6 March, 2007
Third Quarter Results to 31 Jan 2007
We are pleased to report a strong performance in the third quarter.
Unaudited results for the third quarter ended 31 January 2007
|At actual rates of exchange
|At constant rates of exchange
|Underlying operating profit 1
|Underlying profit before taxation 1
|Underlying earnings per share 1 - basic
|- cash tax
|Profit before taxation
1See Explanatory Notes below
- Continued growth in revenue and profit in all divisions with underlying operating profit up 49% at constant exchange rates.
- As anticipated, the relative phasing of savings against additional interest costs arising from the NationsRent acquisition results in underlying pre-tax profits being £11.3m, a reduction of 11%.
- Profit before tax at £2.1m (2006 - £27.1m) is after charging exceptional costs and intangible amortisation amounting to £9.2m (2006 - £14.3m credit).
- On a proforma basis1 Sunbelt Q3 underlying operating profit grew by 69% to $58.1m reflecting the progress made to date on the NationsRent integration.
- Ongoing recovery at A-Plant delivered underlying operating profits 3x prior year at £3.1m (2006 - £1.0m).
- Ashtead Technology continued to deliver good profits in strong markets and grew operating profit 89% to £1.1m.
Ashtead’s chief executive, Geoff Drabble , commented:
“We are pleased to report a strong performance in the third quarter, traditionally our weakest, despite the prior year comparative being enhanced by hurricane activity.
Conditions in the markets we serve in North America remain good and the financial benefits, principally cost savings, from the integration of NationsRent began to flow in the period. We continue to meet our integration expectations.
A-Plant continued to improve its financial performance built upon greater market share and is well positioned for further improvements. Ashtead Technology continued to trade strongly.
Looking forward, the progress made to date in integrating the NationsRent acquisition and delivering the cost savings together with the expected realisation of improvements in its operational performance and the ongoing growth of A-Plant and Technology allow us to view future periods with confidence.”
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- Underlying profit and earnings per share are stated before exceptional items, amortisation of acquired intangibles and non-cash fair value remeasurements of embedded derivatives in long term debt.
- The narrative that follows is based on underlying operating profit, profit before tax and earnings per share as the Directors believe that these provide a more consistent measure of operating performance.
- Proforma basis adjusts for NationsRent throughout both periods.
Review of the quarter
The major focus of the quarter was to drive the operational performance of all three divisions. In North America we began to see the benefits of the cost savings and efficiencies realised to date from the integration of NationsRent and these will be more apparent in subsequent periods.
As we reported at the half year the structural changes completed together with the successful systems integration have allowed us to start to focus on the improvement of the ex-NationsRent operational performance. This will continue to be an area of primary focus in Quarter 4 and beyond.
A-Plant’s recovery programme has continued and it has once again delivered strong revenue and profit growth. Ongoing focus on revenue growth and operational efficiency will allow us to continue to improve margins and return on investment.
We have continued to invest in Ashtead Technology to support current buoyant market conditions contributing to good revenue and profit growth.
A quarter of operational growth
Ashtead has continued to make good progress in the quarter to January 2007, sustaining the momentum established in recent periods.
- Revenue for the quarter was at £240.0m up 47.6% on the revenue reported in Quarter 3 2006. On a consolidated, proforma basis the organic revenue growth was 6.3% at constant exchange rates.
- Underlying operating profit for the quarter at £32.1m was 32.9% up on the prior year, reflecting good performance in all three divisions.
- The underlying profit before tax of £11.3m was down 10.8% on the prior year, reflecting the financing costs of the NationsRent acquisition but not yet benefiting from the full effects of the operational efficiencies and cost savings.
- Profit before tax, which is calculated after exceptional items, non-cash fair value remeasurements of embedded derivatives in long term debt and amortisation of acquired intangibles, was £2.1m in the quarter as compared to £27.1m reported in the prior year. This is due to the exceptional costs associated with the restructuring of the NationsRent business and the intangible amortisation in the quarter amounting to £9.2m. In the same period last year there was an exceptional credit of £14.3m arising mainly from the settlement of litigation against Head & Engquist.
- Basic earnings per share for the quarter were 0.3p (2006 - 4.1p) whilst underlying earnings per share were 1.3p (2006 - 1.8p). On a cash tax basis underlying earnings per share were 2.1p (2006 - 3.2p).
- Capital expenditure in the third quarter was £43.5m (2006 - £41.7m). Full year gross capital expenditure remains forecast at approximately £375m and approximately £275m net.
- Net debt at 31 January 2007 was £972.1m (2006 - £497.4m). The ratio of debt to proforma LTM EBITDA, excluding cost savings, was 3.0 times at 31 January 2007. Availability under the $1.75bn asset based loan facility was $524m at 31 January 2007 ($283m at 30 April 2006).
|Pro forma combined
|Underlying operating profit
Following a successful first phase of integration, the operating efficiencies associated with the restructuring and systems integration are beginning to be reflected in the Q3 proforma profit improvement. The fact that these benefits are flowing to operating profit allows us to focus on the dollar utilisation of the combined business in future periods.
Seasonally Q3 is our weakest period, although last year was improved significantly by the high levels of hurricane activity, particularly in Florida, Louisiana and Texas where we have a large proportion of our fleet. The fact that NationsRent’s geographic footprint was more northerly based increases this seasonality and historically NationsRent made losses in the third and fourth quarters.
Exceptional costs incurred in the third quarter totalled £5.4m and related to NationsRent redundancies, retention bonuses, rebranding and other costs. We continue to anticipate further exceptionals of around £10m in the fourth quarter but no further exceptional items relating to NationsRent thereafter. The charge for intangible amortisation for the third quarter was £3.8m. We expect that fourth quarter amortisation will be at a similar level.
|Underlying operating profit
A-Plant continued its recovery with another quarter of good revenue growth, including for the first full period a contribution from Lux which is now fully integrated into our existing traffic business. Organic revenue growth for the quarter was circa 11% and A-Plant continues to regain market share.
Both Ashtead Technology’s offshore and onshore markets remain good and the division has continued to invest in order to support these markets. This has enabled the business to deliver excellent revenue and profit growth.
Current trading and outlook
Based upon the current performance of all three divisions, together with favourable market conditions the Board anticipates a satisfactory conclusion to the financial year, despite the impact of the weaker US dollar.
Looking forward, the progress made to date in integrating the NationsRent acquisition and delivering the cost savings together with the expected realisation of improvements in its operational performance and the ongoing growth of A-Plant and Technology allow us to view future periods with confidence.
Geoff Drabble and Ian Robson will host a conference call for equity analysts at 9.30am on Tuesday 6 March and a further conference call for bondholders at 3pm (10am EST) on the same day. The analysts’ call will be webcast live via the Company’s website at www.ashtead-group.com and there will also be a replay available from shortly after the call concludes. A copy of the slide presentation used for the call will also be available on the Company’s website. Analysts and bondholders have already been invited to participate in the calls but anyone not having received dial-in details should contact the Company’s PR advisers, Maitland (Jane Franklin) at 020 7379 5151.