REG - Ashtead Group PLC - Q4 2023 Results
13/06/2023 07:00
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RNS Number : 4663C Ashtead Group PLC 13 June 2023
13 June 2023
Audited results for the year and unaudited results
for the fourth quarter ended 30 April 2023
Fourth quarter Year
2023 2022 Growth(1) 2023 2022 Growth(1)
$m $m % $m $m %
Revenue 2,444 2,078 19% 9,667 7,962 24%
Rental revenue 2,126 1,875 15% 8,698 7,235 22%
EBITDA 1,074 900 20% 4,412 3,609 24%
Operating profit 575 445 30% 2,522 1,948 30%
Adjusted(2) profit before taxation 496 418 19% 2,273 1,824 26%
Profit before taxation 466 386 21% 2,156 1,668 30%
Adjusted(2) earnings per share 84.3¢ 72.0¢ 18% 388.5¢ 307.1¢ 27%
Earnings per share 79.1¢ 66.5¢ 19% 368.4¢ 280.9¢ 32%
Full-year highlights(3)
· Record performance with ongoing momentum in robust end markets
· Group revenue up 24%(1); US rental revenue up 24%
· Adjusted(2) earnings per share increased 27% to 388.5¢ (2022:
307.1¢)
· 165 locations added in North America
· $3.8bn of capital invested in the business (2022: $2.4bn)
· $1.1bn spent on 50 bolt-on acquisitions (2022: $1.3bn)
· Net debt to EBITDA leverage(1,3) of 1.6 times (2022: 1.5 times)
· Proposed final dividend of 85.0¢, making 100.0¢ for the full
year (2022: 80.0¢)
(1) Calculated at constant exchange rates applying current period exchange rates.
(2) Adjusted results are stated before exceptional items and amortisation.
(3) Throughout this announcement we refer to a number of alternative performance
measures which provide additional useful information. The directors have
adopted these to provide additional information on the underlying trends,
performance and position of the Group. The alternative performance measures
are not defined by IFRS and therefore may not be directly comparable with
other companies' alternative performance measures but are defined and
reconciled in the Glossary of Terms on page 39.
Ashtead's chief executive, Brendan Horgan, commented:
"I am delighted to report another year of strong performance across all
geographies, with rental revenue growth of 22% for the year at constant
currency, delivering record revenue and profitability for the Group. This
market outperformance is only possible through the dedication of our team
members who deliver for all our stakeholders every day, while ensuring our
leading value of safety remains at the forefront of all we do.
We are executing well against all actionable components of our strategic
growth plan, in end markets which remain strong. We invested $3.8bn in
capital across existing locations and greenfields. This capital investment
was funded from operating cash flow highlighting the cash generative nature of
our business across the cycle. In addition, we spent $1.1bn on 50 bolt-on
acquisitions which, when combined with greenfield openings, added 165
locations in North America. This significant investment is enabling us to take
advantage of the substantial structural growth opportunities that we see for
the business as we deliver our strategic priorities to grow our general tool
and specialty businesses and advance our clusters. We are achieving all this
while maintaining a strong and flexible balance sheet with leverage towards
the lower end of our target range.
We enter the final year of Sunbelt 3.0 with clear momentum in strong end
markets, which are enhanced by the increasing number of mega projects and
recent US legislative acts. We are in a position of strength, with the
operational flexibility and financial capacity to capitalise on the
opportunities arising from these strong markets and ongoing structural change.
The Board looks to the future with confidence."
Contacts:
Will Shaw Director of Investor Relations +44 (0)20 7726 9700
Neil Bennett H/Advisors Maitland +44 (0)20 7379 5151
Sam Cartwright H/Advisors Maitland +44 (0)20 7379 5151
Brendan Horgan and Michael Pratt will hold a conference call for equity
analysts to discuss the results and outlook at 09:30am on Tuesday, 13 June
2023 at Numis, 45 Gresham Street, London, EC2V 7EH. The meeting will be
webcast live via the Company's website at www.ashtead-group.com
(http://www.ashtead-group.com) and a replay will be available via the website
shortly after the meeting concludes. A copy of this announcement and the
slide presentation used for the call are available for download on the
Company's website. The usual conference call for bondholders will begin at
3:00pm (10:00am EST).
Analysts and bondholders have already been invited to participate in the
analyst call and conference call for bondholders but any eligible person not
having received details should contact the Company's PR advisers, H/Advisors
Maitland (Audrey Da Costa) at +44 (0)20 7379 5151.
Forward-looking statements
This announcement 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.
Trading results
Revenue EBITDA Profit(1)
2023 2022 2023 2022 2023 2022
UK in £m 684.8 725.7 192.2 214.6 65.0 86.8
Canada in C$m 827.1 626.0 337.0 281.4 167.4 143.6
US 8,222.4 6,477.0 3,955.3 3,120.6 2,464.7 1,852.3
UK in $m 822.8 986.3 231.0 291.7 78.1 118.0
Canada in $m 622.1 499.0 253.5 224.3 125.9 114.4
Group central costs - - (28.0) (27.2) (29.0) (28.3)
9,667.3 7,962.3 4,411.8 3,609.4 2,639.7 2,056.4
Net financing costs (366.2) (232.6)
Adjusted profit before tax 2,273.5 1,823.8
Amortisation (117.7) (108.6)
Exceptional items - (47.1)
Profit before taxation 2,155.8 1,668.1
Taxation charge (538.1) (417.0)
Profit attributable to equity holders of the Company 1,617.7 1,251.1
Margins
US 48.1% 48.2% 30.0% 28.6%
UK 28.1% 29.6% 9.5% 12.0%
Canada 40.7% 45.0% 20.2% 22.9%
Group 45.6% 45.3% 27.3% 25.8%
(1) Segment result presented is adjusted operating profit.
Group revenue increased 21% (24% at constant currency) to $9,667m during the
year (2022: $7,962m). This revenue growth, combined with strong operational
execution, resulted in adjusted profit before tax increasing 25% to $2,273m
(2022: $1,824m).
In the US, rental only revenue of $5,879m (2022: $4,782m) was 23% higher than
the prior year, representing continued market outperformance and demonstrating
the benefits of our strategy of growing our Specialty businesses and
broadening our end markets. Organic growth (same-store and greenfields) was
18%, while bolt-ons since 1 May 2021 contributed 5% of rental only revenue
growth. In the year, our General Tool business grew 21%, while our Specialty
businesses grew 29%. Rental only revenue growth has been driven by both
volume and rate improvement in what continues to be a good rate environment.
Rental revenue increased 24% to $7,503m (2022: $6,042m). US total revenue,
including new and used equipment, merchandise and consumable sales, increased
27% to $8,222m (2022: $6,477m).
The UK business generated rental only revenue of £429m, up 6% on the prior
year (2022: £403m). Excluding the impact of the work for the Department of
Health, which ended during the first quarter of 2022/23, rental only revenue
increased 22%. Bolt-ons since 1 May 2021 contributed 9% of this growth.
Rental revenue increased 3% to £559m (2022: £544m) or 26% excluding the
impact of the work for the Department of Health. Total revenue decreased 6% to
£685m (2022: £726m) reflecting the high level of sales revenue associated
with the work for the Department of Health, which overall accounted for only
c. 4% of revenue in the year, compared with c. 30% of revenue last year.
Canada's rental only revenue increased 20% to C$548m (2022: C$456m). Markets
are robust and the major part of the Canadian business is growing in a similar
manner to the US with strong volume growth and rate improvement, in a good
rate environment. As highlighted previously, the lighting, grip and lens
business was affected by market uncertainty, with the threat earlier this
financial year of strikes by production staff in Vancouver, resulting in
productions being delayed or moved elsewhere. Rental revenue increased 22%
to C$696m (2022: C$569m), while Canada's total revenue was C$827m (2022:
C$626m).
In common with many businesses, we have faced inflationary pressures across
most cost lines, but particularly in relation to labour, transportation and
fuel. However, our strong performance on rate, combined with operating
efficiencies and inherent economies of scale, has enabled us to navigate this
inflationary environment, driving strong revenue and profit growth in the
US. As expected, US rental revenue drop through to EBITDA has improved as we
have progressed through the year, and in the fourth quarter was 54%, resulting
in drop through of 50% for the year. This contributed to an EBITDA margin of
48.1% (2022: 48.2%) and a 33% increase in segment profit to $2,465m (2022:
$1,852m) at a margin of 30.0% (2022: 28.6%).
The UK remains focused on delivering operational efficiency and improving
returns in the business. However, this year has been one of transition as we
redeployed assets dedicated to the Department of Health testing centres
elsewhere in the business, resulting in lower fleet utilisation than last
year. While we have managed to improve rental rates during the year, this
has been insufficient to offset the inflation impact on the cost base. These
factors, combined with a £4m charge to impair a convertible loan note due
from Britishvolt, which entered administration in January, contributed to the
UK generating an EBITDA margin of 28.1% (2022: 29.6%) and a segment profit of
£65m (2022: £87m) at a margin of 9.5% (2022: 12.0%).
Our Canadian business continues to develop and enhance its performance as it
invests to expand its network and broaden its markets. However, this ongoing
investment, including greenfields, acquisitions and the infrastructure of the
business, combined with drag from the lighting, grip and lens business,
contributed to an EBITDA margin of 40.7% (2022: 45.0%) and a segment profit of
C$167m (2022: C$144m) at a margin of 20.2% (2022: 22.9%).
Overall, Group adjusted operating profit increased to $2,640m (2022: $2,056m),
up 29% at constant exchange rates. After increased net financing costs of
$366m (2022: $233m), reflecting higher average debt levels and the higher
interest rate environment, Group adjusted profit before tax was $2,273m
(2022: $1,824m). After a tax charge of 25% (2022: 25%) of the adjusted
pre-tax profit, adjusted earnings per share increased 27% at constant currency
to 388.5ȼ (2022: 307.1ȼ).
Statutory profit before tax was $2,156m (2022: $1,668m). This is after
amortisation of $118m (2022: $109m) and, in the prior year, exceptional
interest costs of $47m. Included within the total tax charge is a tax credit
of $30m (2022: $39m) which relates to the amortisation of intangibles and in
the prior year exceptional items. As a result, basic earnings per share were
368.4¢ (2022: 280.9¢).
Capital expenditure and acquisitions
Capital expenditure for the year was $3,772m gross and $3,105m net of disposal
proceeds (2022: $2,397m gross and $2,032m net). This was slightly ahead of
our plans as we took delivery of c. $100m of planned first quarter 2023/24
deliveries early. Accordingly, we have reduced our plan for 2023/24 by
$100m. As a result, the Group's rental fleet at 30 April 2023 at cost was
$16bn and our average fleet age is now 35 months (2022: 40 months).
We invested $1,146m (2022: $1,274m) including acquired borrowings in 50
bolt-on acquisitions during the year as we continue to both expand our
footprint and diversify our end markets. Further details are provided in
Note 16. Since the period end, we have invested a further $237m in bolt-ons.
Reflecting the early first quarter fleet deliveries, our plan for 2023/24 now
is for gross capital expenditure to be in the range of $3.9 - 4.3bn.
Return on Investment
The Group return on investment was 19% (2022: 18%). In the US, return on
investment (excluding goodwill and intangible assets) was 27% (2022: 25%),
while in the UK it was 9% (2022: 14%). The decrease in the UK reflects
reduced volumes, particularly service and sales, supporting the Department of
Health as we have demobilised testing sites, and the lower profit margin. In
Canada, return on investment (excluding goodwill and intangible assets) was
18% (2022: 20%). This reduction reflects predominantly the drag from the
recent performance of our lighting, grip and lens business. Return on
investment excludes the impact of IFRS 16.
