While we do not expect our tax arrangements
to be materially impacted by any legislative changes arising from
the BEPS recommendations, we continue to follow the
developments closely.

Earnings per share
Underlying earnings per share increased 36% to 85.1p (2015: 62.6p)
and basic earnings per share increased to 81.3p (2015: 60.5p).
Details of these calculations are included in Note 9 to the
financial statements.

Our end markets remain strong,
the structural drivers are in
place and we have a strong
balance sheet which allows us to
execute our plans responsibly.

Return on investment
Sunbelt’s pre-tax return on investment (excluding goodwill and
intangible assets) in the 12 months to 30 April 2016 was 24%
(2015: 26%). This remains well ahead of the Group’s pre-tax
weighted average cost of capital although it has been affected
in the short term by our investment in greenfields and bolt-on
acquisitions. In the UK, return on investment (excluding goodwill
and intangible assets) was 15% (2015: 13%). For the Group as a
whole, return on investment (including goodwill and intangible
assets) was 19% (2015: 19%).

Dividends
In accordance with our progressive dividend policy, with
consideration to both profitability and cash generation at a level
that is sustainable across the cycle, the Board is recommending
a final dividend of 18.5p per share (2015: 12.25p) making 22.5p
for the year (2015: 15.25p), an increase of 48%. If approved at the
forthcoming Annual General Meeting, the final dividend will be
paid on 9 September 2016 to shareholders on the register on
12 August 2016.

Current trading and outlook
We have seen a good seasonal upward trend in fleet on rent
throughout the spring which has continued into the new financial
year. Our end markets remain strong, the structural drivers are
still in place and we have a strong balance sheet which allows us
to execute our plans responsibly. As a consequence, the Board
continues to look to the medium term with confidence.

BALANCE SHEET
Fixed assets
Capital expenditure in the year totalled £1,240m (2015: £1,063m)
with £1,127m invested in the rental fleet (2015: £979m). Expenditure
on rental equipment was 91% of total capital expenditure with
the balance relating to the delivery vehicle fleet, property
improvements and IT equipment. Capital expenditure by division
is shown in table 01 opposite.

In a strong North American rental market, $871m of rental
equipment capital expenditure was spent on growth while $572m
was invested in replacement of existing fleet. The growth proportion
is estimated on the basis of the assumption that replacement
capital expenditure in any period is equal to the original cost of
equipment sold.

The average age of the Group’s serialised rental equipment, which
constitutes the substantial majority of our fleet, at 30 April 2016 was
25 months (2015: 26 months) on a net book value basis. Sunbelt’s
fleet had an average age of 25 months (2015: 26 months) while
A-Plant’s fleet had an average age of 27 months (2015: 29 months).

01 CAPITAL EXPENDITURE

Sunbelt in $m

Sunbelt in £m
A-Plant
Total rental equipment
Delivery vehicles, property improvements and IT equipment
Total additions

02 FLEET SIZE AND UTILISATION

Sunbelt in $m

Sunbelt in £m
A-Plant

Ashtead Group plc Annual Report & Accounts 2016

Replacement
571.7

390.3
95.2
485.5

Growth
871.0

594.5
46.6
641.1

2016

Total
1,442.7

984.8
141.8
1,126.6
113.4
1,240.0

2015

Total
1,268.4

825.3
153.8
979.1
84.0
1,063.1

Rental fleet at original cost

30 April 2016
5,663

30 April 2015
4,733

LTM average
5,205

LTM rental
revenue
2,924

LTM dollar
utilisation
56%

LTM physical
utilisation
70%

3,866
615
4,481

3,079
559
3,638

3,553
600
4,153

1,946
314
2,260

56%
52%

70%
68%

We are now entering a very different phase of replacement
expenditure as we lap our low capital expenditure years of 2009,
2010 and 2011 and therefore our replacement spend will be much
lower in 2016/17 than in recent years. However, we continue to
expect strong growth capital expenditure generating double-digit
fleet growth. Our operating model, and short delivery lead times,
allow us to flex our capital spend quickly. Reflecting our desire to
be watchful of broader economic trends before finalising our Q3
and Q4 2016/17 spend, we have a broad range for 2016/17 capital
expenditure of £0.7bn to £1bn.

The original cost of the Group’s rental fleet and dollar and
physical utilisation for the year ended 30 April 2016 are shown
in table 02 above.

Dollar utilisation is defined as rental revenue divided by average
fleet at original (or ‘first’) cost and, measured over the last
12 months to 30 April 2016, was 56% at Sunbelt (2015: 59%) and 52%
at A-Plant (2015: 56%). The reduction in Sunbelt reflects the drag
effect of greenfield openings and acquisitions and the increased
cost of fleet, while in A-Plant it is due to lower physical utilisation
principally. Physical utilisation is time-based utilisation, which is
calculated as 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. Measured over the last 12 months to
30 April 2016, average physical utilisation at Sunbelt was 70%
(2015: 70%) and 68% at A-Plant (2015: 70%). At Sunbelt, physical
utilisation is measured for equipment with an original cost in
excess of $7,500 which comprised approximately 85% of its fleet
at 30 April 2016.

Trade receivables
Receivable days at 30 April 2016 were 49 days (2015: 50 days). The
bad debt charge for the year ended 30 April 2016 as a percentage
of total turnover was 0.7% (2015: 0.6%). Trade receivables at
30 April 2016 of £395m (2015: £326m) are stated net of allowances
for bad debts and credit notes of £27m (2015: £21m) with the
allowance representing 6.4% (2015: 6.1%) of gross receivables.

Trade and other payables
Group payable days were 59 days in 2016 (2015: 72 days) with capital
expenditure related payables, which have longer payment terms,
totalling £247m (2015: £261m). Payment periods for purchases
other than rental equipment vary between seven and 60 days and
for rental equipment between 30 and 120 days.

Provisions
Provisions of £47m (2015: £50m) relate to the provision for self-
insured retained risk under the Group’s self-insurance policies,
provisions for vacant property as well as acquisition-related
contingent consideration. The Group’s business exposes it to
the risk of 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 US liability insurance programmes provide that we can recover
our liability related to each and every valid claim in excess of an
agreed excess amount of $1m in relation to general liability claims
and $1.5m for workers’ compensation and motor vehicle claims.
In the UK our self-insured excess per claim is much lower than in
the US and is typically £50,000 per claim. Our liability insurance
coverage is limited to a maximum of £150m.

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 £10m (2015: £8m). Amongst these, the Group has
one defined benefit pension plan which covers approximately
90 remaining active 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, £2m in surplus at 30 April 2016 (2015: £3m). Overall, there
was a net actuarial loss of £1m in the year which was recognised
in the statement of comprehensive income. There was a £2m loss
on plan assets which was partially offset by a gain on liabilities.

The next triennial review of the plan’s funding position by the
trustees and the actuary is due as at 30 April 2016.

Contingent liabilities
The Group is subject to periodic legal claims in the ordinary course
of its business, none of which is expected to have a material impact
on the Group’s financial position.

STRATEGIC REPORT36

Ashtead Group plc Annual Report & Accounts 2016

FINANCIAL REVIEW CONTINUED

03 CASH FLOW

EBITDA before exceptional items

Cash inflow from operations before exceptional items and changes in rental equipment
Cash conversion ratio*

Replacement rental capital expenditure
Payments for non-rental capital expenditure
Rental equipment disposal proceeds
Other property, plant and equipment disposal proceeds
Tax (net)
Financing costs
Cash inflow before growth capex and payment of exceptional costs
Growth rental capital expenditure
Exceptional costs
Total cash used in operations
Business acquisitions
Total cash absorbed
Dividends
Purchase of own shares by the ESOT
Increase in net debt due to cash flow

2016
£m
1,177.6

1,070.6
90.9%

(452.6)
(109.5)
172.1
8.2
(5.3)
(79.4)
604.1
(672.1)
–
(68.0)
(68.4)
(136.4)
(81.5)
(12.0)
(229.9)

Year to 30 April

2015
£m
908.4

841.4
92.6%

(270.6)
(78.7)
95.4
7.5
(32.0)
(63.4)
499.6
(587.5)
(0.5)
(88.4)
(241.5)
(329.9)
(61.4)
(20.3)
(411.6)

* Cash inflow from operations before exceptional items and changes in rental equipment as a percentage of EBITDA before exceptional items.

CASH FLOW
Cash inflow from operations before payment of exceptional costs
and the net investment in the rental fleet increased by 27% to
£1,071m. The cash conversion ratio for the year of 91% (2015: 93%)
reflects a higher level of working capital due to the growth in the
business. The reduction from the prior year is due principally to the
higher level of gains on disposal this year.

Total payments for capital expenditure (rental equipment and other
PPE) during the year were £1,234m (2015: £937m). Disposal proceeds
received totalled £180m (2015: £103m), giving net payments for
capital expenditure of £1,054m in the year (2015: £834m). Financing
costs paid totalled £79m (2015: £63m) while tax payments were
£5m (2015: £32m). Tax payments are stated net of a refund of tax
paid in 2014/15, as a result of the US government introducing
accelerated tax depreciation in 2014 after we had made payments
on account for 2014/15. Following the announcement in 2015 that
accelerated tax depreciation will continue, brought forward tax
losses will not be utilised until 2016/17 when we expect to become
a more significant cash tax payer in the US. Financing costs
paid typically differ from the charge in the income statement
due to the timing of interest payments in the year and non-cash
interest charges.

Accordingly, the Group generated £604m (2015: £500m) of net cash
before discretionary investments made to enlarge the size and
hence earning capacity of its rental fleet and on acquisitions. After
growth investment and acquisitions, there was a net cash outflow
of £136m (2015: £330m).

CAPITAL STRUCTURE AND ALLOCATION
The Group’s capital structure is kept under regular review.
Our operations are financed by a combination of debt and equity.
We seek to minimise the cost of capital while recognising the
constraints of the debt and equity markets. At 30 April 2016
our average cost of capital was approximately 10%.

The Group targets leverage of 1.5 to 2 times net debt to EBITDA over
the economic cycle. This range of leverage is appropriate for the
business given our strong EBITDA margins, young fleet age and
strong asset base. We believe that these levels of leverage are
prudent and provide the Group with a high degree of flexibility
and security.

The Group remains disciplined in its allocation of capital with the
overriding objective of enhancing shareholder value. Our capital
allocation framework prioritises:

• same-store fleet growth;
• greenfield openings;
• bolt-on acquisitions; and
• a progressive dividend with consideration to both profitability
and cash generation that is sustainable through the cycle.

Additionally, we are now considering further returns to
shareholders, balancing capital efficiency and security with
financial flexibility in a cyclical business and an assessment
whether it would be accretive to shareholder value. In this regard,
we have reviewed our medium-term plans which take account of
investment in the business, growth prospects, cash generation,
net debt and leverage.

Balancing these factors, we are commencing a share buyback
programme of up to £200m in 2016/17, for which we will seek
continued shareholder approval at the Annual General Meeting.
Additional capital returns to shareholders will be kept under
regular review reflecting the factors set out above.

Net debt
Chart 04 below shows how, measured at constant April 2016
exchange rates for comparability, our net debt and leverage has
changed over the cycle. From a prior cycle peak in 2008, we
reduced our debt significantly, paying off around one-third of it as
we lowered our capital expenditure, taking advantage of our young
average fleet age, and generated significant cash flow. Since 2010,
we have stepped up our capital expenditure as rental markets
improved. As a result, net debt has increased in absolute terms
over the period principally due to acquisitions and dividends with
free cash flow being broadly sufficient to fund substantially all the
increased capital expenditure. However, importantly, except for a
rise during the recession, net debt to EBITDA leverage has been on
a downward trend since the NationsRent acquisition in August 2006
and we have been operating within our target range of 1.5 to 2 times
for the last three years. Furthermore, our overall balance sheet
strength continues to improve with the second-hand value of our
fleet exceeding our total debt by £1.3bn.

04 NET DEBT AND LEVERAGE

2,000

1,800

1,600

1,400

1,200

1,000

800

600

400

4.5

4.0

3.5

3.0

2.5

2.0

1.5

Oct
06

Apr
07

Apr
08

Apr
09

Apr
10

Apr
11

Apr
12

Apr
13

Apr
14

Apr
15

Apr
16

Net debt (£m)

Leverage (x)

In greater detail, closing net debt at 30 April 2016 is shown in table
05 below.

The Group has arranged its financing such that, at 30 April 2016,
91% of its debt was denominated in US (and Canadian) dollars so
that there is a natural partial offset between its dollar-denominated
net assets and earnings and its dollar-denominated debt and
interest expense.

Net debt at 30 April 2016 was £2,002m with the increase since
30 April 2015 reflecting principally the net cash outflow of £230m
(2015: £412m) and exchange rate fluctuations. The Group’s EBITDA
for the year ended 30 April 2016 was £1,178m and the ratio of net
debt to EBITDA was therefore 1.7 times at 30 April 2016 (2015: 1.8
times) on a constant currency basis and 1.7 times (2015: 1.9 times)
on a reported basis.

05 NET DEBT

First priority senior secured bank debt
Finance lease obligations
6.5% second priority senior secured notes, due 2022
5.625% second priority senior secured notes, due 2024

Cash and cash equivalents
Total net debt

Ashtead Group plc Annual Report & Accounts 2016

Our debt package is well structured for our business across the
economic cycle. We retain substantial headroom on facilities which
are committed for the long term, with an average of six years
remaining at 30 April 2016. The weighted average interest cost of
these facilities (including non-cash amortisation of deferred debt
raising costs) is approximately 4%.

The senior secured bank debt and the senior secured notes are
secured by way of, respectively, first and second priority fixed and
floating charges over substantially all the Group’s property, plant
and equipment, inventory and trade receivables.

Debt facilities
The Group’s principal debt facilities are discussed below.

First priority senior secured credit facility
At 30 April 2016, $2.6bn was committed by our senior lenders
under the asset-based senior secured revolving credit facility
(‘ABL facility’) until July 2020 while the amount utilised was $1,604m
(including letters of credit totalling $36m). The ABL facility is
secured by a first priority interest in substantially all of the Group’s
assets. Pricing for the revolving credit facility is based on average
availability according to a grid which varies from LIBOR plus 125bp
to LIBOR plus 175bp. At 30 April 2016 the Group’s borrowing rate
was LIBOR plus 150bp.

The only financial performance covenant under the asset-based
first priority senior bank facility is a fixed charge ratio (comprising
LTM EBITDA before exceptional items less LTM net capital
expenditure paid in cash over the sum of scheduled debt
repayments plus cash interest, cash tax payments and dividends
paid in the last 12 months) which must be equal to or greater than
1.0 times.

This covenant does not, however, apply when availability (the
difference between the borrowing base and facility utilisation)
exceeds $260m. At 30 April 2016 availability under the bank facility
was $1,126m ($756m at 30 April 2015), with an additional $1,796m
of suppressed availability meaning that the covenant was not
measured at 30 April 2016 and is unlikely to be measured in
forthcoming quarters.

As a matter of good practice, we calculate the covenant ratio each
quarter. At 30 April 2016, as a result of the continued significant
investment in our rental fleet, the fixed charge ratio, as expected,
did not meet the covenant requirement. The fact the fixed charge
ratio is below 1.0 times does not cause concern given the strong
availability and management’s ability to flex capital expenditure
downwards at short notice. Accordingly, the accounts are prepared
on a going concern basis.

6.5% second priority senior secured notes due 2022 having a
nominal value of $900m and 5.625% second priority senior
secured notes due 2024 having a nominal value of $500m
At 30 April 2016 the Group, through its wholly owned subsidiary
Ashtead Capital, Inc., had outstanding two series of second priority
senior secured notes with nominal values of $900m and $500m.
The $900m of notes carry an interest rate of 6.5% and are due on
15 July 2022 while the $500m of notes carry an interest rate of

2016
£m
1,055.2
5.4
618.2
335.9
2,014.7
(13.0)
2,001.7

2015
£m
782.7
5.3
589.8
319.8
1,697.6
(10.5)
1,687.1

STRATEGIC REPORT

Ashtead Group plc Annual Report & Accounts 2016

FINANCIAL REVIEW CONTINUED

5.625% and are due on 1 October 2024. 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.

Under the terms of the 6.5% and 5.625% 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. Financial performance covenants under the 6.5% and
5.625% senior secured note issue are only measured at the time
new debt is raised.

Minimum contracted debt commitments
Table 06 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 2016 by year of expiry.

Operating leases relate to the Group’s properties.

Except for the off balance sheet operating leases detailed below,
£24m ($36m) of standby letters of credit issued at 30 April 2016
under the first priority senior debt facility relating to the Group’s
insurance programmes and £5m 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, the functional
currency of the parent company. However, the 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.

We have arranged our financing so that 91% of our debt was
denominated in US (and Canadian) dollars at 30 April 2016. At that
date, dollar-denominated debt represented approximately 62%
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 current currency mix of our profits and
on current dollar debt levels, interest rates and exchange rates at
30 April 2016, a 1% change in the US dollar exchange rate would
impact pre-tax profit by £6m.

Revenue
Our revenue is a function of our rental rates and the size,
utilisation and mix of our equipment rental fleet. The rates we
charge are affected in large measure by utilisation and the relative
attractiveness of our rental equipment, while utilisation is
determined by fleet size, market size and our market share, as well
as general economic conditions. Utilisation is time-based utilisation
which is calculated as 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. In the US, we measure time
utilisation on those items in our fleet with an original cost of
$7,500 or more which constituted 85% of our US serialised rental
equipment at 30 April 2016. 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 revenue from a limited number of sales of new equipment; and

• revenue from the sale of used rental equipment.

Costs
The main components of our underlying 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 32% of our total operating costs in the year ended
30 April 2016;

• used rental equipment sold which comprises the net book value
of the used equipment sold in the year as it was stated in our
accounts immediately prior to the time at which it was sold and
any direct costs of disposal, comprised 8% of our total operating
costs in the year ended 30 April 2016;

06 MINIMUM CONTRACTED DEBT COMMITMENTS

Bank and other debt
Finance leases
6.5% senior secured notes
5.625% senior secured notes

Deferred costs of raising finance
Cash at bank and in hand
Net debt
Operating leases1
Total

2017
£m
–
2.5
–
–
2.5
–
(13.0)
(10.5)
56.1
45.6

2018
£m
–
1.8
–
–
1.8
–
–
1.8
49.6
51.4

2019
£m
–
0.9
–
–
0.9
–
–
0.9
41.7
42.6

2020
£m
–
0.2
–
–
0.2
–
–
0.2
32.7
32.9

Payments due by year ended 30 April

2021
£m
1,063.1
–
–
–
1,063.1
(7.9)
–
1,055.2
24.7
1,079.9

Thereafter
£m
–
–
627.0
341.3
968.3
(14.2)
–
954.1
81.5
1,035.6

Total
£m
1,063.1
5.4
627.0
341.3
2,036.8
(22.1)
(13.0)
2,001.7
286.3
2,288.0

1 Represents the minimum payments to which we were committed under operating leases.

Ashtead Group plc Annual Report & Accounts 2016

• other operating costs – comprised 35% of total operating costs

in the year ended 30 April 2016. 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 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; and

− 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 25% of total
costs in the year ended 30 April 2016.

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 including the sale of used rental plant and
equipment to customers net of returns and VAT/sales 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 a rental contract can extend across financial
reporting period ends, the Group records accrued revenue (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 sale contract have been fulfilled.

Revenue from the sale 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.

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 to 15% 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 income statement,
over the period we anticipate it will be used in our business. Useful
lives and residual values are reassessed annually, recognising the
cyclical nature of 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 2016 was £449m.

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 cash-generating units. For this
purpose they are considered to be the specialty Pump & Power,
Climate Control and Scaffolding businesses and the remaining
general equipment business in the US and the specialty Eve,
PSS (trenchless technology and fusion) and FLG (lifting) businesses
and the remaining general equipment business in the UK. 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.

Business combinations
We account for business combinations using the acquisition
method. The assets and liabilities of the acquiree that exist as at
the date of acquisition are identified and measured at fair value.
Intangible assets are recognised if they are identifiable. Assets or
disposal groups held for sale at the acquisition date are measured
at fair value less costs to sell.

Income taxes are recognised and measured in accordance
with applicable accounting standards including the potential tax
effects of the temporary differences and carry-forwards of the
acquiree that exist at the acquisition date or as a result of the
business combination.

Goodwill represents the difference between the fair value of
the consideration for the acquisition and the fair value of the net
identifiable assets acquired, including any intangible assets
other than goodwill. Goodwill is stated at cost less any accumulated
impairment losses and is allocated to each of the Group’s
cash-generating units expected to benefit from the synergies
of the combination.

Consideration is the fair value at the acquisition date of the assets
transferred and liabilities incurred in acquiring the business and
includes the fair value of any contingent consideration arrangement.
Changes in the fair value of contingent consideration due to events
post the date of acquisition are recognised in the income statement.

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Ashtead Group plc Annual Report & Accounts 2016

RESPONSIBLE BUSINESS REPORT

BEING RESPONSIBLE
IN EVERYTHING WE DO

HEALTH AND SAFETY
Implementation
Monitoring
Training
Customers and staff

COMMUNITIES
Community investment
Helping out in emergencies

OUR PEOPLE
Recruitment
Career development
and training
Rewards and benefits
Diversity and equal
opportunities

THE ENVIRONMENT
Resource efficiency
Control of hazardous
substances
Mandatory GHG
emissions reporting

We seek to act responsibly in everything we do.
Being responsible is a crucial part of who we are
and how we work at Ashtead. At the most basic
level, acting responsibly is all about the trust
that makes our business function. Trust that the
equipment we provide will do what we say it will,
be well maintained to make sure it works and be
compliant with all health and safety requirements.
And then delivering all of that every time a
customer makes a new order or a new customer
hears we are worth trying out.

ENSURING ASHTEAD REMAINS A RESPONSIBLE BUSINESS
The obligation for ensuring Ashtead remains a responsible
business rests with the Group’s board of directors. It is assisted
in this function by the Group Risk Committee which is chaired
by Suzanne Wood, our finance director. Other members of the
Committee are:

• the heads of Sunbelt’s and A-Plant’s risk, environmental and

health and safety teams;

• UK and US counsel;
• the heads of Sunbelt’s and A-Plant’s performance standards

(internal operational audit) teams; and

• the Sunbelt board member to whom the risk, environmental,

health and safety teams report.

At a broader level, being responsible means we seek, through our
sustainable business model, to improve the lives of our customers,
employees, investors and the communities where we live and
work. Our customers trust us to provide better service than our
competitors. Our employees trust us to keep them safe and reward
them well for their efforts. Investors trust us to deliver good returns
throughout the economic cycle.

Above are the responsible business elements that we judge to be
the most material to our business and which we discuss in detail
here. We assess why each matters, how we have performed and
our objectives.

The Group Risk Committee provides the Audit Committee, and
through them the Board, with a comprehensive annual report on its
activities including new legislative requirements, details of areas
identified in the year as requiring improvement, and the status of
actions being taken to make those improvements. It also facilitates
the coordination of the environmental, health, safety and risk
management activities of Sunbelt and A-Plant so that best practice
and new initiatives in one business can be shared with, and adopted
by, the other.

Ashtead Group plc Annual Report & Accounts 2016

1,000

EMPLOYEES TRAINED
IN VEHICLE SAFETY

Our commitment to the highest ethical standards means that the
Group Risk Committee also works to ensure these continue to be
communicated and upheld throughout the business. Our group-
wide ethics and entertainment policies are communicated directly
to employees through dedicated communication and training
programmes. Whistle-blowing arrangements, in place in both the
US and the UK, allow employees, in confidence, to raise concerns
about any alleged improprieties they may encounter.

The Group Risk Committee priorities this year included:

• assessment of the Group Risk Register;
• identification and prioritisation of business risks;
• reduction in accident rates;
• continued training on driving hours and vehicle fleet compliance;
• health and safety training;
• enhanced training capabilities, particularly for key field

personnel;

• continued evaluation of driver behavioural software tools;
• refresher Competition Act and Bribery Act training;
• updated business continuity plan;
• disaster recovery plan testing;
• performance standards audits; and
• cyber security.

HEALTH AND SAFETY
Why it matters
Health and safety are fundamental to our business as we need to
provide equipment that is safe to use and minimise the risks our
people and our customers may encounter. A strong reputation for
excellent health and safety is a significant competitive advantage
for us. In addition, an ever-changing regulatory focus on safety and
more stringent requirements for all operators continues to assist
our growth. It is easier and cheaper to outsource responsibility
for equipment safety to us than for customers to worry about it
themselves. This has been an important factor in the shift to
rental that has underpinned our growth in the US and reinforces
our position in the UK.

Our extensive health and safety programmes monitor, develop and
maintain safe working practices while reminding our employees
of the need to be safe at all times and look after their own health.
Our continued improvement is accomplished through a combination
of proactive safety and leadership training, enhanced safety
programmes and timely incident response and investigation. We
also help our customers ensure the safety of their own employees,
including providing safety training as required. In addition, we make
a considerable annual investment in ensuring our rental equipment
meets or exceeds the latest safety standards, as well as providing
health and safety advice and materials along with each rental.

How we monitor performance
We monitor health and safety by the number of reported incidents
that occur during our work. We track and analyse all incidents to
enable us to identify recurrent issues and implement preventative
improvements. The importance of health and safety is reflected
in the fact that the number of reportable accidents is one of our
group-wide KPIs (see page 29).

This year Sunbelt rolled out a new online Incident Prevention Model
to focus on and measure those metrics that ultimately have a direct
impact on our key measures of Total Recordable Incident Rate,
Workers Compensation Incurred Cost and Vehicle Incident Rate.
Sunbelt also rolled out new safety initiatives (Near Miss Reporting,
Pre-Task Planning and Post Incident Management) and we have
already seen improvements in our safety culture and an improvement
in metrics. This year Sunbelt had 948 reported incidents in the
US relative to a workforce of 9,877 (2015: 608 incidents relative
to a workforce of 8,401), whilst A-Plant had 284 incidents relative
to an average workforce of 2,953 (2015: 274 incidents relative to
an average workforce of 2,593). For the purposes of our internal
tracking, the term incident 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. There has been
increased focus in the US this year on timely reporting of every
incident or first aid event that occurs. This established very specific
criteria on first aid reporting which contributed to the increase in
incidents in the US.

Reportable accidents continue to be defined differently in the US
and UK. Under the relevant definitions which generally encompass
more accidents in the US than in the UK, Sunbelt had 149 OSHA
(Occupational Safety and Health Administration) recordable
accidents (2015: 179 accidents) which, relative to total employee
hours worked, gave a Total Incident Rate of 1.41 (2015: 1.59). In the
UK, A-Plant had 26 RIDDOR (Reporting of Injuries, Diseases and
Dangerous Occurrences Regulations) (2015: 29), reportable
incidents which, relative to total employee hours worked, gave a
RIDDOR reportable rate of 0.42 (2015: 0.55). In order to compare
accident rates between the US and UK, Sunbelt also applied the
RIDDOR definition to its accident population which gave a figure this
year of 69 RIDDOR reportable accidents in the US and a RIDDOR
reportable rate of 0.26. We remain committed to continuing to
reduce these rates as much as possible.

Safety initiatives
Driver and vehicle safety
Our motor vehicle incident rate continues to decline. In 2016, we
anticipate additional decreases as we roll out our Driver Behaviour
Management System (‘DBMS’) in the US. The DBMS takes data from
our on-board telematics units and communicates it directly to our
Motor Vehicle Compliance Team. The overall goal is to recognise
and address unsafe behaviours before they result in an incident.

Our US transportation fleet continues to operate as one of the
safest fleets in the equipment rental industry. We continued our
commercial vehicle training programme across the US, with more
than 1,000 employees trained in vehicle safety and compliance.
Over the last three years, our US commercial vehicle training
programmes have been instrumental in the education of more than
11,000 employees nationwide. We lead the industry in continuously
supporting the training and education of employees in commercial
vehicle compliance and safety.

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RESPONSIBLE BUSINESS REPORT CONTINUED

In the UK, our driver training courses are aimed at delivery drivers
and cover areas such as loading and unloading of vehicles, working
at height, site safety and manual handling. All general drivers at
A-Plant, including delivery drivers and fitters, are required to
undertake the A-Plant Driver Induction Course, which is delivered
in the form of workshops and covers transport procedures,
legislation, hazard perception and practical driver assessments.

A number of UK customers have called upon contractors to make
safety improvements to vehicles and improve driver training to
protect cyclists through the Construction Logistics and Cycle
Safety initiative (‘CLOCS’). CLOCS is a voluntary scheme, but we
have taken the initiative and organised the first Safe Urban Driving
course with our drivers from Milton Keynes, Colchester, Norwich
and Cambridge stores, focused specifically on safety for cyclists.

Other safety initiatives
At Sunbelt we conducted Safety Coordinator Bootcamps for each
Safety Coordinator in the company. These training sessions ensure
that each store has a representative trained in many of the best
practices we measure and use.

In 2016 we will be working to improve our internal systems
further and focus on rolling out three significant initiatives to our
operations: Sunbelt Safety, Health & Environmental (‘SH&E’)
Committees, a Short-Service Employee Programme, and the Stop
Work Initiative. While these programmes are being rolled out,
Sunbelt will continue to focus on:

• revising the regional safety manager annual audit;
• roll-out of a SH&E perception survey;
• perfecting its online incident reporting tool;
• utilising the audit/inspection tool to conduct warehouse

SH&E inspections via iPad;

• formally aligning its policies and procedures against

OHSAS18001;

• evaluating a need to align with ISO 14001; and
• developing and beta testing a peer-on-peer observation

programme in each of its specialty businesses.

