29 March, 2004
Launch of high yield bond and 9 month trading update
Launch of high yield bond and 9 month trading update Ashtead Group plc announces that it will shortly commence a High Yield Bond offering with the objective of raising £130 million of senior secured second priority debt capital.
Citigroup and Banc of America Securities Limited are acting as joint underwriters and managers of the offering, which is expected to close before the end of April. The issuer, Ashtead Holdings plc will be applying for the Bonds to be listed in London. The Group’s existing senior lenders have agreed to extend the maturity of the Group’s committed senior secured debt facilities to September 2007 conditional upon their receipt of a US$200 million (£110.4 million) paydown to be funded out of the net proceeds of the Bond offering. After this partial paydown these facilities will total approximately £310 million. The balance of the net proceeds from the Bond offering will be retained by the Company as additional working capital.
Rentokil Initial plc, the holder of the Company’s £134 million 5.25% unsecured convertible loan note, due March 2008 has agreed consequential amendments to the terms of the loan note to facilitate the Bond offering.
On closing of the Bond offering the maturity of the Company’s debt facilities, all of which will be fully committed, will be approximately 3½ years for the senior facilities, approximately 4 years for the Rentokil convertible and ten years for the Bonds. Following the issue of the Bonds the Company will also be committed to reporting its results on a quarterly basis.
Results for the nine months ended 31 January 2004
The Group’s results for the nine months ended 31 January 2004 set out below are being released to meet the needs of potential purchasers of the Bonds and will be included in the Offering Memorandum which will be filed with the UK Listing Authority on closing of the Bond offering.
|Sunbelt - $m||429.7||421.3||131.6||126.0|
|Sunbelt - £m||255.0||270.0||78.1||80.8|
|Operating profit before goodwill amortisation and exceptional items||32.3||39.9|
|Interest payable (less exceptional interest)||(27.8)||(31.1)|
|PBT before goodwill & exceptionals||4.5||8.8|
|Loss before tax||(20.8)||(16.4)|
Total dollar turnover in Sunbelt increased by 5.6% in the quarter ended 31 January 2004 and by 2.0% for the nine months. Average fleet utilisation for the nine month period improved to 65.1% from 64.5% in the previous year. Reflecting the operational leveraging inherent in the business, the growth in Sunbelt’s turnover produced an improvement in its EBITDA margins from 29.9% in 2003 to 30.6% in 2004. Consequently dollar EBITDA grew by 10.6% in the quarter ended 31 January 2004 and by 4.4% in the nine months.
A-Plant’s results for the nine months ended 31 January 2004 continue to reflect the effect of its business refocusing strategy which has seen the closure or sale of 59 profit centres since 1 May 2002, including 15 in Ireland sold on 15 January 2004. In the nine months ended 31 January 2004 A-Plant has seen a 13.6% reduction in turnover to £118.4 million. Average fleet utilisation for the nine month period was 58.9% compared to 61.1% in the previous year. More encouragingly utilisation has now risen to a current level of 65%. Cost reductions as part of the refocusing programme have limited the reduction in EBITDA margin to 2% (down to 28.0% from 30.0%).
When measured in sterling, the continued weakness of the dollar resulted in a 5.6% decline in Sunbelt’s total turnover for the nine months ended 31 January 2004. Total Group turnover in sterling decreased by 8.2% for the nine months ended 31 January 2004.
For the Group as a whole, EBITDA for the nine months ended 31 January 2004 declined 4.3% at constant exchange rates (but 9.1% at actual rates due to the impact of the weak dollar). For the 12 months ended 31 January 2004 Group EBITDA was £138.9 million which compares with £142.9 million for the year ended 30 April 2003 at constant exchange rates (£150.1 million at actual rates).
After depreciation and interest costs, which were also reduced by the weak dollar, the profit before tax, goodwill amortisation and exceptional items for the nine months ended 31 January 2004 was £4.5 million compared with £7.9 million in the previous year at constant exchange rates (£8.8 million at actual rates).
Free cash flow1 for the nine months ended 31 January 2004 was £36.2 million (£22.7 million in 2003). For the 12 months ended 31 January 2004 free cash flow was £52.4 million. After non-core disposal proceeds of £13.0 million and exceptional costs mostly related to the default and refinancing costs of £11.3 million, the net cash generated and applied to reduce bank debt was £37.9 million in the nine months ended 31 January 2004 (£11.0 million in 2003) and £48.1 million for the twelve months ended on the same date.
As a result of this cash flow and the impact of the weak US dollar, total net debt at 31 January 2004 was £535.2 million (£618.5 million at 31 January 2003 and £622.3 million at 30 April 2003). Total net debt leverage at 31 January 2004 was 3.85 times (4.15 times at 30 April 2003). At 29 February 2004, total net debt was £523.1 million.
Capital expenditure for the nine months ended 31 January 2004 was £49.7 million (2003 - £60.4 million) and is expected to total between £70 million and £75 million by year-end. The Group’s average fleet age at 31 January 2004 was 54 months (30 April 2003 – 49 months). The Group expects to increase capital expenditure in the year ending 30 April 2005 to an amount broadly equivalent to the annual depreciation charge and thereby hold the fleet age broadly constant over the course of the coming year.
While A-Plant’s profits for the current year will reflect the effects of its refocusing programme and trading conditions remain difficult, its management is now free to concentrate on improving the future performance of the business. In the US there are signs of continued growth in Sunbelt’s end markets as evidenced by the improvement in the non-residential construction market and in recent results announcements from its competitors. Although the weakness of the US dollar will continue to impact Sunbelt’s profits when reported in sterling, the Board is encouraged by the increasing rate of improvement in Sunbelt’s underlying performance and by the better trading conditions in the United States.