Earnings Call: Q4 2012

Jun 21, 2012

Good morning, and welcome to Ashtea Group Plc Year End Results Presentation. I'm Geoff Drabble, Chief Executive. And with me today for the very first time is Suzanne Wood, our new Group Finance Director. So welcome, Suzanne. You've got a tough act to follow, but these numbers should help a little bit. It looks like you're the 1st person ever to get standing room only audience 2. The presentation will follow the usual format. So after a brief overview from me, Suzanne will cover the financials, then I'll go on to cover the underlying trends that are driving these numbers. Then probably more importantly, we will go on and have a look at the outlook and how we see this business developing from this point onwards. As always, we will close with Q and A. I am delighted to be able to report that the mention we have established over a number of quarters was continued in Q4. And as a consequence, the group has delivered record group pre tax profits of £131,000,000 This strong performance resulted in group EBITDA margins of 34% and group ROI including goodwill of 12%, so excellent progress. Our strong U. S. Team has clearly capitalized on the opportunities presented by the market and we have backed this with group investment of £476,000,000 with further significant investment plans for 20 twelve-twenty 13. We are making excellent returns on this organic investment as demonstrated by the fact that despite the scale of the fleet growth and the de aging, we have further reduced net debt leverage to 2.2 times EBITDA from 2.7 times a year ago. We are also pleased to propose a final dividend of 2.5p giving us a total for the year of 3.5p a 17% increase. So the strong end to 2011, 2012 supported by an encouraging start to the new financial year allows us to anticipate further growth with or without end market recovery. As a result, it is likely that our profits in the coming year will be ahead of our previous expectations. So let me now hand over to Suzanne, who will take us through the financials in more detail. Thanks, Jeff, and good morning to everyone here today and also to those listening on the webcast. We appreciate your interest in Ashtead and this opportunity to provide you with an update on our business. I'm pleased to share with you this morning what we believe is a strong set of numbers. As most of you know, our results have improved consistently with each quarter this fiscal year and the Q4 was no exception. We reported an underlying pre tax profit of £26,000,000 compared to £3,000,000 for the same quarter last year. This profit performance was driven first by our rental revenues, which rose £37,000,000 or 16% in the quarter. Secondly, our performance was enhanced by ongoing cost control and efficiency initiatives that improved our operational leverage and drop through. As a result, our EBITDA rose by 37% year over year and our EBITDA margin improved from 26% percent to 31% in the quarter. I also should mention at this point that exchange rates did not have a significant effect on either the annual or the quarterly comparisons. Turning now to the group's full year results. We set forth on this slide our annual revenue and profit figures. Given that end construction markets have not yet recovered, we were very pleased to report an increase in our underlying pretax profit from £31,000,000 to £131,000,000 representing a record year of profitability for group. It is fair to say that a number of things went right for us this year, notwithstanding the broader economic concerns. For example, a number of weather related events, our hurricanes, floods and tornadoes throughout the year coupled with an extremely mild winter positively affected our results. For the full year, our rental revenues grew by 21%. These higher rental revenues combined with our previously discussed operational leverage produced a 36% increase in EBITDA and an 87% growth in operating profit for the year. As a result, our EBITDA margin improved from 30 percent to 34%. And as a final point on 20 twelve's results, our net interest charge was £18,000,000 or 24 percent lower than the prior year as a result of changes we made to the debt structure in April 2011. Now let's take a more detailed look at the numbers on a divisional basis. We'll begin with Sunbelt since the U. S. Was the primary driver of this year's performance. From this graphic, and in particular, from the revenue bridge on the top right showing the changes in revenue from 1 year ago, you can see that Sunbelt's revenue growth was generated principally by a 13% increase in fleet on rent and a 7% rise in yield. On the bottom right of the slide, the EBITDA bridge demonstrates our drop through. So despite increased volume and activity levels this year, our costs only grew by $75,000,000 thus approximately $153,000,000 or 69 percent of Sunbelt's incremental rental revenue growth was brought through to EBITDA. And as a final point before we leave this slide, I'd like to just point out that Sunbelt's EBITDA margin improved from 32 percent to 36%. Moving on now to A Plant's divisional results on the next slide. We were encouraged to see progress in the U. K. As well. In a very tough market, total revenue grew by 14%, including, as shown on the revenue bridge, a 1% increase in volume and importantly, a 6% rise in yield. Raising yields is critical to improving this division's return on investment to levels above our cost of capital. As we transition now to the next slide, we'll shift our focus from profitability to cash flow. As you're aware, our cash