TIDMSDY

RNS Number : 7186Q

Speedy Hire PLC

23 June 2020

Speedy Hire Plc

("Speedy", "the Company" or "the Group")

Results for the year ended 31 March 2020

Resilient performance in uncertain markets, well placed for future

Speedy, the UK's leading tools, equipment and plant hire services company, operating across the construction, infrastructure and industrial markets, announces results for the year ended 31 March 2020.

Underlying results

 
                                  Year ended   Year ended   Change        Change 
                                    31 March 
                                        2020 
                                      (GBPm)     31 March        %             % 
                                                     2019 
                                                   (GBPm)             (excluding 
                                                                        IFRS 16) 
 Revenue (excluding disposals)         402.5        389.2      3.4           3.4 
                                 -----------  -----------  -------  ------------ 
 Adjusted operating 
  profit(1,) (*)                        39.1         36.7      6.5           3.4 
                                 -----------  -----------  -------  ------------ 
 Adjusted profit before 
  tax(1,*)                              34.9         31.4     11.1           6.1 
                                 -----------  -----------  -------  ------------ 
 Adjusted earnings per 
  share(2,*)                            5.54         4.96     11.7           6.3 
                                 -----------  -----------  -------  ------------ 
 

Statutory results

 
                                Year ended   Year ended   Change        Change 
                                  31 March 
                                      2020 
                                    (GBPm)     31 March        %             % 
                                                   2019 
                                                 (GBPm)             (excluding 
                                                                      IFRS 16) 
 Revenue                             406.7        394.7      3.0           3.0 
                               -----------  -----------  -------  ------------ 
 Operating profit (*)                 14.0         34.8   (59.8)        (69.5) 
                               -----------  -----------  -------  ------------ 
 Profit before tax(*)                 20.7         28.7   (27.9)        (30.1) 
                               -----------  -----------  -------  ------------ 
 Basic earnings per share(*)          3.23         4.47   (27.7)        (30.0) 
                               -----------  -----------  -------  ------------ 
 

Other measures

 
                                    Year ended   Year ended   Change        Change 
                                      31 March 
                                          2020 
                                        (GBPm)     31 March        %             % 
                                                       2019 
                                                     (GBPm)             (excluding 
                                                                          IFRS 16) 
 Net debt(3)                              79.3         89.1   (11.0)        (11.2) 
                                   -----------  -----------  -------  ------------ 
 Return on Capital Employed(4,*)         12.0%        11.7%      2.6             - 
                                   -----------  -----------  -------  ------------ 
 Dividend (pence per 
  share)                                  0.70         2.00        -             - 
                                   -----------  -----------  -------  ------------ 
 

* Comparatives restated as a result of the adoption of IFRS 16 - see Note 1 (Accounting policies). Non-statutory percentage change under previous lease accounting policies also shown for illustrative purposes.

Strategic and Operational highlights

-- Adjusted profit before tax(1) up 11.1% to GBP34.9m (2019: GBP31.4m), profit before tax GBP20.7m (2019: GBP28.7m)

   --      ROCE(4) (including goodwill and intangibles) increased to 12.0% (2019: 11.7%) 

-- Strong balance sheet and cash generation. Net debt(3) reduced to GBP79.3m (31 March 2019: GBP89.1m), with leverage(5) of 1.0x (31 March 2019: 1.1x)

   --      Increasing resilience: 

o Reducing reliance on construction sector

o UK and Ireland Services revenue up 8.9%

o Low average age of hire fleet; 3.4 years (2019: 3.3 years) following further investment to support four-hour delivery promise

   --      Continuing growth in higher margin SME customer numbers, with revenues up 32.1% 
   --      Pre COVID-19 asset utilisation in the UK and Ireland was 56.6% (2019: 57.0%) 

-- Artificial intelligence supporting growth through fleet optimisation and identification of revenue opportunities

-- As previously announced, Geason Training performed below expectations resulting in net exceptional items of GBP12.2m. Management changes implemented to improve performance

-- Board strengthened with appointment of Rhian Bartlett in June 2019, bringing significant experience of digital applications and marketing

Trading update for FY2021

-- Decisive action to contain costs and preserve cash following COVID-19 outbreak. Well placed to take advantage of opportunities as restrictions are lifted

-- Significant proportion of revenue retained. UK and Ireland Hire revenue for June is c.17% below prior year

-- Continued strong cash generation, benefiting from available Government support schemes. Net debt(3) at 31 May 2020 further reduced to GBP67.3m. Significant headroom against bank facilities

   --      All discretionary spend frozen, and minimal capex in April and May of c.GBP0.5m 

-- At current revenues the Group can operate throughout FY21 within existing banking facilities, without breaching any covenant tests

   --      Improvements to simplify and standardise operating model under way following COVID-19 

Commenting on the results Russell Down, Chief Executive, said:

"I am pleased to report continued positive momentum across the Group. We have a well invested fleet, diversified customer base and robust balance sheet.

Our priority remains the welfare of our colleagues, customers and the communities we serve. We continue to monitor Government guidance and take action to ensure the safety of our colleagues as we continue to operate to satisfy customer demand. Whilst COVID-19 will have some financial impact on the business, I am reassured by our performance in the last three months. We are well placed to emerge in a position of strength to pursue our strategic objectives as more normal trading levels return."

Enquiries:

Speedy Hire Plc Tel: 01942 720 000

Russell Down, Chief Executive

Chris Morgan, Group Finance Director

   MHP Communications                                                             Tel: 0203 128 8778 

Oliver Hughes

Andrew Jaques

Notes:

Explanatory notes:

(1) See note 8

(2) See note 6

(3) See note 12

(4) Return on Capital Employed: Profit before tax, amortisation and exceptional items divided by the average capital employed (where capital employed equals shareholders' funds and net debt(3) ), for the last 12 months.

(5) Leverage: Net debt(3) covered by EBITDA(1) . This metric excludes the impact of IFRS 16.

   Inside Information :   This announceme nt contains inside information. 

Forward looking statements: The information in this release is based on management information. This report includes statements that are forward looking in nature. Forward looking statements involve known and unknown risks, assumptions, uncertainties and other factors which may cause the actual results, performance or achievements of the Group to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Except as required by the Listing Rules and applicable law, the Company undertakes no obligation to update, revise or change any forward looking statements to reflect events or developments occurring after the date of this report.

Notes to Editors: Founded in 1977, Speedy is the UK's leading provider of tools, equipment and plant hire services to a wide range of customers in the construction, infrastructure and industrial markets, as well as to local trade and industry. The Group provides complementary support services through the provision of training, asset management and compliance services. Speedy is certified nationally to ISO50001, ISO9001, ISO14001, ISO17020, ISO27001 and OHSAS18001. The Group operates from over 200 fixed sites across the UK and Ireland together with a number of on-site facilities at client locations, from an international office based in Abu Dhabi and through a joint venture in Kazakhstan.

Chairman's statement

Overview

I am pleased with these results as we have again grown revenue and underlying profitability through our strategy of delivering best in class performance and focusing on the customer experience. The business has adapted quickly to the challenges of the COVID-19 pandemic and is continuing to trade from a reduced footprint at this time. We have finished the year with excellent customer relationships and remain in a strong financial position from which to build as market conditions return to normal.

COVID-19

The Group reacted quickly to manage its cost base and cash resources following the outbreak of the COVID-19 pandemic in March 2020. Our UK and Ireland operations have remained open, and we have continued to serve our customers nationally, albeit from a reduced depot footprint. Revised health and safety processes have been put in place to protect colleagues and customers and to ensure we are able to continue to support our customers throughout this period.

Our revenues declined initially, but are recovering as we have seen customers returning to work. We have reduced our staff costs through the use of Government support schemes, minimised all other variable costs where possible and frozen all capital expenditure unless specifically needed to meet customer requirements. We continue to apply strict financial discipline to the management of working capital.

The Group is in a strong financial position with substantial unutilised bank facilities and robust plans in place to manage through the anticipated crisis period and adapt our business model as we return to a new normal. We have modelled a range of downturn scenarios and under all of these the Group continues to generate cash and would not breach any of the covenant tests under its banking facilities. The Group has operated with conservative debt levels and consequently at current revenue levels it would be able to operate throughout FY21 within existing banking facilities and without breaching any covenant tests.

Results

Group revenue and underlying profitability has increased reflecting the strategy to acquire specialist businesses and grow higher margin SME customer revenues. Towards the financial year end UK and Ireland revenues were affected by reduced customer demand due to COVID-19, although we have now started to see a return in activity levels. Our Geason Training business has not performed in line with expectations and actions are now in place to address this. Nevertheless services revenues have continued to grow and now amount to over 40% of Group revenues. In the Middle East profitability during the year reduced slightly, due to the revised commercial terms necessary to secure an extension to the contract term. More recently the business has continued to perform well in spite of a reduction in activity levels due to the recent decline in the oil price.

Dividend

As a result of the COVID-19 pandemic the Group has taken advantage of substantial Government support schemes in the UK and implemented cost reduction measures across the business that have affected colleagues and other stakeholders. Whilst the Board recognises the importance of dividend returns and financial discipline to shareholders, in the current exceptional circumstances it has decided not to recommend payment of a final dividend for the year. The Board has not fundamentally changed its dividend policy and will consider whether it is appropriate to recommend payment of an interim dividend for the current financial year at the time of the half year results in November.

Board and people

Rhian Bartlett joined the Board as a Non-Executive Director and member of the Audit & Risk, Remuneration and Nomination Committees on 1 June 2019. I am delighted to welcome her and pleased with the contribution she has already made to the Board.

Chris Morgan will leave the Board on 31 July 2020; I would like to take this opportunity to thank Chris for his efforts over the past four years.

We carried out an external board evaluation during the year and have decided to make a number of changes to roles and committee structures with the aim of enhancing our existing governance structure and spreading responsibilities more evenly across the Board. I am announcing today that Bob Contreras will step down from his role as Senior Independent Director on 1 August 2020. Bob has undertaken this role for almost five years and I would like to express my personal thanks to him for his significant contribution and wise counsel to the Board throughout that period. He remains as the Chairman of the Audit & Risk Committee while David Garman will take over from him as Senior Independent Director.

We also plan to commence a recruitment exercise to add an additional Non-Executive Director to the Board over the next few months. The objective is to add to the existing complement of skills on the Board in the area of HR and People related matters, enhance Board diversity and plan for future succession.

The past few months have proved challenging for all of my colleagues, whether they have continued to be working or on furlough. I would like to take this opportunity to record my personal appreciation to all of the Speedy family for their dedication and continuing support at this challenging time.

Future

I am pleased with the performance and resilience of the business over the past year and more recently since the advent of the COVID-19 crisis. Our operating environment has changed and we will face challenges and uncertainties in the coming year. However we have a clear plan for managing the business through this period and will react and adapt our plans quickly to respond to changes in market dynamics as we move into a post COVID-19 world. A strong balance sheet and the actions which we have already taken to enhance the resilience of the business will allow us to respond to opportunities which will arise as markets recover.

David Shearer

Chairman

Chief Executive's statement

Overview

I am pleased to report continued momentum over the last financial year in achieving our strategic objectives, notwithstanding the reduction in activity levels we experienced in late March 2020 due to the COVID-19 pandemic. I am immensely proud of all of my colleagues' efforts and support during these unprecedented times, as we have continued to provide essential services and adapted to new ways of working.

COVID-19

At the end of March 2020, in response to the outbreak of COVID-19 and related Government guidance, we took immediate and decisive action to protect the health and safety of our colleagues and stakeholders whilst maintaining the ability to support our customers, contain costs and preserve cash. We temporarily closed a number of our depots, and furloughed c.1,800 of our colleagues in the UK under the Government's Coronavirus Job Retention Scheme and in Ireland under the Irish Government's Wage Subsidy Scheme.

A recruitment freeze was put in place and the annual salary review that was due on 1 April 2020 has been deferred. All Board directors and the leadership team agreed to reduce salaries and fees by 20% for a period of three months from 1 April 2020. All non-essential spend has been suspended and variable operating costs, including IT and vehicle costs, have been reduced.

In April Group revenues were c.35% below the prior year as we continued to trade through our larger superstores servicing customers who were providing essential services. Recently, we have seen revenue increase as customers in England, Wales and Ireland return to work. In June hire revenue in the UK and Ireland is c.17% below the prior year. Whilst c.30% of colleagues remain on furlough, we have started to re-open depots and un-furlough colleagues at a rate that reflects increases in customer demand.

The young age profile of the Group's hire fleet has allowed us to significantly reduce capital expenditure. In the short term, whilst the uncertainty continues, all non-essential capital expenditure has been suspended with capital expenditure incurred in April and May amounting to c.GBP0.5m.

The Group has taken advantage of other Government COVID-19 support, including business rates relief, and a reduction, or deferral, in taxes payable. These support measures combined with other measures we have taken give the Board confidence in the Group's ability to continue to generate cash and operate within its existing debt facilities and covenant tests during a prolonged period of reduced activity. As a result of the measures taken the Group has generated cash for the months of April and May with net debt(3) at 31 May 2020 amounting to GBP67.3m.

As our operations return to normal we will learn from the experiences of the past few months in order to simplify and standardise our operating model. This will allow us to be better placed to address growth opportunities and be more efficient in our day to day operations.

Financing and liquidity

The Group has a committed asset based facility of GBP175m and an overdraft facility of GBP5m, available until October 2022. Net debt(3) , excluding lease liabilities, as at 31 March 2020 was GBP79.3m, after continued hire fleet investment of c.GBP55m in the year to support asset availability and our four-hour nationwide service promise. As a result, the Group has significant headroom against its committed banking facilities totalling GBP180m and, in addition, has an uncommitted accordion facility of GBP220m. Leverage(5) at 31 March 2020 was 1.0 times, below the Board's target range through the cycle, which we believe is appropriate in current times.

Results

Group revenue increased by 3.0% to GBP406.7m (2019: GBP394.7m). Group revenues, excluding disposals, increased by 3.4% to GBP402.5m (2019: GBP389.2m), reflecting prior year acquisitions and growth in SME customer revenues, offset by the impact of reduced activity levels due to COVID-19 towards the year end.

UK and Ireland Services revenue grew by 8.9%, primarily due to the prior year acquisition of Geason Training and growth in our Lloyds British testing business. In the Middle East revenues fell slightly reflecting revised commercial terms negotiated as part of an extension to the term of the main contracts.

Gross margin increased to 55.1% (2019: 54.3%), as a result of increased revenues from higher margin SME customers and an increase in Services revenues. Overheads increased as a result of the acquisitions, however remain tightly controlled and consequently EBITA(1) increased by 6.5% to GBP39.1m (2019: GBP36.7m). EBITDA(1) increased by 2.5% to GBP107.4m (2019: GBP104.8m).

There were GBP12.9m of net exceptional expenses incurred during the year (2019: GBP2.0m) principally in relation to Geason Training. As previously announced Geason Training has not performed in line with expectations and consequently exceptional items include a charge for the impairment of assets, partially offset by a write back of contingent consideration. Further details are included in the Financial review.