For several years, A-Plant has been using successfully the ‘Setting
the Safety Standard’ brand to promote the message that A-Plant
is industry-leading when it comes to safety. In addition, it wanted
to foster internally the fact that everyone is responsible for their
own safety, with the aim of helping the business achieve a reduction
in accidents. To do this it launched the Work Safe Home Safe
campaign for staff with five golden rules:

1. Before you start work, be aware of any potential risks.

2. Stop work if it can’t be done safely.

3. If safe to do so, intervene if the actions of others might be unsafe.

Don’t walk by.

4. Maintain a safe, clean and tidy working environment.

5. Always wear the appropriate personal protective equipment.

The campaign is being promoted widely throughout the business
with promotional posters, messages, a video and merchandise
being distributed to every store.

Sunbelt and A-Plant both hold an annual safety week, designed
to increase awareness of the importance of safety across the
business. Through a combination of presentations and workshops,
key safety messages are shared with all employees.

EMPLOYEE SPOTLIGHT: JEFF HUDSON
It is two and a half years since specialty lifting business, FLG
Services, was acquired by A-Plant and former owner Jeff Hudson
says the time has flown by. Jeff says the most surprising thing for him
has been that even though he is now part of a much bigger FTSE 100
group, the directors of Ashtead have encouraged him to develop the
business as if it were still his own. Even his original orange FLG hook
brand has been incorporated within A-Plant – it’s just green now.
When FLG was first acquired, Jeff had four locations based around
London. Now he has 16 locations nationwide. He says there is no way
he could ever have dreamt of the scale of investment needed to build
what FLG is now. Being part of a bigger organisation also means
Jeff believes FLG to be a safer and tighter business now than it was
before being acquired. He says the support he has received from
Ashtead has been second to none.

Ashtead Group plc Annual Report & Accounts 2016

Increasingly, as we grow, we are adding to our employees through
acquisition. When we acquire companies, we also acquire their
knowledgeable and dedicated staff who have often built up a
successful business. If the business has a strong brand, we keep
the brand, particularly in the UK. To maintain that success, we
adopt a circumspect approach when it comes to integrating new
staff into the Group. Employees’ contracts and conditions are
analysed, and if there are differences with Group terms, we
phase-in any convergence over a period of time. We want new
employees to be engaged with the new environment in which they
find themselves, so we hold a presentation day for staff where
senior management present an overview of the Group, our plans
for the acquired company and how they fit into our strategy for
the future. We then further demonstrate our commitment to our
new employees by investing in the business they helped build.

Sunbelt Workday implementation
At the beginning of 2016 we launched the first phase of Workday,
Sunbelt’s new online Human Capital Management System.
The goal of Workday was to merge the numerous human resource
(‘HR’) systems Sunbelt employed into one integrated, streamlined
solution for both the field and HR department. Through Workday,
we are able to offer a single source for recruiting, on-boarding,
payroll, time tracking, benefits, and employee self-service. The
second phase includes launching Workday for Sunbelt Rentals
Canada as well as introducing a Talent/Performance Management
module, additional integrations (including one with Sunbelt’s
Learning Management System that will enable employees and
managers to view transcripts in Workday), as well as advanced
compensation functionality.

Through Workday, employees have already benefitted by having a
one-stop source where they can update their personal information,
view their paystubs, update benefits information, and apply for
jobs internally. Likewise, supervisors now have an invaluable tool
to help better manage their direct reports. For the first time,
every employee can view Sunbelt’s comprehensive organisational
reporting structure across all divisions to gain a better
understanding of the company as a whole and better equip
themselves to serve our customers. As we continue to grow,
Workday will enable us to be more efficient in how we engage
with our employees; as well as work and communicate with
them throughout the entire employee life cycle.

LIFTING LOCATIONS
ACROSS THE UK

Health programmes
It’s important to us to have a healthy workforce and we work hard
to look after our people and help them look after themselves.
When our staff are on top form, they provide the best service to our
customers. Virgin Health Miles is a programme we use to reward
our US staff for healthy behaviour, so they are incentivised to track
their health and invest in it to reap the rewards that we are investing
in the programme on their behalf. Staff get savings on their
healthcare costs if they exercise, for example. Some 30% of US staff
are currently enrolled in the scheme and 40% of those are earning
health miles. Members have earned $104,000 in rewards and
63% of respondents reported that the programme makes Sunbelt
a better place to work.

Working on safety with our customers and suppliers
Being a responsible business means sharing and promoting our
safety culture with our customers and suppliers whenever possible.
For example, Sunbelt and A-Plant have dedicated aerial work
platform, forklift and earth moving operator trainers who train
customers and we build customised training programmes to fill
their needs. In the US, Zachry and NBC Universal are two examples
of customers where we worked with the customer’s safety team
to develop customised aerial work platform and forklift training
courses, sometimes for a specific jobsite, the passing of which
becomes a requirement for the customer operator. In the UK,
A-Plant regularly participates in training days for major customers,
demonstrating safe use of equipment and running training
seminars. This is in addition to the routine safety briefings that
accompany equipment rental.

OUR PEOPLE
Why they matter
We endeavour to hire the best people, train them well and look
after them so that they provide the best possible service for our
customers. Our aim is to keep employee turnover as low as possible
to enable us to build on the skill base we have established. This is
core to the success of the business and our competitive position
and therefore staff turnover is one of our KPIs (see page 29).

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 increasingly find our staff targeted
by competitors which, whilst a compliment, means we have to work
harder to retain them.

Our employees are driven, conscientious and loyal and we work
hard to maintain that through market-leading training and
development and superior reward and benefits. Both Sunbelt
and A-Plant have extensive programmes in place to ensure high
standards of recruitment, training and the appraisal, review and
reward of our employees. In addition, we endeavour consistently
throughout the year to maintain and develop arrangements aimed
at involving employees in the Group’s affairs and hearing their
views. Regular meetings are held at stores to discuss performance
and enable employees to input into improvements as well as
providing feedback on their own levels of satisfaction.

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RESPONSIBLE BUSINESS REPORT CONTINUED

EMPLOYEE SPOTLIGHT: PAIGE CARTER
Last year, at just 18 years old, A-Plant apprentice Paige Carter
became the first female apprentice to win Apprentice of the Year at the
Construction Plant-hire Association’s Stars of the Future Awards. Paige
had earlier been awarded ‘Level 2 Apprentice of the Year’ at the event
and went head to head with other winners to clinch the national title.
Nearly 600 apprentices in the construction plant trade were eligible for
the competition which shows how well Paige has performed in her work
to win the award. One example of Paige’s work is when a faulty engine
required £3,000 to replace it. Paige stripped down two other old engines
in the yard, tested the parts and then used them to repair the faulty
engine all by herself. As well as her drive to become a competent and
skilled fitter, she is very customer focused and will attend customer
sites to carry out routine services and repairs, always contacting the
customers in advance to schedule in visits to ensure downtime is
kept to a minimum. Paige is a truly outstanding employee.

Recruitment
With Sunbelt’s rapid growth, recruiting new employees is of the
utmost importance. Our recruitment efforts are not only focused
on finding the right employees and communicating the benefits
of working for Sunbelt, but bringing awareness and excitement
about the opportunities we provide. To aid in our recruitment
and retention efforts we have set up a number of programmes/
initiatives including:

• Manager In Training (‘MIT’)

− This programme identifies top talent out of college and the
military and places them through an accelerated training
programme.

− The MIT programme is based out of our top-performing stores

and provides focused, hands-on training allowing the MIT
graduate to easily perform their duties while on a direct path
to management, with incentives for staying with Sunbelt after
the programme has ended.

− Pump & Power and Scaffolding Services have already both
benefitted from the implementation of this programme.
• Partnership with Lone Star Community College to identify and

hire top technicians
− One of Lone Star Community College’s focus areas is diesel

and industrial training.

− With locations in several major metro areas, the partnership
provides a broad range of candidates able to relocate in the
surrounding areas.

A-Plant apprenticeship programme
A-Plant’s apprenticeship programme continues to be one of the
most successful and highly valued schemes in the equipment rental
industry. Last year we took on 89 trainees and this year we will be
recruiting 80 new apprentices. Our apprentice programmes take
between two and three years to complete and usually include outside
training and a formal NVQ qualification, in addition to on-the-job
training. We have five apprentice streams – plant maintenance,
customer service, driver, electro technical and mechanical
engineering. We are also launching an HNC trainee scheme in
civil engineering for our specialist division, Leada Acrow. We are
pleased that our efforts to increase diversity mean that a quarter
of our apprentices are female, which compares very favourably with
the 90% male apprentices average for the construction industry.
Our apprentice scheme also has an impressive 76% retention rate
compared to the industry rate of circa 65%.

Military recruitment
At a more senior level, we actively recruit military service
members and veterans, appreciating that their experience gives
candidates a sense of discipline, dedication, responsibility and a
determination to do the job right the first time. These valuable skills
are transferable to many of our employment positions. Sunbelt
features a former military employee as a spotlight on its Military
Recruiting page on its website each month. This practice is
designed to educate our own employees, but also to drive interest
among retired military personnel in a career at Sunbelt. Sunbelt
is a Top 50 military employer.

In the UK, as a result of our efforts to hire and develop former
members of the armed forces, A-Plant received the bronze award
from the Armed Forces Covenant Employer Recognition Scheme.
We also work in partnership with British Forces Resettlement
Services (‘BFRS’) – a social enterprise created to help the armed
forces community with their transition into civilian life. BFRS works
with service leavers to provide them with the skills and opportunities
they need to successfully resettle after leaving the armed forces.

Career development and training
Training and development continues throughout the careers of
our employees and we have many programmes in place to ensure
they achieve their ambitions, reach their potential and remain safe,
as outlined above. Employees’ welfare and job satisfaction is
enormously important and we invest significant money and time
in facilitating career development and evolving training to reflect
the changing needs of our workforce.

Sunbelt has implemented a number of new training and
development initiatives including a new two-day leadership and
coaching training programme for store managers during the year.
Approximately 50% of store managers have so far completed
the training and it has achieved good satisfaction scores from
attendees. Sunbelt has also implemented a Wynne system training
and practice environment allowing new employees to safely
practice customer scenarios, in a training environment that mirrors
the ‘live’ system. This provides practical experience before official
on-site training and observation.

Ashtead Group plc Annual Report & Accounts 2016

VETERAN SPOTLIGHT: ROB SMITH
Rob joined the Sunbelt team in 1999 as a customer service representative
and has held numerous positions since then. As a result of his drive, Rob is
now the Business Development Manager for Pump & Power Services and
his leadership positively impacts employees and customers alike. The
characteristics that make Rob an invaluable employee at Sunbelt Rentals
can be traced back to his military career with the U.S. Navy where he was
Mess management Specialist aboard the USS Key West, stationed in
Virginia Beach and later Pearl Harbor, Hawaii. Rob says submariners are
required to know all systems and operations beyond their normal duties
and that helped him adapt quickly when he joined Sunbelt and tried to
learn as many systems as he could. Rob moved from customer service
to driving, then becoming a dispatcher and then store manager in
the fast-growing specialty Pump & Power business. Eventually,
Rob moved into project management and began working on
new acquisitions for Pump & Power.

A structured two-week on-boarding programme was also
developed for store-level employees. The objective was to ensure
a consistent and repeatable process for new recruits. As part
of our commitment to continued education and development,
Sunbelt’s Customer Service Representative Development
programme provides a one-day training class, preceded by an
online course focused on operational and customer service
training. Approximately 75% of all customer service representatives
have participated in this training.

In 2015, A-Plant held over 4,500 employee training days through
a wide range of courses including the safety training highlighted
earlier. In order to identify training needs when recruiting, A-Plant
has developed a series of competence forms and adopted the OSAT
(On Site Assessment and Training) programme. Each employee has
their skills mapped against the qualification framework through
assessment and any skills gaps are filled through training. Through
this process we can be sure of developing the skills and qualifying
the experience of our workforce. To evaluate the effectiveness of
our training, we issue all delegates with feedback forms and these
are evaluated and actioned as required. We have also used our
appraisal reviews to identify several management training
initiatives that will be launched later in 2016.

All senior employees at A-Plant are now required to undertake an
e-learning module on ‘The Green Café’ (A-Plant’s e-learning portal)
to ensure they understand their obligations and responsibilities with
regard to competing fairly and the Bribery Act 2010. The module
must be completed every 12 months, and only a 100% score on
the module is acceptable. Employees must repeat the module
until they achieve 100%.

Reward and benefits
We believe in treating our staff well and rewarding them for the
effort they put in on our behalf.

We use a combination of competitive fixed pay and attractive
incentive programmes to reward and motivate staff and these drive
our profits and return on investment. Our sales force is incentivised
through our commission plans which are based on sales, both
volume and price achieved, 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 is an important element in retaining
the confidence of our workforce through the economic cycle.
In addition to their core benefits, including pension and life
assurance arrangements, we have an employee assistance helpline
which offers free confidential support and advice to those in need.
We also have other benefits such as Virgin Health Miles, as
mentioned earlier, to promote good health amongst our employees.

This year, as an additional benefit, A-Plant introduced a holiday sell
back scheme. This allows employees to sell unused or unwanted
holiday days back to the company, giving them the opportunity to
exchange some of their holiday entitlement for additional pay and
allow the employee more flexibility and choice in how they use their
contractual benefits.

Diversity and equal opportunities
Providing equal opportunities for all our staff and employment
diversity are priorities for Ashtead. Our recruitment comes
predominantly from the areas immediately around our facilities
thereby providing opportunities for local people. We make
every reasonable effort to give disabled applicants and existing
employees who become disabled, opportunities for work, training
and career development in keeping with their aptitudes and
abilities. We do not discriminate against any individual on the
basis of a protected status, such as sex, colour, race, religion,
native origin or age.

In the US we are required by law to monitor ethnicity in our
workforce every year and we maintain a diverse workforce.
We also gather ethnicity data as part of the recruitment process
in the UK and through an Equality and Inclusion Survey to monitor
our diversity. Increasingly, many local authority and public sector
tenders request this kind of information. We are committed to
providing opportunities for people from all ethnic groups and
in both geographies we have good representation from ethnic
minorities across the organisation.

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RESPONSIBLE BUSINESS REPORT CONTINUED

While our industry has traditionally had many more men than
women, we do have women at all levels in both the US and UK
including on the Board, on the senior management team and as
store managers, sales executives and apprentices. While we
prioritise recruiting the best people for every role, we are working
to make it easier for more women to join the organisation,
particularly as we expand.

WORKFORCE BY GENDER

Number of employees
Board directors
Senior management
All staff

Male
8
23
11,992

Female
2
2
1,120

Female %
20%
8%
9%

HUMAN RIGHTS
At Ashtead we believe in the rights of individuals and take our
responsibilities seriously to all our employees and those who may
be affected by our activities. We have policies in place, such as
whistle-blowing procedures which protect our employees as they
go about their work. These policies form part of our way of doing
business and are embedded in our operations. Thus, while we
do not manage human rights matters separately, we continue to
assess potential risks and do not believe they raise particular
issues for the business.

COMMUNITIES
Why they matter
The communities in which we operate have always been important
to Ashtead. As we expand our market share, particularly in the US,
we have ever more impact and influence over the communities
where we hire staff and make an economic contribution. Our
responsibility to those communities increases likewise. In addition,
our staff feel great pride in providing a service for the community.
Our business is about helping people and getting things done.
It is about finding solutions, especially when there has been an
emergency or a disaster like a major flood or a hurricane, for
example. Contributing to the communities where we operate is
an important differentiating factor for Ashtead staff as well as being
attractive to new recruits.

Community initiatives
In the locations where we work, we have multiple community-based
programmes which often tie in well with what we do and how we
do it. Raising our profile in the community in this way is completely
consistent with our desire to do more in terms of the quality of life
of our staff and their families.

Our stores regularly support and participate in local charity events
and community service. For example, we provide support to many
community sporting events, including sponsoring a local softball
team in Dallas and various charity golf tournaments across the US.
We also continue to work closely with our designated charitable
partner, the American Red Cross and its affiliates such as the
Second Harvest Food Bank for which we have a food drive every
November. We allow employees to make payroll deductions to
contribute to the American Red Cross or the Sunbelt Employee
Relief Fund. Our Charlotte support office took part in the 2015
Charlotte Corporate Cup, which features a half marathon,
10k and 5k race and hosted a Red Cross blood drive in the autumn.

GARY SINISE FOUNDATION
The Gary Sinise Foundation supports military veterans by creating
and supporting unique programmes designed to entertain, educate,
inspire, strengthen and build communities. Sunbelt is in a perfect
position to help the foundation with the R.I.S.E. (Restoring Independence
Supporting Empowerment) programme which provides severely
wounded veterans and their families with resources to overcome the
challenges of life after their injuries. A major area of focus for R.I.S.E.
is the building of custom smart homes. The Sunbelt partnership with
R.I.S.E. gives contractors access to tools and equipment at no cost.
In addition, Sunbelt provides a portion of revenue generated from
custom-wrapped equipment to the Foundation in the form of a cash
donation. With a history of community and veteran support, this
partnership continues to drive Sunbelt’s culture of giving back.

Ashtead Group plc Annual Report & Accounts 2016

Our Whitehaven team supplied equipment for use during
the Hospice at Home West Cumbria 2015 Colour Run.
Runners completed a 1k or 5k route whilst getting covered
with coloured powder paint along the way. The event raised
over £30,000 for palliative care for those with life-limiting
illnesses, as well as helping and supporting their families
and carers, and the bereaved.

In the UK we continue to support CRASH, the construction and
property industry’s charity for homeless people. As a patron of
the charity, A-Plant has been instrumental in delivering improved
accommodation to homeless people through professional
expertise, building materials and financial donations. Last year we
were also involved in setting up Emmaus Salford, a new community
recently opened in Greater Manchester which comprises a shop
and accommodation for the homeless. A-Plant worked alongside
Network Rail volunteers and fellow CRASH patron, Dulux Trade,
to assist in the conversion of a near-derelict former council office
building. We supplied a range of equipment for use during the
refurbishment, including transformers, wallpaper strippers,
scaffold towers, podiums and steps.

As part of our commitment to the Prince’s Trust, Ashtead made
a donation of £15,000 last year which helped young people gain
access to jobs in construction, civil engineering and other sectors
associated with the built environment. Ashtead forms part of the
Prince’s Trust Built Environment Leadership Group and donations
from this group helped 1,000 young people move into the sector
in 2015.

THE ENVIRONMENT
Why it matters
As we expand our territory and service offering, we necessarily
have more of an impact on the environments around our stores.
We make every effort to ensure that our impact is a positive one
and to limit any negative impact we may have in the course of our
work. This helps us save on costs, on any potential damage to our
reputation and also helps build that level of trust our customers
require. It also helps our staff feel good about where they work
and helps to build good relationships with the communities around
our stores.

In 2015, at Sunbelt, the safety and environmental departments
merged, creating the Safety, Health and Environmental
Department. This move improves organisational awareness and
focus to our environmental initiatives because safety managers
are now also responsible for bringing awareness and compliance
to environmental initiatives. Safety managers are fully trained
and capable of identifying risks associated with safety and
environmental issues.

In the UK, to comply with the new Energy Savings Opportunity
Scheme (‘ESOS’), we implemented ISO 50001 awareness training
for all the performance standards team in 2015. ESOS is a
mandatory energy assessment scheme for organisations in the
UK that meet the qualification criteria based on size and we are
delighted to have achieved ISO 50001 certification. Organisations
that qualify for ESOS must carry out ESOS assessments every
four years. These assessments are audits of the energy used
by their buildings, industrial processes and transport to identify
cost-effective energy-saving measures. Organisations must notify
the Environment Agency that they have complied with their ESOS
obligations. In relation to ISO 50001, our significant impacts include
electricity, natural gas for heating and diesel for our transport fleet.
Our commitment to improving energy performance is intended to
reduce our impact on the environment and could deliver significant
cost savings.

In addition we have made fleet efficiency gains in the UK. The Fleet
Operator Recognition Scheme (‘FORS’) is an accreditation scheme
that aims to improve vehicle fleet activity throughout the UK and
beyond. The overarching scheme encompasses all aspects of
safety, fuel efficiency, economical operations and vehicle emissions.
Every A-Plant location is now FORS accredited to Bronze level
(with 25 accredited to Silver), meaning we are meeting legislative
requirements, as well as helping to increase environmental and
operational efficiencies.

BY ROYAL APPOINTMENT
A-Plant has helped many families and groups across the UK with
building projects, through our association with DIY SOS, the BBC’s
flagship DIY show. Our latest contribution saw us involved in an
attempt to regenerate a rundown community in Manchester. The aim
was to transform two entire streets, turning empty properties into
homes for war veterans and building a support centre to help other
veterans find homes and jobs. The team were joined by two very
special royal helpers, Prince William and Prince Harry, who
volunteered on site. The trades came together to build homes for two
former soldiers who fought in Iraq and Afghanistan and are suffering
from Post-Traumatic Stress Disorder, before also helping them
find new careers in the building trade. In total, 62 homes were
transformed. For the project, general tool, our accommodation
division and Leada Acrow supplied a broad range of equipment.

STRATEGIC REPORT48

Ashtead Group plc Annual Report & Accounts 2016

RESPONSIBLE BUSINESS REPORT CONTINUED

We seek to minimise our environmental impact in everything we
do, through:

• thorough evaluation of new stores and acquisitions to ensure
they meet our environmental standards and do not pose an
unacceptable risk to the business;

• improved safety/environmental audit tracking software

and database;

• improved environmental information database increasing
efficiency in addressing permits and various requirements;

• carbon, waste and other environmental KPIs captured

and reported;

• increased inventory of Tier 4 engines and training of key staff

on their impact and maintenance;

• national (non-exclusive) agreements for emergency response

and waste disposal in the US;

• providing lists of required and recommended equipment to new

store openings for spill prevention and clean-up supplies;

• the use of telematics to monitor vehicle idling and driving efficiency;
• optimisation of delivery routes via our efficiency programme;
• the use of tyre pressure monitors to ensure optimal

fuel efficiency;

• increased fuel efficiency in delivery and service fleet, including

through improved design;

• providing environmental education reminders to field and

service personnel through TechConnect newsletter delivered
to their homes in the US; and

• the use of environmentally and ozone-friendly refrigerants

in our cooling equipment.

>80%

OF AFFECTED FLEET
IS ALREADY TIER 4

Greenhouse gas emissions
As we are a growing business with aggressive expansion plans,
our absolute greenhouse gas (‘GHG’) emissions will necessarily
increase. However, we continue to evaluate how best we can limit
that increase and mitigate the impact.

Our Scope 1 (fuel combustion and operation of facilities) and 2
(purchased electricity) GHG emissions are reported below. We
have opted not to report Scope 3 emissions due to the difficulty in
gathering accurate and reliable information. The majority of these
arise through our customers’ use of our equipment on their sites
and projects.

GHG EMISSION BY GHG PROTOCOL SCOPE (tCO2e/YEAR*)

Scope 1
Scope 2
Total

2016
198,769
38,236
237,005

2015
188,514
33,674
222,188

* tCO2e/year defined as tonnes of CO2 equivalent per year.

In order to calculate the GHG emissions, we have used the GHG
Protocol Corporate Accounting and Reporting Standard (revised
edition), together with emission factors from the UK government’s
GHG Conversion Factors for Company Reporting 2015, as well as
the US Environmental Protection Agency.

In the UK, we collect data from all Scope 1 and 2 vendors and
hence, there is no estimation involved. In the US, due to the size
of our operation, we collect data from the significant vendors and
then use this to estimate emissions attributable to the balance.
At April 2016, approximately 10% of the Sunbelt emissions balance
was estimated.

FROM CAPITAL TO COAST
The legendary London to Brighton Bike Ride
took place in June and an Ashtead and A-Plant
contingent rode the gruelling 54 miles from
capital to coast to raise money for the British
Heart Foundation. A total of 23 cyclists took part,
including work colleagues, friends and
customers. The fundraising target for the
British Heart Foundation was initially £2,000
but we were delighted to raise over £3,000.

Ashtead Group plc Annual Report & Accounts 2016

We are also required to give an intensity ratio as appropriate for our
business. Our level of GHG emissions varies with our activity levels
and we have concluded that the most appropriate intensity ratio
for Ashtead is revenue intensity. Our intensity metric is therefore
an indication of emissions per £1m of revenue (tCO2e/£m).

More and more of our customers are demanding eco-friendly
equipment such as power and hydraulic oil-free platforms, or the
utilisation of bi-fuel on larger equipment, so the investment offers
our customers a wider range of access solutions.

GEOFF DRABBLE
Chief executive
13 June 2016

SUZANNE WOOD
Finance director

Revenue intensity ratio

2016
93.1

2015
109.0

The majority of our revenue is in dollars and so the reported ratio is
affected by the exchange rate. On a constant currency basis (using
this year’s average exchange rate) our intensity ratio has reduced
from 103.4 last year to 93.1 this year.

Greener equipment
Whenever we can and where it makes economic sense, we invest in
‘greener’ equipment, sometimes also driven by customer demand.
In addition to the Tier 4 engine requirements in the US, where we
can, we purchase other more environmentally efficient equipment
for a wide range of different applications. In terms of our US rental
fleet, approximately 65% of our fleet is affected by Tier 4 regulations
and over 80% of it is already Tier 4. In the UK, A-Plant has continued
its significant investment in eco-friendly access equipment by
taking delivery of a further 300+ powered access and low level
access machines manufactured by Power Towers and Niftylift,
the majority of which are specifically designed to offer an
environmentally friendly solution to working at height. The majority
of these, with no battery, power or oil, are both environmentally
friendly and with a small footprint, are able to be used in confined
spaces. The machines, several of which are also relatively light
weight provide a mechanical solution that doesn’t involve erecting,
unfolding or climbing. Some also come with a bi-fuel option.

EMPLOYEE SPOTLIGHT: DAVE SMITH AND JESSE BEAUSOLEIL
In September 2015, Dave Smith, power generation market manager, and Jesse
Beausoleil, shop foreman, travelled to the Zapaca region of Guatemala with a team of
volunteers. They spent a week doing mechanical, carpentry and humanitarian work at
the campus of non-profit community support organisation, Hope of Life International.
Previous supporters had built a vocational school on the campus, where locals could
get low or no-cost training in skills similar to Sunbelt technicians, but they left the
finishing tasks undone. First Dave, Jesse and the team worked alongside the staff to
get the school building ready. Then they repaired three generators, inspected and
tested two three-ton air conditioners, and put together two functioning commercial
convection ovens from four broken ones. They ran conduit and a new electrical feed
from the sub panels at the hospital to the kitchen that supports it, and charged
and repaired a ductless air conditioner at the children’s home. A donation from
Sunbelt also allowed additional supplies to be acquired for the projects and
the team donated all the tools they purchased and used, including skill
saws, cordless tools, electrical connectors, gauges, extension cords,
squares, drills, bits and much more to Hope of Life.

STRATEGIC REPORT50

Ashtead Group plc Annual Report & Accounts 2016

DIRECTORS’ REPORT

52 Our Board of directors
54 Corporate governance report
59 Audit Committee report
62 Nomination Committee report
63 Remuneration report
83 Other statutory disclosures
Statement of directors’
85
responsibilities

FROM: A ONE-OFF
COOLING EMERGENCY

SPOT COOLERS DELIVERED
WITHIN ONE HOUR

Ashtead Group plc Annual Report & Accounts 2016

D
R
E
C
T
O
R
S

’

R
E
P
O
R
T

24/7

ON-SITE MOBILE STORE

TO: FULL-TIME SUPPORT
COMPETENCY

We pride ourselves on being able to respond
to any scenario, whether that be highly localised
emergency cooling or long-term planning and
project management, with almost all our product
range utilised.

A shop needed rapid delivery of air conditioning units
to enable customers to keep shopping through a
heatwave. An 18-month casino construction project
in Washington needed continuous quick responses
to changing project needs and round-the-clock
service and support.

Ashtead Group plc Annual Report & Accounts 2016

DIRECTORS’ REPORT

OUR BOARD
OF DIRECTORS

3. SUZANNE WOOD
FINANCE DIRECTOR
Suzanne Wood was appointed as a director
in July 2012. Suzanne joined Sunbelt as its
chief financial officer in 2003. Suzanne is
a qualified accountant, having trained with
Price Waterhouse. She is a US citizen and
lives in Charlotte, North Carolina but also
maintains a London residence.

4. BRENDAN HORGAN
CHIEF EXECUTIVE, SUNBELT
Brendan Horgan was appointed a director
in January 2011. Brendan joined Sunbelt
in 1996 and has held a number of senior
management positions including chief sales
officer and chief operating officer. Brendan
is a US citizen and lives in Charlotte,
North Carolina.

5. SAT DHAIWAL
CHIEF EXECUTIVE, A-PLANT
Sat Dhaiwal has been chief executive 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.

1. CHRIS COLE
NON-EXECUTIVE CHAIRMAN
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
non-executive chairman of WSP Global Inc.,
a company formed from the merger of
GENIVAR Inc. and WSP Group plc. Prior to
the merger he was chief executive of WSP
Group plc. He is also the non-executive
chairman of Tracsis plc and Applus+.

EXECUTIVE DIRECTORS

2. GEOFF DRABBLE
CHIEF EXECUTIVE
Geoff Drabble was appointed 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.

KEY

Audit Committee
Remuneration Committee
Nomination Committee
Finance and Administration Committee

Details of the directors’
contracts, emoluments and share
interests can be found in the
Remuneration report.