flow generally runs contracyclical to profit. So during the worst of the recession, we sharply curtailed our capital expenditure and gently aged our fleet and, as a result, substantially reduced our debt by almost onethree over a 3 year period. As we move into a different phase of the cycle, we've begun to invest in renewing and growing our fleet. You can see this clearly from the table on the slide as our cash payments for CapEx doubled this year. But importantly, even after significantly investing in our fleet and even after covering our cash interest and our cash tax payments, our free cash flow was only slightly negative for the year at £13,000,000 Therefore, our organic growth was funded largely from operating cash flow and this is in keeping with the guidance that's previously been given. In a few minutes, Jeff will talk a little bit more about our recent acquisition of Top, which was a business specializing in temperature control. With respect to our outlook for CapEx in fiscal 2013, I'd refer you to the guidance that we included in this morning's statement. From a cash payments perspective in 2013, we expect net payments of approximately £400,000,000 after disposal proceeds of approximately £100,000,000 So as in prior reinvestment years, the majority of the fleet deliveries will occur in the seasonally busier first half. As you can see on this net debt and leverage chart, the absolute dollar amount of our debt rose only slightly at April 2012 as a result of the fleet investment activities that we've talked about. However, from a leverage perspective, this modest increase in debt was more than offset by our earnings recovery. And therefore, I'm happy to report that our leverage declined from 2.7x last year to 2.2x at April 30. Our long stated objective, as you will recall, has been to manage our net debt to EBITDA leverage between 2 and 3 times over the cycle. And at this stage, we'd anticipate operating at the lower end of that range. We remain committed to this course as we believe it provides the greatest financial flexibility and strikes the right balance in a cyclical business like ours. The outlook for the medium term is that our debt, therefore, should remain broadly flat at constant exchange rates, rising only as appropriate growth opportunities present themselves. And as we just demonstrated this year, we'd expect leverage to continue to gently decrease as earnings recover in the cyclical upturn. This is in keeping with our general practice over the past 10 years of funding our organic growth CapEx as well as our maintenance or replacement CapEx from cash generation. And lastly, we should touch on our debt structure. As shown here, we believe that the structure we have is well suited to our Asset Intensive business, and it also provides us with substantial capacity to fund future growth, either organic growth or the small bolt on acquisitions that Jeff will further discuss. We have no debt maturities till 2016, effectively no financial monitoring covenants at these availability levels, and our blended cost of debt is 5.4%. Now as we announced this morning, we further enhanced by increasing the size of our committed senior bank facility from $1,400,000,000 to $1,800,000,000 with no changes in terms or conditions or pricing on that facility. Given the group's strong growth, we felt that it was appropriate to upsize the facility. And after giving effect to that upsizing, our headroom or availability under the facility at April 30 was $735,000,000 That concludes my remarks. And at this point, I'll hand it over to Jeff and he will review his view on the divisions and our outlook. Thanks, Suzanne. Let me now look at some of the drivers behind those excellent results starting with Sunbelt and this analysis on Page 12 that we shared with you many times before, which breaks down rental revenue into its constituent parts. I think the key takeaway here is the continuation of the strong performance that we've seen in previous quarters despite much tougher comparators. Although as Suzanne said, we undoubtedly did benefit from a very mild winter. This strong revenue performance is also reflected in very strong EBITDA and ROI performance with excellent progression over prior years and we're already heading towards historical highs. For consistency, we're disclosing ROI here including goodwill. However, excluding goodwill, Sunbelt's ROI is now organic fleet investments. I think the underlying strength of our recovery since the low point in 2,009, 2010 is also shown by the significant improvement in our fleet metrics. Fleet on rent is already up 20% against its low point and at all time record highs. And as importantly, at this stage in the cycle, we have also de aged the fleet by 9 months. What of course this demonstrates is our potential to experience further significant upside. These record levels of fleet on rent are being achieved even though end construction markets remain at historically low levels. In today's markets, access to finance is key. We are at historically low levels of net debt to EBITDA leverage despite the significant investments that we have already made. And as Suzanne highlighted, we have a healthy availability of $735,000,000 Therefore, we have the flexibility to take prompt advantage of any opportunities provided either by further structural change or a recovering market. Therefore, the consistent application of our long term cyclical planning around debt and fleet investments, a plan we first laid out in the very different days of 2,009 has enabled us to reach this strong