Set out below are the principal business risks that could impact the Group’s business model, future performance, solvency or liquidity and information on how we mitigate them. Our risk profile evolves as we move through the economic cycle and commentary on how risks have changed is included below.

Change in risk in 2020/21

Increased risk Increased risk
Constant risk Constant risk
Decreased risk Decreased risk

Strategic priorities

Grow General Tool and advance our clusters Grow General Tool and advance our clusters
Amplify Specialty Amplify Specialty
Advance technology Advance technology
Lead with ESG Lead with ESG
Dynamic capital allocation Dynamic capital allocation

Economic conditions Increased risk Grow General Tool and advance our clusters Amplify Specialty Dynamic capital allocation

Potential impact

In the longer-term, there is a link between levels of economic activity and demand for our services. The most significant end market which affects our business is construction. The construction market is cyclical and typically lags the general economic cycle by between 12 and 24 months. The economic uncertainties resulting from the impact of the COVID-19 or other pandemics are considered as part of this risk.

Mitigation

  • Prudent management through the different phases of the cycle.
  • Flexibility in the business model.
  • Capital structure and debt facilities arranged in recognition of the cyclical nature of our market and able to withstand market shocks.

Change

Despite the ongoing impact of the COVID-19 pandemic, the performance of the Group in recent months together with the success of the vaccine roll-out programme in our major markets and planned stimulus packages mean that we expect the economy to be supportive of our business and as such have reduced the likelihood rating of an adverse economic event to ‘medium’. Nevertheless, we remain cognisant of market dynamics and uncertainties to ensure that the Group is positioned to respond to changes in economic conditions.

Competition Constant risk Grow General Tool and advance our clusters Amplify Specialty Dynamic capital allocation

Potential impact

The already competitive market could become even more competitive and we could suffer increased competition from large national competitors or small companies or local companies resulting in reduced market share and lower revenue. This could negatively affect rental rates and physical utilisation. Continuing industry consolidation could also have a similar effect.

Mitigation

  • Create commercial advantage by providing the highest level of service, consistently and at a price which offers value.
  • Differentiation of service.
  • Enhance the barriers to entry to newcomers provided by our platform: industry-leading technology; experienced personnel and a broad network; and equipment fleet.
  • Regularly estimate and monitor our market share and track the performance of our competitors.

Change

Our competitive position continues to improve. We have grown faster than our larger competitors and the market, and continue to take market share from our smaller, less well financed competitors. We have a 11% market share in the US, a 7% market share in Canada and 9% in the UK.

Financing Constant risk Dynamic capital allocation

Potential impact

Debt facilities are committed for a finite period of time and thus must be renewed before they mature. Our loan agreements also contain conditions (known as covenants) with which we must comply.

Mitigation

  • Maintain conservative (1.5 to 2.0 times excluding the impact of IFRS 16), net debt to EBITDA leverage which helps minimise our refinancing risk.
  • Maintain long debt maturities.
  • Use of an asset-based senior facility means none of our debt contains quarterly financial covenants when availability under the facility exceeds $410m.

Change

At 30 April 2021, our facilities were committed for an average of five years, leverage was at 1.4 times and availability under the senior debt facility was $3,011m.

Cyber Security Constant risk Advancing Technology

Potential impact

A cyber-attack or serious uncured failure in our systems could result in us being unable to deliver service to our customers and/or the loss of data. In particular, we are heavily dependent on technology for the smooth running of our business given the large number of both units of equipment we rent and our customers. As a result, we could suffer reputational loss, revenue loss and financial penalties.

This is the most significant factor in our business continuity planning.

Mitigation

  • Stringent policies surrounding security, user access, change control and the ability to download and install software.
  • Testing of cyber security including system penetration testing and internal phishing training exercises undertaken.
  • Use of antivirus and malware software, firewalls, email scanning and internet monitoring as an integral part of our security plan.
  • Use of firewalls and encryption to protect systems and any connections to third parties.
  • Use of multi-factor authentication.
  • Continued focus on development of IT strategy taking advantage of cloud technology available.
  • Separate near-live back-up data centres which are designed to be able to provide the necessary services in the event of a failure at a primary site.

Change

Good progress has been made in enhancing the Group’s cyber security profile, with a significant and ongoing investment in resource and tooling. Nevertheless, cyber security remains a continually evolving area and a priority for the Group.

In relation to business continuity, our plans have been subject to continued review and update during the year and our disaster recovery plans are tested regularly. Our broader business continuity plans have been tested extensively as a result of the COVID-19 pandemic and were proven robust and enabled the business to operate uninterrupted throughout. We will review these plans over the coming year to ensure they reflect the lessons learnt from the last year.

Health and safety Constant risk Lead on ESG

Potential impact

A failure to comply with laws and regulations governing health and safety and ensure the highest standards of health and safety across the Group could result in accidents which may result in injury to or fatality of an individual, claims against the Group and/or damage to our reputation.

