REG - Ashtead Tech Hldgs - Full-year Results 2022
03/05/2023 07:00
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RNS Number : 1933Y Ashtead Technology Holdings plc 03 May 2023
3 May 2023
Ashtead Technology Holdings plc
("the Company")
Full-year Results 2022
Ashtead Technology Holdings plc (AIM: AT.), a leading subsea equipment rental
and solutions provider for the global offshore energy sector, announces its
full-year results for the period ended 31 December 2022.
Highlights
Financial Results
· Group revenue up 31% to £73.1m (2021: £55.8m), primarily driven by
organic growth (23.7%) favourable FX rates (c.5.5%) and M&A (1.7%).
· Revenues from offshore renewables and offshore oil and gas markets up
22% and 35%, respectively.
· Gross profit up 34% to £54.3m (2021: £40.5m), with gross margin of
74% (2021: 73%), benefitting from increased pricing and utilisation.
· Adjusted EBITA(1) increased 47% to £20.1m (2021: £13.7m), with an
Adjusted EBITA(1) margin of 28% (2021: 25%).
· Adjusted earnings per share of 19.6p (2021: 13.2p) and basic earnings
per share of 15.9p (2021: 3.6p).
· ROIC of 21% for the period (2021: 17%).
· RCF refinanced and increased in April 2023 to £100m (plus accordion
of £50m) to support growth opportunities.
· Final dividend of 1p per share recommended.
Operational Highlights
· Meaningfully expanded operational capabilities and technical expertise
through bolt-on acquisitions in H2:
o Hiretech, completed December 2022, adding a multi-purpose fleet of marine
and subsea equipment rental assets and skilled personnel
o WeSubsea, completed September 2022, providing high performance, in-house
designed dredge systems to complement existing product and service offering
· Continued to invest in high-quality equipment rental fleet, increasing
number of items from 17,000 to over 19,000 through organic investment (£13.1
million capex in our equipment rental fleet), as well as WeSubsea and Hiretech
acquisitions.
· Employee headcount 260 at year end, up from 204, with business
continuing to scale up to support future growth.
· New senior leadership appointments to grow international footprint and
bolster technical capabilities across our services.
· Strong progress towards sustainability goals - increased revenues from
offshore renewables, secured ISO14001 environmental management certification.
Outlook
· Market outlook remains strong, with customer backlogs at record
levels. Demand remained high in Q1 2023 across both offshore oil and gas and
offshore renewables markets with pricing and utilisation continuing to track
upwards.
· Inflationary pressures remain, but increased pricing is expected to
continue to offset impact on the business.
· The Board remains confident in the business' near and medium-term
prospects and is focused on leveraging its market position and offering to
drive further progress.
· Given the performance to date, the Board expects the outturn for the
full year to be materially ahead of its previous expectations.
Allan Pirie, Chief Executive Officer, commented:
"This has been a very successful and busy year for Ashtead Technology. We
believe we are well-positioned to exploit the many growth opportunities that
lie before us in 2023 and beyond, driven by higher activity levels across both
oil and gas and offshore renewables markets. With a full year's benefit of
our two recent acquisitions, coupled with enhanced financial firepower, we
will look to further expand our offering whilst continuing to grow within our
existing markets."
Analyst Briefing
A conference call for sell-side analysts will be held today at 8.00am BST. If
you would like to participate, please email
ashteadtechnology@vigoconsulting.com.
Investor Presentation
Allan Pirie and Ingrid Stewart will provide a presentation relating to the
full year results via the Investor Meet Company platform on 12 May 2023 at
11.00am BST.
The presentation is open to all existing and potential shareholders. Questions
can be submitted pre-event via the Investor Meet Company dashboard up until
9.00am the day before the meeting or at any time during the live presentation.
Investors can register for the presentation via the link below:
https://www.investormeetcompany.com/ashtead-technology-holdings-plc/register-investor
(https://www.investormeetcompany.com/ashtead-technology-holdings-plc/register-investor)
For further information, please contact:
Ashtead Technology (Via Vigo Consulting)
Allan Pirie, Chief Executive Officer
Ingrid Stewart, Chief Financial Officer
Vigo Consulting (financial PR) Tel: +44 (0)20 7390 0230
Patrick d'Ancona ashteadtechnology@vigoconsulting.com
Finlay Thomson
Kate Kilgallen
Numis Securities Limited (Nomad and Broker) Tel: +44 (0)20 7260 1000
Julian Cater
George Price
Kevin Cruickshank (QE)
1. Adjusted EBITA is defined as operating profit adjusted to add
back, amortisation, foreign exchange movements and non-trading items as
described in Note 28 to the accounts. Adjustments predominantly owing to one
off costs related to acquisitions
Notes to editors:
Ashtead Technology is a leading subsea equipment rental and solutions provider
for the global offshore energy sector. Ashtead Technology's specialist
equipment, advanced-technologies and support services enable its customers to
understand the subsea environment and manage offshore energy production
infrastructure.
The Company's service offering is applicable across the lifecycle of offshore
wind farms and offshore oil and gas infrastructure.
In the fast-growing offshore wind sector, Ashtead Technology's specialist
equipment and services are essential through the project development,
construction and installation phase. Once wind farms are operational, Ashtead
Technology supports customers with inspection, maintenance and repair ("IMR")
equipment and services. In the more mature oil and gas sector, Ashtead
Technology's focus is on IMR and decommissioning.
Headquartered in the UK, the Company operates globally, servicing customers
from its ten facilities located in key offshore energy hubs.
This announcement contains inside information for the purposes of Article 7 of
EU Regulation 596/2014 as it forms part of domestic law of the United Kingdom
by virtue of the European Union (Withdrawal) Act 2018, as amended (together,
"MAR"). Upon the publication of this announcement, this inside information is
now considered to be in the public domain.
Chairman's Statement
In our first full year as a publicly listed company, I am pleased to report
that Ashtead Technology has delivered a strong performance. We have
consistently outperformed against the forecasts we set at IPO with revenue
growth in both the offshore wind and oil and gas markets, new talent added to
the business, a broadened shareholder base, and demonstrable progress towards
our sustainability goals. We were also delighted to complete two
acquisitions, WeSubsea and Hiretech, during H2.
Delivering beyond Expectations
When we detailed our investment case prior to our 2021 IPO, we set out four
key growth drivers for the business; 1) growth from the significant increase
in expenditure in offshore renewables 2) revenues underpinned by strong demand
from oil and gas 3) increased customer propensity to rent and 4) value
enhancing M&A. Throughout 2022, the business has delivered across all
four growth drivers, delivering a 31% increase in revenues to £73.1m (2021:
£55.8m), a 47% increase in Adjusted EBITA to £20.1m (2021: £13.7m) and
statutory profit before tax of £16.6m versus £3.6m in 2021, an increase of
363%.
With the Board's support, management's focus remains on long-term value
creation through continued organic growth and a focus on M&A. In this
regard, we were delighted that the business successfully completed its first
two acquisitions since the IPO, both of which have now been fully integrated
into the Group. With net debt at £28.7m (2021: £22.7m), leverage at 31
December 2022 was 1.0x. We also recently secured an increase to our banking
facility which provides further capacity for future investment.
Governance
The Board remains committed to strong corporate governance and, in particular,
making sure we monitor and challenge our strategy, performance, risk and
approach to managing our people. More information about our governance
arrangements can be found in the Corporate Governance statement on page 29 of
our 2022 Annual Report.
I also chair the Nominations Committee which met for the first time during the
year. I am pleased to confirm that the Board has integrated itself into the
business well and, through our Board review, I am confident that we currently
provide a sufficient mix of governance, strategy, financial and industry
knowledge, as well as independence.
Sustainability
The Board understands the growing interest in environmental, social and
governance ("ESG") matters for all our stakeholders and as a business we
recognise the importance of our role in helping deliver a lower carbon future
given our offering sits firmly at the heart of the energy transition.
We have made good progress on our sustainability programme throughout 2022 (as
highlighted in pages 12 to 15 of our 2022 Annual Report). Given the
strengthening of the markets in which we operate, there has been a significant
focus on the social element of ESG, with a number of initiatives put in place
to support both the recruitment and retention of personnel.
I would like to personally thank everyone within Ashtead Technology who has
helped make 2022 such a successful year. In my visits to the business I have
been very impressed by the commitment, knowledge, and ambition for the
business that was demonstrated by everyone I met and which bodes well for the
future.
Dividends
While the Board sees an opportunity to reinvest profits to finance the
continued development and expansion of the business through both organic and
M&A growth opportunities, it also recognises the importance of dividends
both to the Company's shareholders, and in maintaining capital discipline.
In this regard, we are delighted to recommend a full and final dividend of 1
pence per share for the year ended 31 December 2022. As noted previously,
the Directors will seek to grow the dividend progressively.
Looking forward
The Group has a proven track record of delivering on both organic growth and
earnings enhancing M&A. While the events of the last few years have
increased fears of recession and cost inflation, Ashtead Technology has
successfully mitigated these risks to date through increased pricing and has
successfully increased utilisation of its equipment rental fleet through 2022.
With a healthy cash position, recently increased debt capacity and a highly
experienced management team, I have every faith in our ability to continue to
monitor and mitigate risk whilst implementing our growth strategy. The Board
is confident that the strategic investments made during the year will
contribute to further progress in 2023 and beyond.
Bill Shannon
Chair
Chief Executive Office's Report
I am delighted with the performance of our business in 2022. We made great
progress on our strategic goals and continued to build our strength and depth
of expertise with a focus on long-term growth.
During 2022 we increased our revenues from offshore renewables projects,
supporting subsea activities in the quest for energy affordability and
security, supported the increased propensity to rent by our customer base, and
completed two strategic acquisitions. In addition to delivering a strong
financial performance with revenue growth across all our geographic regions,
we invested further in our team, expanded our expertise and continued to
invest in our fleet with £13.1m capex on new equipment, positioning us well
for long-term growth.
Delivering Growth
We ended an excellent year with 31% growth in revenues, 47% growth in Adjusted
EBITA and ROIC of 21%. Increased activity offshore and the emergence of the
energy trilemma, a three-way push-pull of energy security, affordability and
sustainability, resulted in increased demand for our services across all the
markets and geographies in which we operate. Our statutory profit before tax
of £16.6m was 363% ahead of prior year (2021: £3.6m).
Responding to the market opportunity and in line with our strategy, we
continued to invest in our high-quality equipment rental fleet, increasing the
number of items from 17,000 to over 19,000 through both organic investment
(£13.1m rental equipment capex) and through the acquisitions of WeSubsea and
Hiretech during H2.
WeSubsea, completed in September 2022, added a fleet of high-performance,
in-house designed, dredge systems and strong technical know-how that strongly
complements, and will provide further pull through for, our wider product and
service offerings.
Hiretech, completed in December 2022, was previously a key supplier to Ashtead
Technology and a business we had been tracking as an acquisition opportunity
for a number of years. Through its multi-purpose fleet of marine and subsea
equipment rental assets and skilled personnel, the acquisition provided strong
synergies through vertical integration of the supply chain, and meaningfully
expanded our business by adding complementary capabilities to strengthen our
mechanical solutions service line and deliver an enhanced offering to our
customers.
Both the acquired businesses have been active in offshore renewables and now,
as part of Ashtead Technology, will be further internationalised increasing
their exposure to wider market opportunities both in offshore renewables and
in their traditional offshore oil and gas market.
Sustainability
We maintained our QHSE track record with no lost time incidents throughout
2022. We also continued to make good progress on our sustainability journey
by increasing our revenues from renewables by 22% and securing our ISO 14001
certification.
From a social perspective, a tightening of the labour market, coupled with
increased mobility opportunities following COVID, has increased focus on staff
retention and recruitment. Being a responsible employer and supporting the
local communities in which we operate is central to how we do business.
On governance, the new Board formed at the time of the IPO has effectively
established itself, further strengthening the governance environment and
processes and procedures under which we operate the business. We recognise
there is always more that can be done as we continue to make progress on our
sustainability goals, and our enhanced governance structure has further
embedded this into our day-to-day operations.
Market
World events in 2022 resulted in the emergence of the energy trilemma. The
heightened focus on energy security and affordability resulted in increased
spending in oil and gas production which, when coupled with the continued
focus on renewable energy sources, has created a tightness in the market that
has allowed the supply chain to increase both utilisation and pricing.
While the expansion of offshore wind as a means of energy production and the
decommissioning of existing oil and gas infrastructure are both critical to a
successful energy transition, the importance of oil and gas as part of this
journey is now much better understood. Oil and gas will for some time remain
an important constituent in meeting energy demand, and will play an important
role in the energy transition, not least by continuing its transition to
cleaner energy production. Years of underinvestment has resulted in a
requirement for significant expenditure to maintain production from existing
fields, as well as the renewed need for investment in new oil and gas
developments and associated infrastructure.
Ashtead Technology remains committed to supporting the energy transition,
targeting 50% of our revenues from the offshore renewables market in the
medium term.
The requirement for energy production from offshore sources has never been
greater and the fungibility of Ashtead Technology's equipment and solutions
across both the offshore wind and oil and gas markets makes for a compelling
and robust proposition, enabling the Group to capture growth opportunities
across both adjacent markets.
Our people
Employee headcount increased from 204 to 260 during the year as we continued
to scale the business for further growth, and included a number of additions
to the senior leadership team - all part of our commitment to bolster
capability across our three service lines, further strengthen our market
leading position internationally, and deliver for our customers.
As part of our programme of wider employee engagement including leadership
visits, regular town hall meetings, monthly newsletters, our company magazine,
and weekly technology awareness sessions, we also introduced the Ashtead
Technology Star Awards recognition programme, where our employees can nominate
colleagues who have gone above and beyond in demonstrating our company values
of agility, collaboration, and excellence.
Building on the strong foundations established in recent years, I would like
to thank the whole team at Ashtead Technology for their ongoing contribution
as we seek to continue that positive momentum in 2023.