Adjusted profit before tax increased to GBP34.9m (2019: GBP31.4m). Adjusted earnings per share(2) increased to 5.54 pence (2019: 4.96 pence).

The net book value of the Group's hire fleet increased to GBP227.1m (2019: GBP 216.9m). Capital expenditure supported the expansion of our four-hour delivery service in London to a nationwide promise across the UK, and grew the international fleet in order to diversify our customer base. The investment has enabled us to maintain a low average fleet age of 3.4 years (2019: 3.3 years) which will allow capital expenditure to reduce during FY2021. Asset utilisation in the UK and Ireland pre COVID-19 was 56.6% (2019: 57.0%), reflecting investment to support our four-hour delivery promise.

Dividend

The Group remains in a strong financial position, with substantial headroom, despite the reduction in activity levels as a result of the COVID-19 pandemic. The Group has modelled a range of outcomes from COVID-19 and under all scenarios is projecting to generate cash over the coming financial year as a result of the cost saving measures it has implemented, reductions to planned capital expenditure and the utilisation of Government support. Under the current circumstances the Board has decided it would not be appropriate to recommend payment of a final dividend. The Board will consider whether it is appropriate to recommend payment of an interim dividend at the time of the half year results in November.

Strategy and operational review

Our vision is to be the best company in our sector to do business with and the best to work for. This entails being uniquely customer focused in everything that we do and actively listening and communicating with our people.

UK and Ireland

We serve c.54,000 customers in the UK and Ireland, ranging from large national contractors to local SMEs. We are pleased to have extended our contract with Babcock, and won and renewed a number of significant contracts including with Morgan Sindall, Welsh Water, Sellafield, Persimmon, Crest Nicholson and AmcoGiffen. We have also further grown our SME revenues by over 30% and customer numbers to c.50,000. This has been achieved by proactively managing these customers through our Customer Relationship Centre (CRC) in South Wales, enhancing service levels to this customer base whilst reducing our cost to serve. During the year we expanded the CRC and re-profiled our sales force to enable targeted new customer acquisition and development of existing accounts. In addition we created new specialist teams with technical knowledge to better service our customers' needs.

We have grown our Services businesses faster than our hire business. Services revenues are less capital intensive, have greater visibility and are more recurring in nature than hire revenues. As a result they are ROCE(4) enhancing for the Group. Our Services categories consist of: re-hire; training; testing, inspection and certification; product and consumable sales; and fuel management services. We target our sales force to sell the full range of our Services to customers. 40% of our revenue now comes from Services compared to c.30% three years ago, primarily due to growth in testing and training revenues from the acquisitions of Lloyds British and Geason Training respectively. Geason Training has performed below expectations during the year due to lower than expected learner enrolments, the setup of a number of regional training centres which have yet to reach critical mass and a poor control environment. More recently the business has been further affected by an assurance visit from a funding agency and market conditions due to COVID-19. All goodwill and contingent consideration payable in relation to the acquisition has been written off and we have provided for amounts which may become repayable as a result of the assurance visit. The strategy remains to grow a profitable training business, and consequently the Group has implemented a number of management changes and is reviewing further initiatives to improve its financial position.

Our customers' key priority is the prompt availability of products for hire. We offer a unique four-hour delivery service on our most popular products. This four-hour promise was originally launched within the M25 in November 2018, and in January 2020 was extended nationally. The success of this service reflects our customer service culture, and the investment we have made in equipment, systems and processes. We will continue to evolve our service offering to ensure that we are able to offer our customers the service that they have come to expect.

We have made further progress in the use of artificial intelligence to optimise our data and identify areas for improving efficiency. We are using machine learning to set depot stocking levels, target sales activity and optimise logistics. During FY2020 we re-launched our online account management service 'MySpeedy' with an improved customer interface and new features. The enhanced service enables both large and small customers instant secure access to their hire information, together with a range of features including: flexible user access levels for our larger account customers; the ability to view transactions and history including deliveries, collection and off-hires; the ability to download and print documents including invoices, proof of delivery and collection notices, and compliance certificates; and enables customers to on-hire and off-hire directly from their mobile device. All of this makes it easier for our customers to do business with us whether by telephone, in-depot or digitally through our website or mobile app. We have made further progress during the year with our mobile app and are in active discussions with a number of our major customers to fully integrate the app into their ordering process.

International

In the Middle East we provide equipment and manpower to the oil and gas market, principally in Abu Dhabi. We have operated in the region for many years and have worked on our main contracts for in excess of seven years; during the year the contracts were renewed for a further year to 31 May 2020 and have subsequently been extended to 31 August 2020. We are in active discussions with our main customer in relation to longer term opportunities. As a result of regional market conditions, and more recently the declining oil price, the commercial terms of the extensions were less favourable. International revenue decreased by 2.5% due to lower rehire and consumable sales, although hire revenue grew 11.4%. EBITA(1) fell by 3.4% reflecting lower margins negotiated to secure the contract extensions. EBITA(1) margins remained broadly consistent year on year at 16.2% (2019: 16.3%) reflecting continued strong returns from the asset base.

The Group has a 45% share in a joint venture in Kazakhstan serving the oil and gas market. Share of profits increased to GBP2.8m (2019: GBP1.9m) reflecting strong asset utilisation due to increased cyclical shutdown activity in the period.

Energise

We launched a new Environmental, Social and Governance (ESG) initiative, Energise, in October 2019. This encompasses a strategy to improve our own environmental and sustainability performance, but also a commitment to continue to invest in the latest innovative technology for the hire fleet. Increasingly alternative options such as hybrid, solar and hydrogen are becoming viable power sources and we are committed to investing in this cleaner technology for our customers. The Energise programme also encompasses our community engagement and I am delighted to see so many of my colleagues participating in volunteering activities during the year.

People

The Group's headcount at 31 March 2020 was consistent with the prior year at 4,065 (2019: 4,063).

During the year we undertook a pulse survey of all colleagues to ascertain progress against the full survey results undertaken the prior year. I am pleased to report that once again our response rate and engagement scores were strong. Our intention was to perform the full survey in April 2020; however this will now be undertaken once normal working conditions resume. Feedback from prior year surveys has related to communication and during the year we launched a new web and app based communications tool, 'The Hub'. This has proved invaluable for communicating with staff, including those furloughed, at this time. We have also introduced a number of regional employee forums with the Chairpersons meeting myself and the HR Director quarterly in order to address any matters raised.

The Board is committed to maintaining the welfare of our colleagues at this challenging time. We have ensured that there is regular communication with, and support for colleagues who are participating in the long-term success of the business, whether working or on furlough leave. This has included calls with all furloughed staff from the senior management team. I would like to take this opportunity to thank all my colleagues for their ongoing support and dedication during the year, and as we continue to navigate this challenging time.

Guidance

As stated in our announcements on 9 April 2020 and 8 June 2020, the COVID-19 situation is likely to remain uncertain for some time and the Group therefore confirms all guidance remains suspended until the position stabilises.

Summary and outlook

I am pleased to report continued positive momentum across the Group. We have a well invested fleet, diversified customer base and robust balance sheet.

Our priority remains the welfare of our colleagues, customers and the communities we serve. We continue to monitor Government guidance and take action to ensure the safety of our colleagues as we continue to operate to satisfy customer demand. Whilst COVID-19 will have some financial impact on the business, I am reassured by our performance in the last three months. We are well placed to emerge in a position of strength to pursue our strategic objectives as more normal trading levels return.

Russell Down

Chief Executive

Financial review

COVID-19

The UK and Ireland businesses experienced a slowdown as result of COVID-19 from the middle of March 2020. This reduced profitability for the year by c.GBP2.5m, mainly due to lower core hire revenue and the postponement of profitable planned disposals. As at the end of March 2020, the International businesses were largely unaffected.

Decisive action was swiftly taken to contain costs and preserve cash, and the Board remains confident that the business can operate within its existing debt facilities and covenant tests during a period of reduced trading activity.

Impact of reporting under IFRS 16 Leases

From 1 April 2019 the Group has reported under IFRS 16 Leases for the first time. This has resulted in a material grossing up of the Balance Sheet with the recognition of a right of use asset and corresponding lease liability for all qualifying leased equipment, vehicles and property. The Income Statement now reflects depreciation on the right of use asset, and interest charged on the lease liability, largely offset by rental charges no longer recognised. With respect to the Cash Flow Statement, there have been no changes in the overall reported net cash flows although operating cash flows and financing cash flows have been adjusted.

The financial impact of IFRS 16 in the period has been to increase EBITA(1) by GBP5.3m, to increase profit before tax by GBP1.7m and to increase profit before tax, amortisation and exceptional items by GBP2.1m. In the Balance Sheet, the right of use asset recognised at 31 March 2020 is GBP64.7m and the corresponding lease liability recognised is GBP72.9m. In the Income Statement, an additional GBP23.8m of depreciation has been charged and an incremental interest charge of GBP3.2m has been recognised, offset by GBP29.1m of rental charges no longer recognised.

A reduction in retained earnings of GBP10.5m was recognised upon transition to IFRS 16 on 1 April 2018.

Group financial performance

Revenue (excluding disposals) for the year to 31 March 2020 increased by 3.4% to GBP402.5m (2019: GBP389.2m). Revenue from disposals was GBP4.2m (2019: GBP5.5m); total revenue for the period increased by 3.0% to GBP406.7m (2019: GBP394.7m).

Gross profit was GBP224.2m (2019: GBP214.4m), an increase of 4.6%. The gross margin increased to 55.1% (2019: 54.3%), reflecting the mix impact of training at higher margin, and increased revenue from SME customers at better rates.

EBITA(1) increased by 6.5% to GBP39.1m (2019: GBP36.7m) and profit before taxation, amortisation and exceptional costs increased to GBP34.9m (2019: GBP31.4m).

The Group incurred net exceptional expenses before taxation of GBP12.9m (2019: GBP2.0m). Further details are included below.

After taxation, amortisation and exceptional items, the Group made a profit of GBP16.8m, compared to a profit of GBP23.2m in 2019.

Segmental analysis

The Group's segmental reporting is split into UK and Ireland, and International. The figures in the tables below are presented before corporate costs of GBP3.9m (2019: GBP5.4m), which have reduced 27.8% reflecting continued cost control and lower IT depreciation.

 
                       Year ended   Year ended   Movement 
                         31 March     31 March 
 UK and Ireland              2020         2019 
                             GBPm         GBPm          % 
 
 Revenue (excluding 
  disposals)                367.3        353.1        4.0 
 
 EBITDA(1,*)                102.7        100.5        2.2 
 
 EBITA(1,*)                  37.3         36.2        3.0 
 
 

* Restated as a result of the adoption of IFRS 16 - see Note 1 (Basis of preparation)

Excluding disposals, revenue increased by 4.0% to GBP367.3m (2019: GBP353.1m) with an increase across both Hire and Services. Revenue for the period benefited from the full year effect of the acquisitions of Geason Training and Lifterz.

Hire revenues increased by 1.4%. Increased telemarketing activity at our Customer Relationship Centre in Newport, South Wales continued to result in significant revenue uplift from SME customers, which grew 32.1%. This growth helped offset less favourable trading conditions, Carillion comparatives and the impact of COVID-19 in March 2020. The addition of Lifterz in March 2019 has complemented Speedy's previous powered access acquisitions, creating a comprehensive national presence. We now have the second largest fleet in the UK.

Services revenues grew by 8.9%. This has been achieved following the acquisition of Geason Training, and testing and rehire growth. Despite this, Geason Training has performed below expectations during the year due to lower than expected learner enrolments and the setup of a number of regional training centres which have yet to reach critical mass. More recently the business has been further impacted by market conditions due to COVID-19 and an assurance visit from a funding agency as described in Note 14. As a consequence the fair value of the contingent consideration has been reduced to GBPnil (2019: GBP10.9m), and an impairment charge recognised of GBP20.1m. The net impact of the impairment and the contingent consideration adjustment is GBP9.2m.

Gross margins improved from 57.1% to 57.7%. Hire margin increased to 77.0% (2019: 76.7%), and was supported by the growth in the higher margin SME market, which more than offset price deflation. Services margin strengthened to 26.0% (2019: 23.2%) due to the mix benefit of the training growth. Overheads remain under tight control and, excluding acquisitions, were 3.1% lower than the comparative period. Headcount has increased slightly to 3,464, compared to 3,458 at 31 March 2019.

Asset utilisation pre COVID-19 was 56.6% (2019: 57.0%), and reflected investment to support our four-hour delivery promise.

The business continues to perform well in a competitive market despite uncertainty during the year associated with the UK's departure from the European Union, and more recently, COVID-19. A number of decisive actions have been swiftly taken to contain costs and preserve cash, whilst maintaining the capability to support customers, and protect the health and safety of colleagues and stakeholders.

 
                  Year ended   Year ended   Movement 
                    31 March     31 March 
 International          2020         2019 
                        GBPm         GBPm          % 
 
 Revenue                35.2         36.1      (2.5) 
 
 EBITDA(1,*)             8.2          8.5      (3.5) 
 
 EBITA(1,*)              5.7          5.9      (3.4) 
 
 

* Restated as a result of the adoption of IFRS 16 - see Note 1 (Basis of preparation)

International revenue in the United Arab Emirates decreased by 2.5%. This slowdown in growth from previous periods was anticipated due to lower rehire and consumable sales, although hire revenue grew 11.4%. The renegotiation during 2019 to secure the extensions with our principal customer, Abu Dhabi National Oil Corporation (ADNOC), has impacted commercial terms, contributing to a decrease in EBITA(1) , which fell by 3.4%. Despite the fall, EBITA(1) margin was 16.2% (2019: 16.3%) reflecting continued strong returns from the asset base.

Our share of profit from the joint venture in Kazakhstan increased to GBP2.8m (2019: GBP1.9m) having benefited from further increased cyclical shutdown activity in the period.

Exceptional items

There were GBP12.9m net exceptional expenses incurred during the year (2019: GBP2.0m).

 
                                               Recognised      Recognised 
                                          in distribution              in 
                                                and admin   net financial 
                                                 expenses        expenses           Total 
                                           --------------  --------------  -------------- 
                                                     GBPm            GBPm            GBPm 
 
Changes to fair value of contingent 
 consideration                                          -            10.9            10.9 
Impairment of Training CGU                         (20.1)               -          (20.1) 
Training provision                                  (3.0)               -           (3.0) 
                                               ----------      ----------      ---------- 
Exceptional items relating to Training 
 CGU                                               (23.1)            10.9          (12.2) 
 
Sale of surplus land                                  3.9               -             3.9 
Integration costs                                   (1.7)               -           (1.7) 
Property related costs                              (2.0)               -           (2.0) 
COVID-19 related costs                              (0.6)               -           (0.6) 
International contract costs                        (0.3)               -           (0.3) 
                                               ----------      ----------      ---------- 
                                                   (23.8)            10.9          (12.9) 
 
 

A GBP20.1m impairment charge for the Training cash-generating unit (CGU) was recognised in operating profit in the year, offset by an exceptional financial credit of GBP10.9m (2019: expense GBP0.8m) in relation to changes in the fair value of contingent consideration payable for the Geason Training acquisition.