Cash flow and net debt
The increased scale of the business enabled the Group to generate free cash
flow of $531m (2022: $1,125m) during the year after capital expenditure
payments of $3,530m (2022: $2,164m). However, as expected, debt increased as
we continued to invest in bolt-ons and returned capital to shareholders.
During the period, we spent $264m (£221m) on share buybacks (2022: $410m
(£302m)) under the two-year buyback programme which concluded in April 2023.
In August 2022, the Group issued $750m 5.500% senior notes maturing in August
2032 and in January 2023, the Group issued $750m 5.550% senior notes maturing
in May 2033. The net proceeds were used to reduce the amount outstanding
under the ABL facility. This ensures the Group's debt package continues to
be well structured and flexible, enabling us to optimise the opportunity
presented by end market conditions. The Group's debt facilities are now
committed for an average of six years at a weighted average cost of 5%.
Net debt at 30 April 2023 was $8,960m (2022: $7,160m). Excluding the effect
of IFRS 16, net debt at 30 April 2023 was $6,588m (2022: $5,179m), while the
ratio of net debt to EBITDA was 1.6 times (2022: 1.5 times) on a constant
currency basis. The Group's target range for net debt to EBITDA is 1.5 to
2.0 times, excluding the impact of IFRS 16 (1.9 to 2.4 times post IFRS 16).
Including the effect of IFRS 16, the ratio of net debt to EBITDA was 2.0 times
(2022: 2.0 times) on a constant currency basis.
At 30 April 2023, availability under the senior secured debt facility was
$2,573m with an additional $4,968m of suppressed availability - substantially
above the $450m level at which the Group's entire debt package is covenant
free.
Dividends
The Company has a progressive dividend policy, which considers both
profitability and cash generation, and results in a dividend that is
sustainable across the cycle. Our intention has always been to increase the
dividend as profits increase and be able to maintain it when profits
decline. In accordance with this policy, the Board is recommending a final
dividend of 85.0¢ per share (2022: 67.5¢) making 100.0¢ for the year (2022:
80.0¢), an increase of 25%. If approved at the forthcoming Annual General
Meeting, the final dividend will be paid on 12 September 2023 to shareholders
on the register on 11 August 2023.
The dividend is declared in US dollars but will be paid in sterling unless
shareholders elect to receive their dividend in US dollars. Those
shareholders who wish to receive their dividend in US dollars and have not yet
made an election may do so by contacting Equiniti on +44 (0) 371 384 2085.
The last day for election for the proposed final dividend is 25 August 2023.
Capital allocation
The Group remains disciplined in its approach to allocation of capital with
the overriding objective being to enhance shareholder value.
Our capital allocation framework remains unchanged and prioritises:
· organic fleet growth;
- same-stores;
- greenfields;
· bolt-on acquisitions; and
· a progressive dividend with consideration to both profitability and
cash generation that is sustainable through the cycle.
Additionally, we consider further returns to shareholders. In this regard,
we assess continuously our medium-term plans which take account of investment
in the business, growth prospects, cash generation, net debt and leverage.
Therefore, the amount allocated to buybacks is simply driven by that which is
available after organic growth, bolt-on M&A and dividends, whilst allowing
us to operate within our 1.5 to 2.0 times target range for net debt to EBITDA
pre IFRS 16.
We spent $675m (£523m) under the two-year buyback programme which concluded
in April 2023. We launched a new buyback programme in May 2023 of up to
$500m over the year to April 2024.
Current trading and outlook
We enter the final year of Sunbelt 3.0 with clear momentum in strong end
markets, which are enhanced by the increasing number of mega projects and
recent US legislative acts. We are in a position of strength, with the
operational flexibility and financial capacity to capitalise on the
opportunities arising from these strong markets and ongoing structural change.
The Board looks to the future with confidence.
Guidance
Rental revenue(1)
-US 13 to 16%
-Canada(2) 15 to 20%
-UK 10 to 13%
-Group 13 to 16%
Capital expenditure (gross)(3) $3.9 - 4.3bn
Free cash flow(3) c. $300m
( )
(1) Represents change in year-over-year rental revenue at constant exchange
rates
(2) Reflects impact of Writers Guild of America strike which commenced in May
2023
(3) Stated at C$1=$0.75 and £1=$1.20
Directors' responsibility statement on the annual report
The responsibility statement below has been prepared in connection with the
Company's Annual Report & Accounts for the year ended 30 April 2023.
Certain parts thereof are not included in this announcement.
We confirm that to the best of our knowledge:
a) the consolidated financial statements, prepared in accordance with IFRS
in conformity with the requirements of the Companies Act 2006, give a true and
fair view of the assets, liabilities, financial position and profit of the
Group;
b) 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
c) the Annual Report and financial statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for
shareholders to assess the Group's position, performance, business model and
strategy.
By order of the Board
Eric Watkins
Company secretary
12 June 2023
CONSOLIDATED INCOME STATEMENT FOR THE THREE MONTHS ENDED 30 APRIL 2023
2023 2022
Before Before
amortisation Amortisation Total amortisation Amortisation Total
$m $m $m $m $m $m
Fourth quarter - unaudited
Revenue
Rental revenue 2,126.1 - 2,126.1 1,874.8 - 1,874.8
Sale of new equipment,
merchandise and consumables 87.9 - 87.9 86.5 - 86.5
Sale of used rental equipment 229.7 - 229.7 116.9 - 116.9
2,443.7 - 2,443.7 2,078.2 - 2,078.2
Operating costs
Staff costs (576.0) - (576.0) (490.5) - (490.5)
Other operating costs (641.1) - (641.1) (603.7) - (603.7)
Used rental equipment sold (153.1) - (153.1) (83.6) - (83.6)
(1,370.2) - (1,370.2) (1,177.8) - (1,177.8)
EBITDA(*) 1,073.5 - 1,073.5 900.4 - 900.4
Depreciation (468.6) - (468.6) (422.7) - (422.7)
Amortisation of intangibles - (30.3) (30.3) - (32.4) (32.4)
Operating profit 604.9 (30.3) 574.6 477.7 (32.4) 445.3
Interest income 0.8 - 0.8 - - -
Interest expense (109.8) - (109.8) (59.6) - (59.6)
Profit on ordinary activities
before taxation 495.9 (30.3) 465.6 418.1 (32.4) 385.7
Taxation (127.1) 7.6 (119.5) (99.1) 8.4 (90.7)
Profit attributable to equity
holders of the Company 368.8 (22.7) 346.1 319.0 (24.0) 295.0
Basic earnings per share 84.3¢ (5.2¢) 79.1¢ 72.0¢ (5.5¢) 66.5¢
Diluted earnings per share 83.8¢ (5.1¢) 78.7¢ 71.7¢ (5.5¢) 66.2¢
(*) EBITDA is presented here as an alternative performance measure as it is
commonly used by investors and lenders.
All revenue and profit is generated from continuing operations.
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 APRIL 2023
2023 2022
Before exceptional items and amortisation
Exceptional items and amortisation
Before amortisation
Amortisation Total Total
$m $m $m $m $m $m
Year to 30 April 2023 - audited
Revenue
Rental revenue 8,698.2 - 8,698.2 7,234.7 - 7,234.7
Sale of new equipment,
merchandise and consumables 341.7 - 341.7 387.2 - 387.2
Sale of used rental equipment 627.4 - 627.4 340.4 - 340.4
9,667.3 - 9,667.3 7,962.3 - 7,962.3
Operating costs
Staff costs (2,222.1) - (2,222.1) (1,830.5) - (1,830.5)
Other operating costs (2,591.1) - (2,591.1) (2,260.9) - (2,260.9)
Used rental equipment sold (442.3) - (442.3) (261.5) - (261.5)
(5,255.5) - (5,255.5) (4,352.9) - (4,352.9)
EBITDA(*) 4,411.8 - 4,411.8 3,609.4 - 3,609.4
Depreciation (1,772.1) - (1,772.1) (1,553.0) - (1,553.0)
Amortisation of intangibles - (117.7) (117.7) - (108.6) (108.6)
Operating profit 2,639.7 (117.7) 2,522.0 2,056.4 (108.6) 1,947.8
Interest income 2.6 - 2.6 0.1 - 0.1
Interest expense (368.8) - (368.8) (232.7) (47.1) (279.8)
Profit on ordinary activities
before taxation 2,273.5 (117.7) 2,155.8 1,823.8 (155.7) 1,668.1
Taxation (567.7) 29.6 (538.1) (456.3) 39.3 (417.0)
Profit attributable to equity
holders of the Company 1,705.8 (88.1) 1,617.7 1,367.5 (116.4) 1,251.1
Basic earnings per share 388.5¢ (20.1¢) 368.4¢ 307.1¢ (26.2¢) 280.9¢
Diluted earnings per share 386.0¢ (19.9¢) 366.1¢ 305.8¢ (26.1¢) 279.7¢
(*) EBITDA is presented here as an alternative performance measure as it is
commonly used by investors and lenders.