P63

Ashtead Group plc Annual Report & Accounts 2016

NON-EXECUTIVE DIRECTORS

6. MICHAEL BURROW
INDEPENDENT
NON-EXECUTIVE DIRECTOR*
Michael Burrow was appointed as a
non-executive director and member of
the Audit, Remuneration and Nomination
Committees effective from March 2007 and
chairman of the Remuneration Committee
in September 2010. He was formerly
managing director of the Investment
Banking Group of Lehman Brothers
Europe Limited.

7. WAYNE EDMUNDS
INDEPENDENT
NON-EXECUTIVE DIRECTOR
Wayne was appointed as a non-executive
director and member of the Audit Committee
in February 2014 and became chairman of
the Audit Committee and a member of the
Remuneration and Nomination Committees
with effect from 1 July 2014. Wayne is
non-executive chairman of Dialight plc.
He is also a non-executive director and
chairman of the Audit Committee at BBA
Aviation plc and a non-executive director of
MSCI, Inc.. He was formerly chief executive
officer of Invensys plc. Wayne is a US citizen
and lives in New Jersey.

8. BRUCE EDWARDS
INDEPENDENT
NON-EXECUTIVE DIRECTOR*
Bruce Edwards was appointed as a
non-executive director in June 2007 and
a member of the Nomination Committee
and Remuneration Committee effective
from February 2009 and September 2010
respectively. He is also a non-executive
director of Greif, Inc., a NYSE-listed
packaging and container manufacturer.
Bruce was formerly the global chief
executive officer for Exel Supply Chain at
Deutsche Post World Net. He is a US citizen
and lives in Columbus, Ohio.

9. LUCINDA RICHES
INDEPENDENT
NON-EXECUTIVE DIRECTOR
Lucinda was appointed as a non-executive
director and a member of the Remuneration
and Nomination Committees in June 2016.
Following the retirement of Michael Burrow,
Lucinda will be appointed as chair of the
Remuneration Committee on 8 September
2016. Lucinda is a non-executive director
of CRH plc, Diverse Income Trust plc and
ICG Enterprise Trust plc. She is also a
non-executive director of The British
Standards Institution and UK Financial
Investments Limited, a non-executive
member of the partnership board of King &
Wood Mallesons LLP and a Trustee of Sue
Ryder. Lucinda was formerly global head
of Equity Capital Markets and a member
of the board of UBS Investment Bank.

10. IAN SUTCLIFFE
SENIOR INDEPENDENT
NON-EXECUTIVE DIRECTOR
Ian Sutcliffe was appointed as a non-
executive director and member of the Audit,
Nomination and Remuneration Committees
in September 2010 and became the senior
independent non-executive director with
effect from 1 July 2014. Ian is the chief
executive of Countryside Properties plc.
He was formerly chief executive officer
of Keepmoat and managing director, UK
Property, at Segro plc. Prior to joining
Segro he held senior executive positions
with Taylor Wimpey plc and Royal Dutch
Shell plc.

Michael Burrow and Bruce Edwards will be retiring
at this year’s AGM, each having served nine years as
a non-executive director.

DIRECTORS’ REPORT

Ashtead Group plc Annual Report & Accounts 2016

CORPORATE GOVERNANCE REPORT

STRONG CORPORATE
GOVERNANCE

CHRIS COLE
Chairman

Areas of Board focus
During the past year the Board has paid particular attention
to the following important areas:

• reviewing Board priorities and activities in line with our risk

and ethics management regime;

• an ongoing evaluation of the efficacy of our strategy and the
degree to which it remains appropriate as markets and
opportunities change;

• continuing review of the effectiveness of our capital structure

as the economic environment changes;

• evaluating our robust operating model and structure to

ensure they remain fit for purpose as Ashtead grows and
markets change;

• assessing the effectiveness of our health and safety practices
and monitoring across the Group, and identifying areas for
improvement;

• ensuring our key management resource remains motivated

and appropriately rewarded; and

• succession planning and ongoing senior recruitment.

Compliance
We endeavour to monitor and comply with ongoing changes
in corporate governance and evolving best practice in this area.
I am pleased to report that, aside from the requirement for an
external board evaluation this year, which I deal with on page 57,
the Company has complied in full throughout the year with the 2014
UK Corporate Governance Code (‘the Code’), issued by the Financial
Reporting Council (‘FRC’) and available to view at www.frc.org.uk,
and I can confirm this report provides a fair, balanced and
understandable view of the Group’s position and prospects.

Dear Shareholder

This year has seen continued development and
growth for Ashtead. We continue to deliver on
our promises and execute our strategy of organic
growth, supplemented by bolt-on acquisitions.
As we grow it is crucial that our governance
structures keep pace so that we can ensure
growth is both responsible and sustainable.

We need to manage our risks efficiently and ensure transparency
across the business. I am confident that your Board is well placed
to do that and we remain committed to maintaining the very highest
standards of corporate governance. We recognise that good
governance is essential in assisting the business deliver its
strategy, generate shareholder value and safeguard shareholders’
long-term interests.

As chairman, it is my role to ensure that the governance regime
remains appropriately robust and that the Board operates
effectively. I am pleased to introduce the corporate governance
report for 2015/16. This report details the matters addressed by
the Board and its committees during the year.

Board composition and diversity
Each member of our Board must be able to demonstrate the
skills, experience and knowledge required to contribute to the
effectiveness of the Board. It is also important that we address
issues of diversity in terms of skills, geographical experience
relevant to our business and gender. I believe the Board is
appropriately balanced in terms of diversity with a good mix
of specialist skills and market expertise. This has been an area
of particular focus this year as we planned for the retirement
of Michael Burrow and Bruce Edwards on 7 September 2016
after each serving for nine years as a non-executive director.

Thus, while the composition of the Board has not changed during the
year, Lucinda Riches was appointed as a non-executive director on
1 June 2016. While sorry to see Michael and Bruce leave, I look forward
to working with Lucinda as we seek to further Ashtead’s success.

CHRIS COLE
Chairman

Ashtead Group plc Annual Report & Accounts 2016

LEADERSHIP
The Company is led by an effective Board which is collectively
responsible for the long-term success of the Company.

The role of the Board
The Board is responsible for setting the Group’s strategy and
ensuring the necessary resources and capabilities are in place to
deliver the strategic aims and objectives. It determines the Group’s
key policies and reviews management and financial performance.
The Group’s governance framework is designed to facilitate a
combination of effective, entrepreneurial and prudent management,
both to safeguard shareholders’ interests and to sustain the
success of Ashtead over the longer term. This is achieved through a
control framework which enables risk to be assessed and managed
effectively. The Board sets the Group’s core values and standards
and ensures that these, together with the Group’s obligations to its
stakeholders, are understood throughout the Group.

Board meetings
The principal activities of the Board are conducted at regular
scheduled meetings of the Board and its committees. The Board
normally meets six times a year, with at least one of these meetings
being held in the US. Additional ad hoc meetings and calls are
arranged outside the scheduled meetings to take decisions
as required.

The chairman and chief executive maintain regular contact with
the other directors to discuss matters relating to the Group and
the Board receives regular reports and briefings to ensure the
directors are suitably briefed to fulfil their roles.

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.

There is a schedule of matters reserved to the Board for decision.
Other matters are delegated to Board committees.

MATTERS RESERVED TO THE BOARD
The schedule of matters reserved to the Board for decision
includes:

• treasury policy;
• acquisitions and disposals;
• appointment and removal

of directors or the company
secretary;

• appointment and removal

of the auditor;

• approval of the annual

accounts and the quarterly
financial reports to
shareholders;

• approval of the issue of
shares and debentures;

• the setting of dividend

policy; and

• the buyback of shares.

ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
HELD BETWEEN 1 MAY 2015 AND 30 APRIL 2016

Board

Audit Remuneration Nomination

Number of
meetings held
Chris Cole
Sat Dhaiwal
Geoff Drabble
Brendan Horgan
Suzanne Wood
Michael Burrow
Wayne Edmunds
Bruce Edwards
Ian Sutcliffe

6
6
6
6
6
6
6
6
6
6

5
–
–
–
–
–
5
5
–
5

3
–
–
–
–
–
3
3
3
3

1
1
–
1
–
–
1
1
1
1

THE BOARD AND COMMITTEES

GROUP RISK COMMITTEE
Chaired by Suzanne Wood
(with responsibility for
Corporate Responsibility)

BOARD

FINANCE AND
ADMINISTRATION
COMMITTEE
Chaired by Geoff Drabble

AUDIT
COMMITTEE

NOMINATION
COMMITTEE

REMUNERATION
COMMITTEE

Michael Burrow
Wayne Edmunds
Ian Sutcliffe

Michael Burrow
Chris Cole
Geoff Drabble
Wayne Edmunds
Bruce Edwards
Lucinda Riches
Ian Sutcliffe

Michael Burrow
Wayne Edmunds
Bruce Edwards
Lucinda Riches
Ian Sutcliffe

DIRECTORS’ REPORT56

Ashtead Group plc Annual Report & Accounts 2016

CORPORATE GOVERNANCE REPORT CONTINUED

Delegated authority
Board committees
The Board has standing Audit, Nomination and Remuneration
Committees. The membership, roles and activities of the Audit and
Nomination Committees are detailed on pages 59 to 62 and the
Remuneration Committee in the separate report on pages 63 to 82.

Each committee reports to, and has its terms of reference agreed
by, the Board. The terms of reference of these committees are
available on our website and will be available for inspection at the
Annual General Meeting.

Finance and Administration Committee
The Finance and Administration Committee comprises Chris Cole,
Geoff Drabble (chairman) and Suzanne Wood. 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 the chairman, including,
for example, the approval of material announcements to the
London Stock Exchange.

Summary of the Board’s work during the year
During the year, the Board considered all matters reserved to the
Board for decision, focusing in particular on the following:

• Review of operations and current trading
• Approval of the quarterly financial statements
• Approval of the Annual Report and Accounts
• Approval of the AGM resolutions
• Dividend policy
• Investor relations
• Treasury policy
• Increase of the senior debt facility to $2.6bn
• Growth and acquisition strategy
• Various acquisitions
• Adoption of the 2016/17 budget
• Review of the work of the Group Risk Committee
• Review and approval of the Group’s risk register
• The recommendations of the Remuneration Committee

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
approval of the chairman is required before a non-executive can
take on other non-executive director roles.

EFFECTIVENESS
Composition of the Board
The Company’s Board comprises the chairman, the chief executive,
the finance director, the executive heads of Sunbelt and A-Plant,
the senior independent non-executive director and normally three
other independent non-executive directors. Short biographies of
the directors are given on pages 52 and 53.

The directors are of the view that the Board and its committees
consist of directors with the appropriate balance of skills,
experience, independence and knowledge of the Group to discharge
their duties and responsibilities effectively. The composition of
the Board has not changed during the year. Lucinda Riches was
appointed as a non-executive director on 1 June 2016. Michael
Burrow and Bruce Edwards will be retiring from the Board with
effect from 7 September 2016.

Appointments to the Board
The Nomination Committee is responsible for reviewing the
structure, size and composition of the Board and making
recommendations to the Board on any changes required.
Appointments are made on merit, based on objective criteria,
including skills and experience and recognising the benefits
of diversity on the Board, including gender. The Nomination
Committee led the process to refresh the Board pending the
retirement of Michael Burrow and Bruce Edwards. Further details
are given in the Nomination Committee report on page 62.

BOARD COMPOSITION AND ROLES

Chairman

Chris Cole

Chief executive

Geoff Drabble

Finance director

Suzanne Wood

Senior independent
director
Independent
non-executive
directors

Ian Sutcliffe

Michael Burrow,
Wayne Edmunds,
Bruce Edwards, Lucinda
Riches, Ian Sutcliffe

Responsible for leadership of the Board, agreeing Board agendas and ensuring its
effectiveness by requiring 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.
Responsible for developing the strategy for the business, in conjunction with the
Board, ensuring it is implemented, and the operational management of the business.
Supports the chief executive in developing and implementing the strategy and
responsible for the reporting of the financial and operational performance of
the business.
Available to shareholders if they have reason for concern that contact through
the normal channels of chairman or chief executive has failed to resolve.
Provide a constructive contribution to the Board by providing objective
challenge and critique for executive management and insights drawn from
their broad experience.

Ashtead Group plc Annual Report & Accounts 2016

Commitment
As part of the appointment process, prospective directors are
required to confirm that they will be able to devote sufficient time
to the Company to discharge their responsibilities effectively.
Furthermore, all directors are required to inform the Company
of changes in their commitments to ensure that they continue to
be able to devote sufficient time to the Company.

Board evaluation
The performance of the chairman, chief executive, the Board and
its committees is evaluated formally annually against, amongst
other things, 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.

Non-executive directors are appointed for specified terms not
exceeding three years and are subject to annual re-election and
the provisions of the Companies Act 2006 relating to the removal
of a director.

TENURE OF NON-EXECUTIVE DIRECTORS

Chris Cole

14 years

Michael Burrow

9 years

Bruce Edwards

Ian Sutcliffe

9 years

6 years

Wayne Edmunds

2 years

Lucinda Riches

–

Development and training
All newly appointed directors undertake an induction to all parts
of the Group’s business. This includes visits to both the Sunbelt and
A-Plant businesses and meetings with their management teams.
The company secretary also provides directors with an overview
of their responsibilities as directors, corporate governance policies
and Board policies and procedures. The chairman and chief
executive assess regularly the development needs of the Board
as a whole with the intention of identifying any additional training
requirements.

Information and support
The directors have access to the company secretary and are able
to seek independent advice at the Company’s expense.

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.

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 are circulated.

In accordance with the Code, it is the Board’s intention to have
its and its committees’ performance evaluation conducted by
an external third party every three years. However, in view of the
recent Board changes, it was considered prudent to delay this
year’s Board evaluation until November 2016 to enable recently
appointed Board members to be part of that evaluation. This year’s
Board evaluation will be conducted by an external third party.

Re-election
The directors will retire at this year’s Annual General Meeting and,
save for Michael Burrow and Bruce Edwards, will offer themselves
for election and re-election in accordance with the Code.

ACCOUNTABILITY
Financial and business reporting
The Board is committed to providing stakeholders with a fair,
balanced and understandable assessment of the Group’s position
and prospects. This is achieved through the Strategic report, which
includes an explanation of the Group’s business model, and other
information included within this Annual Report. The responsibilities
of the directors in respect of the preparation of this Annual Report
are set out on page 85 and the auditor’s report on pages 88 to 90
includes a statement by Deloitte about its reporting responsibilities.
As set out on page 84, the directors are of the opinion that the
Group is a going concern.

Risk management and internal control
The Board is responsible for the Group’s risk management
framework and internal control systems. It has established a
process for identifying, evaluating and managing the principal
risks faced by the Group. This robust process has been in place for
the full financial year, is ongoing and is consistent with the FRC’s
‘Guidance on Risk Management, Internal Control and Related
Financial and Business Reporting’ published in 2014. Under its
terms of reference the Group Risk Committee meets semi-annually
or more frequently if required.

As described more fully on page 30, the Group reviews and assesses
the risks it faces in its business and how these risks are managed.
These reviews are conducted throughout the year in conjunction
with the management teams of each of the Group’s businesses
and are documented in an annual report, including the updated risk
register. 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 Group Risk Committee
reviewed the draft report for 2016, which was then presented to,
discussed and approved by the Audit Committee and the Board
on 9 June 2016.

DIRECTORS’ REPORT58

Ashtead Group plc Annual Report & Accounts 2016

CORPORATE GOVERNANCE REPORT CONTINUED

One of our principal risks is business continuity and the capacity,
resilience and evolution of the Group’s IT systems and networks.
As part of the Board’s regular updates on business risks, it received
a detailed report and update on Sunbelt’s IT strategy and priorities
for the forthcoming two years. This provided the Board with
assurance that the principal IT and related development needs
had been identified and prioritised appropriately.

The Board monitors the risk management framework and internal
control systems on an ongoing basis and reviews their effectiveness
formally each year. As part of its monitoring, through the Audit
Committee, it received reports from the operational audit teams
and considered the internal control improvement recommendations
made by the Group’s internal auditors and its external auditor and
management’s implementation plans. 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 stores or elsewhere. The Audit Committee also
meets regularly with the external auditor to discuss their work.

The Board considers that the Group’s internal control systems are
designed appropriately to manage, rather than eliminate, the risk of
failure to achieve its business objectives. Any such control system,
however, can only provide reasonable and not absolute assurance
against material misstatement or loss.

Audit Committee and auditor
The Board has delegated responsibility for oversight of corporate
reporting and risk management and internal control and for
maintaining an appropriate relationship with the Group’s auditor to
the Audit Committee. The Audit Committee report on pages 59 to 61
contains full details of the role and activities of the Audit Committee.

REMUNERATION
The Board has delegated responsibility for developing remuneration
policy and fixing the remuneration packages of individual directors
to the Remuneration Committee. The Remuneration Committee
report on pages 63 to 82 contains full details of the role and
activities of the Remuneration Committee.

RELATIONS WITH SHAREHOLDERS
Dialogue with shareholders
We engage actively with analysts and investors and are open
and transparent in our communications. This enables us to
understand what analysts and investors think about our strategy
and performance as we drive the business forward. The Board is
updated regularly on the views of shareholders through briefings
and reports from those who have had interaction with shareholders
including the directors and the Company’s brokers. Regular
dialogue is maintained with analysts and investors through
meetings, presentations, conferences and ad hoc events. During
the year, senior management conducted over 400 meetings and
calls and attended three conferences, with investors in the UK,
US and the rest of Europe.

The chairman and the senior independent non-executive director
are available to meet institutional shareholders to discuss any
issues or concerns in relation to the Group’s governance and
strategy. During the year the chairman of the Remuneration
Committee met or had discussions with a number of shareholders
to discuss the application of our remuneration policy and the
details of the new remuneration policy to be proposed at this year’s
Annual General Meeting.

The Group’s results and other news releases are published via the
London Stock Exchange’s Regulatory News Service. In addition,
these news releases are published in the Investor Relations section
of the Group’s website at www.ashtead-group.com. Shareholders
and other interested parties can subscribe to receive these news
updates by email through registering online on the website.

Constructive use of the Annual General Meeting
We value meeting with our private shareholders at the Company’s
Annual General Meeting (‘AGM’). The 2016 AGM will be held in
London on Wednesday, 7 September 2016. Further details of the
meeting are given on page 84. Shareholders will receive an update
on first quarter trading during the meeting and be invited to ask
questions and meet the directors after the formal proceedings
have been completed.

Resolutions at the 2016 AGM will be voted on by a show of hands.
Following each vote, the results will be announced to the meeting
and then announced to the London Stock Exchange and published
on the Company’s corporate website as soon as practicable after
the meeting. Notice of the AGM will be sent to shareholders at least
20 working days before the meeting.

Ashtead Group plc Annual Report & Accounts 2016

AUDIT COMMITTEE
REPORT

WAYNE EDMUNDS
Chairman of the
Audit Committee

Membership of the Committee
The Committee is comprised of independent non-executive
directors, biographical details of whom are set out on page 53.
The members of the Committee are:

Wayne Edmunds
Michael Burrow
Ian Sutcliffe

Chairman

Main responsibilities of the Audit Committee
The Audit Committee assists the Board in its oversight and
monitoring of financial reporting, risk management and
internal controls.

The principal responsibilities of the Committee are to:

• monitor the integrity of the annual and quarterly results,
including a review of the significant financial reporting
judgements contained therein;

• establish and oversee the Company’s relationship with the

external auditor, including the external audit process, its audit and
non-audit fees and independence, and make recommendations
to the Board on the appointment of the external auditor;

• review and assess the effectiveness of the Company’s internal
financial controls and internal control and risk management
systems;

• oversee the nature, scope and effectiveness of the internal audit

work undertaken; and

• monitor the Company’s policies and procedures for handling

allegations from whistle-blowers.

The Committee reports to the Board on its activities and minutes
of meetings are available to the Board.

The Audit Committee’s terms of reference are available on the
Group website and will be available for inspection at the AGM.

Introduction by Wayne Edmunds, Audit Committee chairman
I am pleased to introduce the report of the Audit Committee for
2015/16. The Committee is made up of three independent non-
executive directors. I have been chairman since July 2014 and have
recent and relevant financial experience, having held a number of
senior international finance roles. The members of the Committee,
together with my experience, bring an appropriate balance of
financial and accounting experience combined with a good
understanding of Ashtead’s business.

Eric Watkins is secretary to the Committee. Chris Cole, Geoff
Drabble, Suzanne Wood, and the Group’s deputy finance director
generally attend meetings by invitation. In addition, the Group’s
external audit partner attends the Committee meetings.

The Committee assists the Board in discharging its responsibility for
oversight and monitoring of financial reporting, risk management
and internal control. As chairman of the Committee, it is my
responsibility to ensure that the Committee fulfils its responsibilities
in a rigorous and effective manner. The Committee’s agenda
is designed, in conjunction with the Board’s, to ensure that all
significant areas of risk are covered and to enable it to provide
timely input to Board deliberations.

I am satisfied that the Committee was provided with good-quality
and timely material to allow proper consideration to be given to the
topics under review. I am also satisfied that the meetings were
scheduled to allow sufficient time to ensure all matters were
considered fully.

One of the Code’s principles is that the Board should present a
fair, balanced and understandable assessment of the Company’s
position and prospects through its financial reporting. We have
always sought to ensure our financial and other external reporting
is fair, balanced and understandable. The Committee has kept
this principle at the forefront of its thought process as it reviewed
all the Company’s financial reports in advance of publication and
is satisfied that they provide a fair, balanced and understandable
assessment of the Company’s position and prospects.

WAYNE EDMUNDS
Chairman of the Audit Committee

DIRECTORS’ REPORT60

Ashtead Group plc Annual Report & Accounts 2016

CORPORATE GOVERNANCE REPORT CONTINUED

Summary of the Committee’s work during the year
The Committee met on five occasions during the year. Meetings are
scheduled to coincide with our financial reporting cycle, with four
regular meetings scheduled prior to our quarterly, half-year and
annual results announcements. The Group audit partner from
Deloitte (or his designate) attends all meetings of the Committee
and reports formally at three of these meetings.

A similar process is undertaken at each reporting date whereby the
Committee receives a paper from management which comments
on the principal balances in the financial statements and discusses
any significant judgements and matters of a financial reporting
nature arising since the last meeting. In addition, we receive reports
from Deloitte at three of the meetings. The first, in December,
contains the results of Deloitte’s review of our half-year results.
The half-year review forms part of Deloitte’s planning for the annual
audit and their full audit plan and proposed audit fee is presented
to the February meeting of the Committee. Deloitte’s final report
of the year is at the June meeting when we review the draft annual
report. Their report contains the findings from their audit work,
including comments on the draft annual report.

Integrity of financial reporting
We reviewed the integrity of the quarterly and annual financial
statements of the Company. This included the review and
discussion of papers prepared by management and took account
of the views of the external auditors. The key areas reviewed in
the current year are set out below.

Carrying value of rental fleet
Management undertakes an annual review of the appropriateness
of the useful lives and residual values assigned to property, plant
and equipment and assesses whether they continue to be appropriate
and whether there are any indications of impairment. Inter alia,
this review considers the level of gains on disposal and age of
assets at the date of disposal along with the level of second-hand
values, while taking into account cyclical considerations. We are
satisfied that the judgements taken are appropriate and consistent
with prior years.

Going concern
We reviewed the appropriateness of the going concern assumption
in preparing the financial statements. We reviewed a paper
prepared by management which considered the Group’s internal
budgets and forecasts of future performance, available financing
facilities and facility headroom. In addition, we reviewed the
scenario planning considered in assessing the Group’s viability over
the medium term. Taking account of reasonably possible changes in
trading performance, used equipment values and other factors that
might affect availability, the Group expects to maintain significant
headroom under its borrowing facilities for the forthcoming year.

We are satisfied that the going concern basis of preparation
continues to be appropriate in preparing the financial statements.

The Company’s financial
reports provide a fair,
balanced and understandable
assessment of the Company’s
position and prospects.

Goodwill impairment review
The Group undertakes a formal goodwill impairment review as
at 30 April each year. This is based on the latest approved budget
and three-year plan for Sunbelt and A-Plant. Last year the Group
concluded that certain specialty businesses should be classified as
separate cash-generating units (‘CGUs’), due to them generating
separately identifiable cash flows. We are satisfied that these CGUs
remain appropriate and that there is no impairment of the carrying
value of goodwill in the CGUs of Sunbelt or A-Plant. Further details
are provided in Note 14 to the financial statements.

Intangible asset impairment review
The fall in the oil price and its impact on the oil and gas industry
caused management to reassess the carrying value of intangible
assets related to acquired customer lists within our Oil & Gas
business. Reflecting the expectation that revenue from those
customers, and hence future cash flows, would be much lower than
anticipated when the businesses were acquired, an impairment
charge of £12m was taken. We are satisfied that the judgements
taken are reasonable and appropriate.

External audit effectiveness
The Committee conducted an assessment of the effectiveness
of the audit of the 2016 financial statements, based on its own
experience and drawing on input from senior corporate management
and senior finance management at Sunbelt and A-Plant. The review
was based on questionnaires completed by the members of the
Committee and senior management. The questionnaires focused
on the quality and experience of the team assigned to the audit,
the robustness of the audit process, the quality of delivery and
communication, and governance and independence of the audit
firm. Overall, the Committee is satisfied that the audit process and
strategy for the audit of the 2016 financial statements was effective.

Ashtead Group plc Annual Report & Accounts 2016

Non-audit services and external auditor independence
Each year we review the level of fees and nature of non-audit work
undertaken and we were again satisfied that it was in line with our
policy and did not detract from the objectivity and independence of
the external auditor. It is accepted that certain work of a non-audit
nature is best undertaken by the external auditor. The non-audit
fees paid to the Company’s auditor, Deloitte, for the year relate to its
review of the Company’s interim results. Details of the fees payable
to the external auditor are given in Note 4 to the financial statements.

• 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 each store generally carried out at least
every two years by internal operational audit. A summary of this
work is provided semi-annually to the Audit Committee; and
• whistle-blowing procedures by which staff may, in confidence,
raise concerns about possible improprieties or breaches of
company policy or procedure.

Reappointment of external auditor
Deloitte was appointed external auditor in 2004. The external
auditor is required to rotate the audit partner responsible for the
Group audit every five years and this year is the current lead audit
partner’s third year. The Committee considers the reappointment
of the external auditor each year and is recommending to the
Board that a proposal be put to shareholders at the 2016 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 tenure, objectivity and
independence of Deloitte, as noted above, and its continuing
effectiveness and cost.

The Committee has followed the legislative developments on audit
tendering and rotation from the EU and Competition & Markets
Authority. Under the transitional arrangements, the Group is not
required to rotate its auditor until 2023. Notwithstanding the
transitional arrangements, we will consider tendering the audit in
2017 to fit in with the timing of the next rotation of the current audit
partner scheduled for 2018.

Financial control and risk management
The Company’s objective is to maintain a strong control
environment which minimises the financial risk faced by the
business. It is the Committee’s responsibility to review and assess
the effectiveness of the Company’s internal financial controls and
internal control and risk management factors.

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;
• 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 store by equipment type and
independently checked on a sample basis by our operational
auditors and external auditor;

The Committee receives regular reports from internal operational
audit, outsourced internal audit and the Group Risk Committee.
The Group’s risk management processes are an area of focus as
they adapt to reflect changes to our risk profile as a result of our
significant growth, both organic and through bolt-on acquisitions.

Viability statement
During the year the Committee discussed management’s approach
to addressing the requirements for the new viability statement
and the work undertaken by management and reviewed a paper
summarising their conclusions and proposed statement. The
statement was agreed at the June meeting and is included on
page 32.

Internal audit
The internal operational audit teams in the two businesses
undertake operational audits across the store network using a
risk-based methodology. Each year we agree the scope of work
and the coverage in the audit plan at the start of the year and
receive formal reports on the results of the work at the half year
and full year. During the year 347 audits were completed, which
is consistent with our goal for each of our 700 stores to receive an
audit visit at least once every two years. The audits are scored and
action plans agreed with store management to remedy identified
weaknesses. This continual process of reinforcement is key to the
store-level control environment.

In addition, we engage a major international accounting firm to
perform detailed internal audits at the Group’s major support
centres periodically.

Whistle-blowing
There are policies and procedures in place whereby staff may,
in confidence, report concerns about possible improprieties or
breaches of Company policy or procedure. These suspicions are
investigated and the results of the investigation are, where possible,
reported to the whistle-blower. The Committee receives a report
from the company secretary on control issues arising from
whistle-blowing as well as from other sources.

DIRECTORS’ REPORT62

Ashtead Group plc Annual Report & Accounts 2016

CORPORATE GOVERNANCE REPORT CONTINUED

NOMINATION
COMMITTEE REPORT

CHRIS COLE
Chairman of the
Nomination Committee

The Nomination Committee comprises all of the non-executive
directors, each of whom is independent, myself as chairman and
the chief executive, Geoff Drabble. Eric Watkins is secretary to
the Committee.

The Nomination Committee meets as and when required to
consider the structure, size and composition of the Board of
directors. The Committee’s primary focus during the year remained
succession planning and, in particular, the orderly replacement
of two long-serving non-executive directors, including the chair
of the Remuneration Committee.

There were no changes to the Board during the year.

Main responsibilities of the Nomination Committee
The principal duties of the Committee are making
recommendations to the Board on:

• the Board’s structure, size, composition and balance;
• the appointment, reappointment, retirement or continuation

of any director; and

• the continuation of any non-executive director who has served

for a period of three years or more.