Other exceptional items comprised a GBP3.0m training provision relating to potential funding repayments and associated costs, GBP1.7m acquisition and integration costs, GBP2.0m property related costs, GBP0.6m COVID-19 related expenses and GBP0.3m in relation to the UAE contract renewal. These were in part offset by a profit on the sale of a plot of surplus land of GBP3.9m.

Interest

The Group's net financial expense before exceptional items decreased slightly to GBP7.0m (2019: GBP7.2m).

Borrowings under the Group's bank facility are priced on the basis of LIBOR plus a variable margin, while any unutilised commitment is charged at 35% of the applicable margin. During the period, the margin payable over LIBOR on the outstanding debt fluctuated between 1.50% and 2.00% dependent on the Group's performance in relation to leverage and the weighting of borrowings between receivables and plant and machinery. The effective average margin in the period was 1.84% (2019: 1.80%).

The Group utilises interest rate hedges to manage fluctuations in LIBOR. The fair value of these hedges was not material at 31 March 2020 and they have varying maturity dates to October 2022.

Interest on lease liabilities of GBP3.2m (2019: GBP3.5m) was incurred during the period, following the implementation of IFRS 16 (see Note 1 Basis of Preparation).

Taxation

The Group seeks to protect its reputation as a responsible taxpayer, and adopts an appropriate attitude to arranging its tax affairs, aiming to ensure effective, sustainable and active management of tax matters in support of business performance.

The tax charge for the period was GBP3.9m (2019: GBP5.5m), with an effective tax rate of 18.8% (2019: 19.2%); the decrease in the effective rate includes the impact of exceptional items in the period. The underlying effective tax rate amounts to 17.2% (2019: 17.5%).

Shares, earnings per share and dividends

At 31 March 2020, 526,773,177 Speedy Hire Plc ordinary shares were outstanding, of which 5,472,206 were held in the Employee Benefits Trust.

Adjusted earnings per share(2) was 5.54 pence (2019: 4.96 pence), an increase of 11.7%. Basic earnings per share was 3.23 pence (2019: 4.47 pence).

An interim dividend of 0.70 pence per share (2019: 0.60 pence per share) was paid on 10 January 2020. In view of the current exceptional circumstances, the Board has not recommended payment of a final dividend (2019: 1.40 pence per share).

Capital expenditure and disposals

Total capital expenditure during the year amounted to GBP63.2m (2019: GBP61.8m), of which GBP55.3m (2019: GBP55.1m) related to equipment for hire, and GBP7.9m to other property, plant and equipment (2019: GBP6.7m), which included investment in IT in order to deliver our digital strategy.

Expenditure in the period reflects further investment in tools, access, generators and lighting to improve availability in these categories, ensuring that the UK and Ireland businesses can continue to execute our four- hour delivery promise. Investment also increased in the UAE, to support hire growth with non ADNOC customers. Since November 2017 the Group has invested over GBP55m in the powered access market in line with its strategy to build a national presence through in-fill acquisitions and organic capital expenditure, and now has the second largest fleet in the UK.

Capital expenditure has maintained the young average age of the fleet; 3.4 years (2019: 3.3 years). Total disposal proceeds were GBP11.7m (2019: GBP17.8m). During the period we further optimised our stockholdings across the network, applying machine learning to inform decisions on returns and asset utilisation, which highlighted those areas requiring investment. The number of product lines has further reduced, and this has enabled us to continually improve the efficiency of our supply chain.

Balance sheet

The Group continues to have a strong balance sheet, which reflects the proactive management of the asset fleet and working capital.

Net assets at 31 March 2020 were GBP209.9m (2019: GBP202.0m), equivalent to 39.8 pence per share.

Net property, plant and equipment (excluding IFRS 16 right of use assets) was GBP257.6m at 31 March 2020 (2019: GBP249.1m), of which equipment for hire represents 88.2% (2019: 87.1%). Of the equipment for hire, GBP11.4m related to the International business (2019: GBP7.1m).

Intangibles decreased to GBP23.1m (2019: GBP41.7m), which included the impairment of goodwill and other intangibles associated with the Training CGU (GBP18.5m), and also acquisition fair value adjustments.

Right of use assets of GBP64.7m (2019: GBP72.2m) and corresponding lease liabilities of GBP72.9m (2019: GBP82.4m) were recognised at 31 March 2020 following the implementation of IFRS 16.

Gross trade receivables totaled GBP100.7m at 31 March 2020 (2019: GBP100.2m). Bad debt provisions were GBP3.9m at 31 March 2020 (2019: GBP3.7m), equivalent to 3.9% of gross trade receivables (2019: 3.7%), with an improved trend despite the increased bad debt risk associated with COVID-19. Debtor days were 69.6 (2019: 65.8), of which UK and Ireland were 66.0 (2019: 64.1).

Trade payables were GBP52.3m (2019: GBP45.9m). Creditor days were 103.7 (2019: 99.3).

Cash flow and net debt(3)

Cash generated from operations for the year was GBP64.5m (2019: GBP61.2m). Free cash flow (before dividends and financing activities) increased to GBP45.2m (2019: GBP13.6m), reflecting the acquisitions made in the prior year.

Net debt(3) decreased by GBP9.8m from GBP89.1m at the beginning of the period to GBP79.3m at 31 March 2020. Excluding the impact of IFRS 16, leverage(5) improved to 1.0x (2019: 1.1x).

The Group's continued strong cash position resulted in substantial headroom within the Group's bank facility.

Capital allocation policy

The Board intends to continue to invest in the business in order to grow revenue, profit and ROCE(4) . This investment is expected to include capital expenditure within existing operations, as well as value enhancing acquisitions that fit with the Group's strategy and are returns accretive.

The Board's objective is to maximise long term shareholder returns through a disciplined deployment of cash generated, and it has adopted the following capital allocation policy in support of this:

- Organic growth: the Board will invest in capital equipment to support demand in our chosen markets. This investment will be in hire fleet and IT systems to better enable us to serve our customers;

- Regular returns to shareholders: the Board intends to pay a regular dividend to shareholders, with a policy of growing dividends through the business cycle, and a payment in the range of between 33% and 50% adjusted earnings per share(2) ;

- Acquisitions: the Board will continue to explore value enhancing acquisition opportunities in markets adjacent to, and consistent with its existing operations;

- Gearing and treatment of excess capital: the Board is committed to maintaining an efficient balance sheet. The Board has adopted a target gearing in the region of 1.5x net debt(3) to EBITDA(1) through the business cycle, although it is prepared to move outside this if circumstances warrant. The Board will continue to review the Group's balance sheet in light of the policy, and medium term investment requirements, and will return excess capital to shareholders if and when appropriate.

Capital structure and treasury

Speedy's long term funding is provided through a combination of shareholders' funds and bank debt.

The Group's GBP180m asset based finance facility, which was amended and extended in October 2017, runs through to October 2022. The additional uncommitted accordion of GBP220m remains in place through to October 2022, should further funding requirements be needed.

The average gross borrowings under the facility during the year ended 31 March 2020 increased to GBP110.2m (2019: GBP92.9m) reflecting the full year effect of the acquisitions of Geason Training and Lifterz. The facility includes quarterly leverage(5) and fixed charge cover covenant tests which are only applied if headroom in the facility falls below GBP18m. The Group had significant headroom against these tests throughout the period.

Return on capital

ROCE(4) is a key performance measure for the Group and increased to 12.0% (2019: 11.7%). This remains significantly ahead of the Group's weighted average cost of capital of 9.2%, and continues to reflect the improved profitability and balance sheet discipline.

Chris Morgan

Group Finance Director

The responsibility statement below has been prepared in connection with the Group's full annual report for the year ended 31 March 2020. Certain parts of that report are not included within this announcement.

Directors' Responsibilities Statement

We confirm that to the best of our knowledge:

-- the Financial Statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

-- the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

The names and functions of the Directors of the Company are:

   Name                             Function 
   David Shearer               Chairman 
   Russell Down                Chief Executive 
   Chris Morgan                Group Finance Director 
   Bob Contreras               Senior Independent Director 
   Rob Barclay                  Non-Executive Director 
   David Garman               Non-Executive Director 
   Rhian Bartlett                Non-Executive Director 

Principal Risks and Uncertainties

The business strategy in place and the nature of the industry in which we operate expose the Group to a number of risks. As part of the risk management framework in place, the Board considers on an ongoing basis the nature, likelihood and potential impact of each of the significant risks it is willing to accept in achieving its strategic objectives.

The Board has delegated to the Audit and Risk Committee responsibility for reviewing the effectiveness of the Group's internal controls, including the systems established to identify, assess, manage and monitor risks. These systems, which ensure that risk is managed at the appropriate level within the business, can only mitigate risk rather than eliminate it completely.

Direct ownership of risk management within the Group lies with the senior management teams. Each individual is responsible for maintaining a risk register for their area of the business and is required to update this on a regular basis. The key items are consolidated into a Group risk register which has been used by the Board to carry out a robust assessment of the principal risks.

The principal risks and mitigating controls in place are summarised below.

 
 Risk                     Description and potential impact              Strategy for mitigation 
                         --------------------------------------------  ----------------------------------------- 
 COVID-19 pandemic        Trading performance                           As a supplier to industries 
                           The UK and Ireland imposed                    that have continued to operate, 
                           lockdown has reduced economic                 the Group has also continued 
                           activity and this slowdown                    to trade. Entering the new 
                           has affected Group revenues.                  financial year a significant 
                           The uncertainty of the length                 proportion of revenues have 
                           of the downturn in revenue                    been retained, with trading 
                           leads to difficulty in forecasting.           through the Group's digital 
                                                                         platform and by telephone. 
                           People                                        During the lockdown we suspended 
                           The COVID-19 pandemic may lead                hire charges for equipment 
                           to shortages in the workforce                 not in use in order that the 
                           as a direct result of illness,                impact was minimised. 
                           social shielding or isolation 
                           measures, along with depot                    We acted quickly to contain 
                           closures. This may result in                  costs and preserve cash, including 
                           an inability to effectively                   halting all discretionary 
                           service our customers' requirements.          spend and consolidating our 
                                                                         depot network, temporarily 
                           Supply chain                                  closing sites and servicing 
                           The supply of goods, services                 our clients from alternative 
                           and assets (including the availability        locations, thus ensuring we 
                           of spares) may be disrupted.                  maintain a national coverage. 
                           This may also result in an 
                           inability to effectively service              We continue to monitor Government 
                           our customers' requirements.                  guidance and take action to 
                                                                         ensure the safety of our colleagues, 
                           Middle East                                   as we support customers continuing 
                           With a mainly expat workforce,                to operate. 
                           travel restrictions may result 
                           in an inability to operate                    We have utilised the Government's 
                           our offshore activities. The                  coronavirus job retention 
                           global decline in demand for                  scheme, furloughing up to 
                           oil may result in a reduction                 50% of our workforce. This 
                           of the market in which the                    increases the opportunity 
                           Group predominantly operates                  for our people to remain healthy 
                           its overseas division.                        pending a return to work, 
                                                                         whilst also reducing costs. 
                                                                         We have followed Government 
                                                                         advice, with all employees 
                                                                         who can perform duties from 
                                                                         home doing so. This involves 
                                                                         the utilisation of our secure 
                                                                         and robust infrastructure 
                                                                         and technology platforms. 
                                                                         Despite many colleagues working 
                                                                         from home, we have not experienced 
                                                                         a noticeable drop in productivity. 
 
                                                                         Speedy operates one of the 
                                                                         youngest hire fleets in the 
                                                                         industry and is well placed 
                                                                         to provide asset availability 
                                                                         as a result of better reliability. 
                                                                         The age profile also allows 
                                                                         us to optimise capital expenditure 
                                                                         management during this period, 
                                                                         whilst maintaining customer 
                                                                         service. Our planning for 
                                                                         Brexit included increasing 
                                                                         our stocks of critical spares, 
                                                                         and these remain in place 
                                                                         to allow us to maintain our 
                                                                         fleet effectively if there 
                                                                         are short term disruptions 
                                                                         to the supply chain. 
 
                                                                         Based on various revenue downturn 
                                                                         scenarios, and the measures 
                                                                         outlined above, the Board 
                                                                         remains confident that the 
                                                                         Group can operate within its 
                                                                         existing debt facilities and 
                                                                         covenant tests during a prolonged 
                                                                         period of reduced trading 
                                                                         activity, including in the 
                                                                         event of a second lockdown. 
 
                                                                         In the Middle East we implemented 
                                                                         similar measures to those 
                                                                         in the UK with remote working 
                                                                         where possible from the outset 
                                                                         of the pandemic. Employees 
                                                                         based offshore have remained 
                                                                         in situ and continue to provide 
                                                                         service where required by 
                                                                         our customers, operating a 
                                                                         two-shift rotation pattern 
                                                                         for safety where appropriate. 
                                                                         Incentives have been used 
                                                                         to maintain morale for those 
                                                                         not permitted to return home. 
                                                                         Should a reduction in the 
                                                                         Middle East market become 
                                                                         apparent as a result of COVID-19, 
                                                                         the cost base will be managed 
                                                                         appropriately. 
-----------------------  --------------------------------------------  ----------------------------------------- 
 Safety, health           Serious injury or death                       The Group is recognised for 
  and environment          Speedy operates, transports                   its industry-leading position 
                           and provides for rental a wide                in promoting enhanced health 
                           range of machinery. Without                   and safety compliance, together 
                           rigorous safety regimes in                    with a commitment to product 
                           place there is a risk of injury               innovation. The Group's health, 
                           or death to employees, customers              safety, and environmental 
                           or members of the public.                     teams measure and promote 
                                                                         employee understanding of, 
                           Environmental hazard                          and compliance with, procedures 
                           The provision of such machinery               that affect safety and protection 
                           includes handling, transport                  of the environment. Customer 
                           and dispensing of substances,                 account managers are responsible 
                           including fuel, that are hazardous            for addressing service and 
                           to the environment in the event               safety issues. 
                           of spillage. The delivery locations 
                           for many of our customers require             We maintain systems that enable 
                           Speedy to operate in designated               us to hold appropriate industry 
                           low emission zones.                           recognised accreditations. 
 
                                                                         Speedy has incorporated hybrid 
                                                                         and fully electric vehicles 
                                                                         into the commercial fleet 
                                                                         to ensure we meet and in some 
                                                                         cases exceed emission requirements. 
 