All revenue and profit is generated from continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Audited
Three months to Year to
30 April 30 April
2023 2022 2023 2022
$m $m $m $m
Profit attributable to equity holders of the Company for the period 346.1 295.0 1,617.7 1,251.1
Items that will not be reclassified to profit or loss:
Movements on financial asset investments - - (36.8) -
Remeasurement of the defined benefit pension plan (2.9) 11.4 (2.9) 11.4
Tax on defined benefit pension plan 0.7 (2.7) 0.7 (2.7)
(2.2) 8.7 (39.0) 8.7
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation differences 10.7 (57.4) (19.2) (92.7)
Profit/(loss) on cash flow hedge 0.1 - (3.1) -
10.8 (57.4) (22.3) (92.7)
Total other comprehensive income/(loss) for the period 8.6 (48.7) (61.3) (84.0)
Total comprehensive income for the period 354.7 246.3 1,556.4 1,167.1
CONSOLIDATED BALANCE SHEET AT 30 APRIL 2023
Audited
2023 2022
$m $m
Current assets
Inventories 181.3 168.5
Trade and other receivables 1,659.2 1,390.4
Current tax asset 14.6 7.2
Cash and cash equivalents 29.9 15.3
1,885.0 1,581.4
Non-current assets
Property, plant and equipment
- rental equipment 9,649.1 7,814.3
- other assets 1,392.0 1,078.3
11,041.1 8,892.6
Right-of-use assets 2,206.0 1,864.8
Goodwill 2,865.5 2,300.0
Other intangible assets 523.4 475.3
Other non-current assets 189.9 157.5
Net defined benefit pension plan asset 18.4 18.5
16,844.3 13,708.7
Total assets 18,729.3 15,290.1
Current liabilities
Trade and other payables 1,533.6 1,197.1
Current tax liability 12.4 20.2
Lease liabilities 233.2 188.6
Provisions 78.6 68.8
1,857.8 1,474.7
Non-current liabilities
Lease liabilities 2,161.1 1,806.6
Long-term borrowings 6,595.1 5,180.1
Provisions 75.9 68.0
Deferred tax liabilities 1,995.3 1,695.4
Other non-current liabilities 36.1 31.6
10,863.5 8,781.7
Total liabilities 12,721.3 10,256.4
Equity
Share capital 81.8 81.8
Share premium account 6.5 6.5
Capital redemption reserve 20.0 20.0
Own shares held by the Company (740.9) (480.1)
Own shares held by the ESOT (38.8) (44.9)
Cumulative foreign exchange translation differences (245.9) (226.7)
Retained reserves 6,925.3 5,677.1
Equity attributable to equity holders of the Company 6,008.0 5,033.7
Total liabilities and equity 18,729.3 15,290.1
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 APRIL 2023
Own Cumulative
Own shares foreign
Share Capital shares held exchange
Share premium redemption held by the by translation Retained
capital account reserve Company the ESOT differences reserves Total
$m $m $m $m $m $m $m $m
Audited
At 1 May 2021 81.8 6.5 20.0 (66.2) (36.8) (134.0) 4,654.2 4,525.5
Profit for the year - - - - - - 1,251.1 1,251.1
Other comprehensive income:
Foreign currency translation
differences - - - - - (92.7) - (92.7)
Remeasurement of the defined
benefit pension plan - - - - - - 11.4 11.4
Tax on defined benefit
pension plan - - - - - - (2.7) (2.7)
Total comprehensive income
for the year - - - - - (92.7) 1,259.8 1,167.1
Dividends paid - - - - - - (271.5) (271.5)
Own shares purchased by
the ESOT - - - - (23.8) - - (23.8)
Own shares purchased by
the Company - - - (413.9) - - - (413.9)
Share-based payments - - - - 15.7 - 32.4 48.1
Tax on share-based payments - - - - - - 2.2 2.2
At 30 April 2022 81.8 6.5 20.0 (480.1) (44.9) (226.7) 5,677.1 5,033.7
Profit for the year - - - - - - 1,617.7 1,617.7
Other comprehensive income:
Movement on financial asset investments
- - - - - - (36.8) (36.8)
Foreign currency translation
differences - - - - - (19.2) - (19.2)
Loss on cash flow hedge - - - - - - (3.1) (3.1)
Remeasurement of the defined
benefit pension plan - - - - - - (2.9) (2.9)
Tax on defined benefit
pension scheme - - - - - - 0.7 0.7
Total comprehensive income
for the year - - - - - (19.2) 1,575.6 1,556.4
Dividends paid - - - - - - (356.6) (356.6)
Own shares purchased
by the ESOT - - - - (12.5) - - (12.5)
Own shares purchased by
the Company - - - (260.8) - - - (260.8)
Share-based payments - - - - 18.6 - 26.2 44.8
Tax on share-based payments - - - - - - 3.0 3.0
At 30 April 2023 81.8 6.5 20.0 (740.9) (38.8) (245.9) 6,925.3 6,008.0
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 APRIL 2023
Audited
2023 2022
$m $m
Cash flows from operating activities
Cash generated from operations before
changes in rental equipment 4,073.6 3,406.5
Payments for rental property, plant and equipment (3,019.6) (1,765.4)
Proceeds from disposal of rental property,
plant and equipment 573.6 343.8
Cash generated from operations 1,627.6 1,984.9
Financing costs paid (net) (340.2) (231.1)
Exceptional financing costs paid - (36.0)
Tax paid (net) (287.3) (218.8)
Net cash generated from operating activities 1,000.1 1,499.0
Cash flows from investing activities
Acquisition of businesses (1,083.2) (1,277.4)
Financial asset investments (42.4) (40.0)
Payments for non-rental property, plant and equipment (510.0) (398.4)
Proceeds from disposal of non-rental
property, plant and equipment 41.4 24.8
Net cash used in investing activities (1,594.2) (1,691.0)
Cash flows from financing activities
Drawdown of loans 3,355.0 3,054.5
Redemption of loans (2,001.5) (2,062.7)
Repayment of principal under lease liabilities (109.5) (107.6)
Dividends paid (357.8) (269.3)
Purchase of own shares by the ESOT (12.5) (23.8)
Purchase of own shares by the Company (264.4) (409.6)
Net cash generated from financing activities 609.3 181.5
Increase/(decrease) in cash and cash equivalents 15.2 (10.5)
Opening cash and cash equivalents 15.3 26.6
Effect of exchange rate differences (0.6) (0.8)
Closing cash and cash equivalents 29.9 15.3
Reconciliation of net cash flows to net debt
(Increase)/decrease in cash and
cash equivalents in the year (15.2) 10.5
Increase in debt through cash flow 1,244.0 884.2
Change in net debt from cash flows 1,228.8 894.7
Exchange differences (37.8) (47.1)
Debt acquired 227.9 131.7
Deferred costs of debt raising 7.2 18.0
New lease liabilities 373.4 362.0
Increase in net debt in the year 1,799.5 1,359.3
Net debt at 1 May 7,160.0 5,800.7
Net debt at 30 April 8,959.5 7,160.0
NOTES TO THE CONDENSED 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 condensed
consolidated financial statements as at, and for the year ended 30 April 2023,
comprise the Company and its subsidiaries ('the Group') and are presented in
US dollars.
The financial statements for the year ended 30 April 2023 were approved by the
directors on 12 June 2023.
This preliminary announcement of the results for the year ended 30 April 2023
contains information derived from the forthcoming 2022/23 Annual Report &
Accounts and does not constitute statutory accounts as defined in Section 434
of the Companies Act 2006. The statutory accounts for the year ended 30
April 2023 were approved by the directors on 12 June 2023 and will be
delivered to shareholders, filed with the Registrar of Companies and made
available on the Group's website at www.ashtead-group.com
(http://www.ashtead-group.com) in July 2023. The auditor's report on those
accounts was unqualified, did not include a reference to any matter by way of
emphasis and did not contain a statement under Section 498(2) or (3) of the
Companies Act 2006.
Details of principal risks and uncertainties are given in the Review of Fourth
Quarter, Balance Sheet and Cash Flow accompanying these condensed consolidated
financial statements.
2. Basis of preparation
The financial statements for the year ended 30 April 2023 have been prepared
in accordance with relevant United Kingdom adopted International Financial
Reporting Standards ('IFRS') and the accounting policies set out in the
Group's Annual Report & Accounts for the year ended 30 April 2022.
In preparing the financial statements, the exchange rates used in respect of
the pound sterling (£) and Canadian dollar (C$) are:
Pound sterling Canadian dollar
2023 2022 2023 2022
Average for the three months ended 30 April 1.22 1.32 0.74 0.79
Average for the year ended 30 April 1.20 1.36 0.75 0.80
At 30 April 1.26 1.26 0.74 0.78
The directors have adopted various alternative performance measures to provide
additional useful information on the underlying trends, performance and
position of the Group. The alternative performance measures are not defined
by IFRS and therefore may not be directly comparable with other companies'
alternative performance measures but are defined within the Glossary of Terms
on page 39.
The financial statements have been prepared on the going concern basis. The
Group's internal budgets and forecasts of future performance, available
financing facilities and facility headroom (see Note 13), provide a reasonable
expectation that the Group has adequate resources to continue in operation for
the foreseeable future and consequently the going concern basis continues to
be appropriate in preparing the financial statements.
3. Segmental analysis
Three months to 30 April 2023 (unaudited)
Corporate
US UK Canada items Group
$m $m $m $m $m
Revenue
Rental revenue 1,833.7 165.4 127.0 - 2,126.1
Sale of new equipment, merchandise
and consumables 50.2 17.5 20.2 - 87.9
Sale of used rental equipment 199.2 16.5 14.0 - 229.7
2,083.1 199.4 161.2 - 2,443.7
Segment profit 574.4 12.0 26.4 (7.9) 604.9
Amortisation (30.3)
Net financing costs (109.0)
Profit before taxation 465.6
Taxation (119.5)
Profit attributable to equity shareholders 346.1
Three months to 30 April 2022 (unaudited)
Corporate
US UK Canada items Group
$m $m $m $m $m
Revenue
Rental revenue 1,574.2 182.3 118.3 - 1,874.8
Sale of new equipment, merchandise
and consumables 40.8 38.6 7.1 - 86.5
Sale of used rental equipment 98.4 15.1 3.4 - 116.9
1,713.4 236.0 128.8 - 2,078.2
Segment profit 438.4 19.8 26.2 (6.7) 477.7
Amortisation (32.4)
Net financing costs (59.6)
Profit before taxation 385.7
Taxation (90.7)
Profit attributable to equity shareholders 295.0
Year to 30 April 2023
Corporate
US UK Canada items Group
$m $m $m $m $m
Revenue
Rental revenue 7,502.6 671.8 523.8 - 8,698.2
Sale of new equipment, merchandise
and consumables 186.1 89.4 66.2 - 341.7
Sale of used rental equipment 533.7 61.6 32.1 - 627.4
8,222.4 822.8 622.1 - 9,667.3
Segment profit 2,464.7 78.1 125.9 (29.0) 2,639.7
Amortisation (117.7)
Net financing costs (366.2)
Profit before taxation 2,155.8
Taxation (538.1)
Profit attributable to equity shareholders 1,617.7
Year to 30 April 2022
Corporate
US UK Canada items Group
$m $m $m $m $m
Revenue
Rental revenue 6,041.9 739.0 453.8 - 7,234.7
Sale of new equipment, merchandise
and consumables 155.0 202.2 30.0 - 387.2
Sale of used rental equipment 280.1 45.1 15.2 - 340.4
6,477.0 986.3 499.0 - 7,962.3
Segment profit 1,852.3 118.0 114.4 (28.3) 2,056.4
Amortisation (108.6)
Exceptional items (47.1)
Net financing costs (232.6)
Profit before taxation 1,668.1
Taxation (417.0)
Profit attributable to equity shareholders 1,251.1
Corporate items
US UK Canada Group
$m $m $m $m $m
At 30 April 2023
Segment assets 15,637.5 1,427.8 1,567.3 52.2 18,684.8
Cash 29.9
Taxation assets 14.6
Total assets 18,729.3
At 30 April 2022
Segment assets 12,839.6 1,162.3 1,212.7 53.0 15,267.6
Cash 15.3
Taxation assets 7.2
Total assets 15,290.1
4. Operating costs and other income
2023 2022
Before Before
amortisation
amortisation Amortisation Total Amortisation Total
$m $m $m $m $m $m
Three months to 30 April (unaudited)
Staff costs:
Salaries 523.6 - 523.6 446.0 - 446.0
Social security costs 41.7 - 41.7 36.1 - 36.1
Other pension costs 10.7 - 10.7 8.4 - 8.4
576.0 - 576.0 490.5 - 490.5
Other operating costs:
Vehicle costs 145.2 - 145.2 133.3 - 133.3
Spares, consumables & external repairs 125.1 - 125.1 121.3 - 121.3
Facility costs 32.4 - 32.4 25.1 - 25.1
Other external charges 338.4 - 338.4 324.0 - 324.0
641.1 - 641.1 603.7 - 603.7
Used rental equipment sold 153.1 - 153.1 83.6 - 83.6
Depreciation and amortisation:
Depreciation of tangible assets 422.9 - 422.9 376.6 - 376.6
Depreciation of right-of-use assets 45.7 - 45.7 46.1 - 46.1
Amortisation of intangibles - 30.3 30.3 - 32.4 32.4
468.6 30.3 498.9 422.7 32.4 455.1
1,838.8 30.3 1,869.1 1,600.5 32.4 1,632.9
2023 2022
Before Before
amortisation Amortisation Total amortisation Amortisation Total
$m $m $m $m $m $m
Year to 30 April (audited)
Staff costs:
Salaries 2,026.0 - 2,026.0 1,668.8 - 1,668.8
Social security costs 155.9 - 155.9 127.1 - 127.1
Other pension costs 40.2 - 40.2 34.6 - 34.6
2,222.1 - 2,222.1 1,830.5 - 1,830.5
Other operating costs:
Vehicle costs 620.3 - 620.3 510.1 - 510.1
Spares, consumables & external repairs 488.8 - 488.8 431.7 - 431.7
Facility costs 112.3 - 112.3 82.1 - 82.1
Other external charges 1,369.7 - 1,369.7 1,237.0 - 1,237.0
2,591.1 - 2,591.1 2,260.9 - 2,260.9
Used rental equipment sold 442.3 - 442.3 261.5 - 261.5
Depreciation and amortisation:
Depreciation of tangible assets 1,600.5 - 1,600.5 1,398.9 - 1,398.9
Depreciation of right-of-use assets 171.6 - 171.6 154.1 - 154.1
Amortisation of intangibles - 117.7 117.7 - 108.6 108.6
1,772.1 117.7 1,889.8 1,553.0 108.6 1,661.6
7,027.6 117.7 7,145.3 5,905.9 108.6 6,014.5
5. Exceptional items and amortisation
Exceptional items are those items of financial performance that are material
and have limited predictive value. Amortisation relates to the write-off of
intangible assets over their estimated useful economic life. The Group
believes these items should be disclosed separately within the consolidated
income statement to assist in the understanding of the financial performance
of the Group. Adjusted profit and earnings per share are stated before
exceptional items and amortisation of intangibles.