Use of Alternative Performance Measures and Non-Financial KPI's
Throughout the strategic report we use a range of financial and non-financial
measures to assess our performance. A number of the financial measures
including Adjusted EBITDA, Adjusted EBITA, Adjusted Profit After Tax and
Adjusted EPS are not defined under IFRS, so they are considered alternative
performance measures ("APMs"). Management uses these measures to monitor the
Group's financial performance alongside IFRS measures because they help
illustrate the underlying financial performance and position of the Group.
These APM's should be considered in addition to, and not as a substitute for,
or as superior to, measures of financial performance, financial position of
cash flows reported in accordance with IFRS. APM's are not uniformly defined
by all companies, including those in the Group's industry. Accordingly,
APM's may not be comparable with similarly titled measures and disclosures by
other companies.
Current trading and outlook
The outlook for all our geographic regions is positive, with all markets
remaining strong and customer backlogs at record levels. Q1 2023 has
continued to deliver strong results with customer demand remaining high across
both offshore wind and oil and gas end markets in what traditionally would be
our weakest quarter due to seasonality. Activity levels experienced were
higher than the same period in the prior year, with utilisation rates and
pricing continuing to track upwards. Inflationary pressures continue to be
mitigated by increased pricing and we remain confident of making further
progress in 2023 as we continue to focus on delivering our strategic growth
plan. Given the performance to date, the Board expects the outturn for the
full year to be materially ahead of its previous expectations.
Allan Pirie
Chief Executive Officer
Chief Financial Officer's Report
The Group delivered a strong trading performance in 2022, whilst continuing to
focus on our strategic goals and long-term growth. We have made progress
against all of our financial KPI's and were delighted to add the WeSubsea and
Hiretech acquisitions as we continue to build on the strong foundations of our
business.
Revenue
The Group delivered revenue of £73.1m in the year, an increase of 31% from
£55.8m in 2021, driven by an increase in revenue across both the offshore
renewables (22%) and offshore oil and gas markets (35%). Offshore renewables
revenue accounted for 31% of total revenue in 2022 (2021: 33%).
Our 31% revenue growth was derived from organic growth (23.7%), M&A
(1.7%), and favourable FX rates (5.5%) with growth coming from all our
geographical segments.
On a proforma basis, taking into account the full year impact of WeSubsea and
Hiretech, our revenues were £80.9m.
Gross profit
Gross profit increased to £54.3m from £40.5m in 2021. The increase in the
gross margin to 74% (2021: 73%) was the result of a higher proportion of
revenues from equipment rental. In our rental business, we saw cost
utilisation increase from 43% in 2021 to 44% in 2022.
Administration costs
Administration expenses of £37.0m compares to £33.9m in 2021 with the
increase (£3.1m) coming from personnel costs (up £4.8m) offset by lower
professional fees (down £2.2m) predominantly related to IPO costs in 2021.
In addition to pay increases and an increase in number of employees,
personnel costs were impacted by the re-introduction of an annual bonus scheme
(£2.2m) and the introduction of an LTIP (£0.8m).
Profitability
Adjusted EBITA of £20.1m compares to £13.7m in 2021 and represents a margin
of 28% (2021: 25%), resulting in ROIC increasing to 21% (2021: 17%),
significantly ahead of cost of capital.
Our EBITA growth of 47% can be split as 36% from organic growth, 5% from
M&A, and 6% from FX.
On a proforma basis, taking into account the full year impact of WeSubsea and
Hiretech, our Adjusted EBITA increased to £25.1m.
Where we have provided adjusted figures, they are after the add-back of
adjusting items which, with regard to 2022, predominantly related to
professional and other fees arising from our two acquisitions. Our 2021
adjustments were mostly in relation to costs associated with the IPO.
Statutory profit before tax of £16.6m in 2022 compares to a statutory profit
before tax of £3.6m in 2021.
Net finance expense
Net finance costs were £1.4m in 2022 compared to £4.0m in 2021, with the
decrease reflecting our lower post IPO debt structure.
Taxation
The total tax charge was £4.0m (2021: £1.1m). This equates to an effective
tax rate of 23.8% compared to 29.5% in 2021, which was high due to
non-deductible expenses associated with the IPO. The 2022 tax charge includes
the recognition of a non-cash deferred tax liability of £0.9m, excluding
this, our effective tax rate would have been 18.4%. Our expectation is that
the Group's effective tax rate will be close to the UK corporation tax rate,
although this will be impacted by the amount of profit the Group earns in its
overseas jurisdictions where, in some cases, corporation tax rates are higher
or lower than those in the UK.
EPS and dividend
Adjusted EPS was 19.6 pence (2021: 13.2 pence) with statutory EPS at 15.9
pence (2021: 3.6 pence). The adjusted figures exclude the impact of adjusting
items as set out in note 28 of the accounts, foreign exchange profit/loss and
amortisation and reverses the impact of the US deferred tax liability
recognition.
The Board sees an opportunity to reinvest profits to expand the business both
organically and through M&A growth. At the same time, the Board
recognises the importance of dividends both to the Company's shareholders and
in maintaining capital discipline. In this regard, the Board has recommended
a full and final dividend of 1 pence per share for the year ended 31 December
2022, payable on 23 June 2023 to shareholders with a record date of 26 May
2023. Going forward the Directors will seek to pay a progressive annual final
dividend.
Cash flow and balance sheet
Cash inflow from operations was £36.0m (2021: £11.7m). The Group increased
its investment in capital expenditure in the year to £14.5m (2021: £7.9m),
investing predominantly in rental equipment to capitalise on the continued
improvement in market conditions. The net book value of our rental fleet
increased by £10.4m in the period.
Cash spent on acquisitions of £24.0m was funded in part by debt (net draw of
£9.3m on RCF during the year). Acquisitions completed in the year resulted
in an increase in both intangible assets (£4.7m of additions) and goodwill
(£16.9m of additions).
Net working capital reduced significantly in the year due to improvement in
debtor days (£0.8m), bonus accrual (£2.5m), accrued completion accounts and
other payments relating to acquisitions (£1.6m), and timing of capex payables
(£2.4m) resulting in a lower than normal 3% of working capital to revenues
ratio.
Overall movement in cash was a positive inflow of £3.9m for the year (2021:
£6.3m) with cash balance at £9.0m at year end (2021: £4.9m).
Net debt increased from £22.7m to £28.7m representing leverage of 1.0x at
year end (2021: 1.0x). On a proforma basis, taking into account the full
year impact of the acquisitions, leverage was 0.8x.
Going concern
The consolidated financial statements of the Group are prepared on a going
concern basis. The Directors of the Group assert that the preparation of the
consolidated financial statements on a going concern basis is appropriate
based upon a review of the future forecast performance of the Group.
During 2022 the Group continued to generate positive cash flow from operating
activities with a cash and cash equivalents balance of £9.0m (2021: £4.9m)
at year end.
In December 2022, the Company utilised its accordion facility provided by
Clydesdale Bank and HSBC, increasing its RCF capacity to £60m in order to
support the Hiretech acquisition. With a continued focus on M&A, in
April 2023 the Company extended its RCF facility further to £100m (plus an
accordion of £50m), expanding its banking syndicate to include ABN and
Citibank. This new RCF facility expires in April 2027.
Under the new RCF facility, the Company is subject to a leverage covenant of
3.0x and an interest cover covenant of 4:1, which are both to be tested on a
quarterly basis. The increase in leverage covenant is designed to give more
flexibility to funding of potential acquisitions with a focus on maintaining a
1-2x leverage over the short to medium term. The Group has complied with all
covenants through 2022 and to the date of this report.
The Group monitors its funding and liquidity position throughout the year to
ensure it has sufficient funds to meet its ongoing cash requirements. Each
geographic region prepares its own forecasts based on a number of inputs such
as estimated revenues, margins and overheads which is challenged by the
Executive Directors and rolled into a Group cash flow forecast based on
assumed collection and payment terms, capex requirements, and the payment of
interest and capital on existing debt facilities. Consideration is also
given to the availability of bank facilities. In preparing these forecasts,
both management and the Directors have considered the principal risks and
uncertainties to which the business is exposed.
Taking account of reasonable changes in trading performance and bank
facilities available, the cash forecast prepared by management and reviewed by
the Directors indicates that the Group is cash generative, has adequate
financial resources to continue to trade for the foreseeable future, and to
meet its obligations as they fall due.
Reconciliation of adjusted and reported IFRS results
The Group uses certain measures that it believes assist a reader of the Report
and Accounts in understanding the business. The measures are not defined under
IFRS and, therefore, may not be directly comparable with adjusted measures
presented by other companies. The non-GAAP measures are not intended to be a
substitute for, or superior to, any IFRS measures of performance. However,
they are considered by management to be important measures used in the
business for assessing performance.
In establishing Adjusted EBITDA, Adjusted EBITA and Adjusted Profit After Tax
(used for Adjusted EPS calculation), the Group has added back various costs,
deemed to be one-off in nature, which in 2022 predominantly relate to
acquisitions completed during the period. The definitions can be found in
the definitions section of the 2022 Annual Report and reconciliation to GAAP
metrics included in Note 28 to the accounts.
Table A - Results reconciliation / Adjusted figures
Results reconciliation Adjusted Acquisition costs Restructuring costs Other Reported
£'000
Revenue 73,120 - - - 73,120
Gross profit 54,291 - - - 54,291
Administrative expenses* (36,176) 787 28 36 (37,027)
Other operating income 804 - - - 804
Operating profit 18,919 787 28 36 18,068
Finance cost (net) (1,437) - - - (1,437)
Profit before tax 17,482 787 28 36 16,630
Profit after tax 13,517 787 28 36 12,665
Foreign exchange 3
Amortisation 1,202
Tax impact of adjustments (12)
Remove US deferred tax recognition 910
Adjusted profit after tax for EPS calculation 15,619
EBITDA/EBITA/Adjusted Profit Before Tax
Operating profit 18,919 787 28 36 18,068
Foreign exchange 3 - - - 3
Depreciation 8,431 - - - 8,431
Amortisation 1,202 - - - 1,202
EBITDA 28,555 787 28 36 27,704
Depreciation (8,431) - - - (8,431)
EBITA 20,124 787 28 36 19,273
Finance cost (net) (1,437)
Adjusted profit before tax 18,686
*includes impairment loss on trade receivables
Ingrid Stewart
Chief Financial Officer
Consolidated Income Statement
for the year ended 31 December 2022
Notes 2022 2021
£000 £000
Revenue 4 73,120 55,805
Cost of sales 5 (18,829) (15,262)
Gross profit 54,291 40,543
Administrative expenses 5 (36,217) (33,385)
Impairment loss on trade receivables 5 (810) (545)
Other operating income 5 804 995
Operating profit 5 18,068 7,608
Finance income 7 21 −
Finance costs 7 (1,459) (4,019)
Profit before taxation 16,630 3,589
Taxation charge 8 (3,965) (1,060)
Profit for the financial year 12,665 2,529
Profit attributable to:
Equity shareholders of the Company 12,665 2,529
Earnings per share
Basic 9 15.9 3.6
Diluted 9 15.7 3.6
The below financial measures are non-GAAP metrics used by management and are
not an IFRS disclosure:
Adjusted EBITDA* 28 28,555 22,437
Adjusted EBITA** 28 20,124 13,724
* Adjusted EBITDA is calculated as earnings before interest, tax,
depreciation, amortisation and items not considered part of underlying trading
including foreign exchange gains and losses, is a non-GAAP metric used by
management and is not an IFRS disclosure. See Note 28 to the financial
statements for calculations.
** Adjusted EBITA is calculated as earnings before interest, tax,
amortisation and items not considered part of underlying trading including
foreign exchange gains and losses, is a non-GAAP metric used by management and
is not an IFRS disclosure. See Note 28 to the financial statements for
calculations.
All results derive from continuing operations.
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2022
2022 2021
£000 £000
Profit for the year 12,665 2,529
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations 1,179 163
Net gain on cash flow hedges − 351
Other comprehensive income for the year, net of tax 1,179 514
Total comprehensive income 13,844 3,043
Total comprehensive income attributable to:
Equity shareholders of the Company 13,844 3,043
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated Balance Sheet
at 31 December 2022
Notes 2022 2021
£000 £000
Non-current assets
Property, plant and equipment 11 31,812 20,832
Goodwill 12 66,043 48,651
Intangible assets 12 5,978 1,760
Right-of-use assets 19 2,631 2,923
Deferred tax asset 8 − 1,010
106,464 75,176
Current assets
Inventories 13 1,865 1,778
Trade and other receivables 14 19,456 17,224
Cash and cash equivalents 15 9,037 4,857
30,358 23,859
Total assets 136,822 99,035
Current liabilities
Trade and other payables 16 19,134 9,415
Income tax payable 8 1,820 821
Lease liabilities 19 865 783
21,819 11,019
Non-current liabilities
Loans and borrowings 17 34,865 24,425
Lease liabilities 19 1,991 2,351
Deferred tax liability 8 2,227 −
Provisions for liabilities 20 117 108
39,200 26,884
Total liabilities 61,019 37,903
Equity
Share capital 23 3,979 3,979
Share premium 23 14,115 14,115
Merger reserve 23 9,435 9,435
Share based payment reserve 23 827 −
Foreign currency translation reserve 23 (111) (1,290)
Retained earnings 23 47,558 34,893
Total equity 75,803 61,132
Total equity and liabilities 136,822 99,035
The accompanying notes are an integral part of these consolidated financial
statements.
The financial statements of Ashtead Technology Holdings plc (registered number
13424040) for the year ended 31 December 2022 were authorised by the Board of
Directors on 2 May 2023 and signed on its behalf by:
Allan Pirie
Ingrid Stewart
Chief Executive Officer
Chief Financial Officer
2 May 2023
2 May 2023
Consolidated Statement of Changes in Equity
for the year ended 31 December 2022
Share capital Share premium Merger reserve Share based payment reserve Hedging reserve Foreign currency translation reserve Retained earnings Total
£000 £000 £000 £000 £000 £000 £000 £000
At 1 January 2021 3,500 − 9,429 − (351) (1,453) 33,660 44,785
Profit for the year − − − − − − 2,529 2,529
Other comprehensive income − 351 163 − 514
− − −
Total comprehensive income − 351 163 2,529 3,043
− − −
Issue of shares from IPO 479 15,044 − 15,523
− − − −
Transaction fees on issue of shares from IPO − (929) − − − − − (929)
Issue of shares* − − 6 − − − − 6
Dividends declared** − − − − − − (1,296) (1,296)
At 31 December 2021 3,979 14,115 9,435 − − (1,290) 34,893 61,132
Profit for the year − − − − − − 12,665 12,665
Other comprehensive income − 1,179 − 1,179
− − − −
Total comprehensive income − 1,179 12,665 13,844
− − − −
Share based payment charge − − − 827 − − − 827
At 31 December 2022 3,979 14,115 9,435 827 − (111) 47,558 75,803
* The movement in merger reserve represents the issue of shares in BP
INV2 Pledgeco Limited and Ashtead US Pledgeco Inc pre IPO.