                                                                         All operatives who handle 
                                                                         hazardous substances are trained 
                                                                         and provided with appropriate 
                                                                         equipment to manage small 
                                                                         scale spills. In the case 
                                                                         of more serious accidents, 
                                                                         we have a contract with a 
                                                                         third party specialist who 
                                                                         would undertake any clean-up 
                                                                         operation as necessary. 
-----------------------  --------------------------------------------  ----------------------------------------- 
 Service                  Provision of equipment                        During the year we have successfully 
                           Speedy is required to provide                 launched our nationwide four 
                           well maintained equipment to                  hour service promise under 
                           its customers on a consistent                 "Trust Speedy to Deliver". 
                           and dependable basis.                         Our use of personal digital 
                                                                         assistants (PDAs) and online 
                           Back office services                          based customer feedback system 
                           It is important that Speedy                   are fully embedded into our 
                           is able to provide timely and                 business and these are used 
                           accurate management information               to improve the on-site customer 
                           to its customers, along with                  experience. 
                           accurate invoices and supporting 
                           documentation.                                Speedy liaises with its customer 
                                                                         base and takes into account 
                           In both cases, a failure to                   feedback where particular 
                           provide such service could                    issues are noted, to ensure 
                           lead to a failure to attract                  that work on resolving those 
                           or retain customers, or to                    issues is prioritised accordingly. 
                           diminish the level of business 
                           such customers undertake with 
                           Speedy. 
-----------------------  --------------------------------------------  ----------------------------------------- 
 Revenue                  Competitive pressure                          The Group monitors its competitive 
  and trading              The hire market is fragmented                 position closely, to ensure 
  performance              and highly competitive. We                    that it is able to offer customers 
                           are continuing to develop strategic           the best solution. The Group 
                           relationships with larger customers           provides a wide breadth of 
                           and also working hard to grow                 offerings, supplemented by 
                           our local and regional accounts.              its rehire division for specialist 
                                                                         equipment. The Group monitors 
                           Reliance on high value customers              the performance of its major 
                           There is a risk to future revenues            accounts against forecasts, 
                           should preferred supplier status              strength of client future 
                           with larger customers be lost                 order books and individual 
                           when such agreements may individually         expectations with a view to 
                           represent a material element                  ensuring that the opportunities 
                           of our revenues. The International            for the Group are maximised. 
                           business in the Middle East                   Market share is measured and 
                           is dependent on major contracts               competitors' activities are 
                           which are due for renewal in                  reported on and reacted to 
                           August 2020.                                  where appropriate. The Group's 
                                                                         integrated services offering 
                                                                         further mitigates against 
                                                                         this risk as it demonstrates 
                                                                         value to our customers, setting 
                                                                         us apart from purely asset 
                                                                         hire companies. 
 
                                                                         No single customer currently 
                                                                         accounts for more than 10% 
                                                                         of revenue or receivables. 
                                                                         We have been successful in 
                                                                         growing our SME customer base, 
                                                                         which also helps to mitigate 
                                                                         this risk. Investment has 
                                                                         been made to diversify our 
                                                                         International business in 
                                                                         the Middle East. 
-----------------------  --------------------------------------------  ----------------------------------------- 
 Project                  Acquisitions                                  All potential business combinations 
  and change               Our strategy includes selective               are presented to the Board, 
  management               acquisitions that complement                  with an associated business 
                           or extend our existing business               case, for approval. 
                           in specialised markets. There 
                           is a risk that suitable targets               Once a decision in principle 
                           are not identified, or that                   is made, a detailed due diligence 
                           acquired businesses do not                    process covering a range of 
                           perform to expectations.                      criteria is undertaken. The 
                                                                         results of due diligence are 
                                                                         presented to the Board prior 
                                                                         to formal approval being granted. 
 
                                                                         The use of a cross functional 
                                                                         project team ensures effective 
                                                                         integration into the Group. 
                                                                         These teams work with a blueprint 
                                                                         plan, modified as needed to 
                                                                         specifically address any risks 
                                                                         identified during the due 
                                                                         diligence phase. 
 
                                                                         A Programme Management Office 
                                                                         function is established with 
                                                                         clearly defined governance 
                                                                         in place to oversee all change 
                                                                         initiatives. 
-----------------------  --------------------------------------------  ----------------------------------------- 
 People                   Employee excellence                           Skill and resource requirements 
                           In order to achieve our strategic             for meeting the Group's objectives 
                           objectives, it is imperative                  are actively monitored and 
                           that we are able to recruit,                  action is taken to address 
                           retain and motivate employees                 identified gaps. Succession 
                           who possess the right skills                  planning aims to identify 
                           for the Group.                                talent within the Group and 
                                                                         is formally reviewed on an 
                                                                         annual basis by the Nomination 
                                                                         Committee, focusing on both 
                                                                         short and long-term successors 
                                                                         for the key roles within the 
                                                                         Group. 
 
                                                                         Programmes are in place for 
                                                                         employee induction, retention 
                                                                         and career development, which 
                                                                         are tailored to the requirements 
                                                                         of the various business units 
                                                                         within the Group. 
 
                                                                         The Group regularly reviews 
                                                                         remuneration packages and 
                                                                         aims to offer competitive 
                                                                         reward and benefit packages, 
                                                                         including appropriate short 
                                                                         and long-term incentive schemes. 
-----------------------  --------------------------------------------  ----------------------------------------- 
 Partner and              Supply chain                                  A dedicated and experienced 
  supplier service         Speedy procures assets and                    supply chain function is in 
  levels                   services from a wide range                    place to negotiate all contracts 
                           of sources, both UK and internationally       and maximise the Group's commercial 
                           based. Within the supply chain                position. Supplier accreditations 
                           there are risks of non-fulfilment.            are recorded and tracked centrally 
                                                                         through a supplier portal 
                           Partner reputation                            where relevant and set service 
                           A significant amount of our                   related KPIs are included 
                           revenues come from our rehire                 within standard contract terms. 
                           offering, where the delivery                  Regular reviews take place 
                           or performance is effected                    with all supply chain partners. 
                           through a third party partner. 
 
                           Speedy's ability to supply 
                           assets with the expected customer 
                           service is therefore reliant 
                           on the performance of others 
                           with the risk that if this 
                           is not effectively managed, 
                           the reputation of Speedy and 
                           hence future revenues may be 
                           adversely impacted. 
-----------------------  --------------------------------------------  ----------------------------------------- 
 Operating                Fixed cost base                               The Group has a purchasing 
  costs                    Speedy has a fixed cost base                  policy in place to negotiate 
                           including people, transport                   supply contracts that, wherever 
                           and property. When revenues                   possible, determine fixed 
                           fluctuate this can have a disproportionate    prices for a period of time. 
                           effect on the Group's financial               In most cases, multiple sources 
                           results.                                      exist for each supply, decreasing 
                                                                         the risk of supplier dependency 
                                                                         and creating a competitive 
                                                                         supply-side environment. All 
                                                                         significant purchase decisions 
                                                                         are overseen by a dedicated 
                                                                         supply chain team with structured 
                                                                         supplier selection procedures 
                                                                         in place. Property costs are 
                                                                         managed by an in-house team 
                                                                         of specialists who manage 
                                                                         the estate. 
 
                                                                         We operate a dedicated fleet 
                                                                         of commercial vehicles that 
                                                                         are maintained to support 
                                                                         our brand image. Fuel is purchased 
                                                                         through agreements controlled 
                                                                         by our supply chain processes. 
 
                                                                         The growth of our services 
                                                                         offering will help to mitigate 
                                                                         this risk as these activities 
                                                                         have overheads that are more 
                                                                         flexible. 
-----------------------  --------------------------------------------  ----------------------------------------- 
 Cyber Security           IT system availability                        Annual and more medium-term 
  and data integrity       Speedy is increasingly reliant                planning processes are in 
                           on IT systems to support our                  place; these create future 
                           business activities. Interruption             visibility as to the level 
                           in availability or a failure                  and type of IT infrastructure 
                           to innovate will reduce current               and services required to support 
                           and future trading opportunities              the business strategy. Business 
                           respectively.                                 cases are prepared for any 
                                                                         new/upgraded systems, and 
                           Data accuracy                                 require formal approval. 
                           The quality of data held has 
                           a direct impact on how both                   Management information is 
                           strategic and operational decisions           provided in all key areas 
                           are made. If decisions are                    from dashboards that are based 
                           made based on erroneous data                  on real time data drawn from 
                           there could be a direct impact                central systems. We have devised 
                           on the performance of the Group.              a data management framework 
                                                                         and identified data owners 
                           Data security                                 across the business who are 
                           Speedy, as with any organisation,             responsible for putting in 
                           holds data that is commercially               place procedures to maintain 
                           sensitive and in some cases                   accuracy of the information. 
                           personal in nature. There is 
                           a risk that disclosure or loss                Mitigations for IT data recovery 
                           of such data is detrimental                   are described below under 
                           to the business, either as                    business continuity as these 
                           a reduction in competitive                    risks are linked. 
                           advantage or as a breach of 
                           law or regulation.                            Speedy's IT systems are protected 
                                                                         against external unauthorised 
                                                                         access. All mobile devices 
                                                                         have access restrictions and, 
                                                                         where appropriate, data encryption 
                                                                         is applied. 
-----------------------  --------------------------------------------  ----------------------------------------- 
 Funding                  Sufficient capital                            The Board has established 
                           Should the Group not be able                  a treasury policy regarding 
                           to obtain sufficient capital                  the nature, amount and maturity 
                           in the future, it might not                   of committed funding facilities 
                           be able to take advantage of                  that should be in place to 
                           strategic opportunities or                    support the Group's activities. 
                           it might be required to reduce 
                           or delay expenditure, resulting               The GBP180m asset based finance 
                           in the ageing of the fleet                    facility including an additional 
                           and/or non-availability. This                 uncommitted accordion of GBP220m, 
                           could disadvantage the Group                  is available through to October 
                           relative to its competitors                   2022. Close relationships 
                           and might adversely impact                    are maintained with the Group's 
                           its ability to command acceptable             bankers with a view to ensuring 
                           levels of pricing.                            that the Group enjoys a broad 
                                                                         degree of support. 
 
                                                                         In line with the treasury 
                                                                         policy, the Group's capital 
                                                                         requirements, forecast and 
                                                                         actual financial performance 
                                                                         and potential sources of finance 
                                                                         are reviewed at Board level 
                                                                         on a regular basis in order 
                                                                         that its requirements can 
                                                                         be managed with appropriate 
                                                                         levels of spare capacity. 
-----------------------  --------------------------------------------  ----------------------------------------- 
 Economic vulnerability   Economy                                       The Group assesses changes 
                           Any changes in construction/industrial        in both Government and private 
                           market conditions could affect                sector spending as part of 
                           activity levels and consequently              its wider market analysis. 
                           the prices that the Group can                 The impact on the Group of 
                           charge for its services. Any                  any such change is assessed 
                           reduction in Government expenditure           as part of the ongoing financial 
                           which is not offset by an increase            and operational budgeting 
                           in private sector expenditure                 and forecasting process. Our 
                           could adversely affect the                    strategy is to develop a differentiated 
                           Group.                                        proposition in our chosen 
                                                                         markets and to ensure that 
                           Although the COVID-19 pandemic                we are well positioned with 
                           has recently overshadowed Brexit,             clients and contractors who 
                           in common with many UK businesses,            are likely to benefit from 
                           Speedy faces uncertainty as                   those areas in which increased 
                           to the possible impact of leaving             activity is forecast. 
                           the European Union. 
                                                                         The main risk in relation 
                                                                         to the UK's departure from 
                                                                         the European Union is the 
                                                                         impact on the overall market 
                                                                         in which Speedy operates. 
                                                                         In addition, there are limited 
                                                                         risks associated with availability 
                                                                         of assets and spares, cost 
                                                                         price inflation, labour availability 
                                                                         and consequences of potential 
                                                                         border arrangements in Ireland 
                                                                         (the Irish business poses 
                                                                         only a limited risk, since 
                                                                         turnover is less than 3% of 
                                                                         the overall Group's). Risks 
                                                                         have been assessed in detail 
                                                                         by the Board as part of the 
                                                                         overall risk assessment process, 
                                                                         and contingency plans established. 
                                                                         These plans include the consideration 
                                                                         of alternative sources for 
                                                                         equipment supply and forward 
                                                                         buying of spares stock. Sensitivity 
                                                                         analysis has been prepared 
                                                                         and reviewed by the Board. 
                                                                         Combined with strong progress 
                                                                         against strategic goals, the 
                                                                         Board believes that these 
                                                                         plans will allow Speedy to 
                                                                         continue to maximise growth 
                                                                         opportunities in whatever 
                                                                         scenario transpires. Notwithstanding 
                                                                         the impact on the wider economy, 
                                                                         no significant impact on the 
                                                                         Group is therefore expected 
                                                                         at this stage. 
-----------------------  --------------------------------------------  ----------------------------------------- 
 Corporate                Operational empowerment and                   All Speedy employees are expected 
  culture                  culture                                       to abide by our Code of Conduct, 
                           We operate an internal structure              which forms a condition of 
                           that is aligned around separate               employment. Training is provided, 
                           specialisms to better serve                   via a combination of online 
                           our customer base. Each division              and face-to-face means, to 
                           is challenged to operate with                 all management grades in areas 
                           a degree of empowerment within                such as compliance with the 
                           overriding Group policies.                    Bribery Act 2010 and relevant 
                                                                         competition laws. Group policies 
                           Achievement of corporate objectives           are in place that both support 
                           is dependent on individuals'                  and oversee key aspects of 
                           behaviours and these are influenced           our operation in particular 
                           by the corporate culture.                     the areas of treasury, purchasing, 
                                                                         asset management, accounting 
                                                                         and debt management. Review 
                                                                         and exception reporting activities 
                                                                         are in place, which are designed 
                                                                         to reduce the risk of individuals 
                                                                         overriding controls put in 
                                                                         place by the Group. 
 
                                                                         All of the above are supported 
                                                                         by a well-publicised and robust 
                                                                         whistleblowing policy with 
                                                                         rigorous follow up of all 
                                                                         concerns raised. 
 