Unaudited Audited
Three months to Year to
30 April 30 April
2023 2022 2023 2022
$m $m $m $m
Amortisation of intangibles 30.3 32.4 117.7 108.6
Write-off of deferred financing costs - - - 11.1
Early redemption fee - - - 36.0
Taxation (7.6) (8.4) (29.6) (39.3)
22.7 24.0 88.1 116.4
In the prior year, the costs associated with the redemption of the $600m
4.125% senior notes and the $600m 5.25% senior notes in August 2021 were
classified as exceptional items. The write-off of deferred financing costs
consisted of the unamortised balance of the costs relating to the notes. In
addition, an early redemption fee of $36m was paid to redeem the notes prior
to their scheduled maturity. Of these items, total cash costs were $36m.
The items detailed in the table above are presented in the income statement as
follows:
Unaudited Audited
Three months to Year to
30 April 30 April
2023 2022 2023 2022
$m $m $m $m
Amortisation of intangibles 30.3 32.4 117.7 108.6
Charged in arriving at operating profit 30.3 32.4 117.7 108.6
Interest expense - - - 47.1
Charged in arriving at profit before tax 30.3 32.4 117.7 155.7
Taxation (7.6) (8.4) (29.6) (39.3)
22.7 24.0 88.1 116.4
6. Net financing costs
Unaudited Audited
Three months to Year to
30 April 30 April
2023 2022 2023 2022
$m $m $m $m
Interest income:
Net income on the defined benefit plan asset 0.4 - 0.6 0.1
Other interest 0.4 - 2.0 -
0.8 - 2.6 0.1
Interest expense:
Bank interest payable 33.5 10.6 116.7 32.8
Interest payable on senior notes 46.4 25.6 142.8 111.2
Interest payable on lease liabilities 27.7 21.5 100.9 80.7
Non-cash unwind of discount on provisions 0.3 0.3 1.2 1.1
Amortisation of deferred debt raising costs 1.9 1.6 7.2 6.9
109.8 59.6 368.8 232.7
Net financing costs before exceptional items 109.0 59.6 366.2 232.6
Exceptional items - - - 47.1
Net financing costs 109.0 59.6 366.2 279.7
7. Taxation
The tax charge for the year has been computed using the tax rates in force for
the year ending 30 April 2023 of 25% in the US (2022: 25%), 19% in the UK,
rising to 25% from 1 April 2023 (2022: 19%) and 26% in Canada (2022: 26%).
This results in a blended effective rate for the Group as a whole of 25%
(2022: 25%) for the year.
The tax charge of $568m (2022: $456m) on the adjusted profit before taxation
of $2,273m (2022: $1,824m) can be explained as follows:
Year to 30 April
2023 2022
$m $m
Current tax
- current tax on income for the period 295.4 266.2
- adjustments to prior year (7.6) 6.6
287.8 272.8
Deferred tax
- origination and reversal of temporary differences 278.1 187.0
- adjustment due to change in UK corporate tax rate - 9.6
- adjustments to prior year 1.8 (13.1)
279.9 183.5
Tax on adjusted profit 567.7 456.3
Comprising:
- UK 26.8 43.0
- US 521.5 389.9
- Canada 19.4 23.4
567.7 456.3
In addition, the tax credit of $30m (2022: $39m) on amortisation of $118m
(2022: on exceptional items and amortisation of $156m) consists of a current
tax credit of $12m (2022: $21m) relating to the US, $0.3m (2022: $nil)
relating to the UK and $1m (2022: $1m) relating to Canada and a deferred tax
credit of $10m (2022: $11m) relating to the US, $1m (2022: $1m) relating to
the UK and $5m (2022: $5m) relating to Canada.
8. Earnings per share
Basic and diluted earnings per share for the three and twelve months ended 30
April 2023 have been calculated based on the profit for the relevant period
and the weighted average number of ordinary shares in issue during that period
(excluding shares held by the Company and the ESOT over which dividends have
been waived). Diluted earnings per share is computed using the result for
the relevant period and the diluted number of shares (ignoring any potential
issue of ordinary shares which would be anti-dilutive). These are calculated
as follows:
Unaudited Audited
Three months to Year to
30 April 30 April
2023 2022 2023 2022
Profit for the financial period ($m) 346.1 295.0 1,617.7 1,251.1
Weighted average number of shares (m)
- basic 437.7 443.3 439.1 445.3
- diluted 440.5 445.2 441.9 447.2
Basic earnings per share 79.1¢ 66.5¢ 368.4¢ 280.9¢
Diluted earnings per share 78.7¢ 66.2¢ 366.1¢ 279.7¢
Adjusted earnings per share (defined in any period as the earnings before
exceptional items and amortisation for that period divided by the weighted
average number of shares in issue in that period) may be reconciled to the
basic earnings per share as follows:
Unaudited Audited
Three months to Year to
30 April 30 April
2023 2022 2023 2022
Basic earnings per share 79.1 66.5 368.4 280.9
Amortisation of intangibles 6.9 7.4 26.8 24.4
Exceptional items - - - 10.6
Tax on exceptional items and amortisation (1.7) (1.9) (6.7) (8.8)
Adjusted earnings per share 84.3 72.0 388.5 307.1
9. Dividends
During the year, a final dividend in respect of the year ended 30 April 2022
of 67.50¢ (2021: 48.24¢) and an interim dividend for the year ending 30
April 2023 of 15.00¢ (2022: 12.50¢) per share were paid to shareholders
costing $358m (2022: $269m).
In addition, the directors are proposing a final dividend in respect of the
year ended 30 April 2023 of 85.0¢ (2022: 67.5¢) per share which will absorb
$372m of shareholders' funds, based on the 437m shares qualifying for dividend
on 12 June 2023. Subject to approval by shareholders, it will be paid on 12
September 2023 to shareholders who are on the register of members on 11 August
2023.
10. Property, plant and equipment
2023 2022
Rental Rental
equipment Total equipment Total
Net book value $m $m $m $m
At 1 May 7,814.3 8,892.6 6,908.9 7,776.1
Exchange differences (25.9) (30.7) (83.6) (97.1)
Reclassifications (1.7) - (0.6) -
Additions 3,262.1 3,772.1 1,999.2 2,397.3
Acquisitions 410.8 456.1 456.8 485.3
Disposals (426.5) (448.5) (253.0) (270.1)
Depreciation (1,384.0) (1,600.5) (1,213.4) (1,398.9)
At 30 April 9,649.1 11,041.1 7,814.3 8,892.6
Included within prior year depreciation is an impairment charge of $9m.
11. Right-of-use assets
2023 2022
Property Other Property Other
Net book value leases leases Total leases leases Total
$m $m $m $m $m $m
At 1 May 1,849.1 15.7 1,864.8 1,533.5 12.4 1,545.9
Exchange differences (14.0) - (14.0) (16.1) (1.1) (17.2)
Additions 324.5 10.4 334.9 331.0 8.4 339.4
Acquisitions 151.5 - 151.5 125.9 - 125.9
Remeasurement 53.4 - 53.4 35.0 - 35.0
Disposals (11.9) (1.1) (13.0) (8.8) (1.3) (10.1)
Depreciation (167.8) (3.8) (171.6) (151.4) (2.7) (154.1)
At 30 April 2,184.8 21.2 2,206.0 1,849.1 15.7 1,864.8
Included within prior year depreciation is an impairment charge of $6m.
12. Lease liabilities
30 April 30 April
2023 2022
$m $m
Current 233.2 188.6
Non-current 2,161.1 1,806.6
2,394.3 1,995.2
13. Borrowings
30 April 30 April
2023 2022
$m $m
Non-current
First priority senior secured bank debt 2,038.4 2,108.1
1.500% senior notes, due 2026 546.8 545.8
4.375% senior notes, due 2027 595.6 594.8
4.000% senior notes, due 2028 595.1 594.3
4.250% senior notes, due 2029 594.6 593.9
2.450% senior notes, due 2031 743.9 743.2
5.500% senior notes, due 2032 737.8 -
5.550% senior notes, due 2033 742.9 -
6,595.1 5,180.1
The senior secured bank debt is secured by way of fixed and floating charges
over substantially all the Group's property, plant and equipment, inventory
and trade receivables. The senior notes are guaranteed by Ashtead Group plc
and all its principal subsidiary undertakings.
Our debt facilities are committed for the long term, with an average maturity
of six years. Our $4.5bn asset-based senior credit facility is committed
until August 2026. The $550m 1.500% senior notes mature in August 2026, the
$600m 4.375% senior notes mature in August 2027, the $600m 4.000% senior notes
mature in May 2028, the $600m 4.250% senior notes mature in November 2029, the
$750m 2.450% senior notes mature in August 2031, the $750m 5.500% senior notes
mature in August 2032 and the $750m 5.550% senior notes mature in May 2033.
The weighted average interest cost of these facilities (including non-cash
amortisation of deferred debt raising costs) is 5%.
There is one financial performance covenant under the first priority senior
credit facility. That is the fixed charge ratio (comprising EBITDA before
exceptional items less net capital expenditure paid in cash over the sum of
scheduled debt repayments plus cash interest, cash tax payments and dividends
paid in the last twelve months) which, must be equal to, or greater than,
1.0. This covenant does not apply when availability exceeds $450m. The
covenant ratio is calculated each quarter. At 30 April 2023, the fixed
charge ratio exceeded the covenant requirement.
At 30 April 2023, availability under the senior secured bank facility was
$2,573m ($2,537m at 30 April 2022), with an additional $4,968m of suppressed
availability, meaning that the covenant did not apply at 30 April 2023 and is
unlikely to apply in forthcoming quarters.
Fair value of financial instruments
At 30 April 2023, the Group had no derivative financial instruments.
With the exception of the Group's senior notes detailed in the table below,
the carrying value of non-derivative financial assets and liabilities is
considered to equate materially to their fair value.
At 30 April 2023 At 30 April 2022
Book Fair Book Fair
value value value value
$m $m $m $m
1.500% senior notes 549.0 486.1 548.8 487.4
4.375% senior notes 600.0 573.0 600.0 583.5
4.000% senior notes 600.0 560.3 600.0 564.7
4.250% senior notes 600.0 556.5 600.0 566.2
2.450% senior notes 748.4 595.3 748.2 607.5
5.500% senior notes 743.0 741.6 - -
5.550% senior notes 748.3 744.4 - -
4,588.7 4,257.2 3,097.0 2,809.3
Deferred costs of raising finance (32.0) - (25.0) -
4,556.7 4,257.2 3,072.0 2,809.3
The fair value of the senior notes has been calculated using quoted market
prices at 30 April for each year.