The Nomination Committee’s terms of reference will be available
for inspection at the Annual General Meeting.

Summary of the Committee’s work during the year
The Committee met once during the year and the principal matters
discussed were:

• succession planning; and
• the retirement and replacement of Michael Burrow and

Bruce Edwards.

The Committee met in May 2016 to recommend the appointment
of Lucinda Riches as a non-executive director.

Appointment of non-executive directors
During the year we assessed the non-executive profile of the Board,
including skills, experience and diversity, and factored this into
the search brief for two new non-executive directors to replace
the retiring directors. We appointed Korn Ferry, an independent
search firm with no other connection to the Company, to assist
in identifying suitable candidates. Following a rigorous process,
we were delighted to appoint Lucinda Riches as a non-executive
director of the Company in June 2016. Lucinda will join the
Nomination and Remuneration Committees and, following
the retirement of Michael Burrow, will become chair of the
Remuneration Committee.

Reappointment of directors
The Committee unanimously recommends the re-election/election
of each of the directors, except Michael Burrow and Bruce Edwards
who are retiring, at the 2016 AGM. In making this recommendation,
we evaluated each director in terms of their performance,
commitment to the role, and capacity to discharge their
responsibilities effectively, given their other external time
commitments and responsibilities.

Board composition and diversity
Our objective is to have a broad range of skills, background and
experience within the Board. While we will continue to ensure that
we appoint the best people for the relevant roles, we recognise the
benefits of diversity and we will continue to take this into account
when considering any particular appointment, although we do not
set any particular targets.

By order of the Board

ERIC WATKINS
Company secretary
13 June 2016

Ashtead Group plc Annual Report & Accounts 2016

REMUNERATION REPORT

REMUNERATION
REPORT

Dear Shareholder

I have decided to divide my statement into two
sections this year. The first looks at the Group’s
performance over this and previous years and the
level of remuneration earned by our executive
directors for managing the delivery of this
performance. The second sets out the proposed
changes to remuneration for future years which
includes putting a new remuneration policy for
shareholder approval at this year’s Annual General
Meeting (‘AGM’).

Therefore at this year’s AGM, there will be two resolutions on
the Directors’ remuneration report. The first will be in respect
of the implementation of the existing policy for the year 2015/16.
The second resolution seeks shareholders’ approval of the new
remuneration policy which will apply for the next three years.

MICHAEL BURROW
Chairman of the
Remuneration Committee

CURRENT YEAR
Incentive policy
The performance conditions for both the Deferred Bonus Plan
(‘DBP’) and the Performance Share Plan (‘PSP’), which operated
during the year, incentivise the executive directors to focus on
selected KPIs of the Group and total shareholder return (‘TSR’).
The following table sets out these KPIs and how performance
against them is linked to the incentive plans:

Plan
Deferred Bonus Plan
Performance Share Plan

Profit
✓

EPS

RoI Leverage

TSR

✓

Company performance
It is pleasing to report, once again, another year of extremely strong
performance across the business with market share gains, both in
the US and the UK. We are delighted to be reporting another year
of record profits and record dividends. The following is a breakdown
of our performance for the year.

• Group underlying pre-tax profit of £645m (2015: £490m)
• Sunbelt operating profit of $1,014m (2015: $833m)
• A-Plant operating profit of £67m (2015: £46m)
• Proposed dividend of 22.5p (2015: 15.25p)

Profit is the metric we use for the DBP. The following table sets out the profit targets set and their level of satisfaction for this year:

Executive
Geoff Drabble
Suzanne Wood
Brendan Horgan
Sat Dhaiwal

Measure
Group pre-tax profit
Group pre-tax profit
Sunbelt operating profit
A-Plant operating profit

Threshold
£595m
£595m
$970m
£63m

Target
£610m
£610m
$985m
£67m

Maximum
£635m
£635m
$1,015m
£73m

Actual
at budget
exchange
rates
£634m
£634m
$1,014m
£67m

Bonus
entitlement
earned
(% of salary)
196%
147%
147%
75%

DIRECTORS’ REPORT64

Ashtead Group plc Annual Report & Accounts 2016

REMUNERATION REPORT CONTINUED

The Remuneration Committee (the ‘Committee’) set challenging targets for the DBP and although it was another year of strong performance,
Group and Sunbelt fell just short of the level required for maximum payout and A-Plant achieved target performance. The Committee feels
that this is an appropriate level of reward for the performance of the Group and the hard work put in by our executive directors.

Long-term sustainable performance
One of the primary objectives of the Committee is to incentivise and reward sustained long-term performance of the Group. The charts
below show the performance over the last seven years in terms of the four performance criteria selected for the PSP, which are designed
to operate across the cycle. Each chart has been overlaid with the relative level of total remuneration earned by our chief executive for
each of these years. The Committee believes that there is a strong link between the level of performance demonstrated by these criteria
and remuneration of the chief executive. The TSR chart demonstrates the impact of the significant proportion of remuneration paid to the
chief executive in equity, which ensures he shares the experience of shareholders over the period. This can also be seen when looking at
the other charts where, while financial performance has been strong, the single figure has gone down over the last two years due to the
lower value of the vested awards.

The Committee believes that the current remuneration policy has worked well in both incentivising and rewarding performance and
aligning interests with shareholders. The changes proposed in the new policy will build on this success.

ONE-YEAR TSR OUTPERFORMANCE
OF FTSE 100 AND FTSE 250 (%)

UNDERLYING EPS (p)

150

130

110

-10

-30

2010

2011

2012

2013

2014

2015

2016

2010

2011

2012

2013

2014

2015

2016

RETURN ON INVESTMENT (%)

LEVERAGE (X)

3.2

2.9

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

2.3

2.0

1.8

1.7

2010

2011

2012

2013

2014

2015

2016

2010

2011

2012

2013

2014

2015

2016

Ashtead Group plc Annual Report & Accounts 2016

Single figure (£’000)
Bonus payout (% maximum)
PSP vesting (% maximum)

2011
2,166
100%
50%

2012
4,613
100%
100%

2013
6,510
100%
100%

2014
7,272
100%
100%

2015
4,165
100%
100%

2016
3,115
98%
81%

2013 PSP award vesting
This sustained long-term performance of the Group has been reflected in the level of vesting which is expected for the 2013 PSP award
in June 2016. The following table sets out the performance conditions and targets, weightings, actual performance and associated level
of vesting:

Measure
TSR*
EPS growth
RoI
Leverage

Weighting
of award
to measure
40%
25%
25%
10%

Threshold
level of
vesting (25%)
Median
6% CAGR
10%

Maximum
level of
vesting (100%)
Upper quartile
12% CAGR
15%

Less than 2.5

% of
element of
award vested
52%
100%
100%
100%

Actual
59%
39%
19%
1.7

* TSR performance is estimated based on performance to 30 April 2016, which was at the 59th percentile level.

FUTURE YEARS
Background
The current remuneration policy was formally approved by shareholders at the 2014 AGM and received a 96.8% vote in favour. The policy
became effective for a period of up to three years from that date, which would suggest a normal review date of 2017. Since the drafting
and approval of this policy, Ashtead has continued to deliver exceptional performance, growth and associated returns to its shareholders.

This highly successful growth path has led the Committee to conclude that a review of the remuneration policy should be conducted,
and an amended policy brought forward in 2016.

The Committee is cognisant of the views expressed by some of its shareholders in the voting patterns on the remuneration reports
for both 2013/14 and 2014/15, and determined that the most appropriate and complete response was to review the policy as well as
its implementation. The Committee’s expectation is that the new policy will enable greater alignment with business objectives and
shareholder expectations.

In undertaking the review, the Committee believed it important that the future remuneration policy was tailored to Ashtead’s
circumstances, such that it:

• supports the Group’s strategy over the next stage of its development;
• continues to act as an appropriate tool with which to attract, retain and motivate the executive directors who are critical to executing

the business strategy and driving the continued creation of value for shareholders;

• ensures that remuneration is competitive against companies of a similar size and complexity; and
• reflects practice in the Group’s listing environment (being the UK) whilst being cognisant of its relatively diverse shareholder base which
now contains almost 40% US-based investors and also Ashtead’s main area of operation (being North America, given that in 2015/16,
86% of revenue was generated in this region).

As a result of this review, the Committee concluded that a number of changes to the remuneration policy were required. These changes,
if approved, will mean that Ashtead has in place a policy which is appropriate for the next three-year period of the Group’s development.

DIRECTORS’ REPORT66

Ashtead Group plc Annual Report & Accounts 2016

REMUNERATION REPORT CONTINUED

Context of remuneration review
Ashtead continues to deliver exceptionally strong growth and
associated returns to investors. The success of the Group
in delivering revenue and returns, particularly in the US market,
has been central to this growth and returns to investors.

The key strategic priorities of the Group are:

• Build a platform for growth:

− target 15% US market share;
− increase UK market share by 50%; and
− achieve a 5% market share in Canada.
• Maintain financial and operational flexibility:

− RoI above 15% for the Group;
− maintain leverage in the range of 1.5 to 2 times net debt

to EBITDA; and

− ensure financial firepower at the bottom of the cycle for

the next ‘step change’.
• Operational excellence:

− improve operational capability and effectiveness; and
− continued focus on service.

The Committee’s aim is to ensure that the remuneration of
management provides appropriate incentives and remains aligned
with these strategic objectives. In particular, the Committee has
considered the KPIs and risks associated with these strategic
objectives in order to formulate the proposed policy, metrics
and associated targets for the DBP and the PSP.

Summary of proposed changes to remuneration policy
The key proposed changes to the remuneration policy are set
out below:

• Increase the maximum DBP opportunity from 200% to 225%
of salary; although the policy maximum opportunity is to be
increased, the existing levels of incentive will continue to apply
for executive directors in 2016/17.

• Increase the maximum PSP opportunity from 200% to 250%
of salary; although the policy maximum opportunity is to be
increased, the existing levels of incentive opportunity will
continue to apply for executive directors in 2016/17.

• Introduce a two-year post-vesting holding period on future

PSP awards.

• Change the pension policy so that for new executive directors the
maximum contribution will not be greater than the median level
in the FTSE 100.

• Increase shareholding requirements to 300% of base salary for

the chief executive and 200% for other executive directors.

• Adopt an appropriate peer group for relative TSR measurement
purposes. This group comprises the FTSE 50–100 excluding
investment trusts.

The Committee believes that these approaches are aligned better
with remuneration objectives and the Group’s strategy and will
enable us to both retain and recruit competitively, as required,
and ensure executives are aligned fully with business performance.
In determining the appropriate incentive opportunities for each
financial year, the Committee will apply the following criteria
(excluding 2016/17 where the Committee has committed to
no changes):

• Performance – if revenue and profits fall substantially, the

incentive opportunity will not be increased and may be reduced
from its current level.

• Size of the Group – if the Group is no longer a member of the
FTSE 100 or its ranking is materially below the level when
the policy was designed, the incentive opportunity will not
be increased and may be reduced from its current level.
• Competitor position – if at the point of the annual review

remuneration is competitive against its peers, the incentive
opportunity will not be increased. In addition, if the comparative
position gets ahead of the Committee’s intended positioning,
incentive opportunities may be reduced.

• Total remuneration – the Committee will make its decisions
based on the potential total remuneration rather than each
element of the package individually to avoid any inadvertent
ratcheting of amounts.

OPERATION OF CURRENT POLICY FOR 2016/17
The Committee sets salary levels to reflect the scope of the roles,
their international context and the performance and experience
of the relevant executive director. It should be noted that the
Committee only uses comparator information to review the
decisions taken based on these factors, to ensure it remains
in compliance with the policy. When considering comparator
companies, the Committee looks for companies that are broadly in
line with Ashtead’s size, structure and complexity (with companies
in the FTSE 50–100 currently acting as the primary reference), while
also considering the need to remain competitive in the US market.

In accordance with our current approved remuneration policy,
with effect from 1 May 2016 the Committee made the following
salary increases:

• Geoff Drabble’s salary to £766,000 from £666,500 (15%).
• Brendan Horgan’s salary to $664,000 from $577,500 (15%).
• Suzanne Wood’s salary to $624,000 from $567,000 (10%).
• Sat Dhaiwal’s salary to £275,000 from £250,000 (10%).

These increases deliver on the commitment I made in my statement
in the 2014/15 Directors’ remuneration report to address the
disparity of salaries for our executive directors. The Committee
does not anticipate future years’ rises being greater than the
general rise to all employees unless there is a change in scope or
role of the relevant executive director.

As noted in the policy changes section, the increases to the DBP
and PSP will not be implemented during 2016/17, but provide scope
for future increases should these become necessary to maintain
the effectiveness of the Company’s reward arrangements.

Ashtead Group plc Annual Report & Accounts 2016

CONCLUSION
In undertaking its review, the Committee believes that the future
remuneration policy is tailored to the Group’s circumstances,
such that it:

• supports the Group’s strategy over the next stage of development;
• continues to act as an appropriate tool with which to attract,
retain and motivate executive management who are crucial
to executing the business strategy and the continued creation
of value for shareholders;

• ensures that remuneration is competitive against companies

of similar size and complexity; and

• reflects practice in the Group’s listing environment, whilst being
cognisant of its relatively diverse shareholder base which now
contains almost 40% US-based investors and the Group’s main
area of operation (being North America given that, in 2015/16,
86% of revenue was generated in this region).

The 2016 policy has been included on the agenda for the 2016 AGM.
The proposed policy is set out in full on pages 68 to 75 of this report.

The Committee believes that the proposed remuneration policy is in
the best long-term interests of the Group and its shareholders and
I strongly recommend that shareholders vote in favour of the 2016
policy and the 2016 Directors’ remuneration report.

MICHAEL BURROW
Chairman of the Remuneration Committee

The Committee believes that
the proposed remuneration
policy is in the best long-term
interests of the Group and
its shareholders.

CALIBRATION OF MEASURES
One area which has been raised by some investors relates to the
targets in respect of the PSP. As noted above in the context of the
review, the Committee specifically considered the KPIs of the
business as part of this exercise. Other than the relative TSR
metric, all three of the other performance metrics in the PSP (EPS,
RoI and leverage) are taken from these KPIs. Taking into account
the cyclical nature of Ashtead, the Committee continues to believe
that delivering consistent performance throughout the cycle is the
most appropriate approach to rewarding executives under the PSP.
As a result, the Committee has retained the same targets in respect
of EPS, RoI and leverage since 2012/13 and intends to continue
to do so.

The Committee has, however, adjusted the relative TSR metric to
reflect the most appropriate external comparator group available.
In 2012/13 and 2013/14, this was the FTSE 250 index. For the PSP
awards made in 2014/15 and 2015/16, the comparator group was
the FTSE 75-125. As can be seen from this, the Committee has,
therefore, sought to reflect the growth of Ashtead in its PSP
metrics and targets.

SHAREHOLDER CONSULTATION
On behalf of the Committee I met with, or corresponded with, the
Company’s major shareholders holding just over 50% of the issued
share capital. The feedback on the proposed policy changes varied
and this feedback has been taken into account in both the policy
and how it will be implemented for the next three years. Overall,
shareholders were broadly supportive of the proposed changes.

During the consultation process, some shareholders expressed
a preference that some of the conditions attaching to the PSP
awards should be amended. When setting the four performance
metrics, the Committee intended that the conditions should prevail
throughout the cycle and the dynamic tension between the
metrics would deliver long-term sustainable shareholder value.
Shareholders were comforted to hear that the metrics would be
throughout the cycle. Whilst the leverage ratio was mentioned by a
number of shareholders, this was in the context of the appropriate
level of leverage for the business.

DIRECTORS’ REPORT
68

Ashtead Group plc Annual Report & Accounts 2016

REMUNERATION REPORT CONTINUED

REMUNERATION POLICY

This report has been prepared in accordance with the Listing Rules of the Financial Conduct Authority,
the relevant sections of the Companies Act 2006 and The Large and Medium-sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2013 (‘the Regulations’). It explains how the Board
has applied the Principles of Good Governance relating to directors’ remuneration, as set out in the UK
Corporate Governance Code. The Regulations require the auditor 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 Companies Act 2006. The audited information
is included on pages 75 to 79.

As set out in the Committee chairman’s letter on pages 63 to 67, the Committee undertook a review of the Group’s remuneration
arrangements during the year. The proposed changes to the Group’s existing policy, approved in 2014, are set out in that letter.
The proposed 2016 policy set out below includes these changes.

Two ordinary resolutions concerning the Directors’ remuneration report will be put to shareholders at the AGM on 7 September 2016.
The first resolution is in respect of the implementation of the 2014 policy for the year ended 30 April 2016. The second resolution seeks
shareholders’ approval for the 2016 policy to apply for the next three years.

The aim of the remuneration policy set out below is to reward executives for delivering a sustainable increase in shareholder value over
a long period of time. Accordingly, we seek to:

• set the total remuneration package at a level that is competitive in the markets in which we operate;
• align executives’ interests with those of shareholders;
• link a significant element of total remuneration to the achievement of stretching performance targets over the long term;
• provide a total remuneration package that is balanced between fixed remuneration and variable, performance-based remuneration; and
• enable recruitment and retention of high-calibre executives without paying more than necessary to fill the role.

REMUNERATION POLICY
Summary of the Group’s remuneration policy

PERFORMANCE CONDITIONS
AND ASSESSMENT

N/A

LINK TO STRATEGY

OPERATION

MAXIMUM POTENTIAL VALUE

Base salary

The purpose of the base
salary is to attract and
retain directors of the high
calibre needed to deliver
the long-term success of
the Group without paying
more than is necessary
to fill the role.

Ordinarily, base salary is set
annually and is payable on a
monthly basis.

An executive director’s
base salary is determined
by the Committee. In
deciding appropriate levels,
the Committee considers
the experience and
performance of individuals
and relationships across
the Board and seeks to
be competitive using
information drawn from
both internal and external
sources and taking account
of pay and conditions
elsewhere in the Group.

The policy for salary is
around the median level
for comparable positions
in relation to the
comparator groups.

Increases will normally be
in line with both the market
and typical increases for
other employees across
the Group.

Details of the executive
directors’ salaries, and any
increases awarded will
be set out in the statement
of implementation of
remuneration policy for
the following financial year.

Ashtead Group plc Annual Report & Accounts 2016

LINK TO STRATEGY

OPERATION

MAXIMUM POTENTIAL VALUE

PERFORMANCE CONDITIONS
AND ASSESSMENT

N/A

Base salary
continued

Benefits

To provide competitive
employment benefits.

Pension

To provide a competitive
retirement benefit.

The comparator group
currently used to inform
decisions on base salary
is principally the FTSE 50
– 100 as these organisations
reflect the size and index
positioning of the Company.
The Committee intends
to review the comparator
group each year, to ensure
this remains appropriate,
and any changes would be
disclosed to shareholders
in setting out the operation
of the policy for the
subsequent year.

Individuals who are
recruited or promoted to
the Board may, on occasion,
have their salaries set
below the policy level until
they become established
in their role. In such cases
subsequent increases in
salary may be higher until
the target positioning
is achieved.

The executive directors’
benefits will generally
include medical insurance,
life cover, car allowance and
travel and accommodation
allowances.

The type and level of
benefits provided is
reviewed periodically
to ensure they remain
market competitive.

The Company makes
pension contributions
(or pays a salary
supplement in lieu of
pension contributions) of
between 5% and 40% of
an executive’s base salary.

The maximum will be set
at the cost of providing
the listed benefits.

N/A

The maximum contribution
is 40% of salary. For new
directors, the maximum
contribution will not exceed
the median level in the
FTSE 100.

DIRECTORS’ REPORT70

Ashtead Group plc Annual Report & Accounts 2016

REMUNERATION REPORT CONTINUED

LINK TO STRATEGY

OPERATION

MAXIMUM POTENTIAL VALUE

Deferred
Bonus Plan
(‘DBP’)

The purpose of the DBP is
to incentivise executives to
deliver stretching annual
financial performance while
aligning short-term and
long-term reward through
compulsory deferral of
a proportion into share
equivalents. This promotes
the alignment of executive
and shareholder interests.

The maximum annual bonus
opportunity under the DBP
is 225% of base salary.

Target performance earns
50% of the maximum bonus
opportunity.

The DBP runs for
consecutive three-year
periods with a significant
proportion of any earned
bonus being compulsorily
deferred into share
equivalents. Based on
achievement of annual
performance targets,
participants receive
two-thirds of the combined
total of their earned bonus
for the current year and
the value of any share
equivalent awards brought
forward from the previous
year at the then share price.
The other one-third is
compulsorily deferred
into a new award of share
equivalents evaluated at
the then share price.

Deferred share equivalents
are subject to 50% forfeiture
for each subsequent year
of the plan period where
performance falls below
the forfeiture threshold
set by the Committee.

At the expiration of each
three-year period,
participants will, subject
to attainment of the
performance conditions
for that year, receive in cash
their bonus for that year
plus any brought forward
deferral at its then value.

Dividend equivalents may
be provided on deferred
share equivalents.

PERFORMANCE CONDITIONS
AND ASSESSMENT

The current DBP
performance conditions are:

• Group underlying pre-tax
profit for the Group chief
executive and finance
director.

• Sunbelt underlying

operating profit for the
Sunbelt chief executive.

• A-Plant underlying

operating profit for the
A-Plant chief executive.

Stretching financial targets
are set by the Committee at
the start of each financial
year.

The Group operates in a
rapidly changing sector and
therefore the Committee
may change the balance
of the measures, or use
different measures for
subsequent financial years,
as appropriate.

The Committee has the
discretion to adjust targets
or weightings for any
exceptional events that
may occur during the year.

The Committee is of the
opinion that given the
commercial sensitivity
arising in relation to the
detailed financial targets
used for the DBP, disclosing
precise targets for the
bonus plan in advance
would not be in shareholder
interests. Actual targets,
performance achieved and
awards made will be
published at the end of the
performance periods so
shareholders can
assess fully the basis for
any payouts under the plan.

Ashtead Group plc Annual Report & Accounts 2016

Performance
Share Plan
(‘PSP’)

LINK TO STRATEGY

OPERATION

MAXIMUM POTENTIAL VALUE

The maximum annual award
which can be made under
the PSP scheme has a
market value at the grant
date of 250% of base salary.

At target performance
32.5% of the award vests.

In 2016/17 the award for
Sat Dhaiwal and Suzanne
Wood will be 150% and
for Geoff Drabble and
Brendan Horgan, 200%
of base salary.

The purpose of the PSP
is to attract, retain and
incentivise executives
to optimise business
performance through the
economic cycle and hence,
build a stronger underlying
business with sustainable
long-term shareholder
value creation.

This is an inherently
cyclical business with high
capital requirements. The
performance conditions
have been chosen to ensure
that there is an appropriate
dynamic tension between
growing earnings,
delivering strong RoI,
whilst maintaining
leverage discipline.

PSP awards are granted
annually and vesting
is dependent on the
achievement of
performance conditions.
Performance is measured
over a three-year period.

The operation of the PSP
is reviewed annually to
ensure that grant levels,
performance criteria and
other features remain
appropriate to the
Company’s current
circumstances.

Dividend equivalents may be
provided on vested shares.

Vested shares (net of taxes)
are required to be held for
a period of at least two
years post vesting.

PERFORMANCE CONDITIONS
AND ASSESSMENT

Awards are subject to
continued employment
and achievement of a range
of balanced and holistic
performance conditions
that are maintained across
the cycle. The current
performance criteria are
total shareholder return
(40%), earnings per
share (25%), return on
investment (25%) and
leverage (10%).

Awards vest on a pro
rata basis as follows:

Total shareholder return –
median to upper quartile
performance against an
appropriate comparator
group

Earnings per share –
compound growth of 6-12%
per annum

Return on investment –
10-15%

Leverage – less than,
or equal to, 2.5 times.

Shareholding
Policy

Ensures a long-term
locked-in alignment
between the executive
directors and shareholders.

Minimum shareholding
requirement:

• Chief executive – 300%

of salary

• Other executive directors

– 200% of salary

The Committee requires the
executive directors to build
and maintain a material
shareholding in the
Company over a reasonable
time frame, which would
normally be five years.

The Committee has
discretion to increase the
shareholding requirement.

Notes to the policy table:
1. In relation to the DBP, individual awards to directors are dependent on the most relevant measure of profit for the role which they perform, and thus over which they have the most direct

influence. Profit is a key component of earnings per share, one of the Group’s key performance indicators and is considered the primary measure which aligns with shareholders’ interests.

2. In relation to the PSP:
a. Total shareholder return measures the relative return from Ashtead against an appropriate comparator group, providing alignment with shareholders’ interests.
b. Earnings per share is also a key measure ensuring sustainable profit generation over the longer term and is a measure which is aligned with shareholders’ interests.

c. Return on investment is a key internal measure to ensure the effective use of capital in the business which is highly cyclical and with high capital requirements.

d. The use of leverage alongside the other performance measures ensures there is an appropriate dynamic tension and balance, maintaining leverage discipline in a capital-intensive business.
3. In relation to both the DBP and the PSP, malus and clawback provisions exist which enable the Committee to reduce or eliminate the number of shares, notional shares or unvested shares

held or reduce the amount of any money payable or potentially payable and/or to require the transfer to the Company of all or some of the shares acquired or to pay to the Company an amount
equal to all or part of any benefit or value derived from, or attributable to, the plans in case of material misstatement of accounts or action or conduct of an award holder or award holders
which in the reasonable opinion of the Board, amounts to fraud or gross misconduct.

DIRECTORS’ REPORT
72

Ashtead Group plc Annual Report & Accounts 2016

REMUNERATION REPORT CONTINUED

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.

Remuneration policy on new hires
When hiring a new executive director, the Committee will seek to align the remuneration package with the remuneration policy
summarised above. In addition, where the executive has to relocate, the level of relocation package will be assessed on a case by
case basis. Although it is not the Committee’s policy to buy out former incentive arrangements as a matter of course, it will consider
compensating an incoming executive with like-kind incentive arrangements for foregone incentives with their previous employer,
taking into account the length of the period they were held and an assessment of the likely vesting value. The Committee will ensure
that such arrangements are in the best interests of both the Company and the shareholders without paying more than is necessary.

Total remuneration opportunity
Our remuneration arrangements are designed so that a significant proportion of pay is dependent on the delivery of short and long-term
objectives designed to create shareholder value.

The charts below illustrate the potential future reward opportunity for each of the executive directors, based on the remuneration policy
set out on pages 68 to 71 and the base salary at 1 May 2016 and the sterling/dollar exchange rate at 30 April 2016.

CHIEF EXECUTIVE – GEOFF DRABBLE (£’000)

FINANCE DIRECTOR – SUZANNE WOOD (£’000)

Minimum

69%

31%

1,111

Minimum

81%

19%

523

Target

32%

14%

33% 21%

2,375

Target

41%

30% 20%

1,051

Maximum

18%

37%

4,175

Maximum

25%

1,000

2,000

3,000

4,000

5,000

500

35%

1,801

1,000

1,500

2,000

SUNBELT CHIEF EXECUTIVE – BRENDAN HORGAN (£’000)

A-PLANT CHIEF EXECUTIVE – SAT DHAIWAL (£’000)

Minimum

94%

484

Minimum

79%

21%

347

Target

41%

30% 26%

1,118

Target

40%

10%

30% 20%

687

Maximum

22%

33%

44%

2,070

Maximum

24%

35%

1,172

500

1,000

1,500

2,000

2,500

500

1,000

1,500

Salary

Pension and benefits

DBP

PSP

In illustrating potential reward opportunities, the following assumptions have been made:

Minimum

Target
Maximum

BASE AND PENSION
Base salary, benefits and pension
or cash in lieu of pension
As above
As above

DBP
No DBP payment payable

PSP
No vesting

On target DBP payment (50% of maximum)
Maximum DBP payment

32.5% vesting
Full vesting

In all scenarios, the impact of share price movements on the value of PSPs and mandatory bonus deferrals into the DBP have been excluded.

Ashtead Group plc Annual Report & Accounts 2016

Service contracts
The Company’s policy is that executive directors have rolling contracts which are terminable by either party giving the other 12 months’
notice, which are available for inspection at the Company’s registered office. The service contracts for each of the executive directors all
contain non-compete provisions appropriate to their roles.

Policy on payment for loss of office
Upon the termination of employment of any executive director, any compensation will be determined in accordance with the relevant
provisions of the director’s employment contract and the rules of any incentive scheme, which are summarised below.

ELEMENT

APPROACH

APPLICATION OF COMMITTEE DISCRETION

Base salary
and benefits

In the event of termination by the Company, there will be no
compensation for loss of office due to misconduct or normal resignation.

The Committee has discretion to make
a lump sum payment in lieu.

Pension

DBP

In other circumstances, executive directors may be entitled to
receive compensation for loss of office which will be a maximum
of 12 months’ salary.

Such payments will be equivalent to the monthly salary and benefits
that the executive would have received if still in employment with the
Company. Executive directors will be expected to mitigate their loss
within a 12-month period of their departure from the Company.

Pension contributions or payments in lieu of pension contribution will
be made during the notice period. No additional payments will be made
in respect of pension contributions for loss of office.
The treatment of the Deferred Bonus Plan is governed by the rules
of the plan.

Cessation of employment
If a participant ceases to be employed by a Group company for any
reason, an award that has not vested shall lapse unless the Committee
in its absolute discretion determines otherwise for ‘good leaver’ reasons
(including, but not limited to, injury, disability, ill health, retirement,
redundancy or transfer of the business).

