2 June, 2003
Renewed Agreement with banking syndicate
Agreement with banking syndicate amending the senior debt facility
Conclusion of US accounting investigation
Current trading update
Ashtead Group plc (“Ashtead” or the “Group”) announced on Thursday 13 March 2003 that following discovery of an accounting irregularity at its USA subsidiary, Sunbelt Rentals Inc. (“Sunbelt”), the Group would be in default of its existing banking agreements from later that day. Today the Board is pleased to announce that the accounting investigation at Sunbelt has been concluded and that, following a period of constructive discussions with its senior bank group, all past defaults have been waived and an amended medium term senior debt facility has now been agreed.
Conclusion of US accounting investigation
The Board reported on 10 March 2003 that it had been advised by the directors of Sunbelt that a senior member of its financial staff, responsible for the preparation of its accounts, had been suspended following his admission that he had failed to reconcile properly certain balance sheet accounts. The detailed forensic review, which was immediately instigated by the Board and undertaken by KPMG on behalf of both the Board and the banking group has now been completed
KPMG has confirmed that the impact relating to the financial year ending 30 April 2003 was £2.5m pre-tax as previously reported although, due principally to under-recorded accruals at 30 April 2002, the impact on previous years has risen to £9.0m pre-tax. These amounts remain subject to audit. No evidence has been found of personal financial gain by the relevant staff member, Sunbelt’s financial controller.
The Board has made a series of control enhancements designed to ensure that the situation cannot recur including the adoption of all the recommendations of the independent forensic review.
Current trading
Inevitably recent events have had an impact on current year trading and certain exceptional costs have been incurred as a result. However, the Board still expects to make a profit before tax, goodwill amortisation and exceptional items in the financial year to 30 April 2003.
Medium term capital structure
The bank group has agreed total committed senior debt facilities until 28 January 2005 in an initial amount of £410m. As part of this agreement all previous defaults have been waived and covenant amendments made to reflect the current trading environment. In addition, arrangements have been made for the continuance of ancillary facilities including the accounts receivable securitisation.
The Group has also agreed with Rentokil Initial plc to defer interest payments on its convertible loan note until the existing senior debt facilities have been refinanced.
The Board has decided not to pay a dividend to shareholders for the financial year ended 30 April 2003. Dividend payments thereafter will depend upon the completion of a successful refinancing.
The Board believes these amended financing arrangements provide the Group with a stable capital structure for the medium term along with an appropriate level of headroom.
The Group will generate a significant amount of cash over the next two years and the Board expects to refinance the senior debt facilities well before January 2005.
George Burnett, Chief Executive of Ashtead said, “I am pleased that the US accounting investigation is complete and we are once again in a position to move forward with a renewed capital structure. I would like to take this opportunity to thank our employees, customers and suppliers for the support they have shown during this difficult period which is now behind us.”