position. As we said at the time, we know we can't avoid cycles, but we can certainly manage them. So what about end markets? Are they recovering or not? Current sentiment on the U. S. Economy seems to swing from extremes of boom or bust. From our own perspective, we are not in a materially different place to where we have been for a while. I believe there are, as shown, some better economic indicators, which are also supported by our experiences on the ground. It seems to be no longer getting worse and probably improving gently. It is likely, however, to be a long slow haul. And given there remains fundamental issues that are unresolved, there could be bumps along the road in this recovery. Having said that, we anticipate further growth whatever the end market does and we are confident that we will again outperform the general market. So what does all this mean for us? Well, it means we have been encouraged to take a positive approach to our fleet investments as you can see from the changes in the capital expenditure plan that we shared with you last time. We have pulled forward some expenditure into Q4 2011, 2012 and also increased Q1. However, in aggregate, at this stage, we have not increased our guidance. You will recall that through last year, whilst we were pleased at our record levels of physical utilization, we felt that it meant that we were leaving opportunities on the table as we had no flex capacity. The eagle eyed amongst you will have noticed on Page 12 that physical utilization has ticked down a little. But this is merely a reflection of the high intake. And what's most important is that in May of this year, we had 10% more fleet on rent than May 2011, which in itself was a knockout month. Moving to rates. You can see that we had an unseasonably strong winter. And despite tougher comparators, we maintained the Q4 GAAP of 6%. We have highlighted before that May 2011 was exceptional and the gap would close, but we are pleased to be starting June 1, 2012 with a 4% improvement over June 2011, which is a little better than we previously expected. We believe therefore that our focus on organic growth leveraging our existing network is working supported by this chart. Again, this is one we've shared with you before, but we have updated it for this year's stats. And in my opinion, it gets to the heart of our successful year. You can see how our strategy to expand our existing location capacity has resulted in the growth of the number of higher return larger and medium sized locations. But most encouragingly, you can also see how the margin and ROI across all categories of location has improved significantly. In my mind, this shows the shift in our operational efficiency and it's this which fuels our confidence that we will exceed previous peak margins. We believe that the existing footprint still retains the potential for a further 15% volume growth given current end markets and the practical physical constraints. We will also this year start to accelerate our greenfield openings as we believe the timing is now right. End markets are stabilizing. There is likely to be opportunities from changes in the competitor base and the current real estate market means that we can be far more cost effective than our previous expansion phase. We will focus on filling out non clustered markets and entering into geographies where we have no exposure. And we will also respond to specific market hotspots, for example, oil and gas. This will be a gradual buildup accelerating in future years as hopefully markets recover. And looking forward, we see a medium term opportunity for 100 further locations. This therefore also brings us to the question of where does M and A sit in our priorities, particularly given the United's acquisition of RSC. Well, again, nothing has really changed. There seems to be lots of options out there, but we have the luxury of being able to be selective given the strong organic growth story. And we believe a degree of prudence is still wise in the with the current macro uncertainty. However, we are predominantly looking for bolt ons not transformational deals and the focus will again be on specialty, but we will consider geographical fill ins for general plants and tools. So why specialty? Well, because it broadens our market exposure away from construction, reducing further cyclicality and the higher technical input does drive higher ROI as demonstrated by this slide. To further explain the strategy and the attractiveness of these true relatively small bolt ons, let's briefly look at the acquisition of TOPS as a case study. This was a well managed stable niche business focusing solely on climate control, which is a product we already have significant exposure to and sits readily alongside some of our existing specialty business. However, as you can see from the examples on the photographs on the slides here, the types of application are very different indeed and the TOPS customer base opens up a much broader range of cleaner trades such as facility management and events. The business was strong, but only regional. So it's an obvious strategy for us to use our footprint to expand an existing oops, I'm all over the place here to expand an existing model nationally. Also the financials are just compelling. On a standalone basis in 2011, tops delivered an ROI of 68%. I did say it was well run. In our 1st year, we will deliver a 17% ROI including goodwill. And we are conservatively forecasting a doubling of the business by year 3 with a 25% ROI. So you can see that these deals do not change