14. Share capital
Ordinary shares of 10p each:
30 April 30 April 30 April 30 April
2023 2022 2023 2022
Number Number $m $m
Issued and fully paid 451,354,833 451,354,833 81.8 81.8
During the year, the Company purchased 5.2m ordinary shares at a total cost of
$261m (£218m) under the Group's share buyback programme, which are held in
treasury. At 30 April 2023, 12.9m (April 2022: 7.7m) shares were held by the
Company ($741m; April 2022: $480m) and a further 1.0m (April 2022: 1.2m)
shares were held by the Company's Employee Share Ownership Trust ($39m; April
2022: $45m).
15. Notes to the cash flow statement
a) Cash flow from operating activities
Year to 30 April
2023 2022
$m $m
Operating profit 2,522.0 1,947.8
Depreciation 1,772.1 1,553.0
Amortisation 117.7 108.6
EBITDA 4,411.8 3,609.4
Profit on disposal of rental equipment (185.1) (78.9)
Profit on disposal of other property, plant and equipment (19.0) (9.0)
Increase in inventories (4.7) (67.2)
Increase in trade and other receivables (209.6) (164.1)
Increase in trade and other payables 34.2 68.8
Exchange differences 1.2 (0.6)
Other non-cash movement 44.8 48.1
Cash generated from operations before
changes in rental equipment 4,073.6 3,406.5
b) Analysis of net debt
Net debt consists of total borrowings and lease liabilities less cash and cash
equivalents. Borrowings exclude accrued interest. Non-US dollar
denominated balances are translated to US dollars at rates of exchange ruling
at the balance sheet date.
Non-cash movements
1 May Cash Exchange Debt New lease Other 30 April
2022 flow movement acquired liabilities movements 2023
$m $m $m $m $m $m $m
Long-term borrowings 5,180.1 1,353.5 (23.6) 77.9 - 7.2 6,595.1
Lease liabilities 1,995.2 (109.5) (14.8) 150.0 373.4 - 2,394.3
Total liabilities from
financing activities 7,175.3 1,244.0 (38.4) 227.9 373.4 7.2 8,989.4
Cash and cash
Equivalents (15.3) (15.2) 0.6 - - - (29.9)
Net debt 7,160.0 1,228.8 (37.8) 227.9 373.4 7.2 8,959.5
Non-cash movements
1 May Cash Exchange Debt New lease Other 30 April
2021 flow movement acquired liabilities movements 2022
$m $m $m $m $m $m $m
Long-term borrowings 4,194.0 991.8 (29.5) 5.8 - 18.0 5,180.1
Lease liabilities 1,633.3 (107.6) (18.4) 125.9 362.0 - 1,995.2
Total liabilities from
financing activities 5,827.3 884.2 (47.9) 131.7 362.0 18.0 7,175.3
Cash and cash
Equivalents (26.6) 10.5 0.8 - - - (15.3)
Net debt 5,800.7 894.7 (47.1) 131.7 362.0 18.0 7,160.0
Details of the Group's cash and debt are given in Notes 12 and 13 and the
Review of Fourth Quarter, Balance Sheet and Cash Flow accompanying these
condensed consolidated financial statements.
c) Acquisitions
Year to 30 April
2023 2022
$m $m
Cash consideration paid:
- acquisitions in the period 1,061.3 1,264.8
- contingent consideration 21.9 12.6
1,083.2 1,277.4
During the year, 50 businesses were acquired with cash paid of $1,061m (2022:
$1,265m), after taking account of net cash acquired of $32m (2022: $20m).
Further details are provided in Note 16.
Contingent consideration of $22m (2022: $13m) was paid relating to prior year
acquisitions.
16. Acquisitions
During the period, the following acquisitions were completed:
i) On 5 May 2022, Sunbelt UK acquired the entire share
capital of Movietech Camera Rentals Limited and Movietech Cymru Limited
(together 'Movietech'). Movietech is a specialty business.
ii) On 13 May 2022, Sunbelt US acquired the business and
assets of the power rental division of Filmwerks, LLC ('Filmwerks'). Filmwerks
is a specialty business in North Carolina.
iii) On 20 May 2022, Sunbelt US acquired the business and
assets of Mashburn Equipment, L.L.C. ('Mashburn'). Mashburn is a general
tool business in Georgia.
iv) On 1 June 2022, Sunbelt Canada acquired the entire share
capital of MacFarlands Limited ('MacFarlands'). MacFarlands is a general
tool business in Nova Scotia and New Brunswick.
v) On 8 June 2022, Sunbelt US acquired the business and
assets of Amos Metz Rentals & Sales, LLC ('Amos Metz'). Amos Metz is a
general tool business in California.
vi) On 29 June 2022, Sunbelt US acquired the business and
assets of George's Tool Rental, Inc. ('GTR'). GTR is a general tool business
in Pennsylvania.
vii) On 7 July 2022, Sunbelt UK acquired the entire share
capital of PKE Lighting Holdings Limited ('PKE'). PKE is a specialty
business.
viii) On 13 July 2022, Sunbelt US acquired the business and
assets of Milford Rent-All, Inc. ('Milford'). Milford is a general tool
business in Maine.
ix) On 15 July 2022, Sunbelt US acquired the business and
assets of R&N Tool Rental, Inc. ('R&N'). R&N is a general tool
business in Indiana.
x) On 20 July 2022, Sunbelt US acquired the business and
assets of Chump Management, L.C., trading as Power Equipment Rental ('PER').
PER is a general tool business in Utah.
xi) On 22 July 2022, Sunbelt US acquired the business and
assets of Harmar Contractors Equipment, Inc, ('Harmar'). Harmar is a general
tool business in Pennsylvania.
xii) On 28 July 2022, Sunbelt US acquired the business and
assets of A-V Equipment Rentals, Inc. ('A-V'). A-V is a general tool business
in California.
xiii) On 2 August 2022, Sunbelt Canada acquired the entire
share capital of Compact Rentals Limited ('Compact'). Compact is a general
tool business in Alberta.
xiv) On 3 August 2022, Sunbelt US acquired the business and
assets of Rental Country Inc. ('Rental Country'). Rental Country is a general
tool business in New Jersey.
xv) On 10 August 2022, Sunbelt US acquired the business and
assets of R.J. Lalonde, Inc. ('Lalonde'). Lalonde is a general tool business
in California.
xvi) On 24 August 2022, Sunbelt US acquired the business and
assets of Alaska Pacific Rental, LLC ('APR'). APR is a general tool business
in Alaska.
xvii) On 31 August 2022, Sunbelt UK acquired the entire share
capital of Optimum Power Services Limited ('OPS'). OPS is a specialty
business.
xviii) On 1 September 2022, Sunbelt Canada acquired the entire
share capital of Flagro Industries Limited ('Flagro'). Flagro is a specialty
business in Ontario.
xix) On 1 September 2022, Sunbelt Canada acquired the entire
share capital of Xtreme Rentals Ltd. ('Xtreme'). Xtreme is a general tool
business in Alberta.
xx) On 16 September 2022, Sunbelt US acquired the business and
assets of Tel-Power Tool & Equipment Rental, Inc. ('Tel-Power').
Tel-Power is a general tool business in Pennsylvania.
xxi) On 21 September 2022, Sunbelt US acquired the business and
assets of Rent Mart, Inc. ('Absolute Equipment'). Absolute Equipment is a
general tool business in Pennsylvania.
xxii) On 3 October 2022, Sunbelt UK acquired the entire share
capital of Media Access Solutions (MAS) Limited ('MAS'). MAS is a specialty
business.
xxiii) On 5 October 2022, Sunbelt US acquired the business and
assets of Runjesnor, Limited Partnership ('Bilt Rite'). Bilt Rite is a
specialty business in Texas.
xxiv) On 11 October 2022, Sunbelt US acquired the business and
assets of Comeback Rentals, LLC ('Comeback'). Comeback is a general tool
business in South Carolina.
xxv) On 12 October 2022, Sunbelt US acquired the business and
assets of Presbone Corporation d/b/a Pinellas Rental Center ('PRC'). PRC is a
general tool business in Florida.
xxvi) On 19 October 2022, Sunbelt US acquired the business and
assets of Meco Miami, Inc. ('Meco Miami'). Meco Miami is a general tool
business in Florida.
xxvii) On 26 October 2022, Sunbelt US acquired the business and
assets of Heater Rental Services, LLC ('HRS'). HRS is a general tool and
specialty business in Minnesota.
xxviii) On 1 November 2022, Sunbelt Canada acquired the entire share
capital of Modu-Loc Fence Rentals LP and Sunbelt US acquired the entire share
capital of Modu-Loc USA (together, 'Modu-Loc'). Modu-Loc is a specialty
business operating across Canada and in Texas, US.
xxix) On 4 November 2022, Sunbelt US acquired the business and
assets of Iron Oak Energy, LLC and Spoonbill Logistics, LLC (together
'IOS'). IOS is a general tool business in Louisiana.
xxx) On 9 November 2022, Sunbelt US acquired the business and
assets of Wagner Rental & Supply, Inc., Wagner Tool Rental of Jackson,
Inc., Wagner Rental and Supply of Ashland, Inc., and Wagner Rental and Supply
of Chillicothe, LLC (together 'Wagner'). Wagner is a general tool business in
Ohio and Kentucky.
xxxi) On 10 November 2022, Sunbelt US acquired the business and
assets of QxTwo Equipment Sales, LLC ('QxTwo'). QxTwo is a specialty business
in South Carolina.
xxxii) On 16 November 2022, Sunbelt US acquired the business and
assets of Ohio Rental Mt. Vernon, Inc. and Ohio Rental of Johnstown, Inc.
(together 'Ohio Rental'). Ohio Rental is a general tool business in Ohio.
xxxiii) On 2 December 2022, Sunbelt Canada acquired the entire share
capital of Studio City Scaffold Ltd. ('Studio City'). Studio City is a
specialty business operating in Toronto and Vancouver, Canada and in Los
Angeles, US.
xxxiv) On 7 December 2022, Sunbelt US acquired the business and assets
of Portable Air, L.C. ('Portable Air'). Portable Air is a specialty business
operating in Florida, Texas, and Louisiana.
xxxv) On 8 December 2022, Sunbelt UK acquired the entire share capital
Alpha Grip (UK) Limited ('Alpha Grip'). Alpha Grip is a specialty business.
xxxvi) On 14 December 2022, Sunbelt US acquired the business and assets
of Diamond Rentals, Inc. ('Diamond'). Diamond is a general tool business
operating in Washington.
xxxvii) On 12 January 2023, Sunbelt US acquired the entire share capital
of Lift Works, Inc. ('Lift Works'). Lift Works is a general tool business
operating in Illinois.
xxxviii) On 18 January 2023, Sunbelt US acquired the business and assets
of Straight Up Equipment LLC ('Straight Up'). Straight Up is a general tool
business operating in Ohio.
xxxix) On 7 February 2023, Sunbelt US acquired the business and assets
of Key Rentals Group, LLC and TBG Equipment, LLC (together 'Key Rentals'). Key
Rentals is a specialty business operating in Montana.
xl) On 17 February 2023, Sunbelt US acquired the business
and assets of West Ashley Tool & Rental LLC ('West Ashley'). West Ashley
is a general tool business operating in South Carolina.
xli) On 21 February 2023, Sunbelt US acquired the business
and assets of C2 Equipment Rental, LLC ('C2'). C2 is a general tool business
operating in Florida.
xlii) On 22 February 2023, Sunbelt US acquired the business
and assets of BigSky Rents & Events, Inc. ('BigSky'). BigSky is a
general tool business operating in Montana.
xliii) On 28 February 2023, Sunbelt US acquired the entire share
capital of Bullet Rentals & Sales, Inc. ('Bullet'). Bullet is a general
tool business operating in Oregon.
xliv) On 1 March 2023, Sunbelt Canada acquired the entire share
capital of Ottawa Rental and Supply Ltd., trading as Ontario Rental &
Supply ('ORS'). ORS is a general tool business operating in Ontario.
xlv) On 3 March 2023, Sunbelt US acquired the business and
assets of Ned R. Werbe, Inc., trading as A Rental Service Company ('ARS').