** The dividends declared in 2021 relate to the pre-IPO group restructure.
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated Cash Flow Statement
for the year ended 31 December 2022
Notes 2022 2021
£000 £000
Cash generated from operating activities
Profit before taxation 16,630 3,589
Adjustments to reconcile profit before taxation to net cash from operating
activities
Finance income 7 (21) −
Finance costs 7 1,459 4,019
Depreciation 11 & 19 8,431 8,713
Amortisation 12 1,202 1,516
Gain on sale of property, plant and equipment 5 (804) (995)
Share based payment charges 6 825 −
Provision for liabilities 20 (4) (28)
Cash generated before changes in working capital 27,718 16,814
Decrease/(increase) in inventories 274 (524)
Decrease/(increase) in trade and other receivables 785 (6,597)
Increase in trade and other payables 7,207 2,016
Cash inflow from operations 35,984 11,709
Interest paid (1,132) (3,615)
Tax paid (1,998) (858)
Net cash generated from operating activities 32,854 7,236
Cash flow used in investing activities
Purchase of property, plant and equipment (13,728) (7,889)
Proceeds from disposal of property, plant and equipment 1,518 1,453
Purchase of computer software (725) −
Acquisition of subsidiary undertakings net of cash acquired (23,999) −
Interest received 21 −
Net cash used in investing activities (36,913) (6,436)
Cash flow generated from/(used in) financing activities
Proceeds from IPO share issue − 15,523
Transaction fees on share issue − (929)
Proceeds from share issue − 50
Loans received 31,000 25,107
Transaction fees on loans received (228) (914)
Repayment of bank loans (21,727) (44,121)
Payment of lease liability (1,064) (1,012)
Repayment of loan notes − (830)
Net cash generated from/(used in) financing activities 7,981 (7,126)
Net increase/(decrease) in cash and cash equivalents 3,922 (6,326)
Cash and cash equivalents at beginning of year 4,857 10,958
Net foreign exchange difference 258 225
Cash and cash equivalents at end of year 9,037 4,857
The accompanying notes are an integral part of these consolidated financial
statements.
Notes to the Consolidated Financial Statements
for the year ended 31 December 2022
1. General information
1.1 Background
Ashtead Technology Holdings plc (the "Company") is a public limited company
incorporated in the United Kingdom under the Companies Act 2006, whose shares
are traded on AIM. The consolidated financial statements of the Company as at
and for the year ended 31 December 2022 comprise the Company and its interest
in subsidiaries (together referred to as the "Group"). The Company is
domiciled in the United Kingdom and its registered address is 1 Gateshead
Close, Sunderland Road, Sandy, Bedfordshire, SG19 1RS, United Kingdom.
1.2 Basis of preparation
The financial information set out in this statement has been prepared in
accordance with the recognition and measurement principles of International
Financial Reporting Standards ("IFRSs"), IFRIC interpretations and the
Companies Act 2006 applicable to companies reporting under IFRS. It does not
include all the information required for full annual accounts.
The financial information does not constitute the Company's statutory accounts
for the years ended 31 December 2022 or 31 December 2021 but is derived from
those accounts. Statutory accounts 2022 will be delivered to the Registrar of
Companies in due course. The Auditor has reported on the 2022 accounts; his
reports (i) were unqualified, (ii) did not include a reference to any matters
to which the Auditor drew attention by way of emphasis without qualifying his
report and (iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006.
1.3 Predecessor accounting
Ashtead Technology Holdings plc was incorporated on 27 May 2021 and became the
parent entity of the Group on 17 November 2021 when Ashtead Technology
Holdings plc acquired the entire shareholding of both BP INV2 Pledgeco Limited
and Ashtead US Pledgeco Inc by way of share for share exchange agreement.
This does not constitute a business combination under IFRS 3 'Business
Combinations' as it is effectively a combination among entities under common
control. There is currently no guidance in IFRS on the accounting treatment
for combinations among entities or businesses under common control. IAS 8
requires management, if there is no specifically applicable standard or
interpretation, to develop a policy that is relevant to the decision making
needs of users and that is reliable. The entity first considers requirements
and guidance in other international standards and interpretations dealing with
similar issues, and then the content of the IASB's Conceptual Framework for
Financial Reporting (Conceptual Framework). Management might consider the
pronouncements of other standard-setting bodies that use a similar conceptual
framework to the IASB's, provided that they do not conflict with the IASB's
sources of guidance.
Considering facts and circumstances management has decided to apply a method
broadly described as predecessor accounting. The principles of predecessor
accounting are:
· Assets and liabilities of the acquired entity are stated at
predecessor carrying values. Fair value measurement is not required.
· No new goodwill arises in predecessor accounting.
· Any difference between the consideration given and the aggregate
carrying value of the assets and liabilities of the acquired entity at the
date of the transaction is included in equity in retained earnings or in a
separate reserve.
During the year ended 31 December 2021, management used merger accounting and
had taken merger relief at a Company level. Under merger accounting
principles, the assets and liabilities of the subsidiaries were consolidated
at book value in the Group financial statements and the consolidated reserves
of the Group were adjusted to reflect the statutory share capital of Ashtead
Technology Holdings plc with the difference presented as the merger reserve.
The cost of investments in subsidiaries is determined by the historical cost
of investments in the subsidiaries of the Group transferred from the previous
owning entities, including transaction costs. The value of total equity
reflects the combination of former BP INV2 Pledgeco Limited and Ashtead US
Pledgeco Inc Group.
1.4 Presentational currency
The consolidated financial statements, unless otherwise stated, are presented
in sterling, to the nearest thousand.
1.5 Going concern
The consolidated financial statements of the Group are prepared on a going
concern basis. The Directors of the Group assert that the preparation of the
consolidated financial statements on a going concern basis is appropriate,
which is based upon a review of the future forecast performance of the Group
for a two year period ending 31 December 2024.
During 2022 the Group has continued to generate positive cash flow from
operating activities with a cash and cash equivalents balance of £9,037,000
(2021: £4,857,000). The Group has access to a multi currency RCF and
additional accordion facility. After a refinance which completed on 5 April
2023, the RCF and accordion facility have total commitments of £100,000,000
and £50,000,000 respectively, both of which expire in April 2027, with an
option to extend by 1 year. The accordion facility is subject to credit
approval. As at 31 December 2022 the RCF had an undrawn balance of
£24,562,000 on the £60,000,000 facility available at that time. Refer to
Note 17 for details on the available facilities.
The Facility Agreement is subject to a leverage covenant of 3.0x and an
interest cover covenant of 4:1, which are both to be tested on a quarterly
basis. The Group has complied with all covenants from entering the Facility
Agreement until the date of these financial statements.
The Group monitors its funding and liquidity position throughout the year to
ensure it has sufficient funds to meet its ongoing cash requirements. Cash
forecasts are produced based on a number of inputs such as estimated revenues,
margins, overheads, collection and payment terms, capex requirements and the
payment of interest and capital on its existing debt facilities. Consideration
is also given to the availability of bank facilities. In preparing these
forecasts, the Directors have considered the principal risks and uncertainties
to which the business is exposed.
The Directors perform sensitivity analysis on the going concern assumption to
determine whether plausible downside scenarios would have a material impact.
Forecasts were flexed to incorporate a 5% downturn in forecast performance
in the year ending 31 December 2023 and a 10% downturn in forecast performance
in the year ending 31 December 2024. Under this downside scenario the peak
funding requirement over the forecast period would leave £105,000,000
headroom in the available facilities with no threat to breach of covenants.
Taking account of reasonable changes in trading performance and bank
facilities available, the application of severe but plausible downside
scenarios to the forecasts, the cash forecasts prepared by management and
reviewed by the Directors indicate that the Group is cash generative and has
adequate financial resources to continue to trade for the foreseeable future
and meet its obligations as they fall due.
1.6 Basis of consolidation
Subsidiaries are entities controlled by the Group. The Group controls an
entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns
through its power over the entity. In assessing control, the Group takes into
consideration potential voting rights and rights to variable returns of the
subsidiaries. The acquisition date is the date on which control is transferred
to the acquirer. The financial information of subsidiaries is included in the
consolidated financial statements from the date that control commences until
the date that control ceases. Control is reassessed whenever facts and
circumstances indicate that there may be a change in any of these elements of
control.
The consolidated financial statements present the results of the Company and
its subsidiaries as if they formed a single entity. Intercompany transactions
and balances between Group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of the business
combinations using the acquisition method. In the balance sheet, the
acquiree's identifiable assets, liabilities and contingent liabilities are
initially recognised at their fair values at the acquisition date.
1.7 Business combinations
All business combinations are accounted for by applying the acquisition method
as at the acquisition date, which is the date on which control is transferred
to the Group.
The Group measures goodwill at the acquisition date as:
· the fair value of the consideration transferred; plus
· the recognised amount of any non-controlling interests in the
acquiree; plus
· the fair value of the existing equity interest in the acquiree;
less
· the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed.
Costs related to the acquisition, other than those associated with the issue
of debt or equity securities, are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the
acquisition date. Subsequent changes to the fair value of the contingent
consideration are recognised in the income statement.
The Group determines that it has acquired a business when the acquired set of
activities and assets include an input and a substantive process that together
significantly contribute to the ability to create outputs. The acquired
process is considered substantive if it is critical to the ability to continue
producing outputs, and the inputs acquired include an organised workforce with
the necessary skills, knowledge, or experience to perform that process or it
significantly contributes to the ability to continue producing outputs and is
considered unique or scarce or cannot be replaced without significant cost,
effort, or delay in the ability to continue producing outputs.
When the Group acquires a business, it assesses the financial assets and
liabilities assumed for appropriate classification and designation in
accordance with the contractual terms, economic circumstances and pertinent
conditions as at the acquisition date. This includes the separation of
embedded derivatives in host contracts by the acquiree.
1.8 New and amended standards adopted by the Group
There are no new IFRS or IFRIC Interpretations that are effective for the
first time this financial year which have a material impact on the Group. The
Group has not early adopted any standards, interpretations or amendments that
have been issued but are not yet effective. There are no IFRS standards or
amendments that have been issued but not yet adopted that are expected to have
a material impact on the Group.
1.9 Statement of compliance
The preparation of financial statements in compliance with adopted IFRS
requires the use of certain critical accounting estimates. It also requires
Group management to exercise judgement in applying the Group's accounting
policies. The areas where significant judgements and estimates have been made
in preparing the financial statements and their effect are disclosed in Note
2.
2. Summary of significant accounting policies
2.1 Foreign currencies
Transactions in foreign currencies are translated to the respective functional
currencies of Group entities at the foreign exchange rate ruling at the date
of the transaction. Monetary assets and liabilities denominated in foreign
currencies at the balance sheet date are retranslated to the functional
currency at the foreign exchange rate ruling at that date. Foreign exchange
differences arising on translation are recognised in the income statement.
Non-monetary assets and liabilities that are measured in terms of historical
cost in a foreign currency are translated using the exchange rate at the date
of the transaction.
The assets and liabilities of foreign operations, including goodwill and fair
value adjustments arising on consolidation, are translated to the Group's
presentational currency, sterling, at foreign exchange rates ruling at the
balance sheet date. The revenues and expenses of foreign operations are
translated at an average rate for each month where this rate approximates to
the foreign exchange rates ruling at the dates of the transactions.
Exchange differences arising from this translation of foreign operations are
reported as an item of other comprehensive income and accumulated in the
translation reserve, within equity. When a foreign operation is disposed of,
such that control, joint control or significant influence (as the case may be)
is lost, the entire accumulated amount in the foreign currency translation
reserve is recycled to the income statement as part of the gain or loss on
disposal.
2.2 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and impairment losses. Depreciation is charged to the income statement on a
straight-line basis over the estimated useful lives of each part of an item of
property, plant and equipment. The estimated useful lives are as follows:
Leasehold improvements - remaining lease term
Freehold property - 25 years
Fixtures and fittings - 5 years
Motor vehicles - 5 years
Assets held for rental - 4-8 years
Depreciation methods, useful lives and residual values are reviewed at each
balance sheet date.
Any gain or loss on disposal of an item of property, plant and equipment is
recognised in the income statement.
Subsequent expenditure is capitalised only if it is probable that the future
economic benefits associated with the expenditure will flow to the Group.
2.3 Intangible assets and goodwill
Goodwill
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is
allocated to cash-generating units and is not amortised but is tested annually
for impairment.
Other intangible assets
Expenditure on internally generated goodwill and brands is recognised in the
income statement as an expense as incurred.
Other intangible assets that are acquired by the Group are stated at cost less
accumulated amortisation and accumulated impairment losses.
Amortisation
Amortisation is charged to the income statement on a straight-line basis over
the estimated useful lives of intangible assets unless such lives are
indefinite. Intangible assets with an indefinite useful life and goodwill are
systematically tested for impairment at each balance sheet date. Other
intangible assets are amortised from the date they are available for use. The
estimated useful lives are as follows:
Non-compete arrangements - 3 years
Customer relationships - 3 years
Computer software - 5 years
Both the non-compete arrangements and customer relationships are intangible
assets arising from business combinations. The fair value of the non-compete
arrangements at the acquisition date has been determined using the 'with and
without method', an income approach which considers the difference between
discounted future cash flow models, with and without the non-compete clause.
The fair value of the customer relationships at the acquisition date has been
determined using the multi-period excess earnings method.