If the Committee determines that deferred awards held in a participant’s
plan account shall not lapse on cessation of employment, all deferred
awards held in the participant’s plan account shall vest immediately and
the Committee shall determine:

(a) whether the measurement date for that plan year is brought forward
to the date of cessation or remains at the end of the plan year; and

(b) whether a reduction is applied to the payment to take account of the
proportion of the plan year elapsed and the contribution to the Group.

If the Committee determines that the measurement date is the date
of cessation, the Committee shall pro-rate the performance conditions
to the date of cessation.

Change of control
On a change of control, all deferred awards held in a participant’s plan
account shall vest immediately and the Committee shall determine:

(a) that the measurement date is the date of the change of control; and

(b) whether a reduction is applied to the payment to take account of the

proportion of the plan year elapsed and the participant’s contribution
to the Group.

The Committee shall pro-rate the performance conditions to the
measurement date.

In the event of an internal reorganisation, the Committee may determine
that awards are replaced by equivalent awards.

The Committee has discretion to make
a lump sum payment in lieu.

The Committee has the discretion to
determine that an executive director
is a ‘good leaver’.

The Committee retains discretion to set
the measurement date for the purposes of
determining performance measurement
and whether to pro-rate the contribution
for that plan year.

It should be noted that it is the
Committee’s policy only to apply such
discretions if the circumstances at the
time are, in its opinion, sufficiently
exceptional, and to provide a full
explanation to shareholders where
discretion is exercised.

The Committee retains discretion to
pro-rate the contribution for that plan year.

It is the Committee’s policy in normal
circumstances to pro-rate to time;
however, in exceptional circumstances
where the nature of the transaction
produces exceptional value for
shareholders and provided the
performance targets are met, the
Committee will consider whether
pro-rating is equitable.

DIRECTORS’ REPORT74

Ashtead Group plc Annual Report & Accounts 2016

REMUNERATION REPORT CONTINUED

ELEMENT

APPROACH

PSP

The treatment of awards is governed by the rules of the plan.

Where the participant is a ‘good leaver’, and at the discretion of the
Committee, awards may continue until the normal time of vesting and
with the performance target and any other conditions considered at the
time of vesting. If the participant’s awards vest, the proportion of the
awards which shall vest will be determined by the Committee in its
absolute discretion taking into account such factors as the Committee
may consider relevant including, but not limited to, the time the award
has been held by the participant and having regard to the performance
target and any further condition imposed under the rules of the plan.

Alternatively, the Committee may decide that the award may vest on
the date of cessation taking into account such factors as the Committee
may consider relevant including, but not limited to, the time the award
has been held by the participant and having regard to the performance
target and any further condition imposed under the rules of the plan.

Change of control
The proportion of the awards which shall vest will be determined by the
Committee in its absolute discretion taking into account such factors as
the Committee may consider relevant including, but not limited to, the
time the award has been held by the participant and having regard to the
performance target and any further condition imposed under the rules
of the plan.

APPLICATION OF COMMITTEE DISCRETION

The Committee has the discretion to
determine that an executive director
is a ‘good leaver’.

The Committee retains discretion to set
the vesting date.

It is the Committee’s policy to measure
the level of satisfaction of performance
targets on a change of control. It is
the Committee’s policy in normal
circumstances to pro-rate to time; however,
in exceptional circumstances where the
nature of the transaction produces
exceptional value for shareholders and
provided the performance targets are met,
the Committee will consider whether
pro-rating is equitable.

There is no agreement between the Company and its directors or employees, providing for compensation for loss of office or employment
that occurs as a result of a takeover bid. The Committee reserves the right to make payments where such payments are made in good faith
in discharge of a legal obligation (or by way of damages for breach of such an obligation); or by way of settlement or compromise of any
claim arising in connection with the termination of an executive director’s office or employment.

When determining any loss of office payment for a departing individual the Committee will always seek to minimise cost to the Company
whilst seeking to address the circumstances at the time.

Consideration of conditions elsewhere in the Company
The constituent parts of the senior management team’s remuneration package mirror those of the executives. The performance conditions
attaching to PSP awards are common throughout the Company.

When considering executive compensation, the Committee is advised of, and takes into account, changes to the remuneration of
employees elsewhere within the Company. The Committee does not consider it appropriate to consult with employees when determining
executive remuneration.

Ashtead Group plc Annual Report & Accounts 2016

ANNUAL REPORT
ON REMUNERATION

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.
When recruiting a non-executive director, the remuneration arrangements offered will be in line with the policy table below:

APPROACH TO FEES
Fees are set at a level to attract and retain high-calibre
non-executive directors.
Fees are reviewed on a regular basis to ensure they reflect the
time commitment required and practice in companies of a similar
size and complexity.

BASIS OF FEES
Each non-executive director is paid a basic fee for undertaking
non-executive director and board responsibilities.
Additional fees are paid to the chairman and the chairs of the Audit
and Remuneration Committees and the senior independent director.

Consideration of shareholder views
The Committee believes that it is important to maintain an open and transparent dialogue with shareholders on remuneration matters.

The Committee sought the views of its major shareholders on the proposed new remuneration policy. The views expressed by the
shareholders have been taken into account in determining the policy and the implementation of it.

Looking forward, the Committee will continue to engage with shareholders regarding material changes to the application of the approved
policy or proposed changes to the policy.

ANNUAL REPORT ON REMUNERATION
Single total figure for remuneration (audited information)
Executive directors
The single figure for the total remuneration received by each executive director for the year ended 30 April 2016 and the prior year is shown
in the table below:

Sat Dhaiwal
Geoff Drabble
Brendan Horgan
Suzanne Wood

2016
£’000
250
667
384
377
1,678

Salary

2015
£’000
245
641
345
338
1,569

Benefits(i)

Pension(ii)

DBP(iii)

PSP(iv)

2016
£’000
17
199
19
81
316

2015
£’000
17
75
17
79
188

2016
£’000
50
267
12
16
345

2015
£’000
49
256
11
19
335

2016
£’000
208
1,113
473
465
2,259

2015
£’000
250
854
345
338
1,787

2016
£’000
239
869
370
351
1,829

2015
£’000
723
2,339
912
912
4,886

2016
£’000
764
3,115
1,258
1,290
6,427

Total

2015
£’000
1,284
4,165
1,630
1,686
8,765

(i)

(ii)

Benefits include the taxable benefit of company owned cars, private medical insurance and subscriptions and other taxable allowances. Other taxable allowances include car, travel and
accommodation allowances. The amount for Geoff Drabble includes the buyout of his accommodation allowance entitlement.
The amounts for Sat Dhaiwal and Geoff Drabble represent cash payments in lieu of pension contributions at 20% and 40% of salary, respectively. The amounts included for Brendan Horgan
and Suzanne Wood represent the co-match under Sunbelt’s 401K defined contribution pension plan and 409A deferred compensation plan.

(iii) DBP includes the cash received by each director from the DBP for 2015/16 performance as explained on pages 76 and 77. This includes 67% of this year’s bonus for each director.
(iv) The PSP value is calculated as the number of shares vesting, valued at the market value of those shares, plus the payment in lieu of dividends paid during the vesting period. Market value

is the market value on the day the awards vest (if they vest before the date the financial statements are approved) or the average market value for the last three months of the financial year
(if the awards vest after the date the financial statements are approved). The 2013 award is expected to vest partially (c.81%), based on the TSR performance at 30 April 2016, on 30 June
2016 and has been valued at an average market value of 856p for the three months ended 30 April 2016, plus 36.75p per share in lieu of dividends paid during the vesting period. The PSP
value for 2015 has been adjusted to reflect the actual market value on the date of vesting of 1,045p.

DIRECTORS’ REPORT76

Ashtead Group plc Annual Report & Accounts 2016

REMUNERATION REPORT CONTINUED

The value attributable to the PSP awards within the single total figure for remuneration reflects the appreciation of the share price since
the awards were granted. This is illustrated as follows:

£’000

Sat
Dhaiwal

Geoff
Drabble

178

100

200

300

400

200

400

647

600

222

800

1,000

Brendan
Horgan

Suzanne
Wood

276

100

200

300

400

261

100

200

300

400

Performance element based on share price at date of grant
Share price appreciation element since grant date plus cash in lieu of dividends

Directors’ pension benefits (audited information)
The Company makes a payment of 20% of Sat Dhaiwal’s base salary in lieu of providing him with any ongoing pension arrangements.

The Company makes a payment of 40% of Geoff Drabble’s base salary in lieu of providing him with any pension arrangements. This 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.

Brendan Horgan and Suzanne Wood are members of the Sunbelt 401K defined contribution pension plan and the 409A deferred
compensation plan. They are entitled to a company co-match conditional on contributing into the 401K plan or deferring into the 409A plan.
The co-match is limited to amounts permitted by regulatory agencies and is effected either by a company payment into the 401K plan or an
enhanced deferral into the 409A plan and was $18,070 for Brendan Horgan and $24,400 for Suzanne Wood in 2015/16.

At 30 April 2016, the total amount available to Brendan Horgan but deferred under the Sunbelt deferred compensation plan was $421,140
or £287,468. This includes an allocated investment loss of $25,600 or £17,039 (2015: gain of £19,549). The amount available to Suzanne
Wood under the same plan was $329,876 or £225,171. This includes an allocated investment loss of $14,257 or £9,489 (2015: gain of £16,019).

The Deferred Bonus Plan (audited information)
The performance targets for the Deferred Bonus Plan for the year were as follows:

Forfeiture
Entry
Threshold
Target
Maximum
Actual – reported
Actual – budget exchange rates

* Underlying profit.

Group
pre-tax
profit*
£490m
£580m
£595m
£610m
£635m
£645m
£634m

Sunbelt
operating
profit*
$833m
$950m
$970m
$985m
$1,015m
$1,014m
n/a

A-Plant
operating
profit*
£46m
£60m
£63m
£67m
£73m
£67m
n/a

The performance targets for Geoff Drabble and Suzanne Wood for the year to 30 April 2016 related directly to the underlying pre-tax profits
of Ashtead Group. The targets for Brendan Horgan and Sat Dhaiwal, related to the underlying operating profit of Sunbelt and A-Plant
respectively. The Group target set by the Committee for full entitlement under the DBP was significantly ahead of the prior year (£490m)
and ahead of the consensus market expectation of £612m when the target was set. The targets for Sunbelt and A-Plant were significantly
ahead of the prior year of $833m and £46m respectively. For the year to 30 April 2016, the underlying pre-tax profit for Ashtead Group was
£634m at budget exchange rates and underlying operating profit for Sunbelt and A-Plant was $1,014m and £67m respectively. As a result,
Geoff Drabble, Suzanne Wood and Brendan Horgan earned 98% of their maximum bonus entitlements and Sat Dhaiwal earned 50%. These
are equivalent to 196% of base salary for Geoff Drabble, 147% of base salary for Suzanne Wood and Brendan Horgan and 75% of base
salary for Sat Dhaiwal. Sat Dhaiwal’s salary review date was 1 November. This year we deferred his salary increase six months to coincide
with the other executive directors. However, in deferring the increase we agreed that his bonus would be based on his salary effective from
1 May 2016.

Ashtead Group plc Annual Report & Accounts 2016

Sat Dhaiwal
Geoff Drabble
Brendan Horgan
Suzanne Wood

Number of share equivalent awards

Brought
forward
11,101
37,940
15,892
15,603

Released
(7,401)
(25,293)
(10,595)
(10,402)

Granted
7,184
45,501
20,611
20,253

Carried
forward
10,884
58,148
25,908
25,454

Value of
released
awards
£’000
71
242
101
100

The Performance Share Plan
The performance criteria represent a balanced and holistic approach involving four measures selected because delivery of them through
the cycle is a significant challenge and the achievement of them will deliver optimum sustainable performance over the long term.
The performance criteria are as follows:

Performance criteria (measured over three years)

Award date
19/9/12

Financial
year
TSR (40%)
2012/13 From date of grant

versus FTSE 250
Index (25% of this
element of the award
will vest at median;
100% at upper
quartile)

1/7/13

2013/14 As above

RoI (25%)
25% of this element
of the award will
vest at an RoI of 10%
with 100% vesting
with an RoI of 15%

Leverage (10%)
100% of this
element of the
award will vest if the
ratio of net debt to
EBITDA is equal to,
or is less than,
2.5 times

As above

EPS (25%)
25% of this element
of the award will
vest if EPS
compound growth
for the three years
ending 30 April
immediately prior to
the vesting date is
6% per annum,
rising to 100%
vesting if EPS
compound growth is
equal to, or exceeds,
12% per annum

19/6/14

2014/15 From 1 May of the

As above

year of grant versus
the FTSE 350
companies ranked
75th to 125th by
market capitalisation

6/7/15

2015/16 As above*

As above

Status
Vested in full in
September/October 2015

2013 award
Expected to vest partially
in June 2016. TSR
performance is in the
second quartile, EPS
growth of 171%, RoI of 19%
and leverage of 1.7 times

2014 award
TSR performance is in the
third quartile, EPS growth
of 83%, RoI of 19% and
leverage of 1.7 times

2015 award
TSR performance is in
the fourth quartile, EPS
growth of 36%, RoI of 19%
and leverage of 1.7 times

* The TSR comparator is FTSE 350 companies ranked 75th to 125th by market capitalisation for awards up to 150% of base salary. The comparator group for that element of any award

above 150% of base salary is FTSE 350 companies ranked 50th to 100th by market capitalisation.

For performance between the lower and upper target ranges, vesting of the award is scaled on a straight-line basis.

The 2012 PSP award vested in full on 9 October 2015 with EPS for 2014/15 of 50% exceeding the upper target of 12% and the Company’s
TSR performance ranked it 13th within the FTSE 250 (excluding investment trusts). RoI was 19% and leverage 1.8 times.

EPS is based on the profit before exceptional items, fair value remeasurements and amortisation of acquired intangibles less the tax
charge included in the accounts. Historically, TSR performance has been measured 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 was a FTSE 250 company. From 2014/15 the comparator group is comprised primarily of those companies in the
FTSE 350 ranked 75th to 125th by market capitalisation (excluding investment trusts). The Company’s TSR performance relative to the
FTSE 250 (excluding investment trusts) and FTSE 100 (excluding investment trusts) is shown on page 80.

DIRECTORS’ REPORT78

Ashtead Group plc Annual Report & Accounts 2016

REMUNERATION REPORT CONTINUED

Single total figure of remuneration (audited information)
Non-executive directors

Chris Cole
Michael Burrow
Wayne Edmunds
Bruce Edwards
Hugh Etheridge
Ian Sutcliffe

2016
£’000
200
60
60
50
–
60
430

Fees

2015
£’000
193
59
58
49
11
58
428

The non-executive directors did not receive any remuneration from the Company in addition to the fees detailed above.

Scheme interests awarded between 1 May 2015 and 30 April 2016 (audited information)
Performance Share Plan
The awards made on 6 July 2015 are subject to the rules of the PSP and the achievement of stretching performance conditions, which are
set out on page 71, over a three-year period to 30 April 2018. The awards are summarised below:

Sat Dhaiwal
Geoff Drabble
Brendan Horgan
Suzanne Wood

Number
35,680
126,832
70,437
51,867

Face value
of award
£‘000
375
1,333
740
545

Face value of
award as %
of base salary
150%
200%
200%
150%

% of award vesting
for target
performance
32.5%
32.5%
32.5%
32.5%

Note
PSP awards were allocated on 6 July 2015 using the closing mid-market share price (1,051p) of Ashtead Group plc on that day.

Payments to past directors (audited information)
No payments were made to past directors of the Company during the year.

Payments for loss of office (audited information)
During the year there have been no payments made to directors for loss of office.

Statement of executive directors’ shareholdings and share interests (audited information)
The executive directors are subject to a minimum shareholding obligation. Under the proposed 2016 remuneration policy, the chief
executive is expected to hold shares at least equal to 300% of base salary and the remaining executive directors are expected to hold
shares at least equal to 200% of base salary. As shown below, the executive directors comply with these shareholding requirements.

Sat Dhaiwal
Geoff Drabble
Brendan Horgan
Suzanne Wood

Shares held
outright at
30 April 2016
398,375
1,334,159
493,874
208,805

Shares held
outright at
30 April 2016
as a % of salary
1,240%
1,491%
933%
420%

Outstanding unvested
scheme interests
subject to
performance measures
96,582
358,575
168,420
146,332

Total of all share
interests and
outstanding
scheme interests
at 30 April 2016
494,957
1,692,734
662,294
355,137

Notes
1. Interests in shares held at 30 April 2016 include shares held by connected persons.
2. All outstanding scheme interests take the form of rights to receive shares.
3. In calculating shareholding as a percentage of salary, the average share price for the three months ended 30 April 2016, the sterling/dollar exchange rate at 30 April 2016, and the directors’

salaries at 1 May 2016, have been used.

Ashtead Group plc Annual Report & Accounts 2016

Performance Share Plan awards
Awards made under the PSP, and those which remain outstanding at 30 April 2016, are shown in the table below:

Sat Dhaiwal

Geoff Drabble

Brendan Horgan

Suzanne Wood

Date of
grant
19/09/12
01/07/13
19/06/14
06/07/15
19/09/12
01/07/13
19/06/14
06/07/15
19/09/12
01/07/13
19/06/14
06/07/15
19/09/12
01/07/13
19/06/14
06/07/15

Held at
30 April 2015
67,012
33,108
27,794
–
216,680
120,429
111,314
–
84,491
51,300
46,683
–
84,491
48,631
45,834
–

Exercised
during the year
67,012
–
–
–
216,680
–
–
–
84,491
–
–
–
84,491
–
–
–

Granted
during the year
–
–
–
35,680
–
–
–
126,832
–
–
–
70,437
–
–
–
51,867

Held at
30 April 2016
–
33,108
27,794
35,680
–
120,429
111,314
126,832
–
51,300
46,683
70,437
–
48,631
45,834
51,867

The performance conditions attaching to the PSP awards are detailed on page 77. The market price of the awards granted during the year
was 1,051p on the date of grant.

Statement of non-executive directors’ shareholding (audited information)
As at 30 April 2016, the non-executive directors’ interests in ordinary shares of the Company were:

Michael Burrow
Chris Cole
Wayne Edmunds
Bruce Edwards
Ian Sutcliffe

Number
22,500
135,082
–
40,000
24,500

The market price of the Company’s shares at the end of the financial year was 907.5p and the highest and lowest closing prices during the
financial year were 1,217p and 769p respectively.

DIRECTORS’ REPORT80

Ashtead Group plc Annual Report & Accounts 2016

REMUNERATION REPORT CONTINUED

18x

TOTAL SHAREHOLDER RETURN

Performance graph and table
Over the last eight years the Company has generated an 18-fold total shareholder return (‘TSR’) which is shown below. The following graph
compares the Company’s TSR performance with the FTSE 100 Index and 250 Index (both excluding investment trusts) over the eight years
ended 30 April 2016. 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 over that period.

TOTAL SHAREHOLDER RETURN (£)

2,500

2,000

1,500

1,000

500

0
Apr
2008

Apr
2009

Apr
2010

Apr
2011

Apr
2012

Apr
2013

Apr
2014

Apr
2015

Apr
2016

Ashtead
FTSE 100 excluding investment trusts
FTSE 250 excluding investment trusts

During the same period, the total remuneration received by the Group chief executive has increased as a result of the strong performance
of the business:

Total remuneration (£’000)
Underlying profit before tax (£m)
Proportion of maximum annual
bonus potential awarded
Proportion of PSP vesting

2009
826
87

25%
0%

2010
1,037
5

75%
0%

2011
2,166
31

100%
50%

2012
4,613
131

100%
100%

2013
6,510
245

100%
100%

2014
7,272
362

100%
100%

2015
4,165
490

100%
100%

2016
3,115
645

98%
81%

Percentage change in remuneration of chief executive
The table below summarises the percentage change in remuneration of Geoff Drabble, the chief executive, between the years ended
30 April 2015 and 30 April 2016 and the average percentage change over the same period for the Group as a whole. Geoff Drabble
participates in the Deferred Bonus Plan and his annual bonus reflects payments under this plan. Details are provided on pages 76 and 77.

Chief executive percentage change
Group percentage change

Salary
4%
3%

Benefits
164%
0%

Annual bonus
30%
-17%

Relative importance of spend on pay
The following table shows the year-on-year change in underlying profit before tax, dividends and aggregate staff costs (see Note 4:
Operating costs and other income to the consolidated financial statements).

Underlying profit before tax
Dividend declared
Aggregate staff costs

2014/15
£m
490
76
486

2015/16
£m
645
113
594

Change
%
32%
48%
22%

Ashtead Group plc Annual Report & Accounts 2016

Consideration by the directors of matters relating to directors’
remuneration
The Company has established a Remuneration Committee (‘the
Committee’) in accordance with the recommendations of the UK
Corporate Governance Code. The Committee is comprised of
independent non-executive directors. The members of the
Committee are as follows:

Chairman

Michael Burrow
Wayne Edmunds
Bruce Edwards
Lucinda Riches
Ian Sutcliffe

None of the Committee members has any personal financial
interests, other than as shareholders, in the matters to be decided.
None of the members of the Committee is or has been at any time
one of the Company’s executive directors or an employee. None of
the executive directors 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 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. Eric Watkins acts as secretary
to the Committee. Under Michael Burrow’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. The Committee appointed
PricewaterhouseCoopers LLP (‘PwC’) to provide independent
advice on various matters it considered. PwC was appointed in 2011
following an interview process by the Committee. PwC is a member
of the Remuneration Consultants Group and adheres to its code in
relation to executive remuneration consulting in the UK. The fees
paid to PwC for its professional advice on remuneration during the
year were £121,000. PwC also provided specific tax services to the
Company during the year. The Committee is satisfied that neither
the nature nor scope of these non-remuneration services by PwC
impaired its independence as advisers to the Committee.

Remuneration for the year commencing 1 May 2016
Basic salary
Salary with effect from 1 May 2016:

Sat Dhaiwal
Geoff Drabble
Brendan Horgan
Suzanne Wood

£275,000
£766,000
$664,000
$624,000

Benefits
Benefits will continue to be applied as per the Policy and application
in previous years.

Retirement benefits
Retirement benefits will continue to be applied as per the Policy
and application in previous years.

Deferred Bonus Plan
Geoff Drabble, Suzanne Wood, Brendan Horgan and Sat Dhaiwal
participate in the DBP. The maximum annual bonus opportunities
as a percentage of salary are 200% for Geoff Drabble and 150% for
Suzanne Wood, Brendan Horgan and Sat Dhaiwal. The performance
measures are set out on page 70. These performance measures
should be viewed in conjunction with the wider performance targets
set for the 2016/17 PSP awards as detailed on page 71.

Performance Share Plan
A 2016 PSP award will be made as follows:

Sat Dhaiwal
Geoff Drabble
Brendan Horgan
Suzanne Wood

Value of
2016 award
£’000
413
1,532
906
639

These awards are based on the directors’ salaries as at 1 May 2016
and, where appropriate, the sterling/dollar exchange rate at
30 April 2016.

Non-executive fees
Fees for non-executive directors with effect from 1 May 2016 are:

Chris Cole
Michael Burrow
Wayne Edmunds
Bruce Edwards
Lucinda Riches
Ian Sutcliffe

£200,000
£60,000
£60,000
£50,000
£50,000*
£60,000

* With effect from date of appointment. This will increase to £60,000 when Lucinda becomes

chair of the Remuneration Committee on 8 September 2016.

DIRECTORS’ REPORT82

Ashtead Group plc Annual Report & Accounts 2016

REMUNERATION REPORT CONTINUED

Main responsibilities of the Remuneration Committee
The principal duties of the Committee are:

• determining and agreeing with the Board the framework

and policy for the remuneration of the executive directors and
senior employees;

• ensuring that executive management is provided with appropriate

incentives to encourage enhanced performance in a fair and
responsible manner;

• reviewing and determining the total remuneration packages for
each executive director including bonuses and incentive plans;
• determining the policy for the scope of pension arrangements,
service agreements, termination payments and compensation
commitments for each of the executive directors; and

• ensuring compliance with all statutory and regulatory provisions.

Summary of the Committee’s work during the year
The principal matters addressed during the year were:

• assessment of the achievement of the executive directors against

their annual bonus and Deferred Bonus Plan objectives;

• setting Deferred Bonus Plan performance targets for the year;
• assessment of performance for the vesting of the 2012 PSP

awards;

• grant of 2015 PSP awards and setting the performance targets

attaching thereto;

• review of executive base salaries; and
• approval of the Directors’ remuneration report for the year

ended 30 April 2015.

Shareholder voting
Two ordinary resolutions concerning the Directors’ remuneration
Report will be put to shareholders at the forthcoming Annual
General Meeting. The first will be in respect of the implementation
of the policy for 2015/16. The second resolution seeks shareholders’
approval of the Company’s new remuneration policy which will
apply for the next three years.

Ashtead is committed to ongoing shareholder dialogue and
considers carefully voting outcomes. Recognising the views
expressed by some of its shareholders in the voting patterns on the
remuneration reports in both 2013/14 and 2014/15, the Committee
determined that the most appropriate and complete response was
to review the policy and its implementation. As part of this process,
Michael Burrow met or corresponded with major shareholders
accounting for just over 50% of the issued share capital. The
feedback on the proposed policy changes has been taken into
account in the new policy and how it will be implemented for the
next three years.

The following table sets out the voting results in respect of our
previous report in 2015:

2014/15 Directors’ annual report
on remuneration

For

Against

73.15%

26.85%

24,711,797 votes were withheld (c.6.89% of share capital) out
of total votes cast of 358,618,638 in relation to the Directors’
remuneration report.

This report has been approved by the Remuneration Committee
and is signed on its behalf by:

MICHAEL BURROW
Chairman, Remuneration Committee
13 June 2016

OTHER STATUTORY DISCLOSURES

Ashtead Group plc Annual Report & Accounts 2016

Pages 50 to 85 inclusive (together with the sections of the Annual
Report incorporated by reference) form part of the Directors’ report.

Other information, which forms part of the Directors’ report, can be
found in the following sections of the Annual Report:

Transfer of shares
Certified shares
(i) Transfers may be in favour of more than four joint holders,
but the directors can refuse to register such a transfer.

Acquisitions
Audit Committee report
Board and committee membership
Corporate governance report
Directors’ biographies
Directors’ responsibility statement
Financial risk management
Future developments
Greenhouse gas emissions
Nomination Committee report
Other statutory disclosures
Our people
Pension schemes
Post balance sheet events
Results and dividends
Share capital
Social responsibility

Location
Financial statements – Note 26
Page 59
Page 52
Page 54
Page 52
Page 85
Financial statements – Note 24
Page 22
Page 48
Page 62
Page 83
Page 43
Financial statements – Note 23
Financial statements – Note 29
Page 33
Financial statements – Note 20
Page 40

SHARE CAPITAL AND MAJOR SHAREHOLDERS
Details of the Company’s share capital are given in Note 20 to the
financial statements.

Acquisition of own shares
At the 2015 annual general meeting, the Company was authorised
to make market purchases of up to 75.5m ordinary shares. The
Company has not acquired any shares under this authority during
the year. This authority will expire on the earlier of the next annual
general meeting of the Company or 2 March 2017.

A special resolution will be proposed at this year’s annual general
meeting to authorise the Company to make market purchases of
up to 75.5m ordinary shares.

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 2006, 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.

(ii) 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.

Significant shareholders
Based on notifications received, the holdings of 3% or more of the
issued share capital of the Company as at 10 June 2016 (the latest
practicable date before approval of the financial statements) are
as follows:

Standard Life
Abrams Bison Investments LLC
Harris Associates LP
BlackRock, Inc.

%
6
5
5
5

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 78 and 79. Details of
all shares subject to option are given in the notes to the financial
statements on page 111.

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 $900m senior secured notes, due 2022 and
$500m senior secured notes, due 2024, to redeem them at 101%
of their face value.

APPOINTMENT AND REMOVAL OF DIRECTORS
Unless determined otherwise by ordinary resolution, the Company
is required to have a minimum of two directors and a maximum
of 15 directors (disregarding alternate directors).

The directors are not required to hold any shares in the Company
by the Articles of Association.

DIRECTORS’ REPORT
84

Ashtead Group plc Annual Report & Accounts 2016

OTHER STATUTORY DISCLOSURES CONTINUED

The Board can appoint any person to be a director. Any person
appointed as a director by the Board must retire from office at the
first annual general meeting after appointment. A director who
retires in this way is then eligible for reappointment.

The Articles state that each director must retire from office if he
held office at the time of the two preceding annual general meetings
and did not retire at either of them. In accordance with the UK
Corporate Governance Code, all directors are subject to annual
election by the shareholders.

In addition to any power to remove directors conferred by
legislation, the Company can pass a special resolution to remove a
director from office even though his time in office has not ended and
can appoint a person to replace a director who has been removed
in this way by passing an ordinary resolution.

Any director stops being a director if (i) he gives the Company
written notice of his resignation; (ii) he gives the Company written
notice in which he offers to resign and the directors decide to accept
this offer; (iii) all the other directors (who must comprise at least
three people) pass a resolution or sign a written notice requiring
the director to resign; (iv) a registered medical practitioner who is
treating that person gives a written opinion to the Company stating
that that person has become physically or mentally incapable of
acting as a director and may remain so for more than three months;
(v) by reason of that person’s mental health, a court makes an
order which wholly or partly prevents that person from personally
exercising any powers or rights which that person would otherwise
have; (vi) he has missed directors’ meetings (whether or not an
alternate director appointed by him attends those meetings) for
a continuous period of six months without permission from the
directors and the directors pass a resolution removing the director
from office; (vii) a bankruptcy order is made against him or he
makes any arrangement or composition with his creditors
generally; (viii) he is prohibited from being a director under the
legislation; or (ix) he ceases to be a director under the legislation
or he is removed from office under the Articles of Association.

