Annual Report and Accounts 2012 - Speedy Hire plc

Exceptional items
Exceptional items totalled £5.1m before taxation (2011: £20.8m).
For 2012 these costs fall into two areas. Firstly, there are certain
items relating to the April 2011 disposal of the Group’s
accommodation hire operation: at 31 March 2011 these assets were
shown in the balance sheet as being held for sale and were written
down to their fair value net of costs to sell. This treatment created an
exceptional item totalling £13.8m in 2011 with a further £2.9m in
2012. Secondly, there is an exceptional financial expense of £2.2m
(2011: £1.5m), which related to the amortisation of bank and adviser
fees for the cash-flow-based bank facility that was replaced by an
asset-based facility in July 2011. Additionally, 2011 included £5.5m of
exceptional cost relating to restructuring and cost-saving initiatives.
The cash cost before taxation of these exceptional items was
£0.8m (which was all spent in 2012). The total tax benefit arising
from these exceptional items is anticipated to be £1.1m (2011: £5.6m).
Taxation
The Group’s income statement shows a tax charge for the year
of £1.5m (2011 credit: £7.7m). Of this amount, £2.6m relates to a
pre-exceptional tax charge based on an effective tax rate of
31.3% (2011 credit of 33.3%). The balance represents a credit of
£1.1m in respect of the exceptional items referred to above.
Tax paid in the year ending 31 March 2012 amounted to £nil (2011:
net payment of £1.3m which related to tax liabilities of prior
accounting periods).
Shares, earnings per share and dividends
At 31 March 2012, 517.2m shares were outstanding, of which 10.3m
were held in the employee benefits trust (including 6.4m jointly
owned shares).
The basic earnings per share before amortisation and exceptional
items was 1.72 pence (2011: loss 0.02 pence). After amortisation and
exceptional costs, it was 0.33 pence (2011: loss 3.81 pence).
The Board remains committed to the payment of dividends when
prudent to do so. Subsequent to the year-end, it has recommended
a final dividend of 0.26 pence per share (2011: 0.20 pence) which
represents a total cash cost of approximately £1.3m. This gives a
total dividend for the year of 0.46 pence per share (2011: 0.40 pence).
If approved by shareholders, the final dividend will be paid on 15
August 2012 to all shareholders on the register on 15 June 2012.
Business review 29
(2011: £7.4m), benefiting from the £33.4m net proceeds from the
disposal of the accommodation hire operation. During the year,
the trade and assets of Morgan Sindall’s internal plant business
were acquired for £5.2m as a consequence of a new strategic
supply agreement. Dividend payments in the year amounted to
£2.1m (2011: £2.1m).
Accordingly, even after the increase in capex, net debt has fallen
from £113.9m at the beginning of the year to £76.3m at 31 March
2012, a £37.6m decrease.
Gearing (net debt divided by shareholders’ funds) has improved as
the business continues to reduce net debt and at 31 March 2012 had
fallen to 33.2% (49.7% at 31 March 2011). Similarly, net debt to EBITDA
(before exceptional items) has also reduced to 1.21x (2011: 1.79x).
Balance sheet
Net assets at 31 March 2012 totalled £229.5m, a £0.1m increase on
the £229.4m reported at 31 March 2011.
Net assets per share amount to 44.4p (33.2p based on tangible
assets). Net property, plant and equipment was £241.0m at 31 March
2012, of which equipment for hire represents approximately 87%. Net
debt/net property, plant and equipment of 0.32x at 31 March 2012
(2011: 0.52x) underlines the strong asset backing within the business.
Gross trade debtors totalled £86.0m at 31 March 2012 (2011:
£97.8m). Bad debt and credit note provisions totalled £5.4m at 31
March 2012 (2011: £7.2m), equivalent to 6.3% of the debtor book (2011:
7.4%). The reduction reflects the improvement in debtor weeks
(calculated on a count-back basis) to 9.0 weeks at year-end
compared to 9.8 weeks at 31 March 2011.
Capital structure and treasury
Speedy’s long-term funding is provided through a combination of
shareholders’ funds and bank debt.
On 30 June 2011, the Group secured a new £220m asset-based
revolving credit agreement which matures in January 2015, with six
banks. At 31 March 2012 the gross amount utilised under the facility
was £83.4m and available headroom under the facility amounted
to £69.3m. The facility includes quarterly fixed charge cover,
leverage and cash flow cover covenant tests. The Group was
compliant with these tests throughout the year.
The Group will continue to maintain a tight focus on cash
generation, recognising however the need to invest in order to
maintain the quality of its UK hire fleet. Additionally, prudent
investment will be provided to help support growth of the Group’s
operating infrastructure and International operations.
Capital expenditure and disposals
Total capital expenditure during the year amounted to £70.8m, of
which £64.2m (2011: £41.8m) related to equipment for hire (including
£10.0m in the International Asset Services division) and the balance
principally to investments in the Group’s depot network (seven new
Return on capital
superstores were opened in the year) and IT. This compares to
£46.7m in 2011, an increase of 52%. With disposal proceeds of £19.4m Return on capital (based on EBITA before exceptional items) totalled
(2011: £16.2m), overall net capital expenditure totalled £51.4m (2011: 6.0% in the year ended 31 March 2012. This compares to 2.3% in the
£30.5m) and net capex investment in hire fleet rose 69%. The disposal prior year period. Return on capital has benefited from increases in
of damaged, older or surplus hire fleet during the year generated a EBITA (before exceptional items) and a reduction in average gross
profit of £4.8m (2011: £5.0m), underlining the appropriateness of the capital employed which was £30.0m lower at £324.6m (2011:
carrying value of the Group’s fixed assets. At 31 March 2012, the £354.6m).
average age of the fleet was estimated at 4.2 years (2011: 4.7 years).
Summary
Cash flow and net debt
With the Group’s focus on strategic markets, targeted capital
Cash generation has remained positive, with net cash flow
investment and rigorous control of our cost base, which is supported
generated from operating activities amounting to £17.7m in the year by the asset-based bank facility, we have a strong and stable
(2011: £12.3m). This increase in cash generation is after increasing platform to build on in FY2013.
the net investment in the hire fleet by £19.2m, funded through
increased profitability and reduced working capital. Free cash flow Lynn Krige
(i.e. before dividends and financing activities)increased to £39.3m Group Finance Director
Speedy Hire Plc Annual Report and Accounts 2012
Business review