2.4 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is
calculated using the FIFO (first in, first out) method.
2.5 Impairment of non-financial assets excluding inventories, deferred tax
assets and contract assets
The carrying amounts of the Group's non-financial assets, other than
inventories and deferred tax assets, are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such
indication exists, then the asset's recoverable amount is estimated. For
goodwill, and intangible assets that have indefinite useful lives or that are
not yet available for use, the recoverable amount is estimated each year at
the reporting date.
The recoverable amount of an asset or cash-generating unit is the greater of
its value in use and its fair value less costs to sell. In assessing value in
use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. For the purpose of
impairment testing, assets that cannot be tested individually are grouped
together into the smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of other
assets or groups of assets (the "cash-generating unit"). The goodwill acquired
in a business combination, for the purpose of impairment testing, is allocated
to groups of cash-generating units ("CGUs") that are expected to benefit from
the synergies of the combination. For the purposes of goodwill impairment
testing, CGUs to which goodwill has been allocated are aggregated so that the
level at which impairment is tested reflects the lowest level at which
goodwill is monitored for internal reporting purposes. This is subject to an
operating segment ceiling test.
An impairment loss is recognised if the carrying amount of an asset or its CGU
exceeds its estimated recoverable amount. Impairment losses are recognised in
the income statement. Impairment losses recognised in respect of CGUs are
allocated first to reduce the carrying amount of any goodwill allocated to the
units, and then to reduce the carrying amounts of the other assets in the unit
(group of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other
assets, impairment losses recognised in prior periods are assessed at each
reporting date for any indications that the loss has decreased or no longer
exists. An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment loss is
reversed only to the extent that the asset's carrying amount does not exceed
the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
2.6 Employee benefits
Defined contribution plans
The Group pays contributions to selected employees' defined contribution
pension plans. The amounts charged to the income statement in respect of
pension costs are the contributions payable in the period. Differences between
contributions payable in the period and contributions actually paid are shown
as either accruals or prepayments on the balance sheet.
2.7 Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, and it is
probable that an outflow of economic benefits will be required to settle the
obligation. If the effect is material, provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and, when appropriate,
the risks specific to the liability.
2.8 Revenue recognition
Revenue relates to the provision of services, rental of equipment and sale of
equipment. Revenues arising from the rental of equipment are recognised in
accordance with the requirements of IFRS 16: Leases. Revenues arising from all
other revenue streams are recognised in accordance with the requirements of
IFRS 15.
Revenue under IFRS 15
Revenues for the provision of services are recognised over time as the
services are provided. The services provided to customers meet the criterion
that the customer simultaneously receives and consumes the benefits provided.
Accordingly, these services qualify for over-time revenue recognition.
Revenues for the provision of goods are recognised at a point in time, which
is the point at which the Group satisfies the performance obligation under the
terms of the contract. The performance obligation is the delivery of the goods
to the customer, which is the point at which the customer obtains control.
Revenues for the provision of goods and services are measured at the
transaction price, stated net of VAT.
Revenue under IFRS 16
All contracts for leases of equipment entered into by the Group are classified
as operating leases. The contracts for equipment rentals do not transfer
substantially all of the risks and rewards incidental to ownership of the
underlying asset to the customer.
The Group recognises lease payments received under operating leases as revenue
on a straight-line basis over the lease term.
Where customers are billed in advance, deferred rental income is recognised,
which represents the portion of billed revenue to be deferred to future
periods. Where customers are billed in arrears for equipment rentals, accrued
rental income is recognised, which represents unbilled revenues recognised in
the period.
Performance obligations and timing of revenue recognition
Revenue derived from selling goods is recognised at a point in time when
control of the goods has transferred to the customer. This is generally when
the goods are delivered to the customer. However, for export sales, control
might also be transferred when delivered either to the port of departure or
port of arrival, depending on the specific terms of the contract with a
customer. There is limited judgement needed in identifying the point control
passes: once physical delivery of the products to the agreed location has
occurred, the group no longer has physical possession, usually will have a
present right to payments (as a single payment on delivery) and retains none
of the significant risks and rewards of the goods in question.
2.9 Operating segments
The Group operates in the following four geographic regions, which have been
determined as the Group's reportable segments. The operations of each
geographic region are similar.
· Europe
· Americas
· Asia-Pacific
· Middle East
The Chief Operating Decision Maker (CODM) is determined as the Group's Board
of Directors. The Group's Board of Directors reviews the internal management
reports of each geographic region monthly as part of the monthly management
reporting. The operations within each of the above regional segments display
similar economic characteristics. There are no reportable segments which have
been aggregated for the purpose of the disclosure of segment information.
2.10 Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax
is recognised in the income statement except to the extent that it relates to
items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income or
loss for the year, using tax rates enacted or substantively enacted at the
balance sheet date, and any adjustment to tax payable in respect of previous
years.
Deferred tax is provided on temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. The following temporary differences are not
provided for: the initial recognition of goodwill; the initial recognition of
assets or liabilities that affect neither accounting nor taxable profit other
than in a business combination; and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively enacted at the
balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the temporary
difference can be utilised. Deferred tax assets are reviewed at each reporting
date and are reduced to the extent that it is no longer probable that the
related tax benefit will be realised; such reductions are reversed when the
probability of future taxable profits improves. Unrecognised deferred tax
assets are reassessed at each reporting date and recognised to the extent that
it has become probable that future taxable profits will be available against
which they can be used.
Current tax assets and current tax liabilities are offset only when:
· the Group has a legally enforceable right to set off current tax
assets against current tax liabilities; and
· the Group intends either to settle on a net basis or to realise the
asset and settle the liability simultaneously.
Deferred tax assets and liabilities are offset only if:
· the Group has a legally enforceable right to set off current tax
liabilities and assets; and
· the deferred tax liabilities and assets relate to income taxes
levied by the same tax authority.
2.11 Leases
At the inception of a contract, the Group assesses whether a contract is, or
contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in
exchange for consideration.
As a lessee
At commencement or on modification of a contract that contains a lease
component, along with one or more other lease or non-lease components, the
Group accounts for each lease component separately from the non-lease
components. The Group allocates the consideration in the contract to each
lease component on the basis of its relative stand-alone price and the
aggregate stand-alone price of the non-lease components.
The Group recognises a right-of-use asset and a lease liability at the lease
commencement date. The right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct
costs incurred and an estimate of costs to dismantle and remove the underlying
asset or to restore the underlying asset or the site on which it is located,
less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line
method from the commencement date to the end of the lease term, unless the
lease transfers ownership of the underlying asset to the Group by the end of
the lease term or the cost of the right-of-use asset reflects that the Group
will exercise a purchase option. In that case the right-of-use asset will be
depreciated over the useful life of the underlying asset, which is determined
on the same basis as those of property, plant and equipment. In addition, the
right-of-use asset is periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted using the
interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group's incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise the
following:
· fixed payments, including in-substance fixed payments;
· variable lease payments that depend on an index or a rate,
initially measured using the index or rate as at the commencement date;
· amounts expected to be payable under a residual value guarantee;
· the exercise price under a purchase option that the Group is
reasonably certain to exercise;
· lease payments in an optional renewal period if the Group is
reasonably certain to exercise an extension option; and
· penalties for early termination of a lease unless the Group is
reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest
method. It is remeasured when there is a change in future lease payments
arising from a change in an index or rate, there is a change in the Group's
estimate of the amount expected to be payable under a residual value
guarantee, if the Group changes its assessment of whether it will exercise a
purchase, extension or termination option or if there is a revised
in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment
is made to the carrying amount of the right-of-use asset, to the extent that
the right-of-use asset is reduced to nil, with any further adjustment required
from the remeasurement being recorded in the income statement.
The Group presents right-of-use assets and lease liabilities as separate line
items on the balance sheet.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease
liabilities for lease of low-value assets and short-term leases. The Group
recognises the lease payments associated with these leases as an expense on a
straight-line basis over the lease term.
As a lessor
Refer to the revenue accounting policy note for the Group's accounting policy
under IFRS 16, as a lessor.
2.12 Financial instruments
Financial assets and financial liabilities are recognised when the Group
becomes a party to the contractual provisions of the instrument.
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument
is any contract that evidences a residual interest in the assets of the Group
after deducting all of its liabilities.
Financial assets and liabilities
All financial assets and liabilities are initially measured at transaction
price (including transaction costs), except for those financial assets
classified as at fair value through profit or loss, which are initially
measured at fair value (which is normally the transaction price excluding
transaction costs).
Financial assets and liabilities are only offset in the balance sheet when,
and only when there exists a legally enforceable right to set off the
recognised amounts and the Group intends either to settle on a net basis, or
to realise the asset and settle the liability simultaneously.
Commitments to make and receive loans which meet the conditions mentioned
above are measured at cost (which may be nil) less impairment.
Financial assets are classified, at initial recognition, as subsequently
measured at amortised cost, fair value through other comprehensive income
(OCI), and fair value through profit or loss. The classification of
financial assets at initial recognition depends on the financial asset's
contractual cash flow characteristics and the Group's business model for
managing them. With the exception of trade receivables for which the Group
has applied the practical expedient, the Group initially measures a financial
asset at its fair value plus, in the case of a financial asset not at fair
value through profit or loss, transaction costs.
For purposes of subsequent measurement, financial assets are classified in
four categories:
· Financial assets at amortised cost (debt instruments)
· Financial assets at fair value through OCI with recycling of
cumulative gains and losses (debt instruments)
· Financial assets designated at fair value through OCI with no
recycling of cumulative gains and losses upon derecognition (equity
instruments)
· Financial assets at fair value through profit or loss
In order for a financial asset to be classified and measured at amortised cost
or fair value through OCI, it needs to give rise to cash flows that are
'solely payments of principal and interest' (SPPI) on the principal amount
outstanding. This assessment is referred to as the SPPI test and is
performed at an instrument level. Financial assets with cash flows that are
not SPPI are classified and measured at fair value through profit or loss,
irrespective of the business model.
The Group's business model for managing financial assets refers to how it
manages its financial assets in order to generate cash flows. The business
model determines whether cash flows will result from collecting contractual
cash flows, selling the financial assets, or both. Financial assets
classified and measured at amortised cost are held within a business model
with the objective to hold financial assets in order to collect
contractual cash flows while financial assets classified and measured at fair
value through OCI are held within a business model with the objective of both
holding to collect contractual cash flows and selling.
Non-derivative financial assets are classified on initial recognition in
accordance with the Group's business model as trade and other receivables, or
cash and cash equivalents and accounted for as follows:
· Trade and other receivables: These are non-derivative financial
assets that are primarily held in order to collect contractual cash flows and
are measured at amortised cost, using the effective interest rate method, and
stated net of allowances for credit losses.
· Cash and cash equivalents: Cash and cash equivalents include cash
in hand and deposits held on call.
Financial liabilities are classified, at initial recognition, as financial
liabilities at fair value through profit or loss, loans and borrowings,
payables, or as derivatives designated as hedging instruments in an effective
hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the
case of loans and borrowings and payables, net of directly attributable
transaction costs.
Non-derivative financial liabilities, including loans and borrowings, and
trade and other payables, are stated at amortised cost using the effective
interest method.
For purposes of subsequent measurement, financial liabilities are classified
in two categories:
· Financial liabilities at fair value through profit or loss
· Financial liabilities at amortised cost
Financial liabilities at fair value through profit or loss include financial
liabilities held for trading and financial liabilities designated upon initial
recognition as at fair value through profit or loss.
Gains or losses on liabilities held for trading are recognised in the
statement of profit or loss.
Financial liabilities designated upon initial recognition at fair value
through profit or loss are designated at the initial date of recognition, and
only if the criteria in IFRS 9 are satisfied. The Group has not designated any
financial liability as at fair value through profit or loss.
Financial liabilities at amortised cost (loans & borrowings, trade
payables, other payables, accruals and lease liabilities) is the category most
relevant to the Group. After initial recognition, interest-bearing loans and
borrowings are subsequently measured at amortised cost using the EIR method.
Gains and losses are recognised in profit or loss when the liabilities are
derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR. The EIR
amortisation is included as finance costs in the statement of profit or loss.
This category generally applies to interest-bearing loans and borrowings. For
more information, refer to Note 17.
Financial assets are derecognised when and only when (a) the contractual
rights to the cash flows from the financial asset expire or are settled, (b)
the Group transfers to another party substantially all of the risks and
rewards of ownership of the financial asset, or (c) the Group, despite having
retained some, but not all, significant risks and rewards of ownership, has
transferred control of the asset to another party.
Financial liabilities are derecognised only when the obligation specified in
the contract is discharged, cancelled or expires.
Fair value measurement
The best evidence of fair value is a quoted price for an identical asset in an
active market. When quoted prices are unavailable, the price of a recent
transaction for an identical asset provides evidence of fair value as long as
there has not been a significant change in economic circumstances or a
significant lapse of time since the transaction took place. If the market is
not active and recent transactions of an identical asset on their own are not
a good estimate of fair value, the fair value is estimated by using a
valuation technique.
Impairment of financial assets
The Group recognises loss allowances for expected credit losses (ECLs) on
financial assets measured at amortised cost.
Loss allowances for trade receivables and accrued income are measured at an
amount equal to the lifetime ECL. Trade receivables do not contain a
significant financing component and typically have a short duration of less
than 12 months. The Group prepares a provision matrix when measuring its ECLs.
Trade receivables and accrued income are segmented on the basis of historic
credit loss experience, based on geographic region. Historical loss experience
is applied to trade receivables and accrued income, after being adjusted for:
· information about current economic conditions; and
· reasonable and supportable forecasts of future economic conditions.
Write-offs
The gross carrying amount of a financial asset is written off (either
partially or in full) to the extent that there is no realistic prospect of
recovery.
2.13 Borrowing costs
Borrowing costs are capitalised and amortised over the term of the related
debt. The amortisation of borrowing costs is recognised as finance expenditure
in the income statement.
2.14 Share based payments
The Group has equity settled compensation plans. Equity settled share based
payments are measured at fair value at the date of grant. The fair value
determined at the grant date of the equity settled share based payments is
expensed over the vesting period, based on the Group's estimate of awards that
will eventually vest. Fair value is measured by the use of the Black Scholes
option pricing model.