the dial significantly short term, but they position the business very well for the future and we would hope for further opportunities. Moving on to the U. K. And Air plants and clearly a very different environment. Having said that, as Suzanne highlighted, we have made progress and it is not a drain on resources either financially or from a management perspective. This year has seen good yield improvement as you can see from this chart and this will remain our focus. Obviously, that's difficult in current markets and the team does deserve credit for a job well done. The outlook for the U. K. End market remains uncertain. And whilst there are some brighter hotspots around areas such as utilities, the issue remains that the decline in the public sector work is not being filled by an improvement in the private sector. My sense for a while, as you know, has been that 2012 is a potential low point. But again, as in the U. S. Any recovery is likely to be slow and vulnerable to setbacks. As you would expect, we continue to consider our strategic options around the U. K. And we have the benefit unlike some others of having a full range of options available to us. We have no need to be a force seller given Air France performance and the relatively small proportion of the group's business in the U. K. Also, we are better positioned than most to just ride this out given our ability to maintain investments. We do also have the firepower to consolidate if whilst recognizing the challenges the U. K. Market provides and the integration risk, it makes good financial strategic sense for the longer term. In short, we remain open to all sensible alternatives. So does some arrive. The business has performed well and is likely to continue to do so given the momentum We are at or near record performance across a broad range of metrics despite still difficult end markets. Our fleet planning and well managed debt structure gives us a high degree of flexibility, which positions us well for further growth, importantly with or without end market recovery. As a result, we now anticipate that our profit for the coming year will be ahead of our earlier expectations. So that ends the presentation. We should now move on to Q and A. And let's just follow the normal protocols. If you could just give us your name prior to asking the question for the benefit of those listening on the web. Good morning. James Barron from Barclays. Two questions if I may. Firstly, your expectation on exceeding previous margins. Yes. Is that expectation pre or post the drag effect from these new openings that you're now expecting? That takes into account the drag effect of the new openings. The drag effect on the new openings will be relatively small as compared to the significant upside we're getting from incremental volume on that semi fixed cost base. And then the second one, I know we're only a month on from completion, but can you just comment on the ground if you're seeing anything any sort of pull out from the UROIC merger? No, you're right. We are only a month on from completion. We've seen I would rather if it's no store closures, but there or thereabouts. So no, it's still very, very early days at this stage. Good morning. Andrew Nussey from Peel Hunt. One of the features of the business over the last couple has been the fact that competitors have struggled to get financing. And I just wonder with the U. S. Economy beginning to look a little bit better whether they're beginning to get some additional support from their lenders or if it's still a case of the status quo? It's a good question. I mean our assessment is that there remains a 2 tiered debt market. I think as you can see from the announcement Suzanne made earlier, our ability to add £400,000,000 to our ABL at no cost. And by no cost, I mean no extra interest cost and no upfront fees either demonstrates for those who have performed well there is an ability to utilize good debt markets. Our experience is our smaller customers and our smaller competitors still find access to finance difficult. If it is accessible, it's at a significantly higher cost, which has to be reflected in their business model, which has to be good full rates. It's Alex here at UBS. I've got 2.5 questions, unusually. Just can you talk a little bit about the monthly and the daily rates? And then the half is kind of what is the flow through from the increases in monthly rates that you've seen this year into next year? Yes. But we haven't put the slides in specifically this time on monthly, daily, weekly. We did the last quarter. We tend to every other quarter. As in previous quarters, nothing's really significantly changed. On the daily rates, we are back and remain at previous peaks. Weekly, we're a good way of the way back and we're still lagging in monthly. I wouldn't see any significant change in that until you see end market recovery. Our larger customers who are going for the larger contract work margins remain exceptionally tight. And therefore, they continue to put pressure on pricing. Also, if we are going to get any sort of benefit from changes in market structure, it's likely to be around the bigger accounts, which typically are the longer rental period and maybe at the lower end of our typical pricing range. So very similar to where we were before. I'd just like to clarify that point also. When we talk about moving the number of stores into the medium and larger category, let's just clarify that's not a change in strategy in our part. What we call medium and large some of our competitors would consider