                                                                         We have transformed our corporate 
                                                                         culture in recent years, however 
                                                                         there will be a need for continuous 
                                                                         evolution as the Group develops 
                                                                         and makes further acquisitions. 
-----------------------  --------------------------------------------  ----------------------------------------- 
 Business continuity      Business interruption                         As described in the paragraph 
                           Any significant interruption                  above, the Group has continued 
                           to Speedy's operational capability,           to operate effectively during 
                           whether IT systems, physical                  the COVID-19 pandemic. Management 
                           restrictions or personnel based,              acted promptly in line with 
                           could adversely impact current                our documented plan to establish 
                           and future trading as customers               a crisis management team which 
                           could readily migrate to competitors.         co-ordinated the activities 
                                                                         required in a rapidly changing 
                           This could range from short-term              environment. 
                           impact in processing of invoices 
                           that would affect cash flows                  Preventative controls, back-up 
                           to the loss of a major site.                  and recovery procedures are 
                                                                         in place for key IT systems. 
                                                                         Changes to Group systems are 
                                                                         considered as part of wider 
                                                                         change management programmes 
                                                                         and implemented in phases 
                                                                         wherever possible. The Group 
                                                                         has critical incident plans 
                                                                         in place for all its central 
                                                                         UK and International sites. 
                                                                         Insurance cover is reviewed 
                                                                         at regular intervals to ensure 
                                                                         appropriate coverage in the 
                                                                         event of a business continuity 
                                                                         issue. 
-----------------------  --------------------------------------------  ----------------------------------------- 
 Asset holding            Asset range and availability                  Our understanding of customer 
  and integrity            Speedy's business model relies                expectation of the relative 
                           on providing assets for hire                  timescales for delivery across 
                           to customers, when they want                  our range of assets allows 
                           to hire them. In order to maximise            us to reduce holdings of less 
                           profitability and ROCE(4) ,                   time critical assets by centralising 
                           demand is balanced with the                   the storage locations, whilst 
                           requirement to hold a range                   at the same time increasing 
                           of assets that is optimally                   the breadth of holding across 
                           utilised.                                     our customer trading locations 
                                                                         of those assets most likely 
                                                                         to be required on a short 
                                                                         notice basis. 
 
                                                                         We regularly monitor our asset 
                                                                         status information and use 
                                                                         this to optimise our asset 
                                                                         holdings. 
 
                                                                         We constantly review our range 
                                                                         of assets and introduce innovative 
                                                                         solutions to our customers 
                                                                         as new products come to market, 
                                                                         under our Green Option programme. 
-----------------------  --------------------------------------------  ----------------------------------------- 
 

Viability Statement

The Group operates an annual planning process which includes a five year strategic plan and a one year financial budget. These plans, and risks to their achievement, are reviewed by the Board as part of its strategy review and budget approval processes. The Board has considered the impact of the principal risks, including COVID-19, to the Group's business model, performance, solvency and liquidity as set out above.

The FY2021 budget was completed prior to the recent increased economic uncertainty resulting from COVID-19. The Group responded quickly to assess the potential impact on revenues, costs and cash; actions implemented immediately included restricting discretionary spend, consolidating the depot network, temporarily closing sites and servicing customers from alternative locations. The Board has considered various downturn scenarios during a prolonged period of reduced activity and believes that trading conditions are likely to recover during FY2021.

The Directors have determined that three years is an appropriate period over which to assess the Viability statement. The projections for the first three years of the strategic plan are based on detailed action plans developed by the Group with specific initiatives and accountabilities. There is inherently less certainty in the projections for years four and five. The Group has a GBP180m asset-based finance facility in place through to October 2022. The strategic plan makes certain assumptions about the adequacy of facilities and expected renewal on broadly similar terms to meet the Group's capital investment and acquisition strategies.

In making this statement, the Directors have considered the resilience of the Group, its current position, the principal risks facing the business in distressed but reasonable scenarios, including various risks associated with COVID-19 as set out above, and the effectiveness of any mitigating actions.

Based on this assessment, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period to March 2023.

Consolidated Income Statement

for the year ended 31 March 2020

 
 
                                     Year ended March 2020                           Year ended March 2019 
                                                                                           Restated(1) 
                           ------------------------------------------      ------------------------------------------ 
                                  Before                                          Before 
                             exceptional      Exceptional                    exceptional      Exceptional 
                                   items            items         Total            items            items         Total 
                   Note             GBPm             GBPm          GBPm             GBPm             GBPm          GBPm 
 
  Revenue             2            406.7                -         406.7            394.7                -         394.7 
 
  Cost of sales                  (182.5)                -       (182.5)          (180.3)                -       (180.3) 
                              ----------       ----------    ----------       ----------       ----------    ---------- 
  Gross profit                     224.2                -         224.2            214.4                -         214.4 
 
  Distribution 
   and 
   administrative 
   costs (1)                     (186.4)           (23.8)       (210.2)          (178.4)            (1.2)       (179.6) 
 
  Analysis of 
  operating 
  profit 
  Operating 
   profit before 
   amortisation 
   and 
   exceptional 
   items                            39.1                -          39.1             36.7                -          36.7 
  Amortisation        9            (1.3)                -         (1.3)            (0.7)                -         (0.7) 
  Exceptional 
   items              3                -           (23.8)        (23.8)                -            (1.2)         (1.2) 
-----------------  ----  ---------------  ---------------  ------------  ---------------  ---------------  ------------ 
 
  Operating 
   profit                           37.8           (23.8)          14.0             36.0            (1.2)          34.8 
 
  Share of 
   results of 
   joint 
   venture                           2.8                -           2.8              1.9                -           1.9 
                              ----------       ----------    ----------       ----------       ----------    ---------- 
  Profit from 
   operations                       40.6           (23.8)          16.8             37.9            (1.2)          36.7 
 
  Net financial 
   expense(1)         4            (7.0)             10.9           3.9            (7.2)            (0.8)         (8.0) 
                              ----------       ----------    ----------       ----------       ----------    ---------- 
  Profit before 
   taxation                         33.6           (12.9)          20.7             30.7            (2.0)          28.7 
 
  Taxation(1)         5            (5.9)              2.0         (3.9)            (5.5)                -         (5.5) 
                              ----------       ----------    ----------       ----------       ----------    ---------- 
  Profit for the 
   financial 
   year                             27.7           (10.9)          16.8             25.2            (2.0)          23.2 
 
 
  Earnings per 
  share 
  - Basic 
   (pence)(1)         6                                            3.23                                            4.47 
 
  - Diluted 
   (pence)(1)         6                                            3.19                                            4.43 
 
 
  Non-GAAP 
  performance 
  measures 
  EBITDA before 
   exceptional 
   items(1)           8            107.4                                           104.8 
 
  Profit before 
   tax, 
   amortisation 
   and 
   exceptional 
   items(1)           8             34.9                                            31.4 
 
  Adjusted 
   earnings per 
   share 
   (pence)(1)         6             5.54                                            4.96 
 
 

(1) Restated as a result of the adoption of IFRS 16 - see Note 1 (Accounting policies)

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2020

 
                                                 Year ended    Year ended 
                                                   31 March      31 March 
                                                       2020          2019 
                                                              Restated(1) 
                                                       GBPm          GBPm 
 
Profit for the financial year(1)                       16.8          23.2 
                                                 ----------    ---------- 
Other comprehensive income that may 
 be reclassified subsequently to the 
 Income Statement: 
 - Effective portion of change in fair 
  value of cash flow hedges                           (0.2)         (0.6) 
 - Exchange difference on translation 
  of foreign operations(1)                              0.9           0.4 
 - Tax on items                                         0.1           0.1 
                                                 ----------    ---------- 
Other comprehensive income, net of tax                  0.8         (0.1) 
                                                 ----------    ---------- 
Total comprehensive income for the financial 
 year                                                  17.6          23.1 
 
 

(1) Restated as a result of the adoption of IFRS 16 - see Note 1 (Accounting policies)

Consolidated Balance Sheet

at 31 March 2020

 
                                 Note    31 March        31 March       1 April 
                                             2020            2019          2018 
                                                    Restated(1,2)   Restated(1) 
                                             GBPm            GBPm          GBPm 
ASSETS 
Non-current assets 
Intangible assets(2)                9        23.1            41.7          10.5 
Investment in joint venture                   7.3             5.8           5.1 
Property, plant and equipment 
   Hire equipment(2)               10       227.1           216.9         203.7 
   Non-hire equipment(1)           10        30.5            32.2          34.2 
Right of use assets(1)             11        64.7            72.2          68.4 
Deferred tax asset(1)                         2.8             3.0           3.7 
                                       ----------      ----------    ---------- 
                                            355.5           371.8         325.6 
                                       ----------      ----------    ---------- 
Current assets 
Inventories(2)                                8.7             9.1           7.9 
Trade and other receivables(2)              102.3           101.7          97.0 
Cash                               12        22.8            11.5           9.8 
Current tax asset                             1.5               -             - 
                                       ----------      ----------    ---------- 
                                            135.3           122.3         114.7 
                                       ----------      ----------    ---------- 
Total assets                                490.8           494.1         440.3 
                                       ----------      ----------    ---------- 
LIABILITIES 
Current liabilities 
Borrowings(1)                      12           -           (1.1)         (5.4) 
Lease liabilities(1)               13      (20.2)          (22.3)        (18.6) 
Other financial liabilities                 (0.5)           (0.3)             - 
Trade and other payables(2)                (90.9)          (83.6)        (81.6) 
Provisions(1,2)                    14       (5.9)           (6.9)         (1.6) 
Current tax liability                           -           (4.7)         (1.4) 
                                       ----------      ----------    ---------- 
                                          (117.5)         (118.9)       (108.6) 
                                       ----------      ----------    ---------- 
Non-current liabilities 
Borrowings(1)                      12     (102.1)          (99.5)        (73.5) 
Lease liabilities(1)               13      (52.7)          (60.1)        (62.3) 
Provisions(1,2)                    14       (1.2)           (6.5)         (0.4) 
Deferred tax liability(1)                   (7.4)           (7.1)         (8.2) 
                                       ----------      ----------    ---------- 
                                          (163.4)         (173.2)       (144.4) 
                                       ----------      ----------    ---------- 
Total liabilities                         (280.9)         (292.1)       (253.0) 
                                       ----------      ----------    ---------- 
Net assets                                  209.9           202.0         187.3 
 
EQUITY 
Share capital                                26.4            26.3          26.2 
Share premium                                 0.8             0.4             - 
Merger reserve                                1.0             1.0           1.0 
Hedging reserve                             (0.9)           (0.7)         (0.1) 
Translation reserve                           0.4           (0.5)         (0.9) 
Retained earnings(1)                        182.2           175.5         161.1 
                                       ----------      ----------    ---------- 
Total equity                                209.9           202.0         187.3 
 
 

(1) Restated as a result of the adoption of IFRS 16 - see Note 1 (Accounting policies)

(2) Restated for fair value adjustments relating to acquisitions made in the prior year, see Note 15.

Consolidated Statement of Changes in Equity

for the year ended 31 March 2020

 
                                                                                                Retained         Total 
                                  Share       Share      Merger     Hedging    Translation      earnings        equity 
                                capital     premium     reserve     reserve        reserve   Restated(1)   Restated(1) 
                                   GBPm        GBPm        GBPm        GBPm           GBPm          GBPm          GBPm 
 
At 1 April 2018                    26.2           -         1.0       (0.1)          (0.9)         171.6         197.8 
IFRS 16 transition 
 impact(1)                            -           -           -           -              -        (10.5)        (10.5) 
                             ----------  ----------  ----------  ----------     ----------    ----------    ---------- 
At 1 April 2018(1)                 26.2           -         1.0       (0.1)          (0.9)         161.1         187.3 
Total comprehensive 
 income(1)                            -           -           -       (0.6)            0.4          23.3          23.1 
Dividends                             -           -           -           -              -         (9.1)         (9.1) 
Tax on items taken 
 directly 
 to equity                            -           -           -           -              -           0.4           0.4 
Equity-settled 
 share-based 
 payments                             -           -           -           -              -           0.9           0.9 
Issue of shares under 
 the Sharesave Scheme               0.1         0.4           -           -              -             -           0.5 
Purchase of own 
 shares 
 to satisfy share 
 schemes                              -           -           -           -              -         (1.1)         (1.1) 
                             ----------  ----------  ----------  ----------     ----------    ----------    ---------- 
At 31 March 2019(1)                26.3         0.4         1.0       (0.7)          (0.5)         175.5         202.0 
Total comprehensive 
 income                               -           -           -       (0.2)            0.9          16.9          17.6 
Dividends                             -           -           -           -              -        (10.9)        (10.9) 
Tax on items taken 
 directly 
 to equity                            -           -           -           -              -           0.2           0.2 
Equity-settled 
 share-based 
 payments                             -           -           -           -              -           0.5           0.5 
Issue of shares under 
 the Sharesave Scheme               0.1         0.4           -           -              -             -           0.5 
Purchase of own 
shares 
to satisfy share 
schemes                               -           -           -           -              -             -             - 
                             ----------  ----------  ----------  ----------     ----------    ----------    ---------- 
At 31 March 2020                   26.4         0.8         1.0       (0.9)            0.4         182.2         209.9 
 
 

(1) Restated as a result of the adoption of IFRS 16 - see Note 1 (Accounting policies)

Consolidated Cash Flow Statement

for the year ended 31 March 2020

 
                                             Note  Year ended    Year ended 
                                                     31 March      31 March 
                                                         2020          2019 
                                                                Restated(1) 
                                                         GBPm          GBPm 
Cash generated from operating activities 
Profit before tax(1)                                     20.7          28.7 
Financial expense(1)                                      7.0           7.2 
Exceptional intangible asset impairment                  18.5             - 
Exceptional financial (income)/expense                 (10.9)           0.8 
Amortisation                                              1.3           0.7 
Depreciation(1)                                          68.3          68.1 
Share of profit from joint venture                      (2.8)         (1.9) 
Termination of lease contracts                          (1.3)         (1.0) 
Profit on disposal of hire equipment                    (0.8)         (1.2) 
Profit on disposal of non-hire equipment                (3.9)             - 
Decrease/(increase) in inventories                        0.4         (0.9) 
Increase in trade and other receivables(1)              (0.6)         (0.7) 
Increase/(decrease) in trade and other 
 payables(1)                                              5.4         (2.7) 
Movement in provisions(1)                                 4.6         (0.3) 
Equity-settled share-based payments                       0.5           0.9 
                                                   ----------    ---------- 
Cash generated from operations before 
 changes in hire fleet                                  106.4          97.7 
Purchase of hire equipment                             (53.6)        (54.3) 
Proceeds from sale of hire equipment                     11.7          17.8 
                                                   ----------    ---------- 
Cash generated from operations                           64.5          61.2 
Interest paid(1)                                        (6.5)         (6.7) 
Tax paid                                                (9.3)         (4.7) 
                                                   ----------    ---------- 
Net cash flow from operating activities                  48.7          49.8 
 
Cash flow from investing activities 
Purchase of non-hire property, plant 
 and equipment                                          (9.0)         (6.5) 
Proceeds from sale of non-hire property, 
 plant and equipment                                      4.2             - 
Acquisitions, net of cash acquired                          -        (30.9) 
Investment in joint venture                               1.3           1.2 
                                                   ----------    ---------- 
Net cash flow from investing activities                 (3.5)        (36.2) 
                                                   ----------    ---------- 
Net cash flow before financing activities                45.2          13.6 
                                                   ----------    ---------- 
Cash flow from financing activities 
Payments for the principle element of 
 leases(1)                                             (24.5)        (23.7) 
Drawdown of loans                                       398.5         468.7 
Repayment of loans                                    (396.4)       (442.9) 
Proceeds from the issue of Sharesave 
 Scheme shares                                            0.5           0.5 
Purchase of own shares to satisfy share 
 schemes                                                    -         (1.1) 
Dividends paid                                         (10.9)         (9.1) 
                                                   ----------    ---------- 
Net cash flow from financing activities                (32.8)         (7.6) 
                                                   ----------    ---------- 
Increase in cash and cash equivalents                    12.4           6.0 
 
Net cash at the start of the financial 
 year                                                    10.4           4.4 
                                                   ----------    ---------- 
Net cash at the end of the financial 
 year                                                    22.8          10.4 
 
Analysis of cash and cash equivalents 
Cash                                           12        22.8          11.5 
Bank overdraft                                 12           -         (1.1) 
                                                   ----------    ---------- 
                                                         22.8          10.4 
 
 

(1) Restated as a result of the adoption of IFRS 16 - see Note 1 (Accounting policies)

Notes to the Financial Statements

   1             Accounting policies 

Speedy Hire Plc is a company incorporated and domiciled in the United Kingdom. The consolidated Financial Statements of the Company for the year ended 31 March 2020 comprise the Company and its subsidiaries (together referred to as the 'Group').