The cost is recognised in staff costs (Note 6), together with a corresponding
increase in equity (share based payment reserve), over the period in which the
service and the performance conditions are fulfilled (the vesting period). The
cumulative expense recognised for equity-settled transactions at each
reporting date until the vesting date reflects the extent to which the vesting
period has expired and the Group's best estimate of the number of equity
instruments that will ultimately vest. The expense or credit in the
statement of profit or loss for a period represents the movement in cumulative
expense recognised as at the beginning and end of that period.
Service and non-market performance conditions are not taken into account when
determining the grant date fair value of awards, but the likelihood of the
conditions being met is assessed as part of the Group's best estimate of the
number of equity instruments that will ultimately vest. Non-vesting
conditions are reflected in the fair value of an award and lead to an
immediate expensing of an award unless there are also service and/or
performance conditions.
Where an award is cancelled by the entity or by the counterparty, any
remaining element of the fair value of the award is expensed immediately
through profit or loss.
The dilutive effect of outstanding options is reflected as additional share
dilution in the computation of diluted earnings per share (further details are
given in Note 9).
2.15 Dividends
Dividends are recognised as a liability and deducted from equity at the time
they are paid or approved by shareholders at the Annual General Meeting.
Otherwise dividends are disclosed if they have been proposed or declared
after the year end and before the relevant financial statements are approved.
2.16 Critical estimates and judgements
In the application of the Group's accounting policies the Directors are
required to make judgements that have a significant impact on the amounts
recognised and to make estimates and assumptions about the carrying amounts of
assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
The Directors have not identified any critical judgements that have a
significant effect on the amounts recognised in the consolidated financial
statements, apart from those involving estimations (which are explained
separately below).
2.17 Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation
uncertainty at the balance sheet date, that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are discussed below.
Provision for bad debts
The Group applies IFRS 9 to measure the lifetime expected credit loss of trade
receivables. The lifetime expected credit loss is based upon historic loss
experience, which is then adjusted for information about current economic
conditions and reasonable and supportable forecasts of future economic
conditions. The Group applies judgement to the adjustments to the expected
credit loss for information about current economic conditions and reasonable
and supportable forecasts of future economic conditions, and it considers all
relevant factors that impact future payment by customers. The expected credit
loss on trade receivables at the reporting date is estimated on the basis of
these underlying assumptions. Refer to Note 24(a) for the carrying value of
trade receivables to which the expected credit loss model is applied.
Impairment of goodwill
The Group determines whether goodwill is impaired on an annual basis. For each
group of CGUs to which goodwill has been allocated a goodwill impairment
review is performed. The carrying value of each group of CGUs to which
goodwill is allocated is compared to the recoverable amount, which is
determined through a value in use calculation. The value in use at each
reporting date is based on certain assumptions, including future forecast cash
flows, discount rates and growth rates. Refer to Note 12 for further
information in respect of the key assumptions applied in determining the value
in use for each group of CGUs.
Carrying value and useful lives of property, plant and equipment
The Group reviews the estimated useful lives of property, plant and equipment
at the end of each reporting period based on condition and usage of those
assets. Based on management's assessment as at the end of the reporting period
the useful lives of property, plant and equipment remain appropriate. The
Group reviews at the end of each reporting period, the carrying amounts of its
property, plant and equipment to determine whether there is any indication
that these assets have suffered an impairment loss. The Group applies
judgement to the impairment review including future cash flow, discount rates
and growth rates, which are common with the impairment review of goodwill
noted above. No impairment loss was recognised during the period.
Business combinations
The Group assesses the fair value of the assets and liabilities on acquisition
and there is estimation uncertainty in identifying any adjustments to the book
values. The business combinations in 2022 included adjustments for
intangible assets in respect of customer relationships and non-compete
agreements. For intangible assets, a valuation methodology based on a
discounted cash flow (DCF) model was used and there is estimation uncertainty
in the future forecast cash flows, discount rates and growth rates used. The
acquisition of Hiretech also gave rise to a fair value adjustment to property,
plant and equipment. The Group reviewed the estimated useful lives of
property, plant and equipment on acquisition, based on condition and usage of
those assets. The Group has had to estimate the residual value of property,
plant and equipment which resulted in a fair value adjustment to book value.
The Group reviewed all other assets and liabilities on acquisition and after
considering all relevant factors, no other adjustments were made to book
value. Refer to Note 27 for further information in respect of the business
combinations.
2.18 Adjusting items
Adjusting items are significant items of income or expense in revenue, profit
from operations, net finance costs and/or taxation which individually or, if
of a similar type, in aggregate, are relevant to an understanding of the
Group's underlying financial performance because of their size, nature or
incidence. In identifying and quantifying adjusting items, the Group
consistently applies a policy that defines criteria that are required to be
met for an item to be classified as an adjusting item. These items are
separately disclosed in the segmental analysis or in the notes to the accounts
as appropriate.
The Group believes that these items are useful to users of the consolidated
financial statements in helping to understand the underlying business
performance and are used to derive the Group's principal non-GAAP measure of
Adjusted EBITDA, which is before the impact of adjusting items and which is
reconciled from profit from operations.
3. Segmental analysis
For the year ended 31 December 2022
Europe Americas Asia Pacific Middle East Head Office Total
£000 £000 £000 £000 £000 £000
Total revenue 42,827 13,912 10,874 5,507 - 73,120
Cost of sales (9,663) (4,867) (2,368) (1,931) - (18,829)
Gross profit 33,164 9,045 8,506 3,576 - 54,291
Administrative expenses (12,735) (5,274) (3,014) (1,563) (4,805) (27,391)
Other operating income 264 156 362 22 - 804
Operating profit before depreciation, amortisation and foreign exchange 20,693 3,927 5,854 2,035 (4,805) 27,704
gain/(loss)
Foreign exchange loss (3)
Depreciation (8,431)
Amortisation (1,202)
Operating profit 18,068
Finance income 21
Finance costs (1,459)
Profit before taxation 16,630
Taxation charge (3,965)
Profit for the financial year 12,665
Total assets 93,522 15,335 11,025 5,429 11,511 136,822
Total liabilities 17,500 2,755 2,310 723 37,731 61,019
For the year ended 31 December 2021
Europe Americas Asia Pacific Middle East Head Office Total
£000 £000 £000 £000 £000 £000
Total revenue 33,241 11,779 7,911 2,874 - 55,805
Cost of sales (7,723) (4,599) (1,817) (1,123) - (15,262)
Gross profit 25,518 7,180 6,094 1,751 - 40,543
Administrative expenses (9,143) (3,799) (2,169) (1,064) (7,311) (23,486)
Other operating income 351 313 77 254 - 995
Operating profit before depreciation, amortisation and foreign exchange 16,726 3,694 4,002 941 (7,311) 18,052
gain/(loss)
Foreign exchange loss (215)
Depreciation (8,713)
Amortisation (1,516)
Operating profit 7,608
Finance costs (4,019)
Profit before taxation 3,589
Taxation charge (1,060)
Profit for the financial year 2,529
Total assets 62,402 15,912 9,669 5,102 5,950 99,035
Total liabilities 8,343 3,014 1,080 644 24,822 37,903
Central administrative expenses represent expenditures which are not directly
attributable to any single operating segment. The expenditure has not been
allocated to individual operating segments.
The revenues generated by each geographic segment almost entirely comprise
revenues generated in a single country. Revenues in the Europe, Americas, Asia
Pacific and Middle East segments are almost entirely generated in the UK, USA,
Singapore and UAE respectively. Revenues generated outside of these
jurisdictions are not material to the Group. The basis for the allocation of
revenues to individual countries is dependent upon the depot from which the
equipment is provided.
No single customer or group of customers under common control account for 10%
or more of Group revenue.
The carrying value of non-current assets, other than deferred tax assets,
split by the country in which the assets are held is as follows:
As at 31 December As at 31 December
2022 2021
£000 £000
UK 82,337 51,411
USA 11,163 11,394
Singapore 8,885 7,799
UAE 4,079 3,562
4. Revenue
(a) Revenue streams:
The Group's key revenue generating activity comprises equipment rental, sale
of equipment and provision of related services (non-rental revenue). The
revenue is attributable to the continuing activities of renting equipment,
selling equipment or providing a service. All rental income is expected to
be settled within 12 months.
2022 2021
£000 £000
Rental income (Note 19) 61,157 43,913
Non-rental revenue 11,963 11,892
Total revenue 73,120 55,805
(b) Disaggregation of revenue from contracts with customers:
Revenue from contracts with customers from sale of equipment and provision of
related services is disaggregated by primary geographical market, major
products and services and timing of revenue recognition.
Primary geographical markets 2022 2021
£000 £000
Europe 7,812 7,579
Americas 1,859 3,052
Asia Pacific 1,037 550
Middle East 1,255 711
Non-rental revenue 11,963 11,892
Major products and services and timing of revenue recognition of non-rental
revenue:
2022 2021
£000 £000
Sale of equipment, transferred at a point in time 5,259 6,147
Provision of related services, transferred over time 6,704 5,745
Non-rental revenue 11,963 11,892
5. Operating profit
This is stated after charging/(crediting):
2022 2021
£000 £000
Spares, consumables and external repairs 4,956 2,838
Facilities costs 464 329
Depreciation on property, plant and equipment (Note 11) 7,501 7,878
Depreciation on right-of-use assets (Note 19) 930 835
Amortisation of intangible assets (Note 12) 1,202 1,516
Staff costs including share based payments (Note 6) 18,622 13,851
Transaction costs 787 3,332
Foreign exchange losses 3 215
Operating lease rentals 172 165
Impairment loss on trade receivables 810 545
Impairment loss on inventories 394 98
Other operating income
Gain on sale of property, plant and equipment 804 995
804 995
Fees payable to the auditor for the audit of the financial statements:
Total audit fees 202 167
Fees payable to the auditor and its associates for other services to the Group
Review of interim financial statements 5 −
Reporting accountant services* − 152
Total non-audit fees 5 152
* These fees were incurred as reporting accountant services provided by
BDO LLP in relation to the listing. Included in the total fee is £18,000 that
was deducted from share premium.
6. Staff costs
2022 2021
£000 £000
Wages and salaries 16,190 12,520
Social security costs 1,097 908
Other pension costs (Note 22) 510 423
Share based payment expense 825 -
18,622 13,851
The average number of employees during the year was as follows:
No. No.
Operations 133 122
Sales and administrative 97 77
230 199
Full details of the Directors' remuneration and interests are set out in the
Directors' Remuneration Report on pages 34 to 35.
7. Finance income and costs
Finance income 2022 2021
£000 £000
Bank interest receivable 21 -
21 -
Finance costs 2022 2021
£000 £000
Interest on bank loans (held at amortised cost) 1,139 2,261
Amortisation of deferred finance costs 182 1,222
Loan note interest - 71
Interest expense on lease liability (Note 19) 138 151
Hedge reserve movement - 313
Other interest and charges - 1
1,459 4,019
8. Tax
(a) Tax on profit on ordinary activities
The tax charge is made up as follows:
2022 2021
£000 £000
Current tax:
UK corporation tax on profit for the year 2,555 1,397
Adjustment in respect of previous periods (218) (78)
Foreign tax 94 1
Exchange rate differences 3 4
Total current income tax 2,434 1,324
Deferred tax:
Origination and reversal of temporary differences 1,122 (227)
Origination and reversal of temporary differences - prior periods 320 292
Effect of changes in tax rates 99 (326)
Exchange rate differences (10) (3)
Total deferred tax 1,531 (264)
Tax charge in the profit and loss account (Note 8(b)) 3,965 1,060
(b) Factors affecting the current tax charge for the year
The tax assessed for the year differs from the standard rate of corporation
tax in the UK of 19% (2021: 19%). The differences are explained below:
2022 2021
£000 £000
Profit on ordinary activities before taxation 16,630 3,589
Profit on ordinary activities multiplied by standard rate of corporation tax 3,160 682
in the UK of 19% (2021: 19%)
Effects of:
Expenses not deductible for tax purposes 112 500
Income not taxable (88) (43)
Gains/rollover relief 16 11
Effects of overseas tax rates 87 213
Adjustments in respect of previous periods 102 213
Tax rate changes 74 (326)
Share options (17) -
Movement in deferred tax not recognised 525 (176)
Exchange rate difference 47 7
Adjustment in relation to IFRS 16 - (21)
Super deduction relief (53) -
Tax charge 3,965 1,060
(c) Income tax due
2022 2021
£000 £000
Income tax due 1,820 821
(d) Unrecognised tax losses:
The Group has tax losses which arose in the UK, Canada and USA of £11,447,000
(2021: £10,255,000) that are available indefinitely for offset against future
taxable profits of the Group companies in which the losses arose.
Deferred tax assets have not been recognised in respect of these losses as
they may not be used to offset taxable profits elsewhere in the Group and they
have arisen in subsidiaries that are loss making.
(e) Deferred tax:
Deferred tax included in the Group balance sheet is as follows:
2022 2021
£000 £000
Fixed asset timing differences (1,212) 838
Short-term timing differences 319 76
Tax losses 85 242
Intangible asset timing differences (1,419) (146)
Deferred tax (liability)/asset (2,227) 1,010
The recoverability of the deferred tax (liability)/asset is as follows:
Current 85 17
Non-current (2,312) 993
(2,227) 1,010
9. Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the weighted average number of Ordinary Shares in
issue during the year.
Diluted earnings per share
For diluted earnings per share, the weighted average number of Ordinary Shares
in issue is adjusted to assume conversion of all potentially dilutive Ordinary
Shares. The Group has potentially dilutive ordinary shares arising from share
options granted to employees under the share schemes as detailed in Note 22 of
these financial statements. During the year ended 31 December 2021, the Group
had no potentially dilutive Ordinary Shares.
Adjusted earnings per share
Earnings attributable to ordinary shareholders of the Group for the year,
adjusted to remove the impact of adjusting items and the tax impact of these,
divided by the weighted average number of Ordinary Shares outstanding during
the period.