ARS is a general tool business operating in Indiana.
xlvi) On 15 March 2023, Sunbelt US acquired the business and
assets of Double D Rentals, Inc. ('Double D'). Double D is a general tool
business operating in California.
xlvii) On 15 March 2023, Sunbelt US acquired the business and
assets of Equipment Rental Options Company, LLC. ('ERO'). ERO is a general
tool business operating in Pennsylvania.
xlviii) On 12 April 2023, Sunbelt US acquired the business and
assets of R&R Group, LLC. ('R&R'). R&R is a general tool business
operating in Washington.
xlix) On 21 April 2023, Sunbelt US acquired the business and
assets of Advantage Tool Rental, Inc. ('Advantage'). Advantage is a general
tool business operating in Indiana.
l) On 26 April 2023, Sunbelt US acquired the business
and assets of Elms Equipment Rental, Inc. and an affiliated company, Quintet
Leasing, Inc. (together 'Elms'). Elms is a general tool business operating in
California.
The following table sets out the fair value of the identifiable assets and
liabilities acquired by the Group. The fair values have been determined
provisionally at the balance sheet date.
Fair value
to the Group
$m
Net assets acquired
Trade and other receivables 54.1
Inventory 9.0
Property, plant and equipment
- rental equipment 410.8
- other assets 45.3
Right-of-use asset 151.5
Creditors (39.4)
Current tax (2.6)
Deferred tax (42.0)
Debt (77.9)
Lease liabilities (150.0)
Intangible assets (non-compete agreements
and customer relationships) 170.6
529.4
Consideration:
- cash paid and due to be paid (net of cash acquired) 1,067.6
- contingent consideration 35.8
1,103.4
Goodwill 574.0
The goodwill arising can be attributed to the key management personnel and
workforce of the acquired businesses, the benefits through advancing our
clusters and leveraging cross-selling opportunities, and to the synergies and
other benefits the Group expects to derive from the acquisitions. The
synergies and other benefits include elimination of duplicate costs, improving
utilisation of the acquired rental fleet, using the Group's financial strength
to invest in the acquired business and drive improved returns through a
semi-fixed cost base and the application of the Group's proprietary software
to optimise revenue opportunities. $310m of the goodwill is expected to be
deductible for income tax purposes.
The gross value and the fair value of trade receivables at acquisition was
$54m.
Due to the operational integration of acquired businesses post acquisition, in
particular due to 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.
The revenue and operating profit of these acquisitions from 1 May 2022 to
their date of acquisition was not material.
17. Contingent liabilities
Following its state aid investigation, in April 2019 the European Commission
announced its decision that the Group Financing Exemption in the UK controlled
foreign company ('CFC') legislation constitutes state aid in some
circumstances. In common with the UK Government and other UK-based
international companies, the Group does not agree with the decision and has
therefore lodged a formal appeal with the General Court of the European
Union. In common with other UK taxpayers, the Group's appeal was stayed
while the appeals put forward by the UK Government and ITV plc proceeded.
On 8 June 2022 the General Court of the European Union dismissed the appeals
put forward by the UK Government and ITV plc. However, there remains a high
degree of uncertainty in the final outcome given the UK Government and ITV plc
have both appealed against the decision to the EU Court of Justice. The
Group will continue to monitor proceedings closely.
Despite the UK Government appealing the European Commission's decision, Her
Majesty's Revenue & Customs ('HMRC') was required to make an assessment of
the tax liability which would arise if the decision is not successfully
appealed and collect that amount from taxpayers. HMRC issued a charging
notice stating that the tax liability it believes to be due on this basis is
£36m, including interest payable. The Group has appealed the charging
notice and has settled the amount assessed on it, including interest, in line
with HMRC requirements. On successful appeal in whole or in part, all or
part of the amount paid in accordance with the charging notice would be
returned to the Group. The £36m ($45m at April 2023 exchange rates) paid has
been recognised as a non-current asset on the balance sheet. If either the
decision reached by the General Court of the European Union or the charging
notice issued by HMRC are not ultimately appealed successfully, we have
estimated the Group's maximum potential liability to be £36m as at 30 April
2023 ($45m at April 2023 exchange rates), including any interest payable.
Based on the current status of proceedings, we have concluded that no
provision is required in relation to this matter.
18. Events after the balance sheet date
Since the balance sheet date, the Group has completed four acquisitions for
total purchase consideration of $237m, including acquired debt of $34m, as
follows:
i) On 17 May 2023, Sunbelt US acquired the business and assets of
Beattie Construction Services, LLC. ('Beattie'). Beattie is a specialty
business operating in Michigan.
ii) On 24 May 2023, Sunbelt US acquired the business and assets of Jones
& Hollands, Inc. ('Jones'). Jones is a general tool business operating in
Michigan.
iii) On 24 May 2023, Sunbelt US acquired the business and assets of West
Coast Equipment, LLC. ('West Coast'). West Coast is a general tool business
operating in California.
iv) On 1 June 2023, Sunbelt Canada acquired the entire share capital of Loue
Froid, Inc. ('Loue Froid'). Loue Froid is a specialty business operating in
Quebec.
The initial accounting for these acquisitions is incomplete given the
proximity to the year end. Had these acquisitions taken place on 1 May 2022,
their contribution to revenue and operating profit would not have been
material.
REVIEW OF FOURTH QUARTER, BALANCE SHEET AND CASH FLOW
Fourth quarter (unaudited)
Revenue EBITDA Profit(1)
2023 2022 2023 2022 2023 2022
UK in £m 163.1 178.6 42.2 49.7 9.7 15.2
Canada in C$m 218.2 162.9 82.5 69.6 35.9 33.2
US 2,083.1 1,713.4 968.5 786.3 574.4 438.4
UK in $m 199.4 236.0 51.8 65.5 12.0 19.8
Canada in $m 161.2 128.8 60.8 55.0 26.4 26.2
Group central costs - - (7.6) (6.4) (7.9) (6.7)
2,443.7 2,078.2 1,073.5 900.4 604.9 477.7
Net financing costs (109.0) (59.6)
Adjusted profit before tax 495.9 418.1
Amortisation (30.3) (32.4)
Profit before taxation 465.6 385.7
Margins as reported
US 46.5% 45.9% 27.6% 25.6%
UK 25.9% 27.8% 5.9% 8.5%
Canada 37.8% 42.7% 16.5% 20.4%
Group 43.9% 43.3% 24.8% 23.0%
(1) Segment result presented is operating profit before amortisation.
Group revenue for the quarter increased 18% (19% at constant currency) to
$2,444m (2022: $2,078m). Adjusted profit before tax for the quarter
increased to $496m (2022: $418m).
US rental only revenue in the quarter was $1,437m (2022: $1,234m), 17% higher
than a year ago. This consisted of our general tool business which was 19%
higher than last year while our specialty businesses were 17% higher than a
year ago. Total revenue was $2,083m (2022: $1,713m).
The UK generated rental only revenue in the quarter of £108m (2022: £102m),
6% higher than the prior year. Total revenue decreased 9% to £163m (2022:
£179m) arising from the higher level of ancillary and sales revenue
associated with the services provided to the Department of Health last year.
Canada's rental only revenue increased 14% to C$132m (2022: C$116m), while
total revenue was C$218m (2022: C$163m).
Group operating profit increased 27% to $605m (2022: $478m). After net
financing costs of $109m (2022: $60m), Group adjusted profit before tax was
$496m (2022: $418m). After amortisation of $30m (2022: $32m), statutory
profit before taxation was $466m (2022: $386m).
Balance sheet
Property, plant and equipment
Capital expenditure in the year totalled $3,772m (2022: $2,397m) with $3,262m
invested in the rental fleet (2022: $1,999m). Expenditure on rental
equipment was 86% of total capital expenditure with the balance relating to
the delivery vehicle fleet, property improvements and IT equipment. Capital
expenditure by division was:
2023 2022
Replacement Growth Total Total
UK in £m 127.8 33.2 161.0 158.1
Canada in C$m 80.8 173.4 254.2 200.5
US 1,329.5 1,548.0 2,877.5 1,624.6
UK in $m 153.5 39.9 193.4 214.8
Canada in $m 60.8 130.4 191.2 159.8
Total rental equipment 1,543.8 1,718.3 3,262.1 1,999.2
Delivery vehicles, property improvements & IT equipment 510.0 398.1
Total additions 3,772.1 2,397.3
In a strong US rental market, $1,548m of rental equipment capital expenditure
was spent on growth while $1,329m was invested in replacement of existing
fleet. The growth proportion is estimated based on the assumption that
replacement capital expenditure in any period is equal to the original cost of
equipment sold.
The average age of the Group's serialised rental equipment, which constitutes
the substantial majority of our fleet, at 30 April 2023 was 35 months (2022:
40 months) on a net book value basis. The US fleet had an average age of 35
months (2022: 41 months), the UK fleet had an average age of 36 months (2022:
37 months) and the Canadian fleet had an average age of 35 months (2022: 36
months).
Rental fleet at original cost LTM rental LTM dollar
30 April 2023 30 April 2022 LTM average revenue utilisation
UK in £m 1,081 988 1,049 559 53%
Canada in C$m 1,438 1,116 1,277 696 55%
US 13,407 11,425 12,381 7,503 61%
UK in $m 1,358 1,241 1,260 672 53%
Canada in $m 1,061 873 961 523 55%
15,826 13,539 14,602 8,698
Dollar utilisation was 61% in the US (2022: 57%), 53% for the UK (2022: 58%)
and 55% for Canada (2022: 55%). The improvement in US dollar utilisation
reflects the improved rate environment while, in the UK, the decrease reflects
the lower level of ancillary revenue due to the reduction in Department of
Health work. In Canada, dollar utilisation benefitted from a good rate
environment but suffered from the drag of the lighting, lens and grip
business.
Trade receivables
Receivable days at 30 April 2023 were 48 days (2022: 47 days). The bad debt
charge for the last twelve months ended 30 April 2023 as a percentage of total
turnover was 0.5% (2022: 0.4%). Trade receivables at 30 April 2023 of $1,385m
(2022: $1,174m) are stated net of allowances for bad debts and credit notes of
$107m (2022: $86m), with the provision representing 7% (2022: 7%) of gross
receivables.
Other non-current assets
Included within 'other non-current assets' are financial assets investments of
$41m (April 2022: $40m). These represent two targeted investments in early
development-stage companies, which have been made in the US as part of the
Group's activity to support the transition to a lower carbon economy. These
financial asset investments are Level 3 financial assets where the fair value
is estimated based on the latest transaction price and any subsequent
investment-specific factors or events.
In the year, the Group made one new investment, namely Britishvolt ($42m;
£34m), a UK company involved in the development of electric vehicle battery
technology. In January 2023, Britishvolt entered administration following
failure to secure additional funding and as a result, the Group estimated the
fair value of its investment as $nil and consequently recognised in the third
quarter a movement in the fair value of the equity component of its investment
($37m; £30m) through other comprehensive income and an impairment of the $5m
(£4m) convertible loan component through the income statement.
Trade and other payables
Group payable days were 43 days at 30 April 2023 (2022: 43 days) with capital
expenditure related payables totalling $606m (2022: $363m). Payment periods
for purchases other than rental equipment vary between seven and 60 days and
for rental equipment between 30 and 120 days.
