Key performance indicators

At Group level, we measure the performance of the business using a number of key performance indicators (‘KPIs’). These help to ensure that we are delivering against our strategic priorities. Several of these KPIs (underlying EPS, return on investment and leverage) influence the remuneration of our executive team. Certain KPIs are more appropriately measured for each of our two operating businesses, whereas other KPIs are best measured for the Group as a whole.

UNDERLYING EPS (p) Calculation Underlying Group profit after taxation divided by the weighted average number of shares in issue (excluding shares held by the Company and the ESOT). Target As a cyclical business, underlying EPS varies substantially through the cycle. 2018 performance Underlying EPS improved to 128p per share in 2017/18. Strategic priority
RETURN ON INVESTMENT (‘RoI’) (%) Calculation Underlying operating profit divided by the sum of net tangible and intangible fixed assets, plus net working capital but excluding net debt and deferred tax. Target Averaged across the economic cycle we look to deliver RoI well ahead of our cost of capital, as discussed in our strategic review. 2018 performance Our RoI was 18% for the year ended 30 April 2018. This has been affected, in the short term, by new store openings and bolt-on acquisitions and our young fleet age. Strategic priority
NET DEBT AND LEVERAGE AT CONSTANT EXCHANGE RATES Calculation Net debt is total debt less cash balances, as reported, and leverage is net debt divided by underlying EBITDA, calculated at constant exchange rates (balance sheet rate). Target We seek to maintain a conservative balance sheet structure with a target for net debt to underlying EBITDA of 1.5 to 2 times. 2018 performance Net debt at 30 April 2018 was £2,712m and leverage was 1.6 times. Strategic priority
PHYSICAL UTILISATION (%) Calculation Physical utilisation is measured as the daily average of the amount of itemised fleet at cost on rent as a percentage of the total fleet at cost and for Sunbelt US is measured only for equipment whose cost is over $7,500 (which comprised 88% of its itemised fleet at 30 April 2018). Target It is important to sustain annual average physical utilisation at between 60% and 70% through the cycle. If utilisation falls below 60%, yield will tend to suffer, whilst above 70% we may not have enough fleet in certain stores to meet our customers’ needs. 2018 performance Sunbelt US utilisation was 72% (2016/17: 71%), while A-Plant utilisation was 68% (2016/17: 69%). Strategic priority
FLEET ON RENT ($m/£m) Calculation Fleet on rent is measured as the daily average of the original cost of our itemised equipment on rent. Target To achieve growth rates in Sunbelt and A-Plant in excess of the growth in our markets and that of our competitors. 2018 performance¹ In Sunbelt US, fleet on rent grew 19% in 2017/18, whilst in A-Plant it grew 16%. The US market grew 4% and the UK market by 1%. Strategic priority
DOLLAR UTILISATION (%) Calculation Dollar utilisation is rental revenue divided by average fleet at original (or ‘first’) cost measured over a 12-month period. Target Improve dollar utilisation to drive improving returns in the business. 2018 performance Dollar utilisation increased to 55% in Sunbelt US, as the drag effect of yield, greenfield openings and acquisitions and the increased cost of fleet moderates. In Sunbelt Canada, it increased to 60% following the acquisition of CRS. In A-Plant it decreased to 48%, principally due to pricing pressure. Strategic priority
UNDERLYING EBITDA MARGINS (%) Calculation Underlying EBITDA as a percentage of total revenue. Target To improve margins and achieve peak EBITDA margins of 45-50% in Sunbelt US during this cycle, 40-45% in Sunbelt Canada and 35-40% in A-Plant. 2018 performance Margins remained constant in 2017/18 at 50% in Sunbelt US, and were 30% and 35% in Sunbelt Canada and A-Plant respectively. Strategic priority
STAFF TURNOVER (%) Calculation Staff turnover is calculated as the number of leavers in a year (excluding redundancies) divided by the average headcount during the year. Target Our aim is to keep employee turnover below historical levels to enable us to build on the skill base we have established. 2018 performance¹ Turnover levels have remained relatively constant for Sunbelt US and continued to decline for A-Plant. Our well-trained, knowledgeable staff remain targets for our competitors. Strategic priority
SAFETY Calculation The RIDDOR (Reporting of Injuries, Diseases and Dangerous Occurrences Regulations) reportable rate is the number of major injuries or over seven-day injuries per 100,000 hours worked. Target Continued reduction in accident rates. 2018 performance The RIDDOR reportable rate increased to 0.33 in Sunbelt US, to 0.08 in Sunbelt Canada and to 0.22 in A-Plant. More detail is included in our Responsible business report. Strategic priority