The Group and Parent Company Financial Statements were approved by the Board of Directors on 22 June 2020.

Basis of preparation

The Financial Statements are prepared on the historical cost basis except that derivative financial instruments and contingent consideration are held at fair value. The accounting policies set out below have been applied consistently to all periods presented in these consolidated Financial Statements.

The Group has a GBP180m asset based finance facility ('the facility') which matures in October 2022 and has no prior scheduled repayment requirements. The undrawn availability on this facility as at 31 March 2020 was GBP70.2m (2019: GBP68.4m) based on the Group's eligible hire equipment and trade receivables. Net debt had reduced from GBP79.3m at 31 March to GBP67.3m at 31 May 2020.

The Group meets its day-to-day working capital requirements through operating cash flows, supplemented as necessary by borrowings. The Directors have prepared a going concern assessment up to 30 June 2021 (and have presented a Viability Statement above), which confirms that the Group is capable of continuing to operate within its existing loan facility and can meet the covenant requirements set out within the facility. The key assumptions on which the projections are based include an assessment of the impact of future market conditions on projected revenues and an assessment of the net capital investment required to support the expected level of revenues, including the impact of the recent increased economic uncertainty resulting from COVID-19. The Group responded quickly to assess the potential impact on revenues, costs and cash; actions implemented immediately included restricting discretionary spend, consolidating the depot network, temporarily closing sites and servicing customers from alternative locations. The Group's base case for the 12 months to 30 June 2021 assumed an initial reduction in revenue of 40% on the prior year, recovering towards prior year levels by the end of March 2021. The Board has considered various severe but possible downturn scenarios including a prolonged period of reduced activity, with revenues for June 2020 reduced by 50% from the prior year, a further three month period of lockdown from November 2020 and a slower recovery than in the base case. Mitigations applied in these downturn scenarios include the use of the Government Coronavirus Job Retention Scheme, delays to certain tax payments, and a reduction in planned capital expenditure. Despite the severity of the assumptions applied in these scenarios, the Group maintains significant headroom against its available facility and covenant requirements.

Whilst the Directors consider that there is a degree of subjectivity involved in their assumptions, on the basis of the above the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for a period of at least 12 months from the date of approval of these Financial Statements. Accordingly, they continue to adopt the going concern basis of accounting in preparing the Financial Statements.

The financial information set out in this final results announcement does not constitute the Group's statutory accounts for the year ended 31 March 2020 or 31 March 2019 but is derived from those accounts. Statutory accounts for Speedy Hire Plc for the year ended 31 March 2019 have been delivered to the Registrar of Companies, and those for the year ended 31 March 2020 will be delivered in due course. The auditor has reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

Copies of full accounts will be available on the Group's corporate website in due course. Additional copies will be available on request from Speedy Hire Plc, 16 The Parks, Newton-le-Willows, Merseyside, WA12 0JQ.

Transition to IFRS 16 'Leases'

In January 2016, the IASB issued IFRS 16 which applies to an entity's first annual statements beginning on or after 1 January 2019, and is therefore applicable to the Group for the year ending 31 March 2020. The main principle of the standard is to eliminate the dual accounting model for lessees under IAS 17, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases, and to provide a single model for lessee accounting. IFRS 16 requires lessees to recognise right of use assets and lease liabilities for leases. Accounting requirements for lessors are substantially unchanged from IAS 17.

The standard represents a significant change in the accounting and reporting of leases for lessees and impacts the Income Statement and Balance Sheet as well as statutory and alternative performance measures used by the Group.

The Group has applied the fully retrospective transition approach to these financial statements, and therefore has restated comparative amounts as at 1 April 2018 and for the year ended 31 March 2019. Under IFRS 16, the Group will experience a different pattern of expense within the Income Statement, with the IAS 17 operating lease expense replaced by depreciation and interest expense. The interest expense is weighted towards the earlier years of the leases and as a result a reduction in Retained Earnings of GBP10.5m has been recognised upon transition. There is no impact on the Group's underlying cash flows.

The financial impact of the transition on the Group's reported results is set out below:

 
                                       Year ended 31 March              Year ended 31 March 
 Income statement impact                       2020                             2019 
                                 ===============================  =============================== 
                                              IFRS 16   Reported   Excluding   IFRS 16   Reported 
                                  Excluding    impact                   IFRS    impact 
                                    IFRS 16      GBPm       GBPm          16      GBPm       GBPm 
                                       GBPm                             GBPm 
===============================  ==========  ========  =========  ==========  ========  ========= 
 
 Operating profit                       9.1       4.9       14.0        29.8       5.0       34.8 
 EBITDA                                78.3      29.1      107.4        78.7      26.1      104.8 
 EBITA                                 33.8       5.3       39.1        32.7       4.0       36.7 
 Financial expense 
  (before exceptional 
  items)                              (3.8)     (3.2)      (7.0)       (3.7)     (3.5)      (7.2) 
 Profit before tax, 
  amortisation and exceptional 
  items                                32.8       2.1       34.9        30.9       0.5       31.4 
 Profit before tax                     19.0       1.7       20.7        27.2       1.5       28.7 
 Taxation                             (3.5)     (0.4)      (3.9)       (5.1)     (0.4)      (5.5) 
 Basic EPS                             2.98      0.25       3.23        4.26      0.21       4.47 
 Diluted EPS                           2.94      0.25       3.19        4.22      0.21       4.43 
 Adjusted EPS                          5.21      0.33       5.54        4.90      0.06       4.96 
 
 
 
 Balance sheet                 31 March 2020                    31 March 2019             1 April 
  impact                                                                                    2018 
                      ===============================  ===============================  ========== 
                                   IFRS 16   Reported   Excluding   IFRS 16   Reported    Restated 
                       Excluding    impact                   IFRS    impact               for IFRS 
                         IFRS 16      GBPm       GBPm          16      GBPm       GBPm          16 
                            GBPm                             GBPm                             GBPm 
====================  ==========  ========  =========  ==========  ========  =========  ========== 
 
 Right of use 
  assets                       -      64.7       64.7           -      72.2       72.2        68.4 
 Non-hire equipment         30.9     (0.4)       30.5        32.8     (0.6)       32.2        34.2 
 Deferred tax 
  assets                     1.3       1.5        2.8         1.1       1.9        3.0         3.7 
 Lease liabilities             -    (72.9)     (72.9)       (0.3)    (82.1)     (82.4)      (80.9) 
 Trade and other 
  receivables              105.1     (2.8)      102.3       104.4     (2.7)      101.7        97.0 
 Trade and other 
  payables                (92.6)       1.7     (90.9)      (84.8)       1.2     (83.6)      (81.6) 
 Provisions                (7.4)       0.3      (7.1)      (14.3)       0.9     (13.4)       (2.0) 
 
 

Accounting for leasing activities under IFRS 16

The Group holds leases for a number of properties and vehicles. Rental contracts are typically entered into for fixed periods of one to ten years but may have break options or extension options as set out below. Such leases can contain a wide range of different terms and conditions. On transition to IFRS 16 the Group also reassessed its other contracts to identify whether they contained a lease.

Until 31 March 2018, leases of property, plant and equipment were classified as either operating leases or finance leases. Payments made under operating leases (net of any incentives received from the lessor) were charged to the Income Statement on a straight-line basis over the lease term.

From 1 April 2018, leases are recognised as a right of use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the Income Statement over the lease period. The right of use asset is depreciated over the lease term on a straight-line basis.

Lease liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of fixed payments (including in-substance fixed payments) and variable lease payments that are based on a specified index or rate. A separate provision for onerous leases is therefore no longer required. The lease payments are discounted using the Group's incremental borrowing rate (if the interest rate implicit in the lease is not readily determinable). This rate is the interest rate the Group would have to pay to borrow the funds necessary to obtain an asset of similar value over a similar term and with similar security to the right of use asset in a similar economic environment.

Right of use assets are measured at cost comprising the amount of the initial measurement of the lease liability, any initial direct costs, any restoration costs, and any lease payments made at or before the commencement date. Payments associated with short term leases and leases of low value assets are recognised on a straight-line basis as an expense in the Income Statement. Short term leases are certain leases with a lease term of 12 months or less. Low value assets comprise certain small items of IT equipment and office furniture where the cash value when new is considered immaterial.

Extension and termination options are included in a number of leases across the Group. These terms are used to maximise operational flexibility in terms of managing contracts. In determining the lease term applicable for accounting purposes, management considers all facts and circumstances that create economic incentive to exercise an extension option, or not to exercise a termination option. Extension options are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The assessment is reviewed if a significant event or significant change in circumstances occurs which affects this assessment and that is within the control of the Group.

   2              Segmental analysis 

The segmental disclosure presented in the Financial Statements reflects the format of reports reviewed by the 'chief operating decision-maker' ('CODM'). UK and Ireland delivers asset management, with tailored services and a continued commitment to relationship management. International principally delivers projects and facilities management contracts by providing a managed site support service.

For the year ended 31 March 2020

 
                                                                    Corporate 
                                    UK and Ireland  International       items       Total 
                                              GBPm           GBPm        GBPm        GBPm 
 
Revenue                                      371.5           35.2           -       406.7 
 
Segment result: 
EBITDA before exceptional items              102.7            8.2       (3.5)       107.4 
Depreciation                                (65.4)          (2.5)       (0.4)      (68.3) 
                                        ----------     ----------  ----------  ---------- 
Operating profit/(costs) before 
 amortisation and exceptional 
 items                                        37.3            5.7       (3.9)        39.1 
Amortisation                                 (1.3)              -           -       (1.3) 
Exceptional items                           (23.5)          (0.3)           -      (23.8) 
                                        ----------     ----------  ----------  ---------- 
Operating profit/(costs)                      12.5            5.4       (3.9)        14.0 
Share of results of joint venture                -            2.8           -         2.8 
                                        ----------     ----------  ----------  ---------- 
Trading profit/(costs)                        12.5            8.2       (3.9)        16.8 
 
Financial expense                                                                   (7.0) 
Exceptional financial credit                                                         10.9 
                                                                               ---------- 
Profit before tax                                                                    20.7 
Taxation                                                                            (3.9) 
                                                                               ---------- 
Profit for the financial year                                                        16.8 
 
 
 
Intangible assets                             21.9              -         1.2        23.1 
Investment in joint venture                      -            7.3           -         7.3 
Hire equipment                               215.7           11.4           -       227.1 
Non-hire equipment                            28.4            2.1           -        30.5 
Right of use assets                           62.2            2.5           -        64.7 
Taxation assets                                  -              -         4.3         4.3 
Current assets                                94.5           14.9         1.6       111.0 
Cash                                             -              -        22.8        22.8 
                                        ----------     ----------  ----------  ---------- 
Total assets                                 422.7           38.2        29.9       490.8 
 
Lease liabilities                           (68.8)          (4.1)           -      (72.9) 
Other liabilities                           (82.4)         (12.1)       (4.0)      (98.5) 
Borrowings                                       -              -     (102.1)     (102.1) 
Taxation liabilities                             -              -       (7.4)       (7.4) 
                                        ----------     ----------  ----------  ---------- 
Total liabilities                          (151.2)         (16.2)     (113.5)     (280.9) 
 
 
 

Corporate items comprise certain central activities and costs that are not directly related to the activities of the operating segments.

The financing of the Group's activities is undertaken at head office level and consequently net financing costs cannot be analysed by segment. The unallocated net assets comprise principally working capital balances held by the support services function that are not directly attributable to the activities of the operating segments, together with net corporate borrowings and taxation.

For the year ended 31 March 2019

 
                                                                      Corporate          Total 
                                     UK and Ireland  International        items 
                                      Restated(1,2)    Restated(1)  Restated(1)  Restated(1,2) 
                                               GBPm           GBPm         GBPm           GBPm 
 
Revenue                                       358.6           36.1            -          394.7 
 
Segment result: 
EBITDA before exceptional items(1)            100.5            8.5        (4.2)          104.8 
Depreciation(1)                              (64.3)          (2.6)        (1.2)         (68.1) 
                                         ----------     ----------   ----------     ---------- 
Operating profit/(costs) before 
 amortisation and exceptional 
 items                                         36.2            5.9        (5.4)           36.7 
Amortisation                                  (0.7)              -            -          (0.7) 
Exceptional (costs)/income(1)                 (1.2)              -            -          (1.2) 
                                         ----------     ----------   ----------     ---------- 
Operating profit/(costs)                       34.3            5.9        (5.4)           34.8 
Share of results of joint venture                 -            1.9            -            1.9 
                                         ----------     ----------   ----------     ---------- 
Trading profit/(costs)                         34.3            7.8        (5.4)           36.7 
 
Financial expense(1)                                                                     (7.2) 
Exceptional financial expense                                                            (0.8) 
                                                                                    ---------- 
Profit before tax                                                                         28.7 
Taxation(1)                                                                              (5.5) 
                                                                                    ---------- 
Profit for the financial year                                                             23.2 
 
 
 
Intangible assets(2)                           41.7              -            -           41.7 
Investment in joint venture                       -            5.8            -            5.8 
Hire equipment(2)                             209.8            7.1            -          216.9 
Non-hire equipment(1)                          29.7            2.5            -           32.2 
Right of use assets(1)                         69.4            2.8            -           72.2 
Taxation assets(1,2)                              -              -          3.0            3.0 
Current assets(1,2)                            97.9           12.0          0.9          110.8 
Cash                                              -              -         11.5           11.5 
                                         ----------     ----------   ----------     ---------- 
Total assets                                  448.5           30.2         15.4          494.1 
 
Lease liabilities(1)                         (77.9)          (4.5)            -         (82.4) 
Other liabilities(1,2)                       (81.8)         (11.4)        (4.1)         (97.3) 
Borrowings(1)                                     -              -      (100.6)        (100.6) 
Taxation liabilities(2)                           -              -       (11.8)         (11.8) 
                                         ----------     ----------   ----------     ---------- 
Total liabilities                           (159.7)         (15.9)      (116.5)        (292.1) 
 
 

(1) Restated as a result of the adoption of IFRS 16 - see Note 1 (Accounting policies)

(2) Restated for fair value adjustments relating to acquisitions made in the prior year - see Note 15

Geographical information

In presenting geographical information, revenue is based on the geographical location of customers. Assets are based on the geographical location of the assets.