to be extremely small. What we consider small I don't think it even classes a location. So we absolutely remain committed to being a provider to that smaller contractor where there's a greater proportion of those daily better rates. But for now the drop through is clearly better on the daily rates. That's our experience. I know others have a different business model And we will remain committed to that. But I still think it's some time before we see significant shifts in those rates for the bigger accounts. Okay. And then so just to press 1, are you able to give us a number on what the carry through would be from the improvements in monthly rates this year? We can show you what's happened with rates, but we haven't done any activity based costing we said therefore that's what the cost Okay. And then the other question, which is coming back to the point about large medium. What was the last one? This is a full one. This is the second. You just put me off. Hang on. In terms of when you do this when you with the clustering strategy, does that tend to be all large? Or does it tend to be a mix across the mediums, all large? That's a good question. Typically within the where we're looking to build out clusters, I think you'll find we will there will be a combination of large and small. So typically, we'll probably be looking for 1 or 2 larger stores as being logistic hubs, but we'll be looking for 1 or 2 smaller stores too to get to sort of downtown small and also in clusters where typically while you'll see initially a greater proportion of the new stores being specialty, it will be adding a pump and power store, adding a scaffolding store where we currently just have now adding a top store, where we typically just have a general plant and tool explosion. Okay. So just wondering on that. And then the margin differential between where you've got clusters and where you're not adequately clustered would be roughly what? I haven't got a number for you. I guess we get that. But typically a bit like with the larger stores, we get better margins where we have In the cluster, okay. We can utilize the fleet better amongst the stores. We can optimize all logistics and fleet movements there. So again, typically, it's better. I don't have a number. Okay. No, that's great. Thank you. Alan, I would just add to that last question that typically in a clustered market, you're going to have a number of general tools stores certainly, but you're usually also going to have a specialty business there be it a pump and power scaffolding store. And with the inclusion of a specialty business store like that, that will tend to drive the returns a bit higher. And it also allows for the cross selling opportunities that Jeff talked about. Justin Jordan, Jefferies. I've just got one very simple question, but I guess 2 or 3 parts or maybe 2.5. Just on capital allocation, obviously, you've increased ABL by €400,000,000 and you've got by anyone's standards ample headroom and a balance sheet that allows you a lot of strategic options. Can you outline the board's thinking between potential organic growth opportunities? And I'm thinking obviously greenfields as well as the 15% additional fleet headroom with an existing branch network. And contrast that with acquisition opportunities at all etcetera. And just how the Board tries to allocate capital between the 2 of them? And are there any That's a good question. I can see there being a natural tendency to believe well they've increased the ABL by €400,000,000 what are we going to do with it. Our planning continues to be predominantly focused around organic growth. We think the returns to shareholders, the returns to the business are proven to be substantial and we believe with a combination of additional capacity on existing stores and with the greenfields there is significant upside from organic growth capacity. The analogy I would use on why have we taken $400,000,000 of extra capacity right now? Well, our organic growth CapEx last year and our general growth was greater than we anticipated when we first did the refinancing back last spring. However, we prudently incorporated in that facility this very opportunity to use an accordion to expand by $400,000,000 Given that given the general economic macro situation, your credit markets could again get very, very tough. So the analogy I was using given that we think that is a potential possibility given we were passing a petrol station and we could fill up for free, why wouldn't you fill up for free? And if you look at the fundamentals of what's driving our business improvement, it is the fact that this access to capital is strong balance sheet when smaller competitors and smaller customers don't have that access is the fundamental of our business model at the moment. So frankly, if the credit markets do get tougher now that decision will look even better. But again, we look at lots of opportunities. I mean, as you could imagine, you could we could stack we could fill this room with presentations from Investment Bankers given United about RSC, therefore, we should do the transformational deal too. That isn't at the forefront of our thoughts. We have very consistently stuck to this strategy. I mentioned today, you remember we give you that fancy chart back in 2009 of this is how we will get through this recovery from both the cash and the profit perspective and we remain committed to that business. We remain a cyclical business managing the debt, managing the fleet through the cycle will bring forth significant returns as we're already seeing