Adjusted Statutory Adjusted Statutory
2022 2022 2021 2021
Earnings attributable to equity shareholders of the Group:
Profit for the year (£000) 15,619* 12,665 9,385* 2,529
Number of shares:
Weighted average number of Ordinary Shares - Basic 79,582,000 79,582,000 70,995,578 70,995,578
Weighted average number of Ordinary Shares - Diluted 80,679,071 80,679,071 70,995,578 70,995,578
Earnings per share attributable to equity holders of the Group - continuing
operations:
Basic earnings per share (pence) 19.6 15.9 13.2 3.6
Diluted earnings per share (pence) 19.4 15.7 13.2 3.6
* Refer to Note 28 for the reconciliation of Non-GAAP Profit Metrics.
10. Dividends
The Board is pleased to propose a final dividend of 1.0p per share, which if
approved at the Annual General Meeting to be held on 8 June 2023, will be paid
on 23 June 2023 with a record date of 26 May 2023. The shares will become
ex-dividend on 25 May 2023. No interim dividend was paid in 2022.
11. Property, plant and equipment
Assets held for rental Leasehold improvements Freehold property Fixture and fittings Motor vehicles Total
£000 £000 £000 £000 £000 £000
Cost:
At 1 January 2021 104,906 1,537 197 3,322 245 110,207
Additions 6,625 201 − 421 56 7,303
Disposals (6,666) − − (29) − (6,695)
Foreign exchange movements 2 1 − (31) 4 (24)
At 31 December 2021 104,867 1,739 197 3,683 305 110,791
Accumulated depreciation:
At 1 January 2021 (84,593) (974) (60) (2,593) (157) (88,377)
Charge for the year (7,158) (244) (8) (296) (24) (7,730)
Disposals 6,252 − − 12 − 6,264
Foreign exchange movements (122) (1) − 10 (3) (116)
At 31 December 2021 (85,621) (1,219) (68) (2,867) (184) (89,959)
Net book value:
At 31 December 2021 19,246 520 129 816 121 20,832
Assets held for rental Leasehold improvements Freehold property Fixture and fittings Motor vehicles Total
£000 £000 £000 £000 £000 £000
Cost:
At 1 January 2022 104,867 1,739 197 3,683 305 110,791
Acquisitions (Note 27) 10,984 409 − 443 29 11,865
Fair value adjustment on acquisitions (Note 27) 467 − − − − 467
Additions 13,098 208 − 295 − 13,601
Disposals (6,280) (76) − (60) (30) (6,446)
Foreign exchange movements 5,937 85 − 170 35 6,227
At 31 December 2022 129,073 2,365 197 4,531 339 136,505
Accumulated depreciation:
At 1 January 2022 (85,621) (1,219) (68) (2,867) (184) (89,959)
Acquisitions (Note 27) (5,920) (338) − (267) (21) (6,546)
Fair value adjustment on acquisitions (Note 27) (1,118) − − (81) − (1,199)
Charge for the year (6,892) (253) (8) (311) (37) (7,501)
Disposals 5,613 43 − 46 29 5,731
Foreign exchange movements (5,018) (62) − (117) (22) (5,219)
At 31 December 2022 (98,956) (1,829) (76) (3,597) (235) (104,693)
Net book value:
At 31 December 2022 30,117 536 121 934 104 31,812
12. Goodwill and intangible assets
Goodwill Customer Non-compete Computer software Total
£000 relationships arrangements £000 £000
£000 £000
Cost:
At 1 January 2021 48,585 4,447 208 2,801 56,041
Additions − − − 966 966
Foreign exchange movements 66 − − 2 68
At 31 December 2021 48,651 4,447 208 3,769 57,075
Amortisation:
At 1 January 2021 − (2,261) (109) (2,627) (4,997)
Charge for the year − (1,449) (67) (148) (1,664)
Foreign exchange movements − − − (3) (3)
At 31 December 2021 − (3,710) (176) (2,778) (6,664)
Net book value:
At 31 December 2021 48,651 737 32 991 50,411
Goodwill Customer Non-compete Computer Total
£000 relationships arrangements software £000
£000 £000 £000
Cost:
At 1 January 2022 48,651 4,447 208 3,769 57,075
Acquisitions (Note 27) 16,852 4,414 274 − 21,540
Additions − − − 725 725
Foreign exchange movements 540 2 − − 542
At 31 December 2022 66,043 8,863 482 4,494 79,882
Amortisation:
At 1 January 2022 − (3,710) (176) (2,778) (6,664)
Charge for the year − (840) (39) (323) (1,202)
Foreign exchange movements − 2 − 3 5
At 31 December 2022 − (4,548) (215) (3,098) (7,861)
Net book value:
At 31 December 2022 66,043 4,315 267 1,396 72,021
Goodwill has arisen on the acquisition of the following subsidiaries: Amazon
Group Limited (the parent company of the existing Ashtead Technology Group at
the time of acquisition, in April 2016), TES Survey Equipment Services LLC,
Welaptega Marine Limited, Aqua-Tech Solutions LLC and its subsidiary Alpha
Subsea LLC, Underwater Cutting Solutions Limited, WeSubsea AS and its
subsidiary WeSubsea UK Limited and Hiretech Limited, as well as the
acquisition of the trade and assets of Forum Subsea Rentals, a division of
Forum Energy Technologies (UK) Limited, Forum Energy Asia Pacific PTE Ltd and
Forum US, Inc.
Impairment testing for CGUs containing goodwill
For the purpose of impairment testing, goodwill has been allocated to the
Group's CGUs as follows. The group of CGUs to which goodwill has been
allocated are consistent with the Group's operating segments.
2022 2021
£000 £000
Europe 52,271 34,916
Americas 6,591 6,569
Asia Pacific 5,351 5,336
Middle East 1,830 1,830
An impairment test has been performed in respect of each of the groups of CGUs
to which goodwill has been allocated on each reporting date.
For each of the operating segments to which goodwill has been allocated, the
recoverable amount has been determined on the basis of a value in use
calculation. In each case, the value in use was found to be greater than the
carrying amount of the group of CGUs to which the goodwill has been allocated.
Accordingly, no impairment to goodwill has been recognised. The value in use
has been determined by discounting future cash flows forecast to be generated
by the relevant regional segment.
A summary of the key assumptions on which management has based its cash flow
projections at each reporting date is as follows:
2022 2021
£000 £000
Europe:
Pre-tax discount rate 12.8% 11.6%
Terminal value growth rate 2% 2%
Forecast period 2 years 2 years
Americas:
Pre-tax discount rate 12.8% 11.6%
Terminal value growth rate 2% 2%
Forecast period 2 years 2 years
Asia Pacific:
Pre-tax discount rate 12.8% 11.6%
Terminal value growth rate 2% 2%
Forecast period 2 years 2 years
Middle East:
Pre-tax discount rate 12.8% 11.6%
Terminal value growth rate 2% 2%
Forecast period 2 years 2 years
Key assumptions used in value in use calculations
In determining the above key assumptions, management has considered past
experience together with external sources of information where available (e.g.
industry-wide growth forecasts).
The calculation of is most sensitive to the following assumptions:
• Discount rates
• Growth rates used to extrapolate cash flows beyond the forecast
period
The discount rate applied to each CGU represents a pre-tax rate that reflects
the market assessment of the time value of money as at 31 December 2022. The
discount rate calculation is based on the specific circumstances of the Group
and its operating segments and is derived from its weighted average cost of
capital (WACC). The WACC takes into account both debt and equity. The cost
of equity is derived from the expected return on investment by the Group's
investors. The cost of debt is based on the interest-bearing borrowings the
Group is obliged to service. Adjustments to the discount rate are made to
factor in the specific amount and timing of the future tax flows in order to
reflect a pre-tax discount rate.
Sensitivity analysis shows that a pre-tax discount rate higher than 18.8%
would be required to start to indicate impairment.
Growth rate estimates are based on published industry research.
Sensitivity analysis shows that a terminal value growth rate lower than -6.7%
would be required to start to indicate impairment.
Sensitivity analysis has been performed in respect of the key assumptions
above with no impairment identified from the sensitivities performed.
13. Inventories
2022 2021
£000 £000
Raw materials and consumables 1,865 1,778
The cost of inventories recognised as an expense and included in cost of sales
during the year is disclosed in Note 5. The impairment loss recognised as an
expense during the year is disclosed in Note 5.
14. Trade and other receivables
2022 2021
£000 £000
Trade receivables (Note 24(a)) 16,494 14,212
Prepayments 1,397 1,684
Accrued income 1,565 1,328
19,456 17,224
The Directors consider that the carrying amount of trade receivables and
accrued income approximates to fair value.
Information about the Group's exposure to credit and market risks, and
impairment losses for trade receivables is included in Note 24.
15. Cash and cash equivalents
2022 2021
£000 £000
Cash at bank 9,031 4,842
Cash in hand 6 15
Cash and cash equivalents 9,037 4,857
Cash at bank earns interest at floating rates based on daily bank overnight
deposit rates. The Directors consider that the carrying amount of cash and
cash equivalents equates to fair value.
Foreign currency denominated balances within Group cash and cash equivalents
amount to:
2022 2021
£000 £000
US dollar denominated balances 1,819 1,581
Singapore dollar denominated balances 982 864
Canadian dollar denominated balances 170 150
AED denominated balances 319 133
Norwegian krone denominated balances 127 −
3,417 2,728
All other balances are denominated in sterling.
16. Trade and other payables
2022 2021
£000 £000
Trade payables 5,896 3,349
Accruals 13,137 5,682
Amounts due to related parties (Note 25) 101 384
19,134 9,415
The Directors consider that the carrying amount of trade and other payables
equates to fair value. The amounts due to related parties bear no interest and
are due on demand.
The Group's exposure to currency and liquidity risks is included in Note 24.
17. Loans and borrowings
2022 2021
£000 £000
Non-current
Bank loans (held at amortised cost) 34,865 24,425
34,865 24,425
At 31 December 2022 the bank loans comprise a revolving credit facility of
£35,438,000 (2021: £24,953,000) which carried interest at SONIA plus 2.2%.
The lenders are HSBC Bank plc and Clydesdale Bank plc. The Facility Agreement
is subject to a leverage covenant of 2.5x and an interest cover covenant of
4:1. The total commitments are £60,000,000 (2021: £40,000,000) for the RCF
and an additional £nil (2021: £20,000,000) accordion facility. As at 31
December 2022 the RCF had an undrawn balance of £24,562,000 (2021:
£15,047,000) and the accordion facility was fully drawn (2021: £20,000,000
undrawn). A non-utilisation fee of 0.88% is charged on the non-utilised
element of the RCF facility. During 2022 the revolving credit facility was
extended by 12 months and is fully repayable by November 2025.
On 5 April 2023 the revolving credit facility was increased from £60,000,000
to £100,000,000 and the accordion facility was increased from £nil to
£50,000,000, and is fully repayable by April 2027 with an option to extend
the facilities by 1 year. The accordion facility is subject to credit
approval. The terms of the facilities are substantially the same terms with
ABN AMRO Bank N.V. and Citibank N.A. joining HSBC UK Bank plc and Clydesdale
Bank plc as lenders.
Certain companies within the Group joined in cross guarantees with respect to
bank loans totalling £35,438,000 (2021: £24,953,000) advanced to Ashtead
Technology Limited and Ashtead Technology Offshore Inc. The lenders have a
floating charge over certain assets of the Group.
Bank loans are repayable as follows:
2022 2021
£000 £000
Within one year − −
Within one to two years − −
Within two to three years 35,438 24,953
35,438 24,953
Deferred finance costs (573) (528)
34,865 24,425
During the year drawdowns totalling £31,000,000 (2021: £25,107,000) and
repayments totalling £21,727,000 (2021: £44,121,000) were made from/to the
RCF.
The weighted average interest rates on floating rate instruments during the
year was as follows:
2022 2021
Weighted average interest rates 4.36% 5.54%
The Group's exposure to interest rate, foreign currency and liquidity risks is
included in Note 24.
18. Financing liabilities reconciliation
1 January Cash flows Interest paid Other non-cash changes Changes in exchange rates 31 December 2021
2021 £000 £000 £000 £000 £000
£000
Cash at bank and in hand 10,958 (6,326) − − 225 4,857
Bank loans (43,008) 19,928 − (1,222) (123) (24,425)
Related party loan notes (1,121) 830 − 291 − −
Lease liabilities (3,052) 1,012 151 (919) (326) (3,134)
Net debt (36,223) 15,444 151 (1,850) (224) (22,702)
The non-cash movement relates to amortisation of deferred finance costs,
accrual of finance costs on related party loan notes and lease liability, and
addition of new leases during the year.
1 January 2022 Cash flows Acquisitions Interest Other non-cash changes Changes in exchange rates 31 December 2022
£000 £000 £000 paid £000 £000 £000
£000
Cash at bank and in hand 4,857 (3,918) 7,938 − − 160 9,037
Bank loans (24,425) (9,045) − − (182) (1,213) (34,865)
Lease liabilities (3,134) 1,064 − 138 (571) (353) (2,856)
Net debt (22,702) (11,899) 7,938 138 (753) (1,406) (28,684)
The non-cash movement relates to the amortisation of deferred finance costs,
accrual of finance costs on lease liability and the addition of new leases
during the year.
19. Leases
Leases as lessee
The Group leases warehouses, offices, and other facilities in different
locations (UK, UAE, Singapore, Canada, USA). The lease term ranges from 2 to
15 years with an option to renew available for some of the leases. Lease
payments are renegotiated every 3-5 years to reflect market terms. The Group
has elected not to recognise right-of-use assets and lease liabilities for
leases that are short-term and/or of low-value items. The Group recognises the
lease payments associated with these leases as an expense on a straight-line
basis over the lease term.
Further information about leases is presented below:
a) Amounts recognised in consolidated balance sheet
Right-of-use assets £000
Balance at 1 January 2021 2,816
Additions to right-of-use assets 940
Depreciation charge for the year (835)
Effects of movements in exchange rates 2
Balance at 31 December 2021 2,923
Additions to right-of-use assets 571
Depreciation charge for the year (930)
Effects of movements in exchange rates 67
Balance at 31 December 2022 2,631
Lease liabilities: 2022 2021
£000 £000
Current 865 783
Non-current 1,991 2,351
Total lease liabilities 2,856 3,134
Refer to Note 24(b) for more information on maturity analysis of lease
liabilities.
