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.
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