before cyclical recovery. Steve Wolf from Numis. Can you just split out the yield improvements you're seeing in the Specialty business versus general if that's possible? We'll have to get back to that. It's not something we typically do. If anything, we're probably right now getting better improvements in general plant and tools than we are in specialty. We're in a phase, but the volume growth in specialty is significantly greater than the volume growth in general plant and tools. Given the returns we have on specialty, which you can see are incredibly high, our focus of attention in specialty is to grow the footprint and grow our market share. And there is less emphasis on growing rates than there is in general plant and tools. So it's not an analysis. It's analysis we could do, but it's not analysis we focus on terribly. Nick, good morning. W. O. Chatham. I just wondered if it's possible to flesh out a bit how much of the progress is you talk about weather related hurricanes, the mild winter and so on. Yes. Suzanne's probably best to say. Suzanne's been doing lots of analysis on our behalf to try and figure out one out. Sure. I'll be happy to try to answer that for you. I just begin by saying, as you can imagine, it's a very difficult number to derive because one would have to make a number of different assumptions across many geographies in the United States as to whether or not the fleet would have been out on rent had there not been a weather related event. So with that as a caveat, we have put pen to paper to try to figure that out. And as we can best determine it, we think all of those weather related events that occurred, including the very mild winter, may have improved the PBT last year by an order of magnitude, maybe £10,000,000 to £15,000,000 But again, that is a that's a guess at best. Mark Harrison from Moro. I've got a range of questions if possible. Firstly just on staff costs. I see that sort of overall staff numbers year on year are up 5%. And yet the costs I think over the last 3 months year on year are actually up 10%. Can you give us a feel for some of the staff costs particularly going forward? So are we looking at the 5% increase like for Yes. I absolutely can. I think the first thing I would say is that when you look at salaries and staff costs generally that I think year over year have gone up by order of magnitude, if I remember the number correctly, maybe 12% or 14%. Look at that in terms of standalone, a 13% increase in fleet on rent. And there are some variable bits to our business. As fleet on rent rises, we do need more drivers, mechanics, etcetera. So when you look at it in that manner and you think about the fact that for the year Sunbelt had a 69% fall through that we are doing a pretty fair job of controlling costs and taking With respect to the staff numbers, which for those of you in the room that may not have had an opportunity to see it, that's on Page 27 of the earnings release. The staff cost of that, about 100 related to top employees. And of course, since we did that acquisition in April, all of those 100 employees would have come in. Based on the number of greenfield stores that we added throughout the year, we would have added about 50 employees related to that. So you take that 5% increase year over year in employee costs and really strip out the top employees and the greenfield employees, you get down to a much more normal growth rate of Look at those staff costs. To me there's 2 key statistics in there. The relatively low increase in dollar staff costs relative to increase in activity, that's a very positive number and the low number of headcount relative to increase in staff cost. This remains a cyclical business. If we the key is learning lessons from cycles. We are flexing the labor that we've got. We're giving them more overtime. We're giving them more sales commission. And we're giving them more profit share, but we're not bringing in fixed costs. There will be a point in time, I hope it's a long time in the future where we will want to correct this business once again. And therefore, having learned from as rates rise, profits rise, flexing the fixed cost base rather than adding more fixed cost base is very central to how we're driving our operational efficiency. Okay. Second question, if I may. Just on the full year margin on equipment disposals sort of edged up by about 200 basis points to about 13% from 11% last year. Can you give us a guide to secondhand equipment values in the U. S. In May June so far? And obviously I'm aware of what they are from RALs up to April. Yes. If you move on to page 32, I'm sorry it's in the appendices. Lots of slides we could show you, but we're here all day and nothing we'd probably enjoy more. But we put in there the RASK valuations. As you can see, the RAS valuation has continued to be strong. And therefore, as we go through this strong investment and strong disposal, the margins are likely to tick up as they have done in recent quarters. Assuming that's up to April, though. So I'm saying I'm aware of what figures are for us up to the end of April. How have you got your experience of auctions in May June? May June, we are landing pretty much all over. We don't sell pretty much in May of June. May June is about how much we land, not how much we get rid of. So but all of the indications on the ground are that secondhand equipments continue to be strong. I think the critical factor in this remains that for those who are capitally constrained, their only access to incremental fleet is probably secondhand