Leases as lessee continued
b) Amounts recognised in the income statement
2022 2021
£000 £000
Depreciation charge 930 835
Interest expense on lease liability 138 151
Expenses relating to short-term leases 172 165
Total amount recognised in the income statement 1,240 1,151
c) Amounts recognised in the cash flow statement
2022 2021
£000 £000
Total cash payments for leases 1,202 1,163
Leases as a lessor
The Group leases out equipment to its customers. The lease period is
short-term which ranges from weeks to a few months. All leases are classified
as operating leases from a lessor perspective, because they do not transfer
substantially all of the risks and rewards incidental to the ownership of the
equipment.
The Group as a lessor recognises lease payments received from operating leases
as income on a straight-line basis. Increases (or decreases) in rental
payments over a period of time, other than variable lease payments, are
reflected in the determination of the lease income, which is recognised on a
straight-line basis (refer to Note 4).
20. Provisions for liabilities
Other
£000
At 1 January 2021 134
Charge for the year 28
Paid during the year (56)
Movement in foreign exchange 2
At 31 December 2021 108
Charge for the year 30
Paid during the year (34)
Movement in foreign exchange 13
At 31 December 2022 117
End of service benefits
The provision relates to end of service benefits for certain employees. The
actual amount payable is dependent on the length of service of the impacted
employees when their employment ceases and their salary at that time. The
provision is calculated on the impacted employees' length of service and
salary at the balance sheet date.
21. Capital commitments
2022 2021
£000 £000
Capital expenditure contracted for but not provided 1,184 2,825
22. Employee benefits
Share based payments
The IPO LTIP awards were granted on 5 September 2022 and comprise three equal
tranches, with the first tranche vesting on the publication of the annual
report for the year ended 31 December 2022, the second tranche vesting on the
publication of the annual report for the year ended 31 December 2023 and the
third tranche vesting on the publication of the annual report for the year
ended 31 December 2024. Eligible senior managers from various Group
companies are eligible for nil cost share option awards with Ashtead
Technology Holdings plc granting the awards and the awards will be equity
settled with ordinary shares in Ashtead Technology Holdings plc. The share
awards vesting is subject to the achievement of Adjusted EPS and that for
participants to remain employed by the Group over the vesting period.
The outstanding number of awards at 31 December 2022 is 1,097,071 (2021: nil).
Share based payments Tranche 1 Tranche 2 Tranche 3
Valuation model Black-Scholes Black-Scholes Black-Scholes
Weighted average share price (pence) 260.5 260.5 260.5
Exercise price (pence) 0 0 0
Expected dividend yield 0.76% 0.81% 0.85%
Expected volatility 41.93% 41.93% 41.93%
Risk-free interest rate 2.79% 3.14% 3.04%
Expected term (years) 0.67 1.67 2.67
Weighted average fair value (pence) 259.2 257.0 254.7
Attrition 5% 5% 5%
Weighted average remaining contractual life (years) 9.67 9.67 9.67
The expected volatility has been calculated using the Group's historical
market data history since IPO in 2021.
Share based payments Number of shares Weighted average exercise price (£)
Outstanding at beginning of the year − −
Granted 1,097,071 −
Exercised − −
Forfeited − −
Outstanding at the end of the year 1,097,071 −
Exercisable at the end of the year − −
Share-based payments expense recognised in the consolidated income statement
for 31 December 2022 total £825,000 (2021: £nil).
Defined contribution scheme
The Group operates defined contribution retirement benefit schemes for all
qualifying employees. The total expense charged to the income statement in the
year ended 31 December 2022 was £510,000 (2021: £423,000). There was a
balance outstanding of £134,000 in relation to pension liabilities at 31
December 2022 (2021: £59,000).
23. Share capital and reserves
The Group considers its capital to comprise its invested capital, called up
share capital, merger reserve, retained earnings and foreign exchange
translation reserve. Quantitative detail is shown in the consolidated
statement of changes in equity. The Directors' objective when managing capital
is to safeguard the Group's ability to continue as a going concern in order to
provide returns for the shareholders and benefits for other stakeholders.
Called up share capital
Allotted, called up and fully paid 31 December 2022 31 December 2021
No. £000 No. £000
Ordinary shares of £0.05 each 79,582,000 3,979 79,582,000 3,979
3,979 3,979
Ordinary share capital represents the number of shares in issue at their
nominal value. The holders of Ordinary Shares are entitled to receive
dividends as declared from time to time and are entitled to one vote per share
at meetings of the Company.
Share premium
Share premium represents the amount over the par value which was received by
the Group upon the sale of the Ordinary Shares. Share premium is stated net of
direct costs of £929,000 relating to the issue of the shares in 2021 on IPO.
Merger reserve
The merger reserve was created as a result of the share for share exchange
under which Ashtead Technology Holdings plc became the parent undertaking
prior to the IPO. Under merger accounting principles, the assets and
liabilities of the subsidiaries were consolidated at book value in the Group
financial statements and the consolidated reserves of the Group were adjusted
to reflect the statutory share capital, share premium and other reserves of
the Company as if it had always existed, with the difference presented as the
merger reserve.
Share based payment reserve
The share based payment reserve is built up of charges in relation to equity
settled share based payment arrangements which have been recognised within the
consolidated income statement.
Foreign currency translation reserve
The assets and liabilities of foreign operations, including goodwill and fair
value adjustments arising on consolidation, are translated to the Group's
presentational currency, sterling, at foreign exchange rates ruling at the
balance sheet date. The revenues and expenses of foreign operations are
translated at an average rate for each month where this rate approximates to
the foreign exchange rates ruling at the dates of the transactions.
Exchange differences arising from this translation of foreign operations are
reported as an item of other comprehensive income and accumulated in the
translation reserve, within invested capital. When a foreign operation is
disposed of, such that control, joint control or significant influence (as the
case may be) is lost, the entire accumulated amount in the foreign currency
translation reserve is recycled to the income statement as part of the gain or
loss on disposal.
Retained earnings
The movement in retained earnings is as set out in the Consolidated Statement
of Changes in Equity. Retained earnings represent cumulative profits or
losses, net of dividends and other adjustments.
24. Financial instruments
Financial risk management
Risk management framework
The Group's risk management policies are established to identify and analyse
the risks faced by the Group, to set appropriate risk limits and controls and
to monitor risks and adherence to limits. Risk management policies and systems
are reviewed regularly to reflect changes in market conditions and the Group's
activities.
The Group has exposure to the following risks arising from financial
instruments:
· Credit risk
· Liquidity risk
· Market risk
a) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group's receivables from
customers. The Group has no significant concentration of credit risk, with
exposure spread over a large number of customers.
The credit risk on liquid funds held with HSBC, Bank of Montreal and The Royal
Bank of Scotland is considered to be low. The long-term credit rating for HSBC
is AA-/A+ per Fitch/Standard & Poor's. The long-term credit rating for
Bank of Montreal is AA/A+ per Fitch/Standard & Poor's. The long-term
credit rating for The Royal Bank of Scotland is A+/A per Fitch/Standard &
Poor's.
The Group has established a credit policy under which each new customer is
analysed individually for creditworthiness before the Group's standard payment
and delivery terms and conditions are offered. The Group's review includes
external ratings, if they are available, financial statements, credit agency
information, industry information and in some cases bank references. Sale
limits are established for each customer and reviewed quarterly. Any sales
exceeding those limits require approval from management.
Trade receivables
Customer credit risk is managed by each business unit subject to the Group's
established policy, procedures and control relating to customer credit risk
management. Credit quality of a customer is assessed based on a credit
rating scorecard and individual credit limits are defined in accordance with
this assessment. Outstanding customer receivables are regularly monitored
and action is taken through an escalation process in relation to slow or
non-payment of invoices. The Group has no significant concentration of
credit risk, with exposure spread over a large number of customers.
An impairment analysis is performed at each reporting date using a provision
matrix to measure expected credit losses. The provision rates are based on
days past due for groupings of various customer segments with similar loss
patterns (i.e., by geographical region, product type, customer type and
rating). The calculation reflects the probability-weighted outcome, the time
value of money and reasonable and supportable information that is available at
the reporting date about past events, current conditions and forecasts of
future economic conditions. Generally, trade receivables are written-off if
past due for more than one year and are not subject to ongoing enforcement
activity. The maximum
exposure to credit risk at the reporting date is the carrying value of each
class of financial assets disclosed in Note 14. The Group does not hold
collateral as security. The Group evaluates the concentration of risk with
respect to trade receivables as low, as exposure is spread over a large number
of customers.
The Group has used a practical expedient by computing the expected credit loss
allowance for trade receivables based on a provision matrix. The provision
percentage is determined for each subsidiary independently.
2022 2021
£000 £000
Current (not past due) 6,955 4,698
Past due 0-90 days 9,738 8,934
Past due 91-180 days 427 1,459
Past due 181-270 days 153 484
Past due 271-365 days 625 51
More than 365 days 1,514 410
19,412 16,036
Movements in the allowance for impairment in respect of trade receivables
The movement in the allowance for impairment in respect of trade receivables
during the year was as follows:
Movement in provision for doubtful debts £000
Balance at 1 January 2021 (1,279)
Increase in allowance recognised in profit or loss during the year (545)
At 31 December 2021 (1,824)
Increase in allowance recognised in profit or loss during the year (810)
Trade receivables written off during the year as uncollectible (284)
At 31 December 2022 (2,918)
Cash and cash equivalents
The Group held cash and cash equivalents and other bank balances of
£9,037,000 at 31 December 2022 (2021: £4,857,000). The cash and cash
equivalents are held with the HSBC Bank plc, Bank of Montreal and The Royal
Bank of Scotland plc.
b) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting
the obligations associated with its financial liabilities that are settled by
delivering cash or another financial asset. The Group's objective when
managing liquidity is to ensure that it will have sufficient liquidity to meet
its liabilities when they are due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the Group's
reputation. The Group utilises both long and short-term borrowing facilities.
Cash flow forecasting is performed centrally with rolling forecasts of the
Group's liquidity requirements regularly monitored to ensure it has sufficient
cash to meet operational needs. The Group's revenue model results in a strong
level of cash conversion allowing it to service working capital requirements.
The Group has access to a multicurrency RCF facility which has total
commitments of £60,000,000 at 31 December 2022, which was increased on 5
April 2023 to a multicurrency RCF facility of £100,000,000 plus an accordion
facility of £50,000,000. As at 31 December 2022 the RCF had an undrawn
balance of £24,562,000.
Maturities of financial liabilities
The table below analyses the Group's financial liabilities into relevant
maturity groupings based on their contractual maturities:
Contractual cash flows
As at 31 December 2021 Carrying total Total Within one year Between one to two years Between two to five years More than five years
£000 £000 £000 £000 £000 £000
Non-derivative financial liabilities
Bank loans 24,425 24,953 − − 24,953 −
Trade and other payables 9,415 9,415 9,415 − − −
Lease liabilities 3,134 3,672 966 767 1,577 362
36,974 38,040 10,381 767 26,530 362
Contractual cash flows
As at 31 December 2022 Carrying total Total Within one year Between one to two years Between two to five years More than five years
£000 £000 £000 £000 £000 £000
Non-derivative financial liabilities
Bank loans 34,865 35,438 − − 35,438 −
Trade and other payables 19,134 19,134 19,134 − − −
Lease liabilities 2,856 3,031 955 722 1,290 64
56,855 57,603 20,089 722 36,728 64
Based on the RCF balance and the interest rate prevailing at 31 December 2022,
the outstanding balance would attract interest at £2,307,000 per annum until
repaid.
c) Market risk
Market risk is the risk that changes in market prices - such as foreign
exchange rates, interest rates and equity prices - will affect the Group's
income or the value of its holdings of financial instruments. The Group's
exposure to market risk is primarily related to currency risk and interest
rate risk.
Currency risk
Currency risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in foreign exchange
rates. The Group's activities expose it primarily to the financial risks of
movements in foreign currency exchange rates. The Group monitors net currency
exposures and hedges as necessary.
The individual Group entities do not have significant financial assets and
liabilities denominated in currencies other than their functional currency
(2021: insignificant) and immaterial impact from the sensitivity analysis,
therefore disclosures relating regarding exposure to foreign currencies and
sensitivity analysis have not been included.
Interest rate risk
Interest rate risk can be either fair value interest rate risk or cash flow
interest rate risk. Fair value interest rate risk is the risk of changes in
fair values of fixed interest-bearing investments and loans. Cash flow
interest rate risk is the risk that the future cash flows of floating
interest-bearing investments and loans will fluctuate because of fluctuations
in the interest rates.
The Group is exposed to interest rate movements on its external bank
borrowing. Based on average loans and borrowings an increase/(decrease) of
1.00% in effective interest rates would increase/(decrease) the interest
charged to the income statement by £354,000 (2021: £248,000).
d) Capital risk management
The Group's objectives when managing capital (defined as net debt plus equity)
are to safeguard the Group's ability to continue as a going concern in order
to provide returns to shareholders and benefits for other stakeholders, while
optimising returns to shareholders through an appropriate balance of debt and
equity funding. The Group manages its capital structure and makes adjustments
to it with respect to changes in economic conditions and strategic objectives.
As at 31 December 2022, the Group had gross borrowings of £35,438,000 through
its RCF and a cash and cash equivalents balance of £9,037,000. Currently
interest is payable on the RCF at a rate of SONIA plus 2.2%. The Group remains
in compliance with its banking covenants.
25. Related parties
Note 26 provides information about the entities included in the consolidated
financial statements as well as the Group's structure, including details of
the subsidiaries and the holding company.
Key managerial personnel:
Allan Pirie
Ingrid Stewart
Bill Shannon
Joe Connolly
Tony Durrant
Thomas Thomsen
Directors' interests in the Ordinary Shares of the Group are included in the
Directors' Report on page 36.
