1 April 2009
Speedy Hire Plc
("Speedy Hire", "the Group")
RENEGOTIATED BANK FACILITY AND PRE-CLOSE PERIOD TRADING UPDATE
Bank Facility
In its January 2009 trading update, Speedy Hire stated that it had commenced discussions with its banking partners to establish more appropriate covenants for its £325 million loan facility which expires in June 2012.
Speedy Hire is pleased to announce that it has agreed revised terms with all of its banks and an amended banking facility was signed yesterday following a detailed review by them and their advisers of the Group's business, operational plan and financial projections.
The amended £300 million committed facility, which also extends until June 2012, provides for prudent levels of headroom between debt outstanding and the facility amount. In addition, quarterly interest cover, leverage and cash flow cover covenant tests have been set with a view to providing the Group with sufficient headroom above the required ratios over the remaining life of the facility.
In consideration of this, the interest margin above LIBOR will range from 2 to 4 per cent depending on the ratio of net debt to EBITDA (less net capex). Following the first covenant test in June 2009, the Group anticipates that the margin will be at 3 per cent. In addition, a one off amendment fee of 1.5 per cent. was paid to the lenders yesterday.
The Board is confident that the revised covenants are appropriate for current market conditions and the Group's trading outlook over the term of the facility. Speedy Hire retains the flexibility to set dividend and bonus payments and manage capex in line with business needs. Combined with the three year term of the facility, this will allow the Group both to focus on managing the business through the downturn and to capitalise on any potential upturn.
Fourth Quarter Trading
As forecast in the January 2009 trading update, conditions in the final quarter of the financial year ended 31 March, 2009 have remained difficult. However, having anticipated much of this weakness, the business had instigated substantial cost reduction plans to help offset the expected lower trading volumes.
This decisive action gives the Board confidence that adjusted PBT (pre amortisation and exceptional costs) for the year ended 31 March, 2009 will be in line with current market expectations, which are at the lower end of the £33-38 million guidance provided in January 2009.
Throughout the period, the Group has continued to implement its cost reduction initiatives in order to position itself for continued weakness in the new financial year, particularly due to reduced construction activity in areas other than infrastructure spending in the public and regulated sectors.
The result of these initiatives is that since July 2008 957 people (17%) have left the business, 82 depots (17%) have been closed and 470 vehicles (15%) returned to their lessors or sold. These actions, together with other cost reduction initiatives, have ensured that cost savings with an annualised benefit of in excess of £42 million are in place for the start of the new financial year.
Capital expenditure has been carefully managed. The focus has been on assets necessary to maintain the operational integrity of the business and essential IT and property investment, together with judicious support of customers, projects and sectors where appropriate. Second half capex of approximately £22 million will be c.60% down on the level of first half spend and this run rate of investment is forecast to carry through into the new financial year.
The Group has also engaged in a proactive disposal programme of under utilised and older assets which, together with reduced capex, has resulted in the net book value of hireable assets reducing by approximately £30 million or 9% over the past six months.
As a result of actions taken to deliver the £42 million of projected cost savings, plus costs associated with restructuring of some businesses and functions and the bank facility amendment costs, the Group has incurred one-off charges of approximately £25 million for the financial year ended 31 March, 2009.
The cash element of these non-recurring costs is approximately £13 million (of which the bulk has been paid in the year to 31 March, 2009), with the remainder of the charge mainly representing increased provisions for future property lease obligations and related costs, together with the loss on sale arising from a one-off disposal project related to the depot closure programme.
Further non-cash one-off costs relating to the possible impairment of balance sheet carrying values for intangible assets may arise from the year-end accounts process.
The strength of the Group's cash generation has meant that, despite these exceptional costs, it has continued to pay down debt. Net debt at 31 March, 2009 is anticipated to be in line with previous guidance, i.e. below the 1 April, 2008 level of £255.6 million and over £40 million lower than its peak in June 2008.
Recent Contract Wins
Despite the challenging environment in which the Group operates, the business continues to secure significant new business.
Recent contract wins include becoming (as part of a consortium with BSS, Hewden and Lavendon) the ODA's first choice partner for the Olympic Park. Additionally, a sole supplier agreement has been signed with one of the country's leading M&E contractors, Southern Electric Contracting. The Group has also recently renewed its contract with SembCorp for the provision of site based services at its Wilton petrochemical facility, at which Huntsman, SABIC, INVISTA, Artenius and Dow all have operations.
These new contracts and renewals, together with the new financing arrangements announced today, underline the Group's ability to trade successfully through the downturn. As a result, the Group enters the new financial year well placed to build on its market leading position.
Speedy Hire will announce its preliminary results for the financial year ending 31 March, 2009 on 27 May, 2009.
Enquiries:
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Speedy Hire Plc |
Hudson Sandler |
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Steve Corcoran, Chief Executive Justin Read, Group Finance Director Tel: 01942 720000 |
Wendy Baker / Kate Hough Tel: 020 7796 4133 |
There will be a conference call for analysts at 7.45am this morning. For conference call details please contact Hudson Sandler on 020 7796 4133.
Notes to editors:
Speedy Hire Plc
Speedy Hire Plc is a leading provider of equipment and support services to construction, manufacturing, industrial, rail and related industries.
The Group operates a number of equipment rental businesses specialising in tools and general building and materials handling equipment, portable accommodation, lifting equipment, surveying and measurement instruments, compressed air and power generating equipment and high performance pumps. In addition, the Group provides a range of support services including customer training on safety and awareness.