markets. They are undoubtedly being supported on anything above 75 brake horsepower by people are wanting to grandfather in Tier 3 engines rather than incur the significant on cost on Tier 4. So I wouldn't see anything which isn't going to continue to maintain very strong secondhand values going forward. Just finally, just on the cost inflation of new equipment purchases. Obviously, we've got a big CapEx program coming up. What are you seeing from the manufacturers terms of price wise? Well, again, it's a massive swing depending on whether you're talking Tier 3 or Tier 4. Tier 4 can see some quite significant increases because of the technological change. They can range anything from generator. If you strip out that technological change, we're probably 3%, 4% up year on year something of that order. Susanne, is that about right? No, you're exactly right. I mean across most of the equipment categories if you strip out those Tier 4 engines that Jeff described, I mean you certainly have a number that would be 5 or just a tad less. Merrill Lynch. I was wondering if you could perhaps talk a little bit about how you see opportunities emerging from the merger of the competitors in the space? And whether you think that they're going to take their off the board a little bit? How much of an opportunity do you think that would provide you? I don't think much. To be perfectly honest, I think they're 2 excellent companies. I think with a strong management team, it would be crazy to think it doesn't provide some opportunity. Certainly, when we close locations and Nations Rent, we lost volume. And every single time we budget to close a location, we assume a portion of lost revenue. So there will be some in the grand scheme of our plan, it's minuscule. I think an integration of that size does have its challenges, but I think our story is about what we see is growth amongst given the strength of our model not because of any challenges that their model is going to face. James Gilbert from Canaccord. As you remix the fleets away from and more towards specialty, what impact do you think that will have on physical utilization? Yes, that's a good question. Physical utilization on specialty products is significantly lower than general planting tools. You have this sort of almost counterintuitive. You get a very high dollar utilization because the pricing is so great. But by the very nature of specialty, it's used in special events and special occasions and it's not out there as often. So it will gently reduce the overall physical utilization. Given the relative proportions at the moment, it's going to have to be a reasonable shift before it becomes marked in our physical utilization numbers. But you're absolutely right. There is this trade off between physical and dollar utilization in Specialty Products. So if you look at tops, which is either it was 68% ROI prior to the acquisition, its physical utilization is around 50%. With that in mind, can you split very roughly the 2013 investment between the 2? I can. Could you give us an indication? I thought we'd be sharing that one with you just yet, Neil. Thank you for questions. Remember before, you said that from the peak, about 8% of the industry has kind of left or gone bust. I think it's almost a bit larger now Mark. But of that order, I think it's over a couple digits now. Yes. I think the last statistics were just over 10%. And secondly, just taking that into account obviously the fleets are the majors. Where would you say the industry fleet is? And again, last time, you're saying it was down about 15% from the peak Yes. The honest answer is I don't know. The time to do that calculation is we will do it for us the next quarter because such a huge proportion of the investment happens this quarter and the quarter just gone. Though if there's going to be a shift, it's going to be in the next quarter. Relatively little fleet comes in since we last shared that data in sort of September. So we'll dig that data out between now and next because the key is what comes in now. Everybody tries to land their fleet April through June. Well to be fair that is one area where the whole United RSA integration thing will because they will well I know they have landed what they originally proposed to land as 2 individual companies. The big question then will be having sat down and looked at it, how much do they sell? And I could see that being a fairly significant quantum towards the back end of the year. There's no further questions. That will conclude the Q and A. However, before we wrap up, as I said right at the very beginning, this was a debut and a notable debut from Cezanne, but of course, it also marks the end of Ian's tenure as Finance Director. Now a number of you will have the opportunity over the next couple of weeks to say a more personal farewell to Iain. It's a little known fact that Iain has now got iconic status on the web, given the quality and transparency of the financial results, which he has been broadcasting now many times for ACHTAD, I sit here in the luxurious position of having a very strong business supported by a very strong balance sheet. And as I said, an integrity and transparency to the numbers, which was not always the case in Ayeshaet's history. And a huge thanks is required to Iain for getting us in that strong position on both a personal and a professional basis. He will be missed. And therefore, if you would just join me in thanking Ian in the appropriate way for his incredible tenure and unstinting dedication to Astrid, that would be very much appreciated.