Entity with significant influence over the Group:
There are no entities with significant influence over the Group.
During 2021 the following entities had significant influence over the Group:
BP INV2 Holdco Limited
BP INV2 Newco Limited
BP INV2B Bidco Limited
A. Transactions during the period with related parties:
2022 2021
£000 £000
Dividend expense*
BP INV2 Newco Limited − 476
BP INV2B Bidco Limited − 820
Interest expense
BP INV2B Bidco Limited − 71
Compensation to key management personnel
Emoluments 1,062 838
Share based payment charges 491 −
* The dividend expense related to the pre-IPO group restructure.
Full details of the Directors' remuneration and interests are set out in the
Remuneration Committee Report on pages 34 to 35.
B. Outstanding balances with related parties as at year end:
2022 2021
£000 £000
Payables to:
BP INV2B Bidco Limited (101) (362)
BP INV2 Holdco Limited - (20)
BP INV2 Newco Limited - (2)
(101) (384)
26. Group structure
A full list of subsidiary undertakings of Ashtead Technology Holdings plc as
defined by IFRS as at 31 December 2022 is disclosed below.
Equity interest at
Name of the Group company Country of incorporation 2022 2021
BP INV2 Pledgeco Limited((1)) England & Wales 100% 100%
Ashtead US Pledgeco Inc((4)) USA 100% 100%
Amazon Acquisitions Limited*((1)) England & Wales 100% 100%
Ashtead Technology (South East Asia) PTE Limited*((2)) Singapore 100% 100%
Ashtead Technology Limited*((3)) Scotland 100% 100%
TES Survey Equipment Services LLC*((5)) UAE 100% 100%
Ashtead Technology Offshore Inc*((4)) USA 100% 100%
Welaptega Marine Limited*((6)) Canada 100% 100%
Aqua-Tech Solutions LLC*((4))^^^ USA 100% 100%
Alpha Subsea LLC*((4))^^^ USA 100% 100%
Underwater Cutting Solutions Ltd*((1)) England & Wales 100% 100%
WeSubsea AS*((7)) ^ Norway 100% -
WeSubsea UK Limited*((3))^ Scotland 100% -
Hiretech Limited*((3))^^ Scotland 100% -
* Shares held by a subsidiary undertaking.
(1) The registered address of the subsidiary is 1 Gateshead Close,
Sunderland Road, Sandy, Bedfordshire, SG19 1RS, United Kingdom.
(2) The registered address of the subsidiary is 80 Raffles Place, #32-01
UOB Plaza 1, Singapore, 048624.
(3) The registered address of the subsidiary is Ashtead House, Discovery
Drive, Arnhall Business Park, Westhill, AB32 6FG, United Kingdom.
(4) The registered address of the subsidiary is 2711 Centerville Road,
Suite 400, Wilmington, Delaware, 19808, USA.
(5) The registered address of the subsidiary is Warehouse B301, Plot
M29, ICAD III, Musaffah, Abu Dhabi, UAE.
(6) The registered address of the subsidiary is 238 Brownlow Avenue,
Unit 103, Dartmouth, Nova Scotia, B3B 1Y2, Canada.
(7) The registered address of the subsidiary is Bryggegata 6, 0250 Oslo,
Norway.
^ On 27 September 2022, the Group acquired 100% of the issued share
capital of WeSubsea AS and its subsidiary WeSubsea UK Limited, companies whose
primary activity is the provision of subsea dredges and ancillary equipment
rental to the offshore energy industry.
^^ On 5 December 2022, the Group acquired 100% of the issued share capital
of Hiretech Limited, a company whose primary activity is the provision of
equipment rental and solutions to the offshore energy industry.
^^^ On 10 March 2023, Alpha Subsea LLC was merged into Aqua-Tech Solutions LLC
and thereafter Aqua-Tech Solutions LLC was merged into Ashtead Technology
Offshore Inc.
27. Business Combinations
A. Acquisition of WeSubsea AS
On 27 September 2022, the Group acquired 100% of the issued share capital of
WeSubsea AS and its subsidiary WeSubsea UK Limited, companies whose primary
activity is the provision of subsea dredges and ancillary equipment rental to
the offshore energy industry.
The acquisition has been accounted for under the acquisition method. The
following tables sets out the book values of the separately identifiable
assets and liabilities acquired and their fair value to the Group:
Book value Revaluation Other adjustments Fair value to the Group
£000 £000 £000 £000
Fixed assets
Property, plant and equipment 800 - - 800
Intangible assets - 926 - 926
Current assets
Inventories 10 - - 10
Trade and other receivables 791 - - 791
Cash 959 - - 959
Total assets 2,560 926 - 3,486
278 - - 278
Trade and other payables
Income tax payable 298 - - 298
Deferred tax liability 41 195 - 236
Total liabilities 617 195 - 812
Net assets 1,943 731 - 2,674
Goodwill 3,982
6,656
Satisfied by:
Cash 6,656
6,656
The Group incurred acquisition-related expenditure of £386,000 on legal fees
and due diligence costs. These costs have been expensed to the Consolidated
Income Statement and included in 'Administrative expenses'.
In the year ended 31 December 2022, revenue of £143,000 and operating profit
of £107,000 was included in the Consolidated Income Statement in respect of
WeSubsea AS and WeSubsea UK Limited. If the acquisition had occurred on 1
January 2022, management estimates that the consolidated revenue would have
been £75,092,000 and the consolidated operating profit for the year would
have been £19,705,000. In determining these amounts, management has assumed
that the fair value adjustments, determined provisionally, that arose on the
date of acquisition would have been the same if the acquisition had occurred
on 1 January 2022.
The goodwill reflects the significant opportunity for future growth in
integrating WeSubsea, utilising their in-house technical knowledge in renting
subsea dredges and ancillary equipment to both new and existing customers of
Ashtead Technology, and increasing cross selling opportunities across all of
our businesses. In addition, this is an opportunity to increase WeSubsea's
international presence and exposure through Ashtead Technology's existing
international network. The wider synergies for the Group will be created by
broadening our rental fleet, investing further in our people, and increasing
our service offering to our customers with a resultant broadening in customer
relationships and increased retention.
B. Acquisition of Hiretech Limited
On 5 December 2022, the Group acquired 100% of the issued share capital of
Hiretech Limited, a company whose primary activity is the provision of
equipment rental and solutions to the offshore energy industry.
The acquisition has been accounted for under the acquisition method. The
following tables sets out the book values of the separately identifiable
assets and liabilities acquired and their fair value to the Group:
Book value Revaluation Other adjustments Fair value to the Group
£000 £000 £000 £000
Fixed assets
Property, plant and equipment 4,519 (732) - 3,787
Intangible assets - 3,762 - 3,762
Current assets
Inventories 395 (132) - 263
Trade and other receivables 2,002 - - 2,002
Cash 6,980 - - 6,980
Total assets 13,896 2,898 - 16,794
1,427 - - 1,427
Trade and other payables
Income tax payable 640 - - 640
Deferred tax liability 651 739 - 1,390
Total liabilities 2,718 739 - 3.457
Net assets 11,178 2,159 - 13,337
Goodwill 12,870
26,207
Satisfied by:
Cash* 26,207
26,207
* Of the total cash consideration of £26,207,000, £25,281,000 was paid in
2022 and £926,000 was paid in 2023.
The Group incurred acquisition-related expenditure of £401,000 on legal fees
and due diligence costs. These costs have been expensed to the Consolidated
Income Statement and included in 'Administrative expenses'.
In the year ended 31 December 2022, revenue of £519,000 and operating profit
of £500,000 was included in the Consolidated Income Statement in respect of
Hiretech Limited. If the acquisition had occurred on 1 January 2022,
management estimates that the consolidated revenue would have been
£78,955,000 and the consolidated operating profit for the year would have
been £21,741,000. In determining these amounts, management has assumed that
the fair value adjustments, determined provisionally, that arose on the date
of acquisition would have been the same if the acquisition had occurred on 1
January 2022.
The fair value of the acquired trade and other payables includes an accrual of
£748,000 which is provisional pending clarification of the tax treatment of
certain matters.
The goodwill reflects the significant opportunity for future growth in
integrating Hiretech, increasing rental equipment and solutions to both new
and existing customers through utilising Hiretech's in-house technical
knowledge, and increasing cross selling opportunities to our combined customer
base. In addition, there is an opportunity to increase Hiretech's
international presence and exposure through Ashtead Technology's existing
international network. The wider synergies for the Group will be achieved by
broadening the rental fleet, investing further in our people, and increasing
our service offering which will broaden our customer relationships and
increase customer retention.
28. Reconciliation of Non-IFRS Profit Metrics
Reconciliation of Adjusted EBITDA
For the year ended 31 December
Notes 2022 2021
£000 £000
Adjusted EBITDA 28,555 22,437
Cost associated with IPO - (3,332)
Cost associated with M&A 27 (787) -
Restructuring costs (28) (1,314)
One-off bad debts & debt collection costs - (39)
One-off inventory adjustment - 205
One-off asset disposal - 130
Other exceptional costs (36) (35)
Operating profit before depreciation, amortisation and foreign exchange loss 27,704 18,052
Depreciation on property, plant and equipment 11 (7,501) (7,878)
Depreciation on right-of-use asset 19 (930) (835)
Operating profit before amortisation and foreign exchange loss 19,273 9,339
Amortisation of intangible assets 12 (1,202) (1,516)
Foreign exchange loss 5 (3) (215)
Operating profit 18,068 7,608
Reconciliation of Adjusted EBITA
For the year ended 31 December
Notes 2022 2021
£000 £000
Adjusted EBITA 20,124 13,724
Cost associated with IPO - (3,332)
Cost associated with M&A 27 (787) -
Restructuring costs (28) (1,314)
One-off bad debts & debt collection costs - (39)
One-off inventory adjustment - 205
One-off asset disposal - 130
Other exceptional costs (36) (35)
Amortisation of intangible assets 12 (1,202) (1,516)
Foreign exchange loss 5 (3) (215)
Operating profit 18,068 7,608
Reconciliation of Adjusted Profit After Tax
For the year ended 31 December
Notes 2022 2021
£000 £000
Adjusted Profit After Tax 15,619 9,385
Cost associated with IPO - (3,332)
Cost associated with M&A 27 (787) -
Restructuring costs (28) (1,314)
One-off bad debts & debt collection costs - (39)
One-off inventory adjustment - 205
One-off asset disposal - 130
One-off hedge reserve movement - (313)
Loan repayment fees - (100)
Deferred finance cost write off - (704)
Other exceptional costs (36) (35)
Foreign exchange loss 5 (3) (215)
Amortisation of intangible assets 12 (1,202) (1,516)
Tax impact of the adjustments above 12 377
Deferred tax arising from temporary timing differences on intangible assets (910) -
Profit for the financial year 12,665 2,529
Adjusted Profit After Tax is used to calculate the Adjusted basic earnings per
share and Adjusted diluted earnings per share in Note 9. A reconciliation of
adjusted profit before tax is included in the CFO report on page 19.
Throughout the annual report we use a range of financial and non-financial
measures to assess our performance. A number of the financial measures
including Adjusted EBITDA, Adjusted EBITA, Adjusted Profit After Tax and
Adjusted EPS are not defined under IFRS, so they are considered alternative
performance measures ("APMs").
Management uses these measures to monitor the Group's financial performance
alongside IFRS measures because they help illustrate the underlying financial
performance and position of the Group. We have explained the purpose of each
of these measures throughout the strategic report and included definitions on
page 86. Management uses APMs as they measure business performance in a more
consistent way.
These APM's should be considered in addition to, and not as a substitute for,
or as superior to, measures of financial performance, financial position of
cash flows reported in accordance with IFRS. APM's are not uniformly defined
by all companies, including those in the Group's industry. Accordingly,
APM's may not be comparable with similarly titled measures and disclosures by
other companies.
29. Subsequent events
On 13 March 2023, the Company issued 365,919 newly authorised shares at a
subscription price of £0.05 (being nominal value) to the EBT in anticipation
of the vesting of the first tranche of IPO LTIP share options. The shares are
held by the EBT on the behalf of certain option holders and are non-voting
until each of the option holders choose to exercise their options at which
point they will be transferred to the option holder and become voting shares.
As of 31 March 2023 the Company has 79,947,919 shares in issue representing a
nominal value of £3,997,396.
On 5 April 2023 the revolving credit facility was increased from £60,000,000
to £100,000,000 and the accordion facility was increased from £nil to
£50,000,000, and is fully repayable by April 2027 with an option to extend
the facilities by 1 year. The terms of the facilities are substantially the
same terms with ABN AMRO Bank N.V. and Citibank N.A. joining HSBC UK Bank plc
and Clydesdale Bank plc as lenders.
On 10 March 2023, Alpha Subsea LLC was merged into Aqua-Tech Solutions LLC and
thereafter Aqua-Tech Solutions LLC was merged into Ashtead Technology Offshore
Inc.
On 10 February 2023, the name of Welaptega Marine Limited was changed to
Ashtead Technology (Canada) Limited.
Company Information
Directors
W M F C Shannon
A W Pirie
I Stewart
J A Connolly
A R C Durrant
T Hamborg-Thomsen
Company Secretary
I Stewart
Auditor
BDO LLP
Statutory Auditor
4 Atlantic Quay
70 York Street
Glasgow G2 8JX
Bankers
HSBC Bank plc
95-99 Union Street
Aberdeen AB11 6BD
Clydesdale Bank plc
1 Queen's Cross
Aberdeen AB15 4XU
Solicitors
White & Case LLP
5 Old Broad Street
London EC2N 1DW
Corporate broker
Numis Securities Ltd
45 Gresham Street
London EC2V 7BF
Registrar
Computershare Limited
The Pavilions
Bridgwater Road
Bristol BS13 8AE
Registered Office
1 Gateshead Close
Sunderland Road
Sandy
Bedfordshire SG19 1RS
Registered number: 13424040
Website
www.ashtead-technology.com
Ashtead Technology Holdings plc
Ashtead House
Discovery Drive
Westhill
Aberdeenshire, UK
AB32 6FG
www.ashtead-technology.com
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