Cash flow and net debt
Year to 30 April
2023 2022
$m $m
EBITDA 4,411.8 3,609.4
Cash inflow from operations before
changes in rental equipment 4,073.6 3,406.5
Cash conversion ratio* 92.3% 94.4%
Replacement rental capital expenditure (1,380.8) (829.7)
Payments for non-rental capital expenditure (510.0) (398.4)
Rental equipment disposal proceeds 573.6 343.8
Other property, plant and equipment disposal proceeds 41.4 24.8
Tax (net) (287.3) (218.8)
Net financing costs before exceptional items (340.2) (231.1)
Cash inflow before growth capex and
payment of exceptional costs 2,170.3 2,097.1
Growth rental capital expenditure (1,638.8) (935.7)
Exceptional costs - (36.0)
Free cash flow 531.5 1,125.4
Business acquisitions (1,083.2) (1,277.4)
Financial asset investments (42.4) (40.0)
Total cash absorbed (594.1) (192.0)
Dividends (357.8) (269.3)
Purchase of own shares by the Company (264.4) (409.6)
Purchase of own shares by the ESOT (12.5) (23.8)
Increase in net debt due to cash flow (1,228.8) (894.7)
* Cash inflow from operations before changes in rental equipment as a
percentage of EBITDA.
Cash inflow from operations before the net investment in the rental fleet was
$4,074m (2022: $3,406m). The conversion ratio for the period was 92%
(2022: 94%).
Total payments for capital expenditure (rental equipment and other PPE) during
the year were $3,530m (2022: $2,164m). Disposal proceeds received totalled
$615m (2022: $369m), giving net payments for capital expenditure of $2,915m in
the period (2022: $1,795m). Financing costs paid totalled $340m (2022:
$231m) while tax payments were $287m (2022: $219m). 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. The exceptional
costs in the prior year relate to the premium on redemption of the senior
notes that were due in 2025 and 2026.
Accordingly, the Group generated free cash flow of $531m (2022: $1,125m) and,
after acquisition and investment related expenditure of $1,126m (2022:
$1,317m), a net cash outflow of $594m (2022: $192m), before returns to
shareholders.
Net debt
2023 2022
$m $m
First priority senior secured bank debt 2,038.4 2,108.1
1.500% senior notes, due 2026 546.8 545.8
4.375% senior notes, due 2027 595.6 594.8
4.000% senior notes, due 2028 595.1 594.3
4.250% senior notes, due 2029 594.6 593.9
2.450% senior notes, due 2031 743.9 743.2
5.500% senior notes, due 2032 737.8 -
5.550% senior notes, due 2033 742.9 -
Total external borrowings 6,595.1 5,180.1
Lease liabilities 2,394.3 1,995.2
Total gross debt 8,989.4 7,175.3
Cash and cash equivalents (29.9) (15.3)
Total net debt 8,959.5 7,160.0
Net debt at 30 April 2023 was $8,960m with the increase since 30 April 2022
reflecting the net cash outflow set out above and additional lease commitments
as we continue our greenfield and bolt-on expansion. The Group's EBITDA for
the year ended 30 April 2023 was $4,412m. Excluding the impact of IFRS 16,
the ratio of net debt to EBITDA was 1.6 times (2022: 1.5 times) on a constant
currency and a reported basis as at 30 April 2023. Including the impact of
IFRS 16, the ratio of net debt to EBITDA was 2.0 times (2022: 2.0 times) as at
30 April 2023.
Financial risk management
The Group's trading and financing activities expose it to various financial
risks that, if left unmanaged, could adversely impact 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.
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
The Group has fixed and variable rate debt in issue with 69% of the drawn debt
at a fixed rate as at 30 April 2023, excluding lease liabilities. 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. Pricing is based on leverage and average availability
according to a grid, varying from the applicable interest rate plus 125bp to
150bp. The applicable interest rate is based on SOFR for US dollar loans,
SONIA for sterling loans and CDOR for Canadian dollar loans. At 30 April
2023, the borrowing rate was the applicable interest rate 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 2023, the Group had no such swap agreements
outstanding. The Group may, at times, hold cash and cash equivalents, which
earn interest at a variable rate.
At 30 April 2023, based upon the amount of variable rate debt outstanding, the
Group's pre-tax profits would change by approximately $21m for each one
percentage point change in interest rates applicable to the variable rate debt
and, after tax effects, equity would change by approximately $16m. 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 risk
Currency risk is predominantly translation risk as there are no significant
transactions in the ordinary course of business that take place between
foreign entities. The Group's reporting currency is US dollars. The majority
of our assets, liabilities, revenue and costs are denominated in US dollars,
but sterling and Canadian dollars make up 25% of our net assets. Fluctuations
in the value of pounds sterling and Canadian dollars with respect to US
dollars may have an impact on our financial condition and results of
operations as reported in US dollars. The Group's financing is arranged such
that the majority of its debt and interest expense is in US dollars. At 30
April 2023, 88% of its debt (including lease liabilities) was denominated in
US dollars.
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 exchange exposures or the impact of exchange rate movements on the
translation of overseas profits into dollars. Where the Group does hedge, it
maintains appropriate hedging documentation. Foreign exchange risk on
significant non-trading transactions is considered on an individual basis.
Based on the current currency mix of our profits and on current sterling and
dollar debt levels, interest and exchange rates at 30 April 2023, a 1% change
in the US dollar to sterling and Canadian dollar exchange rates would impact
pre-tax profit by $0.2m.
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 has a large number of unrelated customers, serving over 800,000
during the financial year, and does not have any significant credit exposure
to any particular customer. Each business segment manages its own exposure to
credit risk according to the economic circumstances and characteristics of the
markets they serve. The Group believes that management of credit risk on a
devolved basis enables it to assess and manage credit risk more effectively.
However, broad principles of credit risk management practice are observed
across the Group, such as the use of credit reference agencies and the
maintenance of credit control functions.
Liquidity risk
Liquidity risk is the risk that the Group could experience difficulties in
meeting its commitments to creditors as financial liabilities fall due for
payment.
The Group uses both short and long-term cash forecasts to assist in monitoring
cash flow requirements ensuring sufficient cash is available to meet
operational needs. The Group monitors available facilities against forward
requirements on a regular basis.
The Group generates significant free cash flow before investment (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 before
investment 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 senior secured debt
facility. At 30 April 2023, availability under the $4.5 billion facility was
$2,573m ($2,537m at 30 April 2022), which compares with the threshold of
$450m, above which the covenant does not apply.
Principal risks and uncertainties
The Group faces a number of risks and uncertainties in its day-to-day
operations and it is management's role to mitigate and manage these risks.
The Board has established a formal risk management process which has
identified the following principal risks and uncertainties which could affect
employees, operations, revenue, profits, cash flows and assets of the Group.
Economic conditions
Potential impact
In the longer term, there is a link between levels of economic activity and
demand for our services. The most significant end market which affects our
business is construction. The construction market is cyclical and typically
lags the general economic cycle by between 12 and 24 months.
The economic uncertainties resulting from the impact of pandemics (such as
COVID-19) is considered as part of this risk.
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 business continues to perform strongly and is well positioned to manage
and benefit from the unique market conditions we face, including supply chain
constraints, inflation and labour scarcity, all of which we believe will be
ongoing drivers of structural change. However, while market forecasts are
predicting continued growth both in terms of starts and the rental market,
supported by the emergence of 'mega projects', there remains some uncertainty
in end market conditions.
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 or local companies resulting in reduced market share and lower
revenue.
This could negatively affect rental rates and physical utilisation.
Continuing industry consolidation could also have a similar effect.
Mitigation
· Create commercial advantage by providing the highest level of service,
consistently and at a price which offers value.
· Differentiation of service.
· Enhance the barriers to entry to newcomers provided by our platform:
industry-leading technology, experienced personnel and a broad network and
equipment fleet.
· Regularly estimate and monitor our market share and track the
performance of our competitors.
Change
Our competitive position continues to improve. We have grown faster than the
market, and continue to take market share from our smaller, less well financed
competitors. We have a 13% market share in the US, a 9% market share in
Canada and a 13% market share in the UK.
Cyber security
Potential impact
A cyber-attack or serious uncured failure in our systems could result in us
being unable to deliver service to our customers and / or the loss of data.
In particular, 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. As a result, we could suffer reputational loss, revenue loss
and financial penalties.
This is the most significant factor in our business continuity planning.
Mitigation
· Stringent policies surrounding security, user access, change control
and the ability to download and install software.
· Testing of cyber security including red team exercises, system
penetration testing and internal phishing and other training exercises
undertaken.
· Use of antivirus and malware software, firewalls, email scanning and
internet monitoring as an integral part of our security plan.
· Use of firewalls and encryption to protect systems and any connections
to third parties.
· Use of multi-factor authentication.
· Continued focus on development of IT strategy taking advantage of cloud
technology available.
· 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 a primary site.
Change
We continue to enhance the Group's cyber security profile, with a significant
and ongoing investment in resource and tooling. Nevertheless, cyber security
remains a continually evolving area and a priority for the Group.
In relation to business continuity, our plans have been subject to continued
review and update during the year and our disaster recovery plans are tested
regularly.
Health and safety
Potential impact
A failure to comply with laws and regulations governing health and safety and
ensure the highest standards of health and safety across the Group could
result in accidents which may result in injury to or fatality of an
individual, claims against the Group and/or 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.
Change
The health and safety of our team members continues to be a key focus area for
the Group and an area of continuous improvement.
In terms of reportable incidents, the TRIR was 0.97 (2022: 0.90) in the US and
0.89 (2022: 1.49) in Canada. The RIDDOR reportable rate was 0.25 (2022: 0.22)
in the UK.
People and culture
Potential impact
Retaining and attracting good people is key to delivering superior performance
and customer service and maintaining and enhancing our culture.
Excessive staff turnover is likely to impact on our ability to maintain the
appropriate quality of service to our customers and our culture and would
ultimately impact our financial performance adversely.
At a leadership level, succession planning is required to ensure the Group can
continue to inspire the right culture, leadership and behaviours and meet its
strategic objectives. Furthermore, it is important that our remuneration
policies reflect the Group's North American focus and enable us to retain and
enhance our strong leadership team.
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.
· Ensure succession plans are in place and reviewed regularly which meet
the ongoing needs of the Group.
Change
Our compensation and incentive programmes have continued to evolve to reflect
market conditions, the economic environment and the results of our employee
engagement surveys. We intend to address the remuneration gap between Group
and its US peers in our next remuneration policy.
Diversity, equity and inclusion programmes are established across the business
to enhance our efforts to attract and retain the best people.
We are increasing our focus on mental health including 'Let's Talk Mental
Health' in the UK.
Environmental
Potential impact
The Group has made a long-term commitment to reduce its Scope 1 and 2 carbon
intensity by 35% by 2030, from its level in 2018, with a near term commitment
to reduce its carbon intensity by 15% by 2024, and set out a roadmap to
achieve this. Failure to do so could adversely impact the Group and its
stakeholders.
A significant part of our rental fleet is reliant on diesel engines. Over
time, lower carbon alternatives will become available as technology
advances. If we do not remain at the forefront of technological advances,
and invest in the latest equipment, our rental fleet could become obsolete.
In addition, 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.
· Collaboration with key suppliers to develop and pilot new technologies.
· Lower carbon vehicle transition plan.
· Real estate and facility standards to reduce emissions from our
operations.
· Monitoring and reporting of carbon emissions.
Change
The Group has appointed a SVP of Sustainability to lead our work on
sustainability-related matters, including those relating to the impact of
climate change on the environment.
