Principal risks and uncertainties

Potential impact

In the longer-term, there is a link between levels of economic activity and demand for our services. The most significant end market which affects our business is construction. The construction industry is cyclical and typically lags the general economic cycle by between 12 and 24 months.

The economic uncertainties resulting from the impact of pandemics is considered as part of this risk.

Mitigation

• Prudent management through the different phases of the cycle.
• Flexibility in the business model.
• Capital structure and debt facilities arranged in recognition of the cyclical nature of our market and able to withstand market shocks.

Change

Our business continues to be well positioned to benefit from supportive end markets. However, while market forecasts are predicting continued growth both in terms of starts and the rental market, supported by the emergence of ‘mega projects’, there remains some uncertainty in end market conditions due to the level of interest rates. At all times, we remain cognisant of market dynamics and uncertainties to ensure that we take actions to ensure the Group is positioned to take advantage of opportunities.

Potential impact

The already competitive market could become even more competitive and we could suffer increased competition from large national competitors or smaller regional or local companies resulting in reduced market share and lower revenue.

This could negatively affect rental rates and physical utilisation. Continuing industry consolidation could also have a similar effect.

Mitigation

• Create commercial advantage by providing the highest level of service, consistently and at a price which offers value.
• Differentiation of service.
• Enhance the barriers to entry to newcomers provided by our platform: industry-leading technology, experienced personnel and a broad network and equipment fleet.
• Regularly estimate and monitor our market share and track the performance of our competitors.

Change

Our markets continue to be competitive but the big continue to get bigger. We have an 11% market share in the US, a 9% market share in Canada and a 10% market share in the UK.

Potential impact

A cyber attack or serious uncured failure in our systems could result in us being unable to deliver service to our customers and/or the loss of data. In particular, we are heavily dependent on technology for the smooth running of our business given the large number of both units of equipment we rent and our customers. As a result, we could suffer reputational loss, revenue loss and financial penalties.

This is the most significant factor in our business continuity planning.

Mitigation

• Stringent policies surrounding security, user access, change control and the ability to download and install software.
• Testing of cyber security including red team exercises, system penetration testing and internal phishing and other training exercises undertaken.
• Use of antivirus and malware software, firewalls, email scanning and internet monitoring as an integral part of our security plan.
• Use of firewalls and encryption to protect systems and any connections to third parties.
• Use of multi-factor authentication.
• Continued focus on development of IT strategy taking advantage of cloud technology available.
• Separate near-live back-up data centres which are designed to be able to provide the necessary services in the event of a failure at a primary site.

Change

The Group remains vigilant with regards to cyber security, with a significant and ongoing investment in resource and tooling to maintain and where appropriate, enhance our posture. Nevertheless, cyber security remains a continually evolving area and a priority for the Group. In relation to business continuity, our plans have been subject to continued review and update during the year and our disaster recovery plans are tested regularly.

Potential impact

A failure to comply with laws and regulations governing health and safety and ensure the highest standards of health and safety across the Group could result in accidents which may result in injury to or fatality of an individual, claims against the Group and/or damage to our reputation.

Mitigation

• Maintain appropriate health and safety policies and procedures regarding the need to comply with laws and regulations and to reasonably guard our employees against the risk of injury.
• Induction and training programmes reinforce health and safety policies.
• Programmes to support our customers exercising their responsibility to their own workforces when using our equipment.
• Maintain appropriate insurance coverage.

Change

Health and safety remains a key focus area for the Group and an area of continuous improvement in order to consider what actions can be implemented to further reduce the risks within our business.

In terms of reportable incidents, the TRIR was 0.76 (2023: 0.97) in the US and 0.78 (2023: 0.89) in Canada. The RIDDOR reportable rate was 0.19 (2023: 0.25) in the UK.

Potential impact

Retaining and attracting good people is key to delivering superior performance and customer service and maintaining and enhancing our culture.

Excessive staff turnover is likely to impact on our ability to maintain the appropriate quality of service to our customers and would utilimately impact our financial performance adversely.