POWERS OF THE DIRECTORS
Subject to the legislation, the Articles of Association and any
authority given to the Company in general meeting by special
resolution, the business of the Company is managed by the Board
of directors that can use all of the Company’s powers to borrow
money and to mortgage or charge all or any of the Company’s
undertaking, property and assets (present and future) and uncalled
capital of the Company and to issue debentures and other security
and to give security, either outright or as collateral security, for
any debt, liability or obligation of the Company or of any third party.

DIRECTORS AND DIRECTORS’ INSURANCE
Details of the directors of the Company are given on pages 52 and
53. The policies related to their appointment and replacement are
detailed on pages 56 and 57. 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 relevant audit information of which the Company’s

auditor is unaware; and

(2) each director has taken all the steps that he ought to have taken
to make himself aware of such information and to establish that
the Company’s auditor is 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.

AMENDMENT OF ARTICLES OF ASSOCIATION
The Articles of Association of the Company may be amended
by a special resolution.

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 2016 was 59 days (30 April 2015: 72 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 £225,193 in total
(2015: £147,508). No political donations were made in either year.

POST BALANCE SHEET EVENTS
Details of post balance sheet events are included in Note 29 to the
financial statements.

GOING CONCERN
After making appropriate enquiries, the directors 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.

AUDITOR
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 (‘AGM’) will be held at 2.30pm on
Wednesday, 7 September 2016 at Wax Chandlers Hall, 6 Gresham
Street, London EC2V 7AD. An explanation of the business to be
transacted at the AGM will be circulated to shareholders and will
be available on the Company’s corporate website.

By order of the Board

ERIC WATKINS
Company secretary
13 June 2016

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

Ashtead Group plc Annual Report & Accounts 2016

RESPONSIBILITY STATEMENT
We confirm to the best of our 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;

• the Strategic 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; and

• the Annual Report and financial statements, taken as a whole,
are fair, balanced and understandable and provide information
necessary for shareholders to assess the Group’s performance,
business model and strategy.

By order of the Board

ERIC WATKINS
Company secretary
13 June 2016

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 Regulation and have also elected to
prepare financial statements for the Company in accordance with
IFRS as adopted by the European Union.

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. In preparing these financial statements,
International Accounting Standard 1 requires that directors:

• 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 and hence,
for taking reasonable steps for the prevention and detection of fraud
and other irregularities.

The directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.

DIRECTORS’ REPORT86

Ashtead Group plc Annual Report & Accounts 2016

FINANCIAL STATEMENTS

88 Independent auditor’s report to

the members of Ashtead Group plc

91 Consolidated income statement
Consolidated statement of
91
comprehensive income
92 Consolidated balance sheet
93

Consolidated statement of changes
in equity
Consolidated cash flow statement
Notes to the consolidated
financial statements

94
95

FROM: CREATING A SPOT
FOR A PRIVATE OCCASION

100%

CLEAN FLOOR DUE TO OUR
TEMPORARY FLOORING

F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S

8,000

METRES OF SUPER
FORTRESS FENCE

TO: PREPARING THE SITE
FOR A GLOBAL SENSATION

Whether you have 40 guests or 135,000 we have the
scale to ensure your event is a great success.

For a 50th birthday garden party, we provide flooring
to protect indoor and outdoor surfaces, portable
heaters and lighting. For the annual Glastonbury
music festival we supply the perimeter fence,
temporary roadways across the 900 acre site, and
over 80 accommodation units for use as offices,
ticket booths, security cabins, stores, changing
rooms and medical centres.

Ashtead Group plc Annual Report & Accounts 2016

INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF ASHTEAD GROUP PLC

OPINION ON FINANCIAL STATEMENTS OF ASHTEAD GROUP PLC
In our opinion:

• the financial statements give a true and fair view of the state of

the Group’s and of the Company’s affairs as at 30 April 2016 and
of the Group’s profit for the year then ended;

• the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards
(‘IFRS’) as adopted by the European Union;

• the Company financial statements have been properly prepared
in accordance with IFRS 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.

The financial statements comprise the Consolidated Income
Statement, the Consolidated Statement of Comprehensive Income,
the Consolidated and Company Balance Sheets, the Consolidated
and Company Statements of Changes in Equity, the Consolidated
and Company Cash Flow Statements and the related Notes 1 to 32.
The financial reporting framework that has been applied in their
preparation is applicable law and IFRS as adopted by the European
Union and, as regards the Company financial statements, as applied
in accordance with the provisions of the Companies Act 2006.

SEPARATE OPINION IN RELATION TO IFRS AS ISSUED BY THE IASB
As explained in Note 2 to the Group financial statements, in addition
to complying with its legal obligation to apply IFRS as adopted by the
European Union, the Group has also applied IFRS as issued by the
International Accounting Standards Board (‘IASB’).

In our opinion the Group financial statements comply with IFRS
as issued by the IASB.

GOING CONCERN AND THE DIRECTORS’ ASSESSMENT OF THE
PRINCIPAL RISKS THAT WOULD THREATEN THE SOLVENCY
OR LIQUIDITY OF THE GROUP
As required by the Listing Rules we have reviewed the directors’
statement regarding the appropriateness of the going concern
basis of accounting contained on page 84 and the directors’
statement on the longer-term viability of the Group on page 32.

We have nothing material to add or draw attention to in relation to:

• the directors’ confirmation on page 57 that they have carried

out a robust assessment of the principal risks facing the Group,
including those that would threaten its business model, future
performance, solvency or liquidity;

• the disclosures on pages 30 to 32 that describe those risks

and explain how they are being managed or mitigated;
• the directors’ statement on page 84 about whether they

considered it appropriate to adopt the going concern basis
of accounting in preparing them and their identification of any
material uncertainties to the Group’s ability to continue to do so
over a period of at least 12 months from the date of approval of
the financial statements;

• the directors’ explanation on page 32 as to how they have

assessed the prospects of the Group, over what period they have
done so and why they consider that period to be appropriate, and
their statement as to whether they have a reasonable expectation
that the Group will be able to continue in operation and meet its
liabilities as they fall due over the period of their assessment,
including any related disclosures drawing attention to any
necessary qualifications or assumptions.

We agreed with the directors’ adoption of the going concern basis of
accounting and we did not identify any such material uncertainties.
However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the Group’s ability
to continue as a going concern.

INDEPENDENCE
We are required to comply with the Financial Reporting Council’s
Ethical Standards for Auditors and we confirm that we are
independent of the Group and we have fulfilled our other ethical
responsibilities in accordance with those standards. We also
confirm we have not provided any of the prohibited non-audit
services referred to in those standards.

OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT
The assessed risks of material misstatement described below
are those that had the greatest effect on our audit strategy,
the allocation of resources in the audit and directing the efforts
of the engagement team.

RISK
Carrying value of rental fleet
As set out in Note 13, the Group holds
£4.5bn (2015: £3.6bn) of rental fleet
at cost (£3.2bn net book value
(2015: £2.5bn net book value)).

There is a risk that an impairment
required to the Group’s rental fleet is
not identified, properly quantified or
recorded and that the carrying value
of these assets are misstated.

HOW THE SCOPE OF OUR AUDIT RESPONDED TO THE RISK
We tested the design, implementation and operating effectiveness of the key controls
over the impairment review.

We considered management’s analysis of impairment indicators, understood and
challenged the key judgements and sensitivities and the impact that each of these have
in determining whether an impairment exists.

In particular, we focused our analysis on returns on investment by asset class, fleet
utilisation, profits and losses on asset disposals, depreciation rates and residual
values. We tested the key metrics noted, including asset utilisation statistics and profit
on disposal. We also assessed whether the accounting for the rental fleet and
associated disclosures were in line with the Group’s accounting policies.

Ashtead Group plc Annual Report & Accounts 2016

RISK

HOW THE SCOPE OF OUR AUDIT RESPONDED TO THE RISK

Carrying value of goodwill
As set out in Note 14, the Group carries
goodwill of £557m (2015: £516m) on its
balance sheet.

Management performs an annual
impairment review of goodwill.
There is a risk that the judgements
used in this, such as forecast cash
flows, discount rates and growth
rates are inappropriate and goodwill
is overstated.

Revenue recognition
There is a risk that earned not billed
and billed not earned revenue is
incorrectly calculated or recorded
in the wrong period due to the
management estimate involved
in the calculation.

We also consider there to be a risk
that rebates payable to customers
are omitted or recorded at an
incorrect amount.

We tested the design, implementation and operating effectiveness of the key controls
over the goodwill impairment review.

We assessed the Group’s current and forecast performance and considered whether
any other factors exist that would suggest that goodwill is impaired. We have
performed the following procedures:

• challenged management’s identification of eight CGUs against our understanding

of the business and the definition as set out in the accounting standards;

• assessed the appropriateness of the calculation of the value in use of each CGU and

the associated headroom, performing recalculations to test the mechanical accuracy
of those amounts;

• compared forecast inputs and growth assumptions against historical trends to

assess the reliability of management’s forecast, in addition to comparing forecast
assumptions to external market analysis;

• with the assistance of internal specialists, recalculated the discount rate applied to

the future cash flows and benchmarked this against other companies in the industry;

• performed sensitivity analysis; and
• considered management’s financial statement disclosures.

We evaluated the design and implementation, and tested the operating effectiveness
of controls over the revenue cycle.

We have focused our substantive testing on the earned not billed and billed not
earned valuation of revenue. In doing so we have reviewed management’s methodology,
traced the information in the reports back to invoices, remittance and credit notes
as a substantive sample, performed analytical procedures over movements in the
period and assessed the historical accuracy of management’s estimations using
a ‘look-back’ approach.

We have also tested the calculations for rebates recorded for a sample of customers to
assess whether they were calculated in line with the rebate contract, and circularised
other customers to understand if further rebates should be recorded. Additionally, we
tested a sample of rebate payments recorded during the year to assess whether
payments were made in line with the rebate agreement.

Our prior year audit report also included a further risk relating
to acquisition accounting which is not included in our report in
the current year. Due to the size of the acquisitions in the current
year being significantly less than the prior year, this risk has been
reassessed and it is not considered to be one of those which
has had the greatest effect on our audit strategy, the allocation
of resources in the audit and direction of the efforts of the
engagement team.

The description of risks above should be read in conjunction with
the significant issues considered by the Audit Committee discussed
on page 60.

These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.

OUR APPLICATION OF MATERIALITY
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be
changed or influenced. We use materiality both in planning the
scope of our audit work and in evaluating the results of our work.

We determined materiality for the Group to be £24.0m
(2015: £17.0m), which is 3.9% (2015: 3.6%) of profit before tax.

In determining our materiality we have used a three-year average
profit before tax to reflect the cyclical nature of the industry in
which the Group operates. We have then applied a benchmark of 5%
to the three-year average profit before tax to arrive at materiality.
This approach is consistent with the prior year.

We agreed with the Audit Committee that we would report to the
Committee all audit differences in excess of £1.0m (2015: £0.7m),
as well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds. We also report to the
Audit Committee on disclosure matters that we identified when
assessing the overall presentation of the financial statements.

AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our group audit was scoped by obtaining an understanding of the
Group and its environment, including group-wide controls, and
assessing the risks of material misstatement at the Group level.
Audit work to respond to the risks of material misstatement
consisted of a combination of the work performed by component
teams in the US and UK, and the Group audit team in London.

The Group comprises three (2015: three) principal locations: the
Head Office in London; A-Plant in Warrington, UK; and Sunbelt in
Charlotte, US. The Group audit team performed a full-scope audit
of the Head Office component and local component audit teams
performed full-scope audits at both A-Plant and Sunbelt; this
was the same approach as the prior year. These three locations
represent 99% (2015: 100%) of the Group’s revenue, 100%
(2015: 100%) of the Group’s profit before tax and 96% (2015: 100%)
of the Group’s net assets. They were also selected to provide an
appropriate basis for undertaking audit work to address the risks of
material misstatement identified above. Our audit work at the three
locations was executed at levels of materiality applicable to each
individual location which were lower than Group materiality and
ranged from £3.4m to £21.6m (2015: £3.1m to £15.4m).

FINANCIAL STATEMENTS90

Ashtead Group plc Annual Report & Accounts 2016

INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF ASHTEAD GROUP PLC CONTINUED

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITOR
As explained more fully in the Statement of directors’
responsibilities, 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 and express an opinion
on the financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). We also
comply with International Standard on Quality Control 1 (UK and
Ireland). Our audit methodology and tools aim to ensure that our
quality control procedures are effective, understood and applied.
Our quality controls and systems include our dedicated professional
standards review team and independent partner reviews.

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 auditor’s 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.

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.

In addition, we read all the financial and non-financial information
in the annual report to identify material inconsistencies with the
audited financial statements and to identify any information that is
apparently materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of performing the
audit. If we become aware of any apparent material misstatements
or inconsistencies we consider the implications for our report.

EDWARD HANSON (SENIOR STATUTORY AUDITOR)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, UK
13 June 2016

Members of the Group audit team (including the lead audit partner)
have made site visits to component audit teams during the financial
year and after the year end to ensure sufficient involvement and
oversight of work performed. At the Group level we also tested the
consolidation process.

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 Strategic report and 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
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if,
in our opinion:

• we have not received all the information and explanations we

require for our audit; or

• 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 are not in agreement with

the accounting records and returns.

We have nothing to report in respect of these matters.

Directors’ remuneration
Under the Companies Act 2006 we are also required to report if
in our opinion certain disclosures of directors’ remuneration have
not been made or the part of the Directors’ remuneration report
to be audited is not in agreement with the accounting records and
returns. We have nothing to report arising from these matters.

Corporate Governance Statement
Under the Listing Rules we are also required to review part of
the Corporate Governance Statement relating to the Company’s
compliance with certain provisions of the UK Corporate Governance
Code. We have nothing to report arising from our review.

Our duty to read other information in the annual report
Under International Standards on Auditing (UK and Ireland),
we are required to report to you if, in our opinion, information
in the annual report is:

• materially inconsistent with the information in the audited

financial statements; or

• apparently materially incorrect based on, or materially

inconsistent with, our knowledge of the Group acquired in the
course of performing our audit; or

• otherwise misleading.

In particular, we are required to consider whether we have
identified any inconsistencies between our knowledge acquired
during the audit and the directors’ statement that they consider
the annual report is fair, balanced and understandable and whether
the annual report appropriately discloses those matters that we
communicated to the Audit Committee which we consider should
have been disclosed. We confirm that we have not identified any
such inconsistencies or misleading statements.

Ashtead Group plc Annual Report & Accounts 2016

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 APRIL 2016

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 of intangibles
Impairment of intangibles
Operating profit
Investment income
Interest expense
Profit on ordinary activities before taxation
Taxation
Profit attributable to equity holders

of the Company

2016

Before
exceptional
items and
amortisation
£m

Exceptional
items and
amortisation
£m

Notes

Total
£m

Before
amortisation
£m

Amortisation
£m

2,260.3

94.2
191.2
2,545.7

(593.6)
(143.8)
(630.7)
(1,368.1)

1,177.6
(449.4)
–
–
728.2
0.1
(83.0)
645.3
(218.7)

4
4
4

4
4, 5
4, 5
3, 4
6
6

7, 19

–

–
–
–

–
–
5.8
5.8

5.8
–
(22.4)
(12.0)
(28.6)
–
–
(28.6)
9.6

2,260.3

1,837.6

94.2
191.2
2,545.7

(593.6)
(143.8)
(624.9)
(1,362.3)

1,183.4
(449.4)
(22.4)
(12.0)
699.6
0.1
(83.0)
616.7
(209.1)

88.2
113.1
2,038.9

(486.3)
(86.3)
(557.9)
(1,130.5)

908.4
(351.5)
–
–
556.9
0.2
(67.5)
489.6
(175.5)

–

–
–
–

–
–
–
–

–
–
(15.8)
–
(15.8)
–
–
(15.8)
5.1

2015

Total
£m

1,837.6

88.2
113.1
2,038.9

(486.3)
(86.3)
(557.9)
(1,130.5)

908.4
(351.5)
(15.8)
–
541.1
0.2
(67.5)
473.8
(170.4)

426.6

(19.0)

407.6

314.1

(10.7)

303.4

Basic earnings per share
Diluted earnings per share

9
9

85.1p
84.7p

(3.8p)
(3.7p)

81.3p
81.0p

62.6p
62.2p

(2.1p)
(2.1p)

60.5p
60.1p

* EBITDA is presented here as an additional performance measure as it is commonly used by investors and lenders.

All revenue and profit for the year is generated from continuing operations.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 APRIL 2016

Profit attributable to equity holders of the Company for the financial year

Items that will not be reclassified to profit or loss:
Remeasurement of the defined benefit pension plan
Tax on defined benefit pension plan

Items that may be reclassified subsequently to profit or loss:
Foreign currency translation differences

Total comprehensive income for the year

Note

2016
£m
407.6

2015
£m
303.4

(0.6)
0.1
(0.5)

(3.1)
0.6
(2.5)

49.7

58.9

456.8

359.8

FINANCIAL STATEMENTS
92

Ashtead Group plc Annual Report & Accounts 2016

CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

CONSOLIDATED BALANCE SHEET
AT 30 APRIL 2016

Current assets
Inventories
Trade and other receivables
Current tax asset
Cash and cash equivalents

Non-current assets
Property, plant and equipment
– rental equipment
– other assets

Goodwill
Other intangible assets
Net defined benefit pension plan asset

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

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

Notes

10
11

13
13

14
14
23

16
18

16
18
19

20
20
20

2016
£m

41.3
455.7
7.5
13.0
517.5

3,246.9
341.9
3,588.8
556.7
83.8
2.2
4,231.5

2015
£m

23.9
377.5
26.2
10.5
438.1

2,534.2
276.9
2,811.1
516.2
92.7
3.1
3,423.1

4,749.0

3,861.2

480.5
3.6
2.5
28.9
515.5

2,012.2
17.6
723.3
2,753.1
3,268.6

55.3
3.6
0.9
–
(33.1)
(16.2)
88.4
1,381.5
1,480.4

491.7
6.2
2.0
18.4
518.3

1,695.6
31.3
504.5
2,231.4
2,749.7

55.3
3.6
0.9
90.7
(33.1)
(15.5)
38.7
970.9
1,111.5

Total liabilities and equity

4,749.0

3,861.2

These financial statements were approved by the Board on 13 June 2016.

GEOFF DRABBLE
Chief executive

SUZANNE WOOD
Finance director

Ashtead Group plc Annual Report & Accounts 2016

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 APRIL 2016

At 1 May 2014
Profit for the year
Other comprehensive income:
Foreign currency translation differences
Remeasurement of the defined benefit

pension plan

Tax on defined benefit pension plan
Total comprehensive income for the year

Dividends paid
Own shares purchased by the ESOT
Share-based payments
Tax on share-based payments
At 30 April 2015

Profit for the year
Other comprehensive income:
Foreign currency translation differences
Remeasurement of the defined benefit

pension plan

Tax on defined benefit pension plan
Total comprehensive income for the year

Dividends paid
Own shares purchased by the ESOT
Share-based payments
Tax on share-based payments
Transfer of non-distributable reserve
At 30 April 2016

Further information is included in Note 20.

Share
capital
£m
55.3
–

–

–
–
–

–
–
–
–
55.3

–

–
–
–

–
–
–
–
–
55.3

Share
premium
account
£m
3.6
–

Capital
redemption
reserve
£m
0.9
–

Non-
distributable
reserve
£m
90.7
–

Own
shares
held by
the
Company
£m
(33.1)
–

Own
shares
held
through
the ESOT
£m
(11.8)
–

Cumulative
foreign
exchange
translation
differences
£m
(20.2)
–

–

–
–
–

–
–
–
–
3.6

–

–
–
–

–
–
–
–
–
3.6

–

–
–
–

–
–
–
–
0.9

–

–
–
–

–
–
–
–
–
0.9

–

–
–
–

–
–
–
–
90.7

–

–
–
–

–

–
–
–

–
–
–
–
(33.1)

–

–
–
–

–

–
–
–

–
(20.3)
16.6
–
(15.5)

–

–
–
–

–
–
–
–
(90.7)
–

–
–
–
–
–
(33.1)

–
(12.0)
11.3
–
–
(16.2)

Retained
reserves
£m
739.0
303.4

Total
£m
824.4
303.4

–

58.9

(3.1)
0.6
300.9

(61.4)
–
(12.6)
5.0
970.9

(3.1)
0.6
359.8

(61.4)
(20.3)
4.0
5.0
1,111.5

58.9

–
–
58.9

–
–
–
–
38.7

–

407.6

49.7

–
–
49.7

–
–
–
–
–
88.4

–

49.7

(0.6)
0.1
407.1

(0.6)
0.1
456.8

(81.5)
–
(6.6)
0.9
90.7
1,381.5

(81.5)
(12.0)
4.7
0.9
–
1,480.4

FINANCIAL STATEMENTS94

Ashtead Group plc Annual Report & Accounts 2016

CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED

CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 APRIL 2016

Cash flows from operating activities
Cash generated from operations before exceptional items and changes in rental equipment
Exceptional operating costs paid
Payments for rental property, plant and equipment
Proceeds from disposal of rental property, plant and equipment
Cash generated from operations
Financing costs paid (net)
Tax paid (net)
Net cash generated from/(used in) operating activities

Cash flows from investing activities
Acquisition of businesses
Payments for non-rental property, plant and equipment
Proceeds from disposal of non-rental property, plant and equipment
Net cash used in investing activities

Notes

25(a)

25(c)

Cash flows from financing activities
Drawdown of loans
Redemption of loans
Capital element of finance lease payments
Dividends paid
Purchase of own shares by the ESOT
Net cash from financing activities

Increase in cash and cash equivalents
Opening cash and cash equivalents
Effect of exchange rate difference
Closing cash and cash equivalents

Reconciliation of net cash flows to net debt
Increase in cash in the period
Increase in debt through cash flow
Change in net debt from cash flows
Debt acquired
Exchange differences
Non-cash movements:
– deferred costs of debt raising
– capital element of new finance leases
Increase in net debt in the period
Net debt at 1 May
Net debt at 30 April

2016
£m

2015
£m

1,070.6
–
(1,124.7)
172.1
118.0
(79.4)
(5.3)
33.3

(68.4)
(109.5)
8.2
(169.7)

570.2
(336.5)
(1.5)
(81.5)
(12.0)
138.7

2.3
10.5
0.2
13.0

2016
£m

(2.3)
232.2
229.9
0.3
81.7

1.8
0.9
314.6
1,687.1
2,001.7

841.4
(0.5)
(858.1)
95.4
78.2
(63.4)
(32.0)
(17.2)

(241.5)
(78.7)
7.5
(312.7)

842.5
(420.4)
(2.9)
(61.4)
(20.3)
337.5

7.6
2.8
0.1
10.5

2015
£m

(7.6)
419.2
411.6
–
121.8

1.5
3.6
538.5
1,148.6
1,687.1

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS

1 GENERAL INFORMATION
Ashtead Group plc (‘the Company’) is a company incorporated and
domiciled in England and Wales and listed on the London Stock
Exchange. The consolidated financial statements are presented
in pounds sterling, the functional currency of the parent. Foreign
operations are included in accordance with the policies set out
in Note 2.

2 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 and
therefore the Group financial statements comply with Article 4
of the EU IAS Regulation. 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.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
judgements, 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. The estimates and associated
assumptions are based on historical experience and other factors
that are considered to be relevant. Actual results could differ
from these estimates. A more detailed discussion of the principal
accounting policies and management estimates and assumptions
is included in the Financial review on pages 38 and 39 and forms
part of these financial statements.

Changes in accounting policies and disclosures
New and amended standards adopted by the Group
There are no new IFRS or IFRIC Interpretations that are effective
for the first time this financial year which have a material impact
on the Group.

New standards, amendments and interpretations issued but
not effective for the financial year beginning 1 May 2015 and
not early adopted
IFRS 15, Revenue from Contracts with Customers, replaces
IAS 18, Revenue, and IAS 11, Construction Contracts, and related
interpretations. The standard is effective for annual periods
beginning on or after 1 January 2018 and earlier application is
permitted. While the Group has not finalised its assessment of this
standard, it does not expect the adoption to have a material impact
on the financial statements of the Group in future periods.

IFRS 16, Leases, provides a new model for lease accounting under
which lessees will recognise a lease liability reflecting future
lease payments and a right-of-use asset on the balance sheet for
all lease contracts other than certain short-term leases and leases
of low-value assets. In the income statement, an interest expense
will be recognised on the lease liability and depreciation on the

Ashtead Group plc Annual Report & Accounts 2016

right-of-use asset. The standard replaces IAS 17, Leases, and
related interpretations. The standard is effective for annual periods
beginning on or after 1 January 2019 and earlier application is
permitted in conjunction with IFRS 15. While the Group has not
finalised its assessment of IFRS 16, the standard is expected to
result in a significant increase in the Group’s assets and liabilities
and will result in increased depreciation and interest expense and
lower operating costs.

The European Union has not yet adopted IFRS 15 or IFRS 16.

There are no other IFRS or IFRIC Interpretations that are not yet
effective that would be expected to have a material impact on
the Group.

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 fully consolidated from or to the date on which
control is passed to the Group. 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.

Business combinations
Acquisitions of subsidiaries and businesses are accounted for using
the acquisition method. The consideration transferred in a business
combination is the fair value at the acquisition date of the assets
transferred and the liabilities incurred by the Group and includes
the fair value of any contingent consideration arrangement.
Acquisition-related costs are recognised in the income statement
as incurred.

Contingent consideration is measured at the acquisition date at
fair value and included in provisions in the balance sheet. Changes
in the fair value of contingent consideration due to events post
the date of acquisition are recognised in the income statement.

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

2016
1.50
1.47

2015
1.60
1.54

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.

FINANCIAL STATEMENTS96

Ashtead Group plc Annual Report & Accounts 2016

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED

2 ACCOUNTING POLICIES CONTINUED
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 VAT/sales 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 a rental contract can extend across financial
reporting period ends, the Group records accrued revenue (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 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.

Investment income and interest expense
Investment income comprises interest receivable on funds invested
and the net interest on the net defined benefit asset.

Interest expense comprises interest payable on borrowings,
amortisation of deferred debt raising costs, and the unwind
of the discount on the self-insurance and contingent
consideration provisions.

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 by the Company or by the Employee
Share Ownership Trust 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 (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 and
amortisation of intangibles.

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 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. 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. Residual values and estimated useful
economic lives are reassessed annually, recognising the cyclical
nature of the business. The rates in use are as follows:

Freehold property
Motor vehicles
Rental equipment
Office and workshop equipment

Per annum

2%
7% to 25%
5% to 33%
20%

Residual values are estimated at 10–15% of cost in respect of most
types of rental equipment, although the range of residual values
used varies between zero and 30%.

Ashtead Group plc Annual Report & Accounts 2016

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
Goodwill
Goodwill represents the difference between the fair value of
the consideration for the acquisition and the fair value of the
net identifiable assets acquired, including any intangible assets
other than goodwill.

Goodwill is stated at cost less any accumulated impairment losses
and is allocated to each of the Group’s cash-generating units
expected to benefit from the synergies of the combination.

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
7% to 15%
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 (cash-generating unit).

The recoverable amount is the higher of an asset’s fair value
less costs of disposal 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 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.

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 comprehensive income.
The increase in the present value of plan liabilities arising from
employee service during the period is charged to operating profit.

Net interest is calculated by applying a discount rate to the net
defined benefit pension plan asset or liability. The net interest
income or net interest expense is included in investment income
or interest expense, respectively.

The defined pension surplus or deficit represents the fair value
of the plan 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.

FINANCIAL STATEMENTS98

Ashtead Group plc Annual Report & Accounts 2016

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED

2 ACCOUNTING POLICIES CONTINUED
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 award. 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.

Secured notes
The Group’s secured notes contain early repayment options,
which constitute embedded derivatives in accordance with IAS 39,
Financial Instruments: Recognition and Measurement. The
accounting for these early repayment options depends on whether
they are considered to be closely related to the host contract or
not based on IAS 39. Where they are closely related, the early
repayment option is not accounted for separately and the notes
are recorded within borrowings, net of direct transaction costs.
The interest expense is calculated by applying the effective interest
rate method.

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.

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.

Net debt
Net debt consists of total borrowings less cash and cash
equivalents. Borrowings exclude accrued interest. Foreign
currency denominated balances are retranslated to pounds
sterling at rates of exchange ruling at the balance sheet date.

In circumstances where the early repayment option is not
considered closely related to the host contract, the repayment
option has to be valued separately. At the date of issue the liability
component of the notes is estimated using prevailing market
interest rates for similar debt with no repayment 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.

Where the Group’s senior secured notes are issued at a premium
or a discount, they are initially recognised at their face value plus
or minus the premium or discount. The notes are subsequently
measured at amortised cost using the effective interest rate method.

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 (‘ESOT’) 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.

Own shares held by the Company
The cost of own shares held by the Company is deducted from
shareholders’ funds. The proceeds from the reissue of own
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.