 
                                              Year ended 31 March                         Year ended 31 March 
                                                             2020                                        2019 
                         ----------------------------------------    ---------------------------------------- 
                                                                                                        Total 
                                                            Total                                      assets 
                                    Revenue                assets            Revenue            Restated(1,2) 
                                       GBPm                  GBPm               GBPm                     GBPm 
 
UK                                    361.3                 438.4              347.8                    449.9 
Ireland                                10.2                  14.2               10.8                     14.0 
United Arab Emirates                   35.2                  38.2               36.1                     30.2 
                                 ----------            ----------         ----------               ---------- 
                                      406.7                 490.8              394.7                    494.1 
 
 

(1) Restated as a result of the adoption of IFRS 16 - see Note 1 (Accounting policies)

(2) Restated for fair value adjustments relating to acquisitions made in the prior year - see Note 15

Revenue by type

Revenue is attributed to the following activities:

 
                                  Year ended      Year ended 
                                    31 March        31 March 
                                        2020            2019 
                              --------------  -------------- 
                                        GBPm            GBPm 
 
Hire and related activities            240.5           236.4 
Services                               162.0           152.8 
Disposals                                4.2             5.5 
                                  ----------      ---------- 
                                       406.7           394.7 
 
 

Major customers

No one customer represents more than 10% of revenue, reported profit or combined assets of the Group.

For the year ended 31 March 2020

 
                                               Recognised      Recognised 
                                          in distribution              in 
                                                and admin   net financial 
                                                 expenses        expenses           Total 
                                           --------------  --------------  -------------- 
                                                     GBPm            GBPm            GBPm 
 
Changes to fair value of contingent 
 consideration                                          -            10.9            10.9 
Impairment of Training CGU                         (20.1)               -          (20.1) 
Training provision                                  (3.0)               -           (3.0) 
                                               ----------      ----------      ---------- 
Exceptional items relating to Training 
 CGU                                               (23.1)            10.9          (12.2) 
 
Sale of surplus land                                  3.9               -             3.9 
Acquisition integration costs                       (1.7)               -           (1.7) 
Property related costs                              (2.0)               -           (2.0) 
COVID-19 related costs                              (0.6)               -           (0.6) 
International contract costs                        (0.3)               -           (0.3) 
                                               ----------      ----------      ---------- 
                                                   (23.8)            10.9          (12.9) 
 
 

An exceptional financial credit of GBP10.9m has been recognised in relation to changes in the fair value of contingent consideration no longer expected to be paid in respect of Geason Training. An exceptional impairment charge of GBP20.1m for the Speedy Training CGU has been recognised, which comprises impairment of GBP13.7m against goodwill and GBP4.8m against other intangible assets (see Note 9), and a provision of GBP1.6m against trade and other receivables.

In April 2020 Speedy were notified that a funding agency was suspending payments, and seeking repayment of funding from Geason Training. GBP3.0 million has been provided as an exceptional charge including legal and verification costs. Further detail is provided in Note 14.

On 29 October 2019, the Group sold a plot of surplus land. Consideration of GBP4.0m was paid in cash in full at completion. The land had a book value GBP0.1m and the resultant profit of GBP3.9m has been recognised as an exceptional item.

Following the acquisitions of Geason Training and Lifterz made in the prior year, integration expenses of GBP1.7m have been incurred relating to property provisions, redundancy and project management costs.

An exceptional provision of GBP2.0m has been made for specific non-recurring identified repairs required to properties within the depot network as a result of potential landlord claims.

Exceptional costs of GBP0.6m related to COVID-19, including bad debt and staff related costs were provided for March 2020.

Exceptional costs of GBP0.3m incurred relating to the renewal of the major contract in the International division have been recognised in the year.

For the year ended 31 March 2019

Prior period - restatement for IFRS 16

Under previous accounting policies for the year ended 31 March 2019, net exceptional items of GBP2.2m (comprising GBP1.2m property related costs, GBP0.2m of people costs, GBP0.9m of transaction costs and a credit of GBP0.1m for released provisions) were charged to operating profit. On transition to IFRS 16, an additional exceptional credit of GBP1.0m was recognised for the year ended 31 March 2019 in relation to a gain on termination of a distribution centre lease.

An exceptional financial expense of GBP0.8m was recognised in relation to changes in the fair value of contingent consideration between the date of the Geason Training acquisition and 31 March 2019.

 
                                                   2020          2019 
                                                          Restated(1) 
                                                   GBPm          GBPm 
Financial expense 
Interest on bank loans and overdrafts               3.4           2.9 
Amortisation of issue costs                         0.4           0.4 
                                             ----------    ---------- 
Total interest on borrowings                        3.8           3.3 
 
Interest on lease liabilities                       3.2           3.5 
Hedge interest payable                              0.1           0.1 
Other finance (income)/costs                      (0.1)           0.3 
Exceptional financial expense (see Note 3)       (10.9)           0.8 
                                             ----------    ---------- 
                                                  (3.9)           8.0 
 
 

(1) Restated as a result of the adoption of IFRS 16 - see Note 1 (Accounting policies)

   4              Taxation 

The adjusted tax rate of 17.2% (2019: 17.5%) is lower than the standard rate of UK corporation tax of 19% (2019: 19%).

The tax charge in the Income Statement for the year is equal to (2019: equal to) the standard rate of corporation tax in the UK of 19% (2019: 19%) and is explained as follows:

 
                                                          2020          2019 
                                                                 Restated(1) 
                                                          GBPm          GBPm 
 
Profit before tax                                         20.7          28.7 
                                                    ----------    ---------- 
Accounting profit multiplied by the standard rate 
 of corporation tax at 19% (2019: 19%)                     3.9           5.5 
Expenses not deductible for tax purposes                   0.9           1.3 
Share-based payments                                       0.1           0.4 
Overseas profits not subject to tax                      (0.6)         (0.8) 
Share of joint venture income already taxed              (0.5)         (0.4) 
Change in deferred tax rates                               0.5             - 
Adjustment to tax in respect of prior years              (0.4)         (0.5) 
                                                    ----------    ---------- 
Tax charge for the year reported in the Income 
 Statement                                                 3.9           5.5 
 
Tax (credited)/charged in equity 
Current tax                                              (0.2)         (0.4) 
Deferred tax                                               0.1         (0.1) 
                                                    ----------    ---------- 
Tax credited to equity                                   (0.1)         (0.5) 
 
 

(1) Restated as a result of the adoption of IFRS 16 - see Note 1 (Accounting policies)

A UK corporation rate of 19% (effective 1 April 2020) was substantively enacted on 17 March 2020, reversing the previously enacted reduction in the rate from 19% to 17%. This will increase the company's future current tax charge accordingly. The deferred tax asset and liability at 31 March 2020 has been calculated at 19% (2019: 17%).

   6              Earnings per share 

The calculation of basic earnings per share is based on the profit for the financial year of GBP16.8m (2019: GBP23.2m) and the weighted average number of 5 pence ordinary shares in issue, and is calculated as follows:

 
                                                         2020          2019 
                                                                Restated(1) 
Profit (GBPm) 
Profit for the year after tax - basic earnings           16.8          23.2 
Intangible amortisation charge (after tax)                1.1           0.5 
Exceptional items (after tax)                            10.9           2.0 
                                                   ----------    ---------- 
Adjusted earnings (after tax)                            28.8          25.7 
 
Weighted average number of shares in issue (m) 
Number of shares at the beginning of the year           519.5         519.6 
Exercise of share options                                 0.3           0.3 
Movement in shares owned by the Employee Benefit 
 Trust                                                    0.2         (1.4) 
                                                   ----------    ---------- 
Weighted average for the year - basic number of 
 shares                                                 520.0         518.5 
Share options                                             5.2           4.4 
Employee share scheme                                     1.1           1.2 
                                                   ----------    ---------- 
Weighted average for the year - diluted number 
 of shares                                              526.3         524.1 
 
Earnings per share (pence) 
Basic earnings per share                                 3.23          4.47 
Amortisation                                             0.21          0.10 
Exceptional items                                        2.10          0.39 
                                                   ----------    ---------- 
Adjusted earnings per share                              5.54          4.96 
 
Basic earnings per share                                 3.23          4.47 
                                                   ----------    ---------- 
Diluted earnings per share                               3.19          4.43 
 
 
Adjusted earnings per share                              5.54          4.96 
Share options                                          (0.07)        (0.05) 
                                                   ----------    ---------- 
Adjusted diluted earnings per share                      5.47          4.91 
 
 

(1) Restated as a result of the adoption of IFRS 16 - see Note 1 (Accounting policies)

Total number of shares outstanding at 31 March 2020 amounted to 526,773,177 (2019: 525,281,026), including 5,472,206 (2019: 5,802,223) shares held in the Employee Benefit Trust, which are excluded in calculating earnings per share.

   7              Dividends 

The aggregate amount of dividend comprises:

 
                                                            2020        2019 
                                                            GBPm        GBPm 
 
2018 final dividend (1.15 pence on 523.7m shares)              -         6.0 
2019 interim dividend (0.60 pence on 523.7m shares)            -         3.1 
2019 final dividend (1.40 pence on 525.3m shares)            7.3           - 
2020 interim dividend (0.70 pence on 525.4m shares)          3.6           - 
                                                      ----------  ---------- 
                                                            10.9         9.1 
 
 

The Directors have recommended no further dividend for the year (2019: 1.40 pence per share). The total amount payable in respect of the 2020 year is 0.70 pence (2019: 2.00 pence).

The Employee Benefit Trust, established to hold shares for the Performance Share Plan and other employee benefits, waived its right to the interim dividend. At 31 March 2020, the Trust held 5,472,206 ordinary shares (2019: 5,802,223).

   8              Non-GAAP performance measures 

The Group believes that the measures below provide valuable additional information for users of the Financial Statements in assessing the Group's performance by adjusting for the effect of exceptional items and significant non-cash depreciation and amortisation. The Group uses these measures for planning, budgeting and reporting purposes and for its internal assessment of the operating performance of the individual divisions within the Group.

 
                                            2020          2019 
                                                   Restated(1) 
                                            GBPm          GBPm 
 
Operating profit                            14.0          34.8 
Add back: amortisation                       1.3           0.7 
Add back: exceptional items                 23.8           1.2 
                                      ----------    ---------- 
Adjusted operating profit ('EBITA')         39.1          36.7 
Add back: depreciation                      68.3          68.1 
                                      ----------    ---------- 
EBITDA before exceptional items            107.4         104.8 
 
Profit before tax                           20.7          28.7 
Add back: amortisation                       1.3           0.7 
Add back: exceptional items                 12.9           2.0 
                                      ----------    ---------- 
Adjusted profit before tax                  34.9          31.4 
 
 

(1) Restated as a result of the adoption of IFRS 16 - see Note 1 (Accounting policies)

   9              Intangible fixed assets 
 
                                    Customer 
                        Goodwill       lists      Brands  IT development       Total 
                            GBPm        GBPm        GBPm            GBPm        GBPm 
Cost 
At 1 April 2018            103.1        38.3         5.1               -       146.5 
Additions(1)                23.2         6.8         1.9               -        31.9 
                      ----------  ----------  ----------      ----------  ---------- 
At 31 March 2019(1)        126.3        45.1         7.0               -       178.4 
Additions                      -           -           -             1.2         1.2 
                      ----------  ----------  ----------      ----------  ---------- 
At 31 March 2020           126.3        45.1         7.0             1.2       179.6 
 
Amortisation 
At 1 April 2018             95.1        36.7         4.2               -       136.0 
Charged in year                -         0.5         0.2               -         0.7 
                      ----------  ----------  ----------      ----------  ---------- 
At 31 March 2019            95.1        37.2         4.4               -       136.7 
Charged in year                -         0.9         0.4               -         1.3 
Impairment                  13.7         3.7         1.1               -        18.5 
                      ----------  ----------  ----------      ----------  ---------- 
At 31 March 2020           108.8        41.8         5.9               -       156.5 
 
Net book value 
At 31 March 2020            17.5         3.3         1.1             1.2        23.1 
 
At 31 March 2019(1)         31.2         7.9         2.6               -        41.7 
 
At 31 March 2018             8.0         1.6         0.9               -        10.5 
 
 

(1) Adjusted for fair value adjustments, see Note 15.

The amount of goodwill that is tax-deductible is GBPnil (2019: GBPnil).

All goodwill has arisen from business combinations. On transition to IFRS, the balance of goodwill as measured under UK GAAP was allocated to cash-generating units (CGUs). These are independent sources of income streams, and represent the lowest level within the Group at which the associated goodwill is monitored for management purposes. The Group's reportable CGUs comprise UK and Ireland (excluding Training), Training and International. All intangible assets are held in the UK. Goodwill arising on business combinations after 1 April 2004 has been allocated to the CGU that is expected to benefit from those business combinations. The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. No impairment test has been performed in respect of the International CGU as there are no intangible assets allocated to the CGU.

The recoverable amounts of the assets allocated to the UK and Ireland (excluding Training) and Training CGUs are determined by a value-in-use calculation. The value-in-use calculation uses cash flow projections based on five-year financial forecasts approved by management. The key assumptions for these forecasts are those regarding revenue growth and discount rate, which management estimates based on past experience adjusted for current market trends and expectations of future changes in the market. To prepare the value-in-use calculation, the Group uses cash flow projections made up of the FY2021 budget, adjusted for the impact of COVID-19, and a subsequent four-year period using the Group's business plan, together with a terminal value using long-term growth rates. The resulting forecast cash flows are discounted back to present value, using an estimate of the Group's weighted average cost of capital, adjusted for risk factors associated with each individual CGU and market-specific risks.

The Training CGU has performed below expectations during the year due to lower than expected learner enrolments, the setup of a number of regional training centres which have yet to reach critical mass and compliance related issues. More recently the business has been further affected by market conditions due to COVID-19. As a consequence an impairment charge has been recognised of GBP18.5m in the year against goodwill (GBP13.7m) and other intangibles (GBP4.8m). The remaining recoverable value of Goodwill in this CGU is GBPnil, and total recoverable amount of the CGU is GBP0.7m. A corresponding release has been made of the fair value of contingent consideration (GBP10.9m, see Note 3).