The work of the Health, Safety and Environmental departments, and the
Sustainability and operational audit teams, continue to assess environmental
compliance.
Our 2021/22 Scope 1 and 2 carbon emissions have been validated by the Carbon
Trust and we will obtain assurance over our 2022/23 Scope 1 and 2 data prior
to the publication of the Group's 2022/23 Sustainability report.
In 2022/23 our Scope 1 and 2 carbon emission intensity ratio reduced to 38.4
(2022: 42.2).
We are working to quantify our Scope 3 emissions, the largest components of
which are category 11 (use of sold products) and category 13 (downstream
leased assets). These categories are complex to measure and reliant on
significant assumptions and estimation techniques.
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 modern slavery, business ethics and ethical sourcing
policies 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.
Change
We monitor regulatory and legislative 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 and the Board during
the course of the year.
During the year 8,678 people in the US, 703 people in Canada and 779 people in
the UK underwent induction training. In addition, training programmes were
undertaken in safety and business ethics.
OPERATING STATISTICS
Number of rental stores Staff numbers
2023 2022 2023 2022
US 1,094 967 18,981 16,068
UK 185 177 4,250 3,983
Canada 119 89 2,094 1,682
Corporate office - - 22 19
Group 1,398 1,233 25,347 21,752
GLOSSARY OF TERMS
The glossary of terms below sets out definitions of terms used throughout this
announcement. Included are a number of alternative performance measures
('APMs') which the directors have adopted in order to provide additional
useful information on the underlying trends, performance and position of the
Group. The directors use these measures, which are common across the
industry, for planning and reporting purposes. These measures are also used
in discussions with the investment analyst community and credit rating
agencies. The APMs are not defined by IFRS and therefore may not be directly
comparable with other companies' APMs and should not be considered superior to
or a substitute for IFRS measures.
Term Closest equivalent statutory measure Definition and purpose
Drop through None Calculated as the change in rental revenue which converts into EBITDA
(excluding gains from sale of new equipment, merchandise and consumables and
used equipment).
2023 2022 Change
US ($m)
Rental revenue 7,503 6,042 1,461
EBITDA 3,955 3,121
Gains (235) (128)
EBITDA excluding gains 3,720 2,993 727
Drop through 50%
This measure is utilised by the Group to demonstrate the change in
profitability generated by the Group as a result of the change in rental
revenue in the period.
Free cash flow Net cash generated from operating activities Net cash generated from operating activities less non-rental net property,
plant and equipment expenditure. Non-rental net property, plant and
equipment expenditure comprises payments for non-rental capital expenditure
less disposal proceeds received in relation to non-rental asset disposals.
2023 2022
($m) ($m)
Net cash generated from operating activities 1,000 1,499
Payments for non-rental property, plant and equipment
(510) (399)
Proceeds from disposal of non-rental property,
plant and equipment 41 25
Free cash flow 531 1,125
This measure shows the cash retained by the Group prior to discretionary
expenditure on acquisitions and returns to shareholders.
Growth at constant exchange rates None Calculated by applying the current period exchange rate to the comparative
period result. The relevant foreign currency exchange rates are provided
within Note 2, Basis of preparation, to the financial statements. This
measure is used as a means of eliminating the effects of foreign exchange rate
movements on the period-on-period changes in reported results.
2023 2022 %
Rental revenue ($m)
As reported 8,698 7,235 20%
Retranslation effect - (112)
At constant currency 8,698 7,123 22%
Adjusted profit before tax ($m)
As reported 2,273 1,824 25%
Retranslation effect - (14)
At constant currency 2,273 1,810 26%
Leverage None Leverage calculated at constant exchange rates uses the period end exchange
rate for the relevant period and is determined as net debt divided by EBITDA.
2023 2022
Excluding IFRS 16 Including IFRS 16 Excluding IFRS 16 Including IFRS 16
Net debt ($m)
As reported and 6,588 8,960 5,179 7,160
at constant currency
EBITDA ($m)
As reported 4,203 4,412 3,430 3,609
Retranslation effect 4 4 (23) (24)
At constant currency 4,207 4,416 3,407 3,585
Leverage
As reported 1.6 2.0 1.5 2.0
At constant currency 1.6 2.0 1.5 2.0
This measure is used to provide an indication of the strength of the Group's
balance sheet and is widely used by investors and credit rating agencies. It
also forms part of the remuneration targets of the Group and has been
identified as one of the Group's key performance indicators.
Return on Investment ('RoI') None Last 12-month ('LTM') adjusted operating profit divided by the last 12-month
average of the sum of net tangible and intangible fixed assets, plus net
working capital but excluding net debt and tax. RoI is calculated excluding
the impact of IFRS 16.
RoI is used by management to help inform capital allocation decisions within
the business and has been identified as one of the Group's key performance
indicators. It also forms part of the remuneration targets of the Group.
A reconciliation of Group RoI is provided below:
2023 2022
Adjusted operating profit ($m) 2,640 2,056
IFRS 16 impact ($m) (40) (28)
Adjusted operating profit (excluding IFRS 16) ($m) 2,600 2,028
Average net assets ($m) 13,565 11,119
Return on investment 19% 18%
RoI for the businesses is calculated in the same way, but excludes goodwill
and intangible assets:
US Canada C$m UK
$m £m
Adjusted operating profit 2,432 160 64
Average net assets, excluding goodwill and intangibles 8,910 884 720
Return on investment 27% 18% 9%
This measure is utilised by the Group to demonstrate the change in
profitability generated by the Group as a result of the change in rental
revenue in the period.
Free cash flow
Net cash generated from operating activities
Net cash generated from operating activities less non-rental net property,
plant and equipment expenditure. Non-rental net property, plant and
equipment expenditure comprises payments for non-rental capital expenditure
less disposal proceeds received in relation to non-rental asset disposals.
2023 2022
($m) ($m)
Net cash generated from operating activities 1,000 1,499
Payments for non-rental property, plant and equipment
(510) (399)
Proceeds from disposal of non-rental property,
plant and equipment 41 25
Free cash flow 531 1,125
This measure shows the cash retained by the Group prior to discretionary
expenditure on acquisitions and returns to shareholders.
Growth at constant exchange rates
None
Calculated by applying the current period exchange rate to the comparative
period result. The relevant foreign currency exchange rates are provided
within Note 2, Basis of preparation, to the financial statements. This
measure is used as a means of eliminating the effects of foreign exchange rate
movements on the period-on-period changes in reported results.
2023 2022 %
Rental revenue ($m)
As reported 8,698 7,235 20%
Retranslation effect - (112)
At constant currency 8,698 7,123 22%
Adjusted profit before tax ($m)
As reported 2,273 1,824 25%
Retranslation effect - (14)
At constant currency 2,273 1,810 26%
Leverage
None
Leverage calculated at constant exchange rates uses the period end exchange
rate for the relevant period and is determined as net debt divided by EBITDA.
2023 2022
Excluding IFRS 16 Including IFRS 16 Excluding IFRS 16 Including IFRS 16
Net debt ($m)
As reported and 6,588 8,960 5,179 7,160
at constant currency
EBITDA ($m)
As reported 4,203 4,412 3,430 3,609
Retranslation effect 4 4 (23) (24)
At constant currency 4,207 4,416 3,407 3,585
Leverage
As reported 1.6 2.0 1.5 2.0
At constant currency 1.6 2.0 1.5 2.0
This measure is used to provide an indication of the strength of the Group's
balance sheet and is widely used by investors and credit rating agencies. It
also forms part of the remuneration targets of the Group and has been
identified as one of the Group's key performance indicators.
Return on Investment ('RoI')
None
Last 12-month ('LTM') adjusted operating profit divided by the last 12-month
average of the sum of net tangible and intangible fixed assets, plus net
working capital but excluding net debt and tax. RoI is calculated excluding
the impact of IFRS 16.
RoI is used by management to help inform capital allocation decisions within
the business and has been identified as one of the Group's key performance
indicators. It also forms part of the remuneration targets of the Group.
A reconciliation of Group RoI is provided below:
2023 2022
Adjusted operating profit ($m) 2,640 2,056
IFRS 16 impact ($m) (40) (28)
Adjusted operating profit (excluding IFRS 16) ($m) 2,600 2,028
Average net assets ($m) 13,565 11,119
Return on investment 19% 18%
RoI for the businesses is calculated in the same way, but excludes goodwill
and intangible assets:
US Canada C$m UK
$m £m
Adjusted operating profit 2,432 160 64
Average net assets, excluding goodwill and intangibles 8,910 884 720
Return on investment 27% 18% 9%
Other terms used within this announcement include:
· Adjusted: adjusted results are results stated before exceptional
items and the amortisation of acquired intangibles. A reconciliation is
shown on the income statement.
· Availability: represents the headroom on a given date under the
terms of our $4.5bn asset-backed senior bank facility, taking account of
current borrowings.
· Capital expenditure: represents additions to rental equipment and
other property, plant and equipment (excluding assets acquired through a
business combination).
· Cash conversion ratio: represents cash flow from operations
before changes in rental equipment as a percentage of EBITDA. Details are
provided within the Review of Fourth Quarter, Balance Sheet and Cash Flow
section.
· Dollar utilisation: dollar utilisation is trailing 12-month
rental revenue divided by average fleet size at original (or 'first') cost
measured over a 12-month period. Dollar utilisation has been identified as
one of the Group's key performance indicators. Details are shown within the
Review of Fourth Quarter, Balance Sheet and Cash Flow section.
· EBITDA and EBITDA margin: EBITDA is earnings before interest,
tax, depreciation and amortisation. A reconciliation of EBITDA to profit
before tax is shown on the income statement. EBITDA margin is calculated as
EBITDA divided by revenue. Progression in EBITDA margin is an important
indicator of the Group's performance and this has been identified as one of
the Group's key performance indicators.
· Exceptional items: those items of income or expense which the
directors believe should be disclosed separately by virtue of their
significant size or nature and limited predictive value to enable a better
understanding of the Group's financial performance. Excluding these items
provides readers with helpful additional information on the performance of the
business across periods and against peer companies. It is also consistent
with how business performance is reported to the Board and the remuneration
targets set by the Company.
· Fleet age: net book value weighted age of serialised rental
assets. Serialised rental assets constitute the substantial majority of our
fleet.
· Fleet on rent: quantity measured at original cost of our rental
fleet on rent. Fleet on rent has been identified as one of the Group's key
performance indicators.
· Net debt: net debt is total borrowings (bank, bonds) and lease
liabilities less cash balances, as reported. This measure is used to provide
an indication of the Group's overall level of indebtedness and is widely used
by investors and credit rating agencies. An analysis of net debt is provided
in Note 15.
· Operating profit and operating profit margin: Operating profit is
earnings before interest and tax. A reconciliation of operating profit to
profit before tax is shown on the income statement. Operating profit margin
is calculated as operating profit divided by revenue. Progression in
operating profit margin is an important indicator of the Group's performance.
· Organic: organic measures comprise all locations, excluding
locations arising from a bolt-on acquisition completed after the start of the
comparative financial period.
· Rental only revenue: rental revenue excluding loss damage waiver,
environmental fees and revenue from rental equipment delivery and collection.
· RIDDOR rate: 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.
· Same-store: same-stores are those locations which were open at
the start of the comparative financial period.
· Segment profit: operating profit before amortisation and
exceptional items by segment.
· Suppressed availability: represents the amount on a given date
that the asset base exceeds the facility size under the terms of our $4.5bn
asset-backed senior bank facility.
· TRIR rate: reportable incidents in North America are reported in
accordance with the OSHA (Occupational, Safety and Health Administration)
framework as a Total Recordable Incident Rate ('TRIR').
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