Ashtead Group plc Annual Report & Accounts 2016

3 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 report separately to, and are managed by, the chief executive and align with the geographies in which they operate,
being North America and the United Kingdom, respectively. 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 2016
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
Taxation liabilities
Total liabilities

Sunbelt
£m
2,180.9
(1,126.8)
1,054.1
(379.4)
674.7
(6.2)
(17.5)
651.0

A-Plant
£m
364.8
(227.8)
137.0
(70.0)
67.0
–
(4.9)
62.1

Corporate
items
£m
–
(13.5)
(13.5)
–
(13.5)
–
–
(13.5)

4,117.9

610.1

0.5

423.7

82.6

5.7

Group
£m
2,545.7
(1,368.1)
1,177.6
(449.4)
728.2
(6.2)
(22.4)
699.6
(82.9)
616.7
(209.1)
407.6

4,728.5
13.0
7.5
4,749.0

512.0
2,029.7
726.9
3,268.6

Other non-cash expenditure – share-based payments

2.4

0.7

1.6

4.7

Capital expenditure

1,129.7

177.6

–

1,307.3

There are no sales between the business segments. Segment assets include property, plant and equipment, goodwill, 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, including goodwill,
and includes additions through the acquisition of businesses.

FINANCIAL STATEMENTS
100

Ashtead Group plc Annual Report & Accounts 2016

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED

3 SEGMENTAL ANALYSIS CONTINUED

Year ended 30 April 2015
Revenue
Operating costs
EBITDA
Depreciation
Segment result before amortisation
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
Taxation liabilities
Total liabilities

Sunbelt
£m
1,715.9
(906.7)
809.2
(288.3)
520.9
(11.2)
509.7

A-Plant
£m
323.0
(213.5)
109.5
(63.2)
46.3
(4.6)
41.7

Corporate
items
£m
–
(10.3)
(10.3)
–
(10.3)
–
(10.3)

3,309.7

514.7

0.1

441.9

81.6

4.3

Group
£m
2,038.9
(1,130.5)
908.4
(351.5)
556.9
(15.8)
541.1
(67.3)
473.8
(170.4)
303.4

3,824.5
10.5
26.2
3,861.2

527.8
1,711.2
510.7
2,749.7

Other non-cash expenditure – share-based payments

2.2

0.6

1.2

4.0

Capital expenditure

1,127.1

180.7

–

1,307.8

Sunbelt includes Sunbelt Rentals of Canada Inc..

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 expenditure on acquisitions, by country of domicile. Segment assets by
geography include property, plant and equipment, goodwill and intangible assets but exclude inventory and receivables.

North America
United Kingdom

2016
£m
2,180.9
364.8
2,545.7

Revenue

2015
£m
1,715.9
323.0
2,038.9

Segment assets

Capital expenditure

2016
£m
3,712.0
517.3
4,229.3

2015
£m
2,976.8
443.2
3,420.0

2016
£m
1,129.7
177.6
1,307.3

2015
£m
1,127.1
180.7
1,307.8

Ashtead Group plc Annual Report & Accounts 2016

101

4 OPERATING COSTS AND OTHER INCOME

Staff costs:
Salaries
Social security costs
Other pension costs

Used rental equipment sold
Other operating costs:
Vehicle costs
Spares, consumables and external repairs
Facility costs
Other external charges

Depreciation and amortisation:
Depreciation of owned assets
Depreciation of leased assets
Amortisation of intangibles
Impairment of intangibles

Before
exceptional
items and
amortisation
£m

Exceptional
items and
amortisation
£m

2016

Total
£m

Before
amortisation
£m

Amortisation
£m

541.4
42.3
9.9
593.6

143.8

131.5
118.6
73.9
306.7
630.7

447.8
1.6
–
–
449.4

–
–
–
–

–

–
–
–
(5.8)
(5.8)

–
–
22.4
12.0
34.4

541.4
42.3
9.9
593.6

441.8
36.0
8.5
486.3

143.8

86.3

131.5
118.6
73.9
300.9
624.9

447.8
1.6
22.4
12.0
483.8

117.8
102.7
58.9
278.5
557.9

349.9
1.6
–
–
351.5

–
–
–
–

–

–
–
–
–
–

–
–
15.8
–
15.8

2015

Total
£m

441.8
36.0
8.5
486.3

86.3

117.8
102.7
58.9
278.5
557.9

349.9
1.6
15.8
–
367.3

1,817.5

28.6

1,846.1

1,482.0

15.8

1,497.8

Proceeds from the disposal of non-rental property, plant and equipment amounted to £7m (2015: £7m), resulting in a profit on disposal
of £1m (2015: £1m) which is included in other external charges.

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 gains

Staff costs include Directors’ remuneration. Directors’ remuneration comprised:

Salaries and short-term employee benefits
Post-employment benefits
National insurance and social security
Share-based payments

2016
£m

1.9
52.9
228.2
17.9
(0.1)

2016
£’000
5,000
28
414
1,698
7,140

2015
£m

2.2
41.0
168.4
12.8
(0.2)

2015
£’000
4,277
30
348
1,349
6,004

FINANCIAL STATEMENTS
102

Ashtead Group plc Annual Report & Accounts 2016

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED

4 OPERATING COSTS AND OTHER INCOME CONTINUED
Remuneration payable to the Company’s auditor, Deloitte LLP, in the year is given below:

Fees payable to Deloitte UK and its associates for the audit of the Group’s annual accounts

Fees payable to Deloitte UK and its associates for other services to the Group:
– the audit of the Group’s UK subsidiaries pursuant to legislation
– audit-related assurance services
– other assurance services

2016
£’000
681

40
68
–
789

2015
£’000
636

38
64
80
818

Fees paid for audit-related assurance services relate to the half-year and quarterly reviews of the Group’s interim financial statements.
Other assurance services in the prior year relate to comfort letters provided in connection with the $500m 5.625% senior secured notes
issue due in 2024.

5 EXCEPTIONAL ITEMS AND AMORTISATION

Impairment of intangibles
Release of provision for contingent consideration
Amortisation of intangibles

Taxation

2016
£m
12.0
(5.8)
22.4
28.6
(9.6)
19.0

2015
£m
–
–
15.8
15.8
(5.1)
10.7

The £12m impairment of intangibles relates to acquired customer lists within our Oil & Gas business. The impairment reflects our
expectation that revenue from these customers will be much lower than anticipated when the businesses were acquired due to the fall
in the oil price and its impact on the oil and gas industry. The £6m release of contingent consideration relates to a provision for contingent
consideration on acquisitions, which was payable depending on revenue targets. These were expected to be achieved in full. Where this
is no longer the case, the excess provision has been released. Both these exceptional items are non-cash.

6 NET FINANCING COSTS

Investment income
Net interest on the net defined benefit asset

Interest expense
Bank interest payable
Interest payable on second priority senior secured notes
Interest payable on finance leases
Non-cash unwind of discount on provisions
Amortisation of deferred debt raising costs
Total interest expense

Net financing costs

2016
£m

(0.1)

22.1
57.7
0.3
1.1
1.8
83.0

82.9

2015
£m

(0.2)

17.5
47.5
0.2
0.8
1.5
67.5

67.3

Ashtead Group plc Annual Report & Accounts 2016

103

7 TAXATION
The tax charge for the year has been computed using a tax rate of 39% in North America (2015: 39%) and 20% in the UK (2015: 21%).
The blended rate for the Group as a whole is 34% (2015: 36%). The Group’s future effective tax rate will depend on the mix of profits
amongst the territories in which it operates and their respective tax rates.

Analysis of the tax charge
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 charge

Comprising:
– UK tax
– North American tax

2016
£m

2015
£m

22.2
0.6
22.8

186.0
0.3
186.3

19.5
(0.3)
19.2

151.2
–
151.2

209.1

170.4

16.5
192.6
209.1

16.4
154.0
170.4

The tax charge comprises a charge of £218.7m (2015: £175.5m) relating to tax on the profit before exceptional items and amortisation,
together with a credit of £9.6m (2015: £5.1m) on exceptional items and amortisation.

The tax charge for the year is higher than the standard rate of corporation tax in the UK of 20%. 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 20% (2015: 20.9%)
Effects of:
Use of foreign tax rates on overseas income
Other
Adjustments to prior years
Total taxation charge

2016
£m
616.7

2015
£m
473.8

123.3

99.0

93.0
(8.1)
0.9
209.1

70.5
1.2
(0.3)
170.4

FINANCIAL STATEMENTS104

Ashtead Group plc Annual Report & Accounts 2016

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED

8 DIVIDENDS

Final dividend paid on 4 September 2015 of 12.25p (2015: 9.25p) per 10p ordinary share
Interim dividend paid on 3 February 2016 of 4.0p (2015: 3.0p) per 10p ordinary share

2016
£m
61.4
20.1
81.5

2015
£m
46.4
15.0
61.4

In addition, the directors are proposing a final dividend in respect of the financial year ended 30 April 2016 of 18.5p per share which
will absorb £93m of shareholders’ funds based on the 502m shares qualifying for dividend at 13 June 2016. Subject to approval by
shareholders, it will be paid on 9 September 2016 to shareholders who are on the register of members on 12 August 2016.

9 EARNINGS PER SHARE

Basic earnings per share
Share options and share plan awards
Diluted earnings per share

Weighted
average no.
of shares
million
501.5
1.9
503.4

Earnings
£m
407.6
–
407.6

2016

Per
share
amount
pence
81.3
(0.3)
81.0

Weighted
average no.
of shares
million
501.4
3.2
504.6

Earnings
£m
303.4
–
303.4

Underlying earnings per share may be reconciled to basic earnings per share as follows:

Basic earnings per share
Exceptional items and amortisation of intangibles
Tax on exceptional items and amortisation
Underlying earnings per share

10 INVENTORIES

Raw materials, consumables and spares
Goods for resale

2016
pence
81.3
5.7
(1.9)
85.1

2016
£m
8.5
32.8
41.3

2015

Per
share
amount
pence
60.5
(0.4)
60.1

2015
pence
60.5
3.1
(1.0)
62.6

2015
£m
9.0
14.9
23.9

11 TRADE AND OTHER RECEIVABLES

Trade receivables
Less: allowance for bad and doubtful receivables

Other receivables
– Accrued revenue
– Other

Ashtead Group plc Annual Report & Accounts 2016

105

2016
£m
421.5
(26.9)
394.6

26.7
34.4
455.7

2015
£m
347.8
(21.3)
326.5

21.6
29.4
377.5

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 24. 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 North America 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 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 2016
Carrying value at 30 April 2015

Current
£m
41.7
32.4

Less than
30 days
£m
208.0
172.1

Trade receivables past due by:

60 – 90
days
£m
31.3
25.8

More than
90 days
£m
46.2
35.4

30 – 60
days
£m
94.3
82.1

Total
£m
421.5
347.8

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 2016
Carrying value at 30 April 2015

Current
£m
218.5
182.1

Less than
30 days
£m
117.8
98.2

Trade receivables past due by:

60 – 90
days
£m
20.5
15.1

More than
90 days
£m
29.3
24.6

30 – 60
days
£m
35.4
27.8

b) Movement in the allowance account for bad and doubtful receivables

At 1 May
Amounts written off or recovered during the year
Increase in allowance recognised in income statement
Currency movements
At 30 April

2016
£m
21.3
(13.4)
17.9
1.1
26.9

Total
£m
421.5
347.8

2015
£m
16.1
(9.0)
12.8
1.4
21.3

FINANCIAL STATEMENTS106

Ashtead Group plc Annual Report & Accounts 2016

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED

12 CASH AND CASH EQUIVALENTS

Cash and cash equivalents

The carrying amount of cash and cash equivalents approximates to their fair value.

13 PROPERTY, PLANT AND EQUIPMENT

Cost or valuation
At 1 May 2014
Exchange differences
Acquisitions
Reclassifications
Additions
Disposals
At 30 April 2015
Exchange differences
Acquisitions
Reclassifications
Additions
Disposals
At 30 April 2016

Depreciation
At 1 May 2014
Exchange differences
Acquisitions
Reclassifications
Charge for the period
Disposals
At 30 April 2015
Exchange differences
Acquisitions
Reclassifications
Charge for the period
Disposals
At 30 April 2016

Net book value
At 30 April 2016
At 30 April 2015

Land and
buildings
£m

Rental
equipment
£m

Office and
workshop
equipment
£m

93.3
5.6
1.7
0.5
14.2
(0.9)
114.4
3.7
–
–
19.1
(1.3)
135.9

38.0
2.4
–
–
5.6
(0.5)
45.5
1.6
–
–
7.3
(1.1)
53.3

2,575.8
214.3
174.4
(2.4)
979.1
(303.0)
3,638.2
152.1
52.6
(3.3)
1,126.6
(485.4)
4,480.8

859.5
76.7
77.0
(1.5)
309.5
(217.2)
1,104.0
52.7
25.2
(1.6)
393.7
(340.1)
1,233.9

82.6
68.9

3,246.9
2,534.2

56.7
3.9
0.3
3.0
9.9
(3.3)
70.5
2.7
0.1
4.5
19.7
(3.9)
93.6

45.3
3.4
0.2
1.7
5.2
(3.2)
52.6
2.1
–
2.5
9.1
(3.6)
62.7

30.9
17.9

2016
£m
13.0

2015
£m
10.5

Motor vehicles

Held under
finance
leases
£m

5.6
–
–
–
2.8
(2.2)
6.2
–
–
–
1.5
(0.3)
7.4

1.8
–
–
–
1.2
(1.4)
1.6
–
–
–
1.4
(0.1)
2.9

Owned
£m

206.3
17.9
19.1
(1.1)
57.1
(20.3)
279.0
11.9
4.9
(1.2)
73.1
(24.1)
343.6

64.0
6.0
9.4
(0.2)
30.0
(15.7)
93.5
4.8
3.0
(0.9)
37.9
(18.6)
119.7

Total
£m

2,937.7
241.7
195.5
–
1,063.1
(329.7)
4,108.3
170.4
57.6
–
1,240.0
(515.0)
5,061.3

1,008.6
88.5
86.6
–
351.5
(238.0)
1,297.2
61.2
28.2
–
449.4
(363.5)
1,472.5

223.9
185.5

4.5
4.6

3,588.8
2,811.1

£1m of rebuild costs were capitalised in the year (2015: £2m). Rental equipment includes leased assets with a net book value of £0.3m
(2015: £0.4m).

Ashtead Group plc Annual Report & Accounts 2016

107

14 INTANGIBLE ASSETS INCLUDING GOODWILL

Cost or valuation
At 1 May 2014
Recognised on acquisition
Exchange differences
At 30 April 2015
Recognised on acquisition
Exchange differences
At 30 April 2016

Amortisation
At 1 May 2014
Charge for the period
Exchange differences
At 30 April 2015
Charge for the period
Impairment loss
Exchange differences
At 30 April 2016

Net book value
At 30 April 2016
At 30 April 2015

Other intangible assets

Goodwill
£m

400.4
76.7
39.1
516.2
16.4
24.1
556.7

–
–
–
–
–
–
–
–

556.7
516.2

Brand
names
£m

Customer
lists
£m

Contract
related
£m

15.7
–
0.9
16.6
–
0.7
17.3

12.7
0.6
0.8
14.1
0.6
–
0.6
15.3

2.0
2.5

48.5
52.8
3.7
105.0
19.9
5.3
130.2

11.9
12.2
0.8
24.9
18.3
12.0
1.7
56.9

73.3
80.1

22.1
6.3
1.4
29.8
1.6
1.0
32.4

15.9
3.0
0.8
19.7
3.5
–
0.7
23.9

8.5
10.1

Total
£m

86.3
59.1
6.0
151.4
21.5
7.0
179.9

40.5
15.8
2.4
58.7
22.4
12.0
3.0
96.1

83.8
92.7

Total
£m

486.7
135.8
45.1
667.6
37.9
31.1
736.6

40.5
15.8
2.4
58.7
22.4
12.0
3.0
96.1

640.5
608.9

Goodwill acquired in a business combination is allocated at acquisition to the cash-generating units (‘CGUs’) that benefit from that
business combination. Goodwill allocated to each of the Group’s CGUs is as follows:

Sunbelt
Pump & Power
Climate Control
Scaffolding
General equipment and related businesses

A-Plant
Eve (temporary roadways and barriers)
PSS (trenchless technology and fusion)
FLG (lifting)
General equipment and related businesses

2016
£m

25.2
17.5
12.4
457.8
512.9

14.3
5.4
3.7
20.4
43.8

2015
£m

26.7
15.6
11.9
424.5
478.7

14.3
4.7
3.7
14.8
37.5

Total goodwill

556.7

516.2

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 2016.
The key assumptions for these financial plans are those regarding revenue growth, margins and capital expenditure required to replace the
rental fleet and support the growth forecast which management estimates based on past experience, market conditions and expectations
for the future development of the market. The projections consist of the 2016/17 budget, a further two years from the Group’s business
plan and a further seven years’ cash flows. The valuation uses an annual growth rate to determine the cash flows beyond the three-year
business plan period of 2%, which does not exceed the average long-term growth rates for the relevant markets, a terminal value
reflective of market multiples and discount rates of 11% and 9% for the US and UK businesses respectively.

The impairment review is sensitive to a change in key assumptions used, most notably the discount rate and the annuity growth rates.
A sensitivity analysis has been undertaken by changing the key assumptions used for each CGU in both Sunbelt and A-Plant. Based
on this sensitivity analysis, no reasonably possible change in the assumptions resulted in the recoverable amount of the CGUs identified
above being reduced to their carrying value.

FINANCIAL STATEMENTS108

Ashtead Group plc Annual Report & Accounts 2016

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED

14 INTANGIBLE ASSETS INCLUDING GOODWILL CONTINUED
Sunbelt
General equipment and related businesses
Revenue for the general equipment business is linked primarily to US non-residential construction spend, which is expected to continue to
grow during the business plan period. These businesses have grown more rapidly than both non-residential construction and the broader
rental market and this outperformance is expected to continue over the business plan period, although not necessarily to the same degree
as over recent years. EBITDA margins are forecast to increase slightly from current levels as the businesses benefit from improving
market conditions and increased scale.

Pump & Power, Climate Control and Scaffolding
Revenue for the Pump & Power, Climate Control and Scaffolding businesses is in part linked to the level of non-residential construction
and also general levels of economic activity. EBITDA margins are forecast to increase slightly from current levels as the businesses
benefit from increased scale.

A-Plant
Revenue for each of the A-Plant CGUs is linked primarily to UK non-residential construction spend. This market is expected to grow during
the business plan period. A-Plant has grown over the last three years more quickly than non-residential construction and we expect it to
perform ahead of the market over the business plan period. The Eve business is also reliant on the events market which is expected to
grow at a similar rate to construction markets. EBITDA margins are forecast to increase slightly from current levels as the businesses
benefit from improving market conditions and increased scale.

15 TRADE AND OTHER PAYABLES

Trade payables
Other taxes and social security
Accruals and deferred income

2016
£m
232.0
32.7
215.8
480.5

2015
£m
264.4
27.6
199.7
491.7

Trade and other payables include amounts relating to the purchase of fixed assets of £247m (2015: £261m). The fair values of trade and
other payables are not materially different from the carrying values presented.

16 BORROWINGS

Current
Finance lease obligations
Non-current
First priority senior secured bank debt
Finance lease obligations
6.5% second priority senior secured notes, due 2022
5.625% second priority senior secured notes, due 2024

2016
£m

2.5

1,055.2
2.9
618.2
335.9
2,012.2

2015
£m

2.0

782.7
3.3
589.8
319.8
1,695.6

The senior secured bank debt and the senior secured notes are secured by way of, respectively, first and second priority fixed and floating
charges over substantially all the Group’s property, plant and equipment, inventory and trade receivables.

Ashtead Group plc Annual Report & Accounts 2016

109

First priority senior secured credit facility
At 30 April 2016, $2.6bn was committed by our senior lenders under the asset-based senior secured revolving credit facility (‘ABL facility’)
until July 2020 while the amount utilised was $1,604m (including letters of credit totalling $36m). The ABL facility is secured by a first
priority interest in substantially all of the Group’s assets. Pricing for the revolving credit facility is based on average availability according
to a grid which varies from LIBOR plus 125bp to LIBOR plus 175bp. At 30 April 2016 the Group’s borrowing rate was LIBOR plus 150bp.

The only financial performance covenant under the asset-based first priority senior bank facility is a fixed charge ratio (comprising
LTM EBITDA before exceptional items less LTM net capital expenditure paid in cash over the sum of scheduled debt repayments plus
cash interest, cash tax payments and dividends paid in the last 12 months) which must be equal to or greater than 1.0 times.

This covenant does not, however, apply when availability (the difference between the borrowing base and facility utilisation) exceeds
$260m. At 30 April 2016 availability under the bank facility was $1,126m ($756m at 30 April 2015), with an additional $1,796m of suppressed
availability meaning that the covenant was not measured at 30 April 2016 and is unlikely to be measured in forthcoming quarters.
Accordingly, the accounts are prepared on a going concern basis.

6.5% second priority senior secured notes due 2022 having a nominal value of $900m and 5.625% second priority senior secured
notes due 2024 having a nominal value of $500m
At 30 April 2016 the Group, through its wholly owned subsidiary Ashtead Capital, Inc., had outstanding two series of second priority senior
secured notes with nominal values of $900m and $500m. The $900m of notes carry an interest rate of 6.5% and are due on 15 July 2022
while the $500m of notes carry an interest rate of 5.625% and are due on 1 October 2024. 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.

Under the terms of the 6.5% and 5.625% 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.
Financial performance covenants under the 6.5% and 5.625% senior secured note issue are only measured at the time new debt is raised.

The effective rates of interest at the balance sheet date were as follows:

First priority senior secured bank debt
Secured notes

– revolving advances in dollars
– $900m nominal value
– $500m nominal value

Finance leases

17 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

2016
1.97%
6.5%
5.625%
6.6%

2015
1.97%
6.5%
5.625%
6.3%

Minimum lease payments

Present value of minimum
lease payments

2016
£m

2.8
3.2
6.0
(0.6)
5.4

2015
£m

2.2
3.7
5.9
(0.6)
5.3

2016
£m

2.5
2.9
5.4

2015
£m

2.0
3.3
5.3

The Group’s obligations under finance leases are secured by the lessor’s rights over the leased assets disclosed in Note 13.

FINANCIAL STATEMENTS110

Ashtead Group plc Annual Report & Accounts 2016

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED

18 PROVISIONS

At 1 May 2015
Acquired businesses
Exchange differences
Utilised/released
Charged in the year
Amortisation of discount
At 30 April 2016

Included in current liabilities
Included in non-current liabilities

Self-insurance
£m
19.0
–
0.9
(22.2)
23.3
0.4
21.4

Vacant
property
£m
5.3
–
0.1
(2.0)
0.9
–
4.3

Contingent
consideration
£m
25.4
4.8
0.8
(10.9)
–
0.7
20.8

2016
£m
28.9
17.6
46.5

Total
£m
49.7
4.8
1.8
(35.1)
24.2
1.1
46.5

2015
£m
18.4
31.3
49.7

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 £1.4m adjustment to reduce the provision
held at 1 May 2015.

The majority of the provision for vacant property costs is expected to be utilised over a period of up to three years. The provision for
contingent consideration relates to recent acquisitions and is expected to be paid out over the next two years.

19 DEFERRED TAX
Deferred tax assets

At 1 May 2015
Offset against deferred tax liability at 1 May 2015
Gross deferred tax assets at 1 May 2015
Exchange differences
(Charge)/credit to income statement
Credit/(charge) to equity
Acquisitions
Less offset against deferred tax liability
At 30 April 2016

Deferred tax liabilities

Net deferred tax liability at 1 May 2015
Deferred tax assets offset at 1 May 2015
Gross deferred tax liability at 1 May 2015
Exchange differences
Charge/(credit) to income statement
Credit to equity
Acquisitions

Less offset of deferred tax assets
– benefit of tax losses
– other temporary differences
At 30 April 2016

Tax losses
£m
–
70.8
70.8
3.8
(2.2)
2.8
–
(75.2)
–

Accelerated tax
depreciation
£m
501.6
126.8
628.4
35.7
197.5
–
0.1
861.7

Other
temporary
differences
£m
–
56.0
56.0
2.9
12.7
(3.6)
(1.9)
(66.1)
–

Other
temporary
differences
£m
2.9
–
2.9
–
(0.7)
(0.1)
0.8
2.9

Total
£m
–
126.8
126.8
6.7
10.5
(0.8)
(1.9)
(141.3)
–

Total
£m
504.5
126.8
631.3
35.7
196.8
(0.1)
0.9
864.6

(75.2)
(66.1)
723.3

Ashtead Group plc Annual Report & Accounts 2016

111

The Group has an unrecognised UK deferred tax asset of £1.2m (2015: £1.2m) 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 are considered to exist as UK
tax legislation largely exempts overseas dividends received from UK tax.

20 SHARE CAPITAL AND RESERVES

Ordinary shares of 10p each
Authorised

Issued and fully paid:
At 1 May and 30 April

2016
Number

2015
Number

900,000,000

2016
£m

90.0

2015
£m

90.0

553,325,554

55.3

There were no movements in shares authorised or allotted during the period.

At 30 April 2016, 50m (2015: 50m) shares were held by the Company, acquired at an average cost of 67p (2015: 67p) and a further 1.8m
(2015: 1.9m) shares were held by the Company’s Employee Share Ownership Trust (‘ESOT’) to facilitate the provision of shares under the
Group’s Performance Share Plan (‘PSP’).

The non-distributable reserve related to the reserve created on the cancellation of the then share premium account in August 2005.
Under the terms of the court order, the reserve became distributable when either:

• there remained no outstanding debt or claim against the Company which existed at the date of the cancellation of the share premium

account; or

• after 10 years if the only outstanding amount related to leases in effect at the cancellation date.

Accordingly, the reserve was transferred to distributable reserves after 10 years in August 2015.

21 SHARE-BASED PAYMENTS
The ESOT facilitates the provision of shares under the Group’s PSP. It holds a beneficial interest in 1,789,203 ordinary shares of the
Company acquired at an average cost of 903.7p per share. The shares had a market value of £16.3m at 30 April 2016. 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.

Details of the PSP are given on pages 71 and 77. 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 2016, there was a net
charge to pre-tax profit in respect of the PSP of £4.7m (2015: £4.0m). After deferred tax, the total charge was £3.3m (2015: £2.8m).

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 1,051p, nil exercise price, a dividend yield of 1.45%, volatility of 30.78%, a risk-free rate of 1% 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.

Details of the PSP awards outstanding during the year are as follows:

Outstanding at 1 May
Granted
Exercised
Expired
Outstanding at 30 April
Exercisable at 30 April

2016
Number
2,734,482
750,785
(1,329,492)
(12,358)
2,143,417
–

2015
Number
4,473,385
684,684
(2,352,219)
(71,368)
2,734,482
–

FINANCIAL STATEMENTS112

Ashtead Group plc Annual Report & Accounts 2016

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED

22 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

2016
£m

4.1
31.9
20.1
56.1

2015
£m

4.2
26.2
14.6
45.0

Total minimum commitments under existing operating leases at 30 April 2016 through to the earliest date at which the lease may be exited
without penalty by year are as follows:

Financial year
2017
2018
2019
2020
2021
Thereafter

£m

56.1
49.6
41.7
32.7
24.7
81.5
286.3

£4m of the total minimum operating lease commitments of £286m relating to vacant properties has been provided within the financial
statements and included within provisions in the balance sheet.

23 PENSIONS
Defined contribution plans
The Group operates pension plans for the benefit of qualifying employees. The plans for new employees throughout the Group are all
defined contribution plans. Pension costs for defined contribution plans were £10m (2015: £8m).

Defined benefit plan
The Group also has a defined benefit plan for certain UK employees which was closed to new members in 2001. The plan is a funded
defined benefit plan with trustee-administered assets held separately from those of the Group. The Trustees are composed of
representatives of both the Company and plan members. The Trustees are required by law to act in the interest of all relevant beneficiaries
and are responsible for the investment policy of the assets and the day-to-day administration of the benefits.

The plan is a final salary plan which provides members a guaranteed level of pension payable for life. The level of benefits provided
by the plan depends on members’ length of service and their salary in the final years leading up to retirement.

The plan’s duration is an indicator of the weighted-average time until benefit payments are made. For the plan as whole, the duration
is around 20 years. The estimated amount of contributions expected to be paid by the Group to the plan during the 2016/17 financial year
is £1m.

The plan exposes the Group to a number of risks, the most significant being investment risk, interest rate risk, inflation risk and life
expectancy risk.