The pre-tax discount rates and terminal growth rates applied are as follows:

 
                                          31 March 2020                               31 March 2019 
                              ----------------------------------------    ---------------------------------------- 
                                       Pre-tax                Terminal             Pre-tax                Terminal 
                                      discount                   value            discount                   value 
                                          rate             growth rate                rate             growth rate 
 
UK and Ireland (excluding 
 Training)                                9.2%                    2.5%               10.1%                    2.5% 
Training                                 11.7%                    2.5%                   -                       - 
 
 

Impairment calculations are sensitive to changes in key assumptions of revenue growth and discount rate. The forecast cash flows used included an impact on revenue, costs and cash for a prolonged period of reduced activity as a result of COVID-19, with trading conditions likely to recover towards the end of 2021. The forecast cash flows for the Training CGU also include an assessment of the possible impact on revenue from the outcome of the funding agency claims (see Note 14).

A change of 1% in the pre-tax discount rate, with all other assumptions held constant, would impact discounted cash flows in the UK and Ireland (excluding Training) CGU by GBP25.9m. A decrease of 1% in the forecast revenue growth, with all other assumptions held constant, would reduce discounted cash flows in the UK and Ireland (excluding Training) CGU by GBP32.6m. In both cases, this would not result in an impairment charge to the UK and Ireland (excluding Training) CGU.

Other intangible assets of GBP1.1m remain within the Training CGU. An increase in the relevant pre-tax discount rate to c.25% or a reduction in forecast revenues for that CGU of c.15% would result in these other intangible assets being fully impaired.

   10           Property, plant and equipment 
 
                                                 Land and        Hire 
                                                buildings   equipment       Other       Total 
                                                     GBPm        GBPm        GBPm        GBPm 
Cost 
At 1 April 2018(1)                                   50.5       364.0        71.6       486.1 
Foreign exchange                                      0.1       (0.2)           -       (0.1) 
Acquisition through business combinations(2)          0.3        10.7         0.9        11.9 
Additions                                             1.4        55.1         5.3        61.8 
Disposals                                           (0.1)      (25.5)           -      (25.6) 
Transfers to inventory                                  -      (18.3)           -      (18.3) 
                                               ----------  ----------  ----------  ---------- 
At 31 March 2019(1,2)                                52.2       385.8        77.8       515.8 
Foreign exchange                                      0.3         0.7           -         1.0 
Additions                                             2.4        55.3         5.5        63.2 
Disposals                                           (0.1)      (21.6)       (0.2)      (21.9) 
Transfers to inventory                                  -      (12.1)           -      (12.1) 
                                               ----------  ----------  ----------  ---------- 
At 31 March 2020                                     54.8       408.1        83.1       546.0 
 
Depreciation 
At 1 April 2018(1)                                   29.9       160.3        58.0       248.2 
Foreign exchange                                      0.1           -           -         0.1 
Charged in year                                       3.2        36.1         6.7        46.0 
Disposals                                           (0.1)      (14.7)           -      (14.8) 
Transfers to inventory                                  -      (12.8)           -      (12.8) 
                                               ----------  ----------  ----------  ---------- 
At 31 March 2019(1)                                  33.1       168.9        64.7       266.7 
Foreign exchange                                        -           -           -           - 
Charged in year                                       3.4        34.9         6.2        44.5 
Disposals                                               -      (14.3)           -      (14.3) 
Transfers to inventory                                  -       (8.5)           -       (8.5) 
                                               ----------  ----------  ----------  ---------- 
At 31 March 2020                                     36.5       181.0        70.9       288.4 
 
Net book value 
At 31 March 2020                                     18.3       227.1        12.2       257.6 
 
At 31 March 2019(1,2)                                19.1       216.9        13.1       249.1 
 
At 31 March 2018(1)                                  20.6       203.7        13.6       237.9 
 
 

(1) Restated as a result of the adoption of IFRS 16 - see Note 1 (Accounting policies)

(2) Adjusted for fair value adjustments, see Note 15.

The net book value of land and buildings comprises freehold properties of GBPnil (2019: GBPnil) and improvements to short leasehold properties of GBP18.3m (2019: GBP19.1m).

An impairment review has been completed during the year on the basis set out in Note 9.

   11           Right of use assets 
 
                     Land and 
                    buildings       Other       Total 
                         GBPm        GBPm        GBPm 
Cost 
At 1 April 2018         119.2        41.7       160.9 
Foreign exchange          0.3           -         0.3 
Additions                14.5        13.7        28.2 
Disposals               (6.0)       (5.5)      (11.5) 
                   ----------  ----------  ---------- 
At 31 March 2019        128.0        49.9       177.9 
Foreign exchange          0.4           -         0.4 
Additions                 9.5         8.5        18.0 
Disposals              (10.1)       (6.5)      (16.6) 
                   ----------  ----------  ---------- 
At 31 March 2020        127.8        51.9       179.7 
 
Depreciation 
At 1 April 2018          71.5        21.0        92.5 
Foreign exchange          0.3           -         0.3 
Charged in year          10.8        11.3        22.1 
Disposals               (5.4)       (3.8)       (9.2) 
                   ----------  ----------  ---------- 
At 31 March 2019         77.2        28.5       105.7 
Foreign exchange          0.2           -         0.2 
Charged in year          13.2        11.7        24.9 
Disposals              (10.0)       (5.8)      (15.8) 
                   ----------  ----------  ---------- 
At 31 March 2020         80.6        34.4       115.0 
 
Net book value 
At 31 March 2020         47.2        17.5        64.7 
 
At 31 March 2019         50.8        21.4        72.2 
 
At 31 March 2018         47.7        20.7        68.4 
 
 

Included within depreciation charged in the year on right of use assets was GBP1.1m relating to exceptional impairments (see Note 3).

   12           Borrowings 
 
                                            2020          2019 
                                                   Restated(1) 
                                            GBPm          GBPm 
Current borrowings 
Bank overdraft                                 -           1.1 
Lease liabilities                           20.2          22.3 
                                      ----------    ---------- 
                                            20.2          23.4 
 
Non-current borrowings 
Maturing between two and five years 
- Asset based finance facility             102.1          99.5 
- Lease liabilities                         52.7          60.1 
                                      ----------    ---------- 
Total non-current borrowings               154.8         159.6 
                                      ----------    ---------- 
Total borrowings                           175.0         183.0 
Less: cash                                (22.8)        (11.5) 
Exclude lease liabilities                 (72.9)        (82.4) 
                                      ----------    ---------- 
Net debt                                    79.3          89.1 
 
 

(1) Restated as a result of the adoption of IFRS 16 - see Note 1 (Accounting policies)

The Group has a GBP180m asset based finance facility which is sub divided into:

(a) A secured overdraft facility, provided by Barclays Bank Plc, which secures by cross guarantees and debentures the bank deposits and overdrafts of the Company and certain subsidiary companies up to a maximum of GBP5m.

(b) An asset based finance facility of up to GBP175m, based on the Group's hire equipment and trade receivables balance. The undrawn availability of this facility as at 31 March 2020 was GBP70.2m (2019: GBP68.4m), based on the Group's eligible hire equipment and trade receivables.

The facility amounts to GBP180m, but is based on the Group's hire equipment and trade receivables balance, reduced to the extent that any ancillary facilities are provided, and is repayable in October 2022, with no prior scheduled repayment requirements. An additional uncommitted accordion of GBP220m remains in place through to October 2022.

Interest on the facility is calculated by reference to the LIBOR applicable to the period drawn, plus a margin of 150 to 250 basis points, depending on leverage and on the components of the borrowing base. During the period, the effective margin was 1.84% (2019: 1.80%).

The facility is secured by fixed and floating charges over the UK and Ireland assets.

Analysis of consolidated net debt

 
                     31 March    Non-cash   Cash flow    31 March 
                         2019    movement                    2020 
                         GBPm        GBPm        GBPm        GBPm 
 
Cash at bank and 
 in hand                 11.5           -        11.3        22.8 
Bank overdraft          (1.1)           -         1.1           - 
Bank borrowings        (99.5)       (0.4)       (2.2)     (102.1) 
                   ----------  ----------  ----------  ---------- 
                       (89.1)       (0.4)        10.2      (79.3) 
 
 
   13           Lease liabilities 
 
                               Land and 
                              buildings       Other       Total 
                                   GBPm        GBPm        GBPm 
 
At 1 April 2018                    59.9        21.0        80.9 
Foreign exchange                    0.3           -         0.3 
Additions                          14.4        13.6        28.0 
Repayments                       (14.9)      (12.2)      (27.1) 
Unwinding of discount rate          2.6         0.9         3.5 
Terminations                      (1.5)       (1.7)       (3.2) 
                             ----------  ----------  ---------- 
At 31 March 2019                   60.8        21.6        82.4 
Foreign exchange                    0.2           -         0.2 
Additions                           9.5         8.4        17.9 
Repayments                       (15.1)      (12.6)      (27.7) 
Unwinding of discount rate          2.4         0.8         3.2 
Terminations                      (2.5)       (0.6)       (3.1) 
                             ----------  ----------  ---------- 
At 31 March 2020                   55.3        17.6        72.9 
 
 

Included within terminations in the year was GBP0.7m relating to exceptional terminations of property leases (see Note 3).

Amounts payable for lease liabilities (discounted at the incremental borrowing rate of each lease) fall due as follows:

 
                                      2020        2019 
                                      GBPm        GBPm 
 
Payable within one year               20.2        22.3 
Payable in more than one year         52.7        60.1 
                                ----------  ---------- 
At 31 March                           72.9        82.4 
 
 
   14           Provisions 
 
                       Dilapidations      Contingent    Training 
                         Restated(1)   consideration   provision       Total 
                                GBPm            GBPm        GBPm        GBPm 
 
At 1 April 2018                  2.0               -           -         2.0 
Created in the year              0.8            10.1           -        10.9 
Provision utilised 
 in the year                   (0.3)               -           -       (0.3) 
Net changes in fair 
 value                             -             0.8           -         0.8 
                          ----------      ----------  ----------  ---------- 
At 31 March 2019                 2.5            10.9           -        13.4 
Created in the year              3.1               -         3.0         6.1 
Provision utilised 
 in the year                   (1.5)               -           -       (1.5) 
Net changes in fair 
 value                             -          (10.9)           -      (10.9) 
                          ----------      ----------  ----------  ---------- 
At 31 March 2020                 4.1               -         3.0         7.1 
 
 

(1) Restated as a result of the adoption of IFRS 16 - see Note 1 (Accounting policies)

Of the GBP7.1m provision at 31 March 2020, GBP5.9m (2019: GBP6.9m) is due within one year and GBP1.2m (2019: GBP6.5m) is due after one year. The dilapidations provision is calculated based on estimated dilapidations at current market rates. The total liability is discounted to current values.

In April 2020 Speedy were notified that a funding agency was suspending payments, and seeking repayment of GBP2.6m from Geason Training, based on an extrapolation of errors found in a small sample of learner documentation over a three year period from August 2017. The Group has engaged external lawyers who have responded to the agency. At this time it is not possible to make an accurate estimate of the timing or amount that may be repayable from this or other potential claims we may receive. GBP3.0 million has been provided as an exceptional charge including legal and verification costs. The provision is made without any admission of liability. The Group is investigating what mitigations may be available to it in relation to this matter.

Contingent consideration of between GBPnil and GBP26.0m may be payable by the Group in relation to the acquisition of Geason Training. The consideration depends on the combined performance of the acquired business and the Group's training business in the three years post acquisition. The fair value of this consideration has been estimated using forecast cash flows for an equivalent period, discounted at a risk-adjusted rate of 25%. Total fair value of contingent consideration as at year end is GBPnil. Information on the change in fair value is included in Note 9.

   15           Prior year acquisition of subsidiaries 

In December 2018, the Group acquired 100% of the share capital of Geason Holdings Limited ("Geason Training"). The fair values disclosed as provisional in the 2019 Financial Statements in respect of this acquisition have been finalised during the year at the end of the measurement period. As a result, the opening balance sheet has been restated to account for an additional GBP1.3m reduction to the fair value of receivables previously recognised, and a GBP0.4m decrease in the fair value of payables previously recognised. This has resulted in GBP1.7m additional goodwill being recognised.

 
                               Book value 
                                       at   Fair value 
                              acquisition   adjustment  Fair value 
                                     GBPm         GBPm        GBPm 
 
Intangible assets                       -          6.7         6.7 
Tangible fixed assets                 0.1            -         0.1 
Receivables(1)                        2.2        (1.3)         0.9 
Cash                                  0.2            -         0.2 
 
Current payables(1)                 (0.9)        (0.4)       (1.3) 
Non-current payables                    -        (1.2)       (1.2) 
 
                                      1.6          3.8         5.4 
 
Goodwill capitalised(1)                                       13.7 
 
Cash consideration                                             9.0 
Contingent consideration                                      10.1 
 
Total consideration                                           19.1 
 
 
 
   (1)   Restated to show the fair value adjustments to the acquired values. 
   15           Prior year acquisition of subsidiaries (continued) 

In March 2019, the Group acquired 100% of the share capital of Lifterz Holdings Limited ("Lifterz"). The fair values disclosed as provisional in the 2019 Financial Statements in respect of this acquisition have been finalised during the year at the end of the measurement period. As a result, the opening balance sheet has been restated to account for a GBP1.3m increase in the fair value of intangible assets, a GBP0.6m reduction to the fair value of tangible fixed assets, a GBP0.2m reduction to the fair value of inventories, a GBP0.4m decrease in the fair value of receivables, a GBP0.6m increase in the fair value of current payables, and a GBP0.6m decrease in the fair value of non-current payables previously recognised. This has resulted in a reduction of GBP0.1m goodwill recognised.

 
                               Book value 
                                       at   Fair value 
                              acquisition   adjustment  Fair value 
                                     GBPm         GBPm        GBPm 
 
Intangible assets(1)                    -          1.6         1.6 
Tangible fixed assets(1)             12.3        (0.6)        11.7 
Inventory(1)                          0.5        (0.2)         0.3 
Receivables(1)                        3.5        (0.4)         3.1 
 
Current payables(1)                 (3.0)          0.3       (2.7) 
Non-current payables(1)             (0.4)        (1.2)       (1.6) 
 
                                     12.9        (0.5)        12.4 
 
Goodwill capitalised(1)                                        9.2 
 
Total consideration                                           21.6 
 
 
 
   (1)   Restated to show the fair value adjustments to the acquired values. 

The customer relationship intangible asset of GBP1.0m has been valued using the 'excess earnings' method and is based on income forecast to be generated by the business acquired. Capital asset charges have been applied using a risk adjusted weighted average cost of capital in respect of fixed assets, working capital and the workforce. Other assumptions used in the valuation include an assumed growth in income from customers of 5.0% per annum, and a discount rate applied to the resulting income stream of 10.7%. The customer list intangible is being amortised over ten years, which is considered to be the period over which the majority of the benefits are expected to arise.

The brand intangible asset of GBP0.6m has been valued using the 'relief-from-royalty' method, using a royalty rate of 0.5% of income, discounted at a rate of 10.7%. The intangible is being amortised over a period of ten years, which is estimated to be the useful life within the business.

   16           Post-balance sheet events 

No post-balance sheet events have occurred.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

FR KKBBQKBKBKAB

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June 23, 2020 02:00 ET (06:00 GMT)

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