Mitigation

  • Maintaining a legal function to oversee management of these risks and to achieve compliance with relevant legislation.
  • Group-wide ethics policy and whistle-blowing arrangements.
  • Evolving policies and practices to take account of changes in legal obligations.
  • Training and induction programmes ensure our staff receive appropriate training and briefing on the relevant policies.

Change

The health and safety of our team members continues to be a key focus area for the Group and an area of continuous improvement.

Additional measures were introduced to protect our team members, customers and communities as a result of the impact of COVID-19 including:

  • restricted travel and meetings;
  • remote working where possible;
  • reinforced health protection protocols and implemented social distancing;
  • provided touchless signature at the point of equipment pick-up or delivery;
  • implemented curbside pick-up and drop-off.

In terms of reportable incidents, the RIDDOR reportable rate was 0.31 (2020: 0.30) in the US, 0.29 (2020: 0.34) in Canada and 0.27 (2020: 0.19) in the UK.

People Constant risk Grow Tools Amplify Speciality Lead on ESG

Potential impact

Retaining and attracting good people is key to delivering superior performance and customer service.

Excessive staff turnover is likely to impact on our ability to maintain the appropriate quality of service to our customers and would ultimately impact our financial performance adversely.

At a leadership level, succession planning is required to ensure the Group can continue to inspire the right culture, leadership and behaviours and meet its strategic objectives.

Mitigation

  • Provide well-structured and competitive reward and benefit packages that ensure our ability to attract and retain the employees we need.
  • Ensure that our staff have the right working environment and equipment to enable them to do the best job possible and maximise their satisfaction at work.
  • Invest in training and career development opportunities for our people to support them in their careers.
  • Ensure succession plans are in place and reviewed regularly which meet the ongoing needs of the Group.

Change

Our compensation and incentive programmes have continued to evolve to reflect market conditions, the economic environment and the results of our employee engagement surveys.

Our early decision at the onset of COVID-19 to not make any team members redundant as a result of the pandemic provided job security and enabled them to focus on serving our customers. In addition, we provided paid time off for team members quarantining as a result of COVID-19.

The establishment of diversity and inclusion programmes across the business to enhance our efforts to attract and retain the best people.

Environmental Constant risk Lead on ESG

Potential impact

At the recent Capital Markets Day, the Group made a long-term commitment to reduce its carbon intensity by 35% by 2030, with a near-term commitment to reduce its carbon intensity by 15% by 2024, and set out a roadmap to achieve this. Failure to do so could adversely impact the Group and its stakeholders.

A significant part of our rental fleet is reliant on diesel engines. Over time, ‘greener’ alternatives will become available as technology advances. If we do not remain at the forefront of technological advances, and invest in the latest equipment, our rental fleet could become obsolete.

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

Mitigation

  • Policies and procedures in place at all our stores regarding the need to adhere to local laws and regulations.
  • Procurement policies reflect the need for the latest available emissions management and fuel efficiency tools in our fleet.
  • Monitoring and reporting of carbon emissions.

Change

The work of the Health, Safety and Environmental departments and Performance Standards teams continue to assess environmental compliance.

The appointments of a Group Managing Director of ESG and a VP of Environmental, Social and Governance for Sunbelt North America has further heightened our focus on this area.

In 2020/21 our carbon emission intensity ratio reduced to 64.3 (2020: 68.5).

As we implement our Sunbelt 3.0 strategy, we will continue to enhance our reporting in this area, including the development of further KPIs across a range ofenvironmental areas. We have committed to reducing our carbon intensity by 35% by 2030 and 15% by the end of Sunbelt 3.0.

Laws and regulations Constant risk Advancing technology Lead on ESG

Potential impact

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

Mitigation

  • Maintaining a legal function to oversee management of these risks and to achieve compliance with relevant legislation.
  • Group-wide ethics policy and whistle-blowing arrangements.
  • Evolving policies and practices to take account of changes in legal obligations.
  • Training and induction programmes ensure our staff receive appropriate training and briefing on the relevant policies.

Change

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

Our whistle-blowing arrangements are well established and the company secretary reports matters arising to the Audit Committee and the Board during the course of the year.

During the year over 1,250 people in the US, 155 people in Canada and 607 people in the UK underwent induction training and additional training programmes were undertaken in safety.

Emerging risks

In addition to the principal risks identified above, the Board considers what emerging risks may also impact the Group. In identifying emerging risks, the Board has considered both third-party risk analysis as well as internal views of emerging trends which may impact the business. As a result of this analysis, the Board specifically considered climate-related matters and emerging technologies, including battery-led technologies and autonomous machines. The Board believes climate-related matters are addressed through our environmental risk and our commitment to reduce our carbon intensity. On balance, the Board believes that the impact from climate change and emerging technologies will increase the demand for rental and continue the shift from ownership to rental.