The most recent actuarial valuation was carried out as at 30 April 2013 by a qualified independent actuary and showed a funding surplus of
£5m. The actuary was engaged by the Company to perform a valuation in accordance with IAS 19 (revised) as at 30 April 2016. The principal
financial assumptions made by the actuary were as follows:

Discount rate
Inflation assumption – RPI
– CPI
Rate of increase in salaries
Rate of increase in pensions in payment

2016
3.4%
3.0%
1.9%
4.0%
3.0%

2015
3.5%
3.3%
2.2%
4.3%
3.2%

Ashtead Group plc Annual Report & Accounts 2016

113

Pensioner life expectancy assumed in the 30 April 2016 update is based on the ‘S1P CMI 2015’ projection model mortality tables adjusted
so as to apply a minimum annual rate of improvement of 1.25% a year. Samples of the ages to which pensioners are assumed to live are
as follows:

Life expectancy of pensioners currently aged 65
Male
Female

Life expectancy at age 65 for future pensioner currently aged 45
Male
Female

The plan’s assets are invested in the following asset classes:

UK equities
US equities
European equities
Asia Pacific (excluding Japan) equities
Corporate bonds
Global loan fund
Property
Cash

The amounts recognised in the balance sheet are determined as follows:

Fair value of plan assets
Present value of funded defined benefit obligation
Net asset recognised in the balance sheet

The components of the defined benefit cost recognised in the income statement are as follows:

2016

2015

86.6
88.9

88.3
90.8

2016
£m
44.8
12.8
2.4
–
11.1
7.5
10.1
0.3
89.0

86.8
89.1

88.5
91.0

Fair value

2015
£m
47.3
11.2
2.7
4.1
11.1
7.8
8.2
0.5
92.9

2016
£m
89.0
(86.8)
2.2

2015
£m
92.9
(89.8)
3.1

Current service cost
Net interest on the net defined benefit plan
Net charge to the income statement

The remeasurements of the defined benefit plan recognised in the statement of comprehensive income are as follows:

Actuarial gain/(loss) due to changes in financial assumptions
Actuarial gain due to changes in demographic assumptions
Actuarial gain arising from experience adjustments
Return on plan assets excluding amounts recognised in net interest
Remeasurement of the defined benefit pension plan

2016
£m
0.8
(0.1)
0.7

2016
£m
1.9
0.8
1.8
(5.1)
(0.6)

2015
£m
0.7
(0.2)
0.5

2015
£m
(9.9)
0.3
0.6
5.9
(3.1)

FINANCIAL STATEMENTS114

Ashtead Group plc Annual Report & Accounts 2016

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED

23 PENSIONS CONTINUED
Movements in the present value of defined benefit obligations were as follows:

At 1 May
Current service cost
Interest cost
Contributions from members
Remeasurements
– Actuarial (gain)/loss due to changes in financial assumptions
– Actuarial gain due to changes in demographic assumptions
– Actuarial gain arising from experience adjustments
Benefits paid
At 30 April

2016
£m
89.8
0.8
3.2
0.2

(1.9)
(0.8)
(1.8)
(2.7)
86.8

2015
£m
78.3
0.7
3.3
0.2

9.9
(0.3)
(0.6)
(1.7)
89.8

The key assumptions used in valuing the defined benefit obligation are: discount rate, inflation and mortality. The sensitivity of the results
to these assumptions is as follows:

• An increase in the discount rate of 0.5% would result in an £8m (2015: £8m) decrease in the defined benefit obligation.
• An increase in the inflation rate of 0.5% would result in a £7m (2015: £7m) increase in the defined benefit obligation. This includes the

resulting change to other assumptions that are related to inflation such as pensions and salary growth.

• A one-year increase in the pensioner life expectancy at age 65 would result in a £3m (2015: £3m) increase in the defined benefit obligation.

The above sensitivity analyses have been determined based on reasonably possible changes to the significant assumptions, while holding
all other assumptions constant. In practice, this is unlikely to occur, and changes in some assumptions may be correlated. The sensitivity
information shown above has been prepared using the same method as adopted when adjusting the results of the latest funding valuation
to the balance sheet date. This is the same approach as has been adopted in previous periods.

Movements in the fair value of plan assets were as follows:

At 1 May
Interest income
Remeasurement – return on plan assets excluding amounts recognised in net interest
Employer contributions
Contributions from members
Benefits paid
At 30 April

The actual return on plan assets was a £1.8m loss (2015: £9.4m gain).

2016
£m
92.9
3.3
(5.1)
0.4
0.2
(2.7)
89.0

2015
£m
84.4
3.5
5.9
0.6
0.2
(1.7)
92.9

Ashtead Group plc Annual Report & Accounts 2016

115

24 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 its financial results
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 48% of the drawn debt at a fixed rate as at 30 April 2016. 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 plus 150bp. 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 2016,
the Group had no such swap agreements outstanding. 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 2016, based upon the amount of variable rate debt outstanding, the Group’s pre-tax profits would change by approximately £10m
for each one percentage point change in interest rates applicable to the variable rate debt and, after tax effects, equity would change by
approximately £7m. The amount of the Group’s variable rate debt may fluctuate as a result of changes in the amount of debt outstanding
under 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, the majority of our assets, liabilities, revenue and
costs are denominated in US dollars. The Group has arranged its financing such that, at 30 April 2016, 91% of its debt was denominated
in US (and Canadian) dollars so that there is a natural partial offset between its dollar-denominated net assets and earnings and its
dollar-denominated debt and interest expense. At 30 April 2016, dollar-denominated debt represented approximately 62% of the value
of dollar-denominated net assets (other than debt).

The Group’s exposure to exchange rate movements on trading transactions is relatively limited. All Group companies invoice revenue 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 currency exposures or the impact of exchange rate movements on the translation of overseas
profits into 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.

Resultant impacts of reasonably possible changes to foreign exchange rates
Based upon the level of US operations and the US dollar-denominated debt balance, at 30 April 2016 a 1% change in the US dollar-pound
exchange rate would have impacted our pre-tax profits by approximately £6m and equity by approximately £15m. At 30 April 2016, the
Group had no outstanding foreign exchange contracts.

FINANCIAL STATEMENTS116

Ashtead Group plc Annual Report & Accounts 2016

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED

24 FINANCIAL RISK MANAGEMENT CONTINUED
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

2016
£m
13.0
455.7
468.7

2015
£m
10.5
377.5
388.0

The Group has a large number of unrelated customers, serving over 570,000 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 it 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, dividend payments and other returns to shareholders 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 2016, availability under the $2.6bn facility was $1,126m (£769m).

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. The undiscounted cash flows have been calculated using foreign
currency exchange rates and interest rates ruling at the balance sheet date.

At 30 April 2016

Bank and other debt
Finance leases
6.5% senior secured notes
5.625% senior secured notes

Interest payments

2017
£m
–
2.5
–
–
2.5
80.2
82.7

2018
£m
–
1.8
–
–
1.8
80.1
81.9

2019
£m
–
0.9
–
–
0.9
80.0
80.9

2020
£m
–
0.2
–
–
0.2
80.0
80.2

Undiscounted cash flows – year to 30 April

2021
£m
1,063.1
–
–
–
1,063.1
59.1
1,122.2

Thereafter
£m
–
–
627.0
341.3
968.3
174.6
1,142.9

Total
£m
1,063.1
5.4
627.0
341.3
2,036.8
554.0
2,590.8

Letters of credit of £24m (2015: £21m) are provided and guaranteed under the ABL facility which expires in July 2020.

At 30 April 2015

Bank and other debt
Finance leases
6.5% senior secured notes
5.625% senior secured notes

Interest payments

2016
£m
–
2.0
–
–
2.0
72.2
74.2

2017
£m
–
1.8
–
–
1.8
72.1
73.9

2018
£m
–
1.1
–
–
1.1
72.0
73.1

2019
£m
788.4
0.4
–
–
788.8
71.9
860.7

Undiscounted cash flows – year to 30 April

2020
£m
–
–
–
–
–
56.4
56.4

Thereafter
£m
–
–
599.3
325.4
924.7
166.4
1,091.1

Total
£m
788.4
5.3
599.3
325.4
1,718.4
511.0
2,229.4

Ashtead Group plc Annual Report & Accounts 2016

117

Fair value of financial instruments
Fair value of derivative financial instruments
At 30 April 2016, the Group had no derivative financial instruments. The embedded prepayment options included within the $900m and
$500m senior secured loan notes are closely related to the host debt contract and hence, are not accounted for separately. The loan
notes are carried at amortised cost.

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 2016. 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
– 6.5% senior secured notes
– 5.625% 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
Finance lease obligations due within one year
Trade and other payables
Trade and other receivables
Cash and cash equivalents

At 30 April 2016

At 30 April 2015

Book value
£m

Fair value
£m

Book value
£m

Fair value
£m

1,063.1
627.0
341.3
2,031.4

2.9
2,034.3
(22.1)
2,012.2

1,063.1
661.5
353.2
2,077.8

3.2
2,081.0
–
2,081.0

788.4
599.3
325.4
1,713.1

3.3
1,716.4
(20.8)
1,695.6

788.4
645.7
341.6
1,775.7

3.7
1,779.4
–
1,779.4

2.5
480.5
455.7
13.0

2.0
491.7
377.5
10.5

2.2
491.7
377.5
10.5

FINANCIAL STATEMENTS118

Ashtead Group plc Annual Report & Accounts 2016

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED

25 NOTES TO THE CASH FLOW STATEMENT
a) Cash flow from operating activities

Operating profit before exceptional items and amortisation
Depreciation
EBITDA before exceptional items
Profit on disposal of rental equipment
Profit on disposal of other property, plant and equipment
Increase in inventories
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
Exchange differences
Other non-cash movements
Cash generated from operations before exceptional items and changes in rental equipment

2016
£m
728.2
449.4
1,177.6
(47.4)
(1.4)
(15.1)
(36.8)
(10.9)
(0.1)
4.7
1,070.6

2015
£m
556.9
351.5
908.4
(26.8)
(1.2)
(2.0)
(58.5)
17.7
(0.2)
4.0
841.4

b) Analysis of net debt
Net debt consists of total borrowings less cash and cash equivalents. Borrowings exclude accrued interest. Foreign currency denominated
balances are retranslated to pounds sterling at rates of exchange ruling at the balance sheet date.

Cash and cash equivalents
Debt due within one year
Debt due after one year
Total net debt

1 May
2015
£m
(10.5)
2.0
1,695.6
1,687.1

Exchange
movement
£m
(0.2)
–
81.9
81.7

Cash
flow
£m
(2.3)
(0.6)
232.8
229.9

Debt
acquired
£m
–
0.1
0.2
0.3

Non-cash
movements
£m
–
1.0
1.7
2.7

30 April
2016
£m
(13.0)
2.5
2,012.2
2,001.7

Non-cash movements relate to the amortisation of prepaid fees relating to the refinancing of debt facilities and the addition of new finance
leases in the year.

c) Acquisitions

Cash consideration paid
– acquisitions in the period (net of cash acquired)
– contingent consideration

2016
£m

64.9
3.5

68.4

2015
£m

236.0
5.5

241.5

During the year, 12 acquisitions were made for a total cash consideration of £65m (2015: £236m), after taking account of net cash acquired
of £0.9m. Further details are provided in Note 26.

Payments for contingent consideration on prior year acquisitions were also made of £3m (2015: £5m).

26 ACQUISITIONS
During the year, the following acquisitions were completed:

i) On 29 May 2015 Sunbelt acquired the business and assets of C. Rowland Enterprises, Inc., trading as Air Systems Sales & Rentals, Inc.
(‘Air Systems’), for an initial cash consideration of £1m ($2m), with contingent consideration of up to £0.5m ($0.8m), payable over the
next year, depending on revenue meeting or exceeding certain thresholds. Air Systems is a climate control business in Oregon.

ii) On 28 August 2015 Sunbelt acquired the business and assets of Dover Rent-All, Inc. (‘Dover’) for an initial cash consideration of £1m

($2m). Dover is a general equipment business in Delaware.

iii) On 1 October 2015 Sunbelt acquired the business and assets of Pinnacle Rentals, Ltd. and Pinnacle Tool & Supply, Ltd. (together

‘Pinnacle’) for an aggregate consideration of £16m ($24m). Pinnacle is an industrial equipment business in Texas.

iv) On 2 October 2015 A-Plant acquired the entire issued share capital of Fraluk Limited (‘Fraluk’) for an initial cash consideration of £1m,

with contingent consideration of up to £1m payable over the next two years. Fraluk is a climate control business.

v) On 9 October 2015 Sunbelt acquired the business and assets of 1139623 Alberta Ltd., trading as The Rental Store (‘The Rental Store’),

for £0.5m (C$1.1m). The Rental Store is a general equipment rental business in Alberta, Canada.

Ashtead Group plc Annual Report & Accounts 2016

119

vi) On 28 October 2015 A-Plant acquired the entire issued share capital of G.B. Access Limited (‘G.B. Access’) for an initial cash

consideration of £6m, with contingent consideration of up to £2m payable over the next year. G.B. Access is a specialist provider
of lifting solutions.

vii) On 1 December 2015 A-Plant acquired the business and assets of Euremica Limited (‘Euremica’) for £0.8m. Euremica is a specialist

test instrumentation service provider.

viii) On 1 December 2015 Sunbelt acquired certain business and assets of 303567 Saskatchewan Ltd, trading as Handy Rental Centre

(‘Handy’), for £6m (C$13m). Handy is a general equipment rental business in Saskatchewan, Canada.

ix) On 31 December 2015 Sunbelt acquired the entire issued share capital of Okotoks Rentals Ltd (‘Okotoks’) for an initial cash

consideration of £16m (C$34m), with contingent consideration of up to £1m (C$2m) payable over the next two years. Okotoks is
a general equipment rental business in Alberta, Canada.

x) On 7 January 2016 Sunbelt acquired the business and assets of Richardson Equipment Rentals, Inc. (‘Richardson’) for £6m ($9m).

Richardson is a general equipment rental business in California.

xi) On 18 January 2016 A-Plant acquired certain business and assets of Rapid Climate Control Limited (‘Rapid’) for £3m. Rapid is

a climate control business.

xii) On 1 April 2016 Sunbelt acquired the business and assets of Equipco, LLC (‘Equipco’) for £7m ($10m). Equipco is a general equipment

rental business in Louisiana.

The following table sets out the book values of the identifiable assets and liabilities acquired and their fair value to the Group. The fair
values have been determined provisionally at the balance sheet date.

Net assets acquired
Trade and other receivables
Inventory
Property, plant and equipment
– rental equipment
– other assets
Creditors
Debt
Current tax
Deferred tax
Intangible assets (non-compete agreements and customer relationships)

Consideration:
– cash paid and due to be paid (net of cash acquired)
– contingent consideration payable in cash

Goodwill

Fair value
to Group
£m

8.2
0.6

27.4
2.0
(1.9)
(0.3)
(0.8)
(2.8)
21.5
53.9

65.5
4.8
70.3

16.4

The goodwill arising can be attributed to the key management personnel and workforce of the acquired businesses and to the synergies
and other benefits the Group expects to derive from the acquisitions. The synergies and other benefits include the elimination of duplicate
costs, improving utilisation of the acquired rental fleet, using the Group’s financial strength to invest in the acquired businesses and
drive improved returns through a semi-fixed cost base and the application of the Group’s proprietary software to optimise revenue
opportunities. £9m of the goodwill is expected to be deductible for income tax purposes.

The fair value of trade receivables at acquisition was £8m. The gross contractual amount for trade receivables due was £9m, net of a £1m
provision for debts which may not be collected.

Due to the operational integration of the acquired businesses with Sunbelt and A-Plant since acquisition, in particular the merger of some
stores, the movement of rental equipment between stores and investment in the rental fleet, it is not practical to report the revenue and
profit of the acquired businesses post acquisition. On an annual basis they generate approximately £45m of revenue.

The revenue and operating profit of these acquisitions from 1 May 2015 to their date of acquisition was not material.

FINANCIAL STATEMENTS120

Ashtead Group plc Annual Report & Accounts 2016

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED

27 CONTINGENT LIABILITIES
The Group is subject to periodic legal claims in the ordinary course of its business, none of which is expected to have a material impact
on the Group’s financial position.

The Company
The Company has guaranteed the borrowings of its subsidiary undertakings under the Group’s senior secured credit and overdraft
facilities. At 30 April 2016 the amount borrowed under these facilities was £1,063m (2015: £788m). Subsidiary undertakings are also able to
obtain letters of credit under these facilities and, at 30 April 2016, letters of credit issued under these arrangements totalled £24m ($36m)
(2015: £21m ($33m)). In addition, the Company has guaranteed the 6.5% and 5.625% second priority senior secured notes with a par value
of $900m (£614m) and $500m (£341m) respectively, issued by Ashtead Capital, Inc..

The Company has guaranteed operating and finance lease commitments of subsidiary undertakings where the minimum lease
commitment at 30 April 2016 totalled £37m (2015: £40m) in respect of land and buildings of which £7m is payable by subsidiary
undertakings in the year ending 30 April 2016.

The Company has provided a guarantee to the Ashtead Group plc Retirement Benefits Plan (‘the plan’) that ensures the plan is at least
105% funded as calculated in accordance with section 179 of the Pensions Act 2004. Based on the last actuarial valuation at 30 April 2013,
this guarantee was the equivalent of £23m.

The Company has guaranteed the performance by subsidiaries of certain other obligations up to £5m (2015: £3m).

28 CAPITAL COMMITMENTS
At 30 April 2016 capital commitments in respect of purchases of rental and other equipment totalled £315m (2015: £321m), all of which
had been ordered. There were no other material capital commitments at the year end.

A-Plant has entered into an agreement to acquire the whole of the issued share capital of Lion Trackhire Limited (‘Lion’) for £38m.
The agreement was entered into on 13 April 2016 and closing is subject to certain conditions precedent. Lion is a specialist provider
of temporary access solutions to the events and industrial sectors.

29 EVENTS AFTER THE BALANCE SHEET DATE
Since the balance sheet date the Group has completed four acquisitions as follows:

ii)

On 2 May 2016 Sunbelt acquired the business and assets of I & L Rentals, LLC (‘I & L’) for a cash consideration of £46m ($67m).
I & L is a general equipment rental business in Hawaii.

On 20 May 2016 Sunbelt acquired the business and assets of LoadBanks of America (‘LBA’), a division of Austin Welder & Generator
Services, Inc. for a cash consideration of £4m ($6m). LBA provides testing solutions for power systems.

iii) On 20 May 2016 A-Plant acquired the entire issued share capital of Mather & Stuart Limited (‘Mather & Stuart’) for a cash consideration

of £7m. Mather & Stuart is a temporary power rental business.

iv) On 6 June 2016 Sunbelt acquired the business and assets of Portable Rental Solutions, Inc. and One Source Cooling, LLC (collectively

‘PRS’) for cash consideration of £7m ($10m). PRS is a temporary heating and cooling business in Texas.

The initial accounting for these acquisitions is incomplete. Had the acquisitions taken place on 1 May 2015 its contribution to revenue
and operating profit would not have been material.

30 RELATED PARTY TRANSACTIONS
The Group’s key management comprise the Company’s executive and non-executive directors. Details of their remuneration are given
in Note 4 and details of their share interests and share awards are given in the Directors’ remuneration report and form part of these
financial statements. In relation to the Group’s defined benefit pension plan, details are included in Note 23.

31 EMPLOYEES
The average number of employees, including directors, during the year was as follows:

North America
United Kingdom

2016
Number
10,001
2,966
12,967

2015
Number
8,422
2,604
11,026

32 PARENT COMPANY INFORMATION
a. Balance sheet of the Company (Company number: 01807982)

Current assets
Prepayments and accrued income
Amounts due from subsidiary undertakings

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

Ashtead Group plc Annual Report & Accounts 2016

121

Notes

(f)

(h)

(g)

(b)
(b)
(b)
(b)
(b)
(b)
(b)

2016
£m

0.3
–
0.3

363.7
0.9
364.6

2015
£m

0.3
157.6
157.9

363.7
1.4
365.1

364.9

523.0

32.6
5.8
38.4

55.3
3.6
0.9
–
(33.1)
(16.2)
316.0
326.5

168.4
4.3
172.7

55.3
3.6
0.9
90.7
(33.1)
(15.5)
248.4
350.3

Total liabilities and equity

364.9

523.0

These financial statements were approved by the Board on 13 June 2016.

GEOFF DRABBLE
Chief executive

SUZANNE WOOD
Finance director

FINANCIAL STATEMENTS
122

Ashtead Group plc Annual Report & Accounts 2016

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED

32 PARENT COMPANY INFORMATION CONTINUED
b. Statement of changes in equity of the Company

At 1 May 2014
Total comprehensive income for the year
Dividends paid
Dividend received from
Ashtead Holdings plc

Own shares purchased by the ESOT
Share-based payments
Tax on share-based payments
At 30 April 2015
Total comprehensive income for the year
Dividends paid
Dividends received from
Ashtead Holdings plc

Own shares purchased by the ESOT
Share-based payments
Tax on share-based payments
Transfer of non-distributable reserve
At 30 April 2016

c. Cash flow statement of the Company

Share
capital
£m
55.3
–
–

–
–
–
–
55.3
–
–

–
–
–
–
–
55.3

Cash flows from operating activities
Cash generated from operations
Financing costs paid – commitment fee
Dividends received from Ashtead Holdings PLC
Net cash from operating activities

Cash flows from financing activities
Purchase of own shares by the ESOT
Dividends paid
Net cash used in financing activities

Change in cash and cash equivalents

Share
premium
account
£m
3.6
–
–

Capital
redemption
reserve
£m
0.9
–
–

Non-
distributable
reserve
£m
90.7
–
–

Own
shares
held by the
Company
£m
(33.1)
–
–

Own
shares
held
through
the ESOT
£m
(11.8)
–
–

–
–
–
–
3.6
–
–

–
–
–
–
–
3.6

–
–
–
–
0.9
–
–

–
–
–
–
–
0.9

–
–
–
–
90.7
–
–

–
–
–
–
(90.7)
–

–
–
–
–
(33.1)
–
–

–
–
–
–
–
(33.1)

–
(20.3)
16.6
–
(15.5)
–
–

–
(12.0)
11.3
–
–
(16.2)

Note

(j)

Retained
reserves
£m
160.9
–
(61.4)

160.2
–
(12.6)
1.3
248.4
0.1
(81.5)

64.7
–
(6.6)
0.2
90.7
316.0

2016
£m

30.4
(1.6)
64.7
93.5

(12.0)
(81.5)
(93.5)

Total
£m
266.5
–
(61.4)

160.2
(20.3)
4.0
1.3
350.3
0.1
(81.5)

64.7
(12.0)
4.7
0.2
–
326.5

2015
£m

(76.7)
(1.8)
160.2
81.7

(20.3)
(61.4)
(81.7)

–

Ashtead Group plc Annual Report & Accounts 2016

123

d. Accounting policies
The Company financial statements have been prepared on the basis of the accounting policies set out in Note 2 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 profit for the financial year dealt with in the accounts of Ashtead Group plc is £0.1m (2015: £nil). There were no other amounts of
comprehensive income in the financial year.

f. Amounts due from subsidiary undertakings

Due within one year:
Ashtead Plant Hire Company Limited

g. Amounts due to subsidiary undertakings

Due within one year:
Ashtead Holdings PLC

2016
£m

2015
£m

–

157.6

2016
£m

2015
£m

32.6

168.4

FINANCIAL STATEMENTS124

Ashtead Group plc Annual Report & Accounts 2016

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED

32 PARENT COMPANY INFORMATION CONTINUED
h. Investments

At 30 April

Details of the Company’s subsidiaries at 30 April 2016 are as follows:

Name
Ashtead Holdings PLC
Ashtead US Holdings, Inc.
Ashtead Holdings, LLC
Sunbelt Rentals, Inc.
Sunbelt Rentals Industrial Services LLC
Sunbelt Rentals Scaffold Services, Inc.
Empire Scaffold LLC
Sunbelt Rentals of Canada Inc.
Ashtead Plant Hire Company Limited
PSS Utility Solutions Limited
Ashtead Capital, Inc.
Ashtead Financing Limited
Ashtead Financing (Ireland)
Accession Group Limited
Accession Holdings Limited
Anglia Traffic Management Group Limited
Ashtead Plant Hire Company (Ireland) Limited
ATM (Scotland) Limited
ATM (Signs) Limited
ATM Traffic Solutions Limited
Event Infrastructure & Branding (Holdings) Limited
Event Infrastructure & Branding Limited
Eve Trakway Limited
Fraluk Limited
G.B. Access Limited
Impress Brand Management Limited
Lux Traffic Controls Limited
Plant and Site Services Holdings Limited
Plant and Site Services Limited
PSS Innovations Limited
Sheriff Plant Hire Limited
Temporary Roadway & Access Company Limited
Vincehire Limited

Country of incorporation and operation
England and Wales
USA
USA
USA
USA
USA
USA
Canada
England and Wales
Republic of Ireland
USA
England and Wales
Republic of Ireland
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales

Shares in Group companies

2016
£m
363.7

2015
£m
363.7

Principal activity
Investment holding company
Investment holding company
Investment holding company
Equipment rental and related services
Equipment rental and related services
Equipment rental and related services
Equipment rental and related services
Equipment rental and related services
Equipment rental and related services
Equipment rental and related services
Finance company
Finance company
Finance company
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant

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.

i. Financial instruments
The book value and fair value of the Company’s financial instruments are not materially different.

j. Notes to the Company cash flow statement
Cash flow from operating activities

Operating profit
Depreciation
EBITDA
Increase/(decrease) in accruals and deferred income
Increase/(decrease) in intercompany payable and receivable
Other non-cash movement
Net cash inflow/(outflow) from operations before exceptional items

2016
£m
1.6
0.1
1.7
1.4
22.6
4.7
30.4

2015
£m
1.7
–
1.7
(1.6)
(80.8)
4.0
(76.7)

TEN-YEAR HISTORY

In £m
Income statement
Revenue+
Operating costs+
EBITDA+
Depreciation+
Operating profit+
Interest+
Pre-tax profit+

Operating profit
Pre-tax profit/(loss)

Cash flow
Cash flow from operations before
exceptional items and changes
in rental fleet

Total cash (used)/generated before

exceptional costs and M&A

Balance sheet
Capital expenditure
Book cost of rental equipment
Shareholders’ funds
In pence
Dividend per share
Earnings per share
Underlying earnings per share
In per cent
EBITDA margin+
Operating profit margin+
Pre-tax profit margin+
Return on investment+
People
Employees at year end
Locations
Stores at year end

Ashtead Group plc Annual Report & Accounts 2016

125

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2,545.7
(1,368.1)

2,038.9
(1,130.5)

1,634.7
(949.6)

1,361.9
(842.9)

1,134.6
(753.5)

1,177.6
(449.4)

728.2
(82.9)

645.3

908.4
(351.5)

556.9
(67.3)

489.6

685.1
(275.9)

409.2
(47.1)

362.1

519.0
(229.0)

290.0
(44.6)

245.4

381.1
(199.8)

181.3
(50.7)

130.6

948.5
(664.7)

283.8
(185.0)

98.8
(67.8)

31.0

836.8
(581.7)

255.1
(186.6)

68.5
(63.5)

5.0

1,073.5
(717.4)

1,047.8
(684.1)

356.1
(201.1)

155.0
(67.6)

87.4

363.7
(176.6)

187.1
(74.8)

112.3

896.1
(585.8)

310.3
(159.8)

150.5
(69.1)

81.4

699.6
616.7

541.1
473.8

403.6
356.5

284.2
214.2

178.2
134.8

97.1
1.7

66.0
4.8

68.4
0.8

184.5
109.7

101.1
(36.5)

1,070.6

841.4

645.5

501.3

364.6

279.7

265.6

373.6

356.4

319.3

(68.0)

(87.9)

(48.5)

(34.0)

(9.4)

65.6

199.2

166.0

14.8

20.3

1,240.0
4,480.8
1,480.4

1,063.1
3,638.2
1,111.5

740.6
2,575.8
824.4

580.4
2,186.5
682.5

476.4
1,854.1
554.7

224.8
1,621.6
481.4

63.4
1,701.3
500.3

238.3
1,798.2
526.0

331.0
1,528.4
440.3

290.2
1,434.1
396.7

22.5p
81.3p
85.1p

15.25p
60.5p
62.6p

11.5p
46.1p
46.6p

7.5p
27.6p
31.4p

3.5p
17.8p
17.3p

3.0p
0.2p
4.0p

2.9p
0.4p
0.2p

2.575p
12.5p
11.9p

2.5p
14.2p
14.8p

1.65p
0.8p
10.3p

46.3% 44.6%
41.9%
28.6% 27.3% 25.0%
25.3% 24.0% 22.2% 18.0%
18.9%

38.1% 33.6%
21.3% 16.0%
11.5%
18.6% 16.2% 12.0%

19.4%

29.9% 30.5% 33.2% 34.7% 34.6%
17.9% 16.8%
14.4%
10.4%
9.1%
8.1%
3.3%
10.7%
12.9%
9.7% 14.0%
7.0%

8.2%
0.6%
4.6%

13,106

11,928

9,934

9,085

8,555

8,163

7,218

8,162

9,594

10,077

715

640

556

494

485

462

498

520

635

659

+ Before exceptional items, amortisation and fair value remeasurements.

ADDITIONAL INFORMATION

FUTURE DATES
Quarter 1 results
2016 Annual
General Meeting
Quarter 2 results
Quarter 3 results
Quarter 4 and
year-end results

7 September 2016

7 September 2016
6 December 2016
7 March 2017

13 June 2017

Financial PR Advisers
The Maitland Consultancy
125 Shaftesbury Avenue
London WC2H 8AD

Solicitors
Travers Smith LLP
10 Snow Hill
London EC1A 2AL

ADVISERS
Auditor
Deloitte LLP
2 New Street Square
London EC4A 3BZ

Registrars & Transfer Office
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA

Skadden, Arps, Slate, Meagher & Flom LLP
155 N Wacker Drive
Chicago, IL 60606

Parker, Poe, Adams & Bernstein LLP
401 South Tryon Street
Charlotte, NC 28202

Brokers
Jefferies Hoare Govett
Vintners Place
68 Upper Thames Street
London EC4V 3BJ

Barclays Bank plc
North Colonnade
Canary Wharf
London E14 4BB

Registered number
01807982

Registered Office
100 Cheapside
London EC2V 6DT

ADDITIONAL INFORMATION

Ashtead Group plc
100 Cheapside
London EC2V 6DT

Phone: + 44 (0) 20 7726 9700
Fax: + 44 (0) 20 7726 9705
www.ashtead-group.com

Printed in the UK by CPI Colour, a CarbonNeutral®
company. Both manufacturing mill and the printer
are registered to the Environmental Management
System ISO14001 and are Forest Stewardship
Council® (FSC®) chain-of-custody certified.

Designed and produced by