At a leadership level, succession planning is required to ensure the Group can continue to inspire the right culture, leadership and behaviours and meet its strategic objectives. Furthermore, it is important that our remuneration policies reflect the Group’s North American focus and enable us to retain and enhance our strong leadership team.

Mitigation

• Provide well-structured and competitive reward and benefit packages that ensure our ability to attract and retain the employees we need.
• Ensure that our staff have the right working environment and equipment to enable them to do the best job possible and maximise their satisfaction at work.
• Invest in training and career development opportunities for our people to support them in their careers.
• Ensure succession plans are in place and reviewed regularly which meet the ongoing needs of the Group.

Change

Recruiting, retention and training continue to be key priorities for the business.

Our compensation and incentive programmes have continued to evolve to reflect market conditions, the economic environment and the results of our employee engagement surveys.

Diversity, equity and inclusion programmes are established across the business to enhance our efforts to attract and retain the best people.

Potential impact

As part of Sunbelt 4.0, the Group has made a long-term commitment to reduce its Scope 1 and 2 carbon intensity by 50% by 2034, compared to a baseline of 2024, on a journey to Net Zero by 2050. Failure to achieve these goals could adversely impact the Group and its stakeholders.

In terms of the Group’s assessment of the broader environmental impacts of our activities, we also consider the upstream and downstream impacts of our operations and note that a significant part of our Scope 3 emissions arises from our rental fleet, which today is reliant on diesel engines. Over time, ‘greener’ alternatives will become available as technology advances. If we do not remain at the forefront of technological advances, and invest in the latest equipment, our rental fleet could become obsolete.

 In addition, we need to comply with the numerous laws governing environmental protection matters. These laws regulate such issues as wastewater, storm water, solid and hazardous wastes and materials, and air quality. Breaches potentially create hazards to our employees, damage to our reputation and expose the Group to, amongst other things, the cost of investigating and remediating contamination and also fines and penalties for non-compliance.

Mitigation

• Policies and procedures in place at all our stores regarding the need to adhere to local laws and regulations.
• Procurement policies reflect the need for the latest available emissions management and fuel efficiency tools in our fleet.
• Collaboration with key suppliers to develop and pilot new technologies.
• Lower carbon vehicle  transition plan.
• Real estate and facility standards to reduce emissions from our operations.
• Monitoring and reporting of carbon emissions.

Change

The work of the Health, Safety and Environmental departments, and the Sustainability and operational audit teams, continue to assess environmental compliance.

Our 2022/23 Scope 1 and 2 carbon emissions have been validated by the Carbon Trust and we will obtain assurance over our 2023/24 Scope 1 and 2 data prior to the publication of the Group’s 2023/24 Sustainability Report.

In 2023/24 our Scope 1 and 2 carbon emission intensity ratios reduced to 37.4 (2023: 38.4). 

We quantified our Scope 3 emissions for the first time during the year, the largest components of which are category 11 (use of sold products) and category 13 (downstream leased assets). These categories are complex to measure and reliant on significant assumptions and estimation techniques. 

Potential impact

Breaches of laws or regulations governing the Group’s activities could result in criminal prosecution, substantial claims and loss of reputation.

Mitigation

• Maintaining a legal function to oversee management of these risks and to achieve compliance with relevant legislation.
• Group-wide modern slavery, business ethics and ethical sourcing policies, and whistle-blowing arrangements.
• Evolving policies and practices to take account of changes in legal obligations.
• Training and induction programmes ensure our staff receive appropriate training and briefing on the relevant policies.

Change

We monitor regulatory and legislative changes to ensure our policies and practices reflect them and we comply with relevant legislation.

Our whistle-blowing arrangements are well established, and the company secretary reports matters arising to the Audit Committee and the Board during the course of the year. 

During the year 4,929 people in the US, 513 people in Canada and 944 people in the UK underwent induction training. In addition, training programmes were undertaken in safety and business ethics.