12 December, 2004
Second quarter & half year results to 31 Oct 2004
Ashtead Group plc, the equipment rental group serving the US and UK construction, industrial and homeowner markets, announces its results for the half year and second quarter ended 31 October 2004.
Unaudited results for the half year and second quarter ended 31 October 2004
- Group H1 pre-tax profit before goodwill and, in 2003, exceptional items up 81% to £20.1m
- Group H1 pre-tax profit of £15.7m (2003 – loss of £8.5m)
- Sunbelt’s H1 profit* up 50% to US$61.9m
- A-Plant’s H1 profit* up 52% to £8.5m
- Group Q2 pre-tax profit before goodwill and, in 2003, exceptional items up 52% to £14.4m
- Group Q2 pre-tax profit of £12.2m (2003 – loss of £0.5m)
- New five year $675m asset based senior syndicated loan facility successfully completed
* Sunbelt’s and A-Plant’s profit comprises their operating profit before goodwill amortisation and, in 2003, exceptional items.
Ashtead’s chief executive, George Burnett, commented:
“The Group again performed strongly in the second quarter reflecting improving markets, increased market share and the shift from ownership to rental in the US . A-Plant also showed strong growth building on the improvements seen since the completion in January of its refocusing programme. Our new five-year senior debt facility, which was successfully completed just after the end of the period, provides us with greater flexibility to invest and a lower interest cost.
Current trading conditions in both our main markets remain strong. Whilst the continuing weakness of the US dollar and any further interest rate rises may adversely impact second half performance, the Board remains encouraged by the underlying performance of both our main businesses and by the Group’s long term growth potential.”
|Cob Stenham||Non-executive chairman||020 7299 5562|
|George Burnett||Chief executive|
|Ian Robson||Finance director||01372 362300|
|Brian Hudspith||The Maitland Consultancy||020 7379 5151|
In the first half Group profit before tax, goodwill amortisation and exceptional items (which arose only in 2003) rose 81% to £20.1m (2003 - £11.1m) and by 114% at constant exchange rates. After goodwill amortisation and exceptional items, pre-tax profits were £15.7m compared with last year’s loss of £8.5m. Earnings per share based on the pre-tax profit before goodwill amortisation and exceptional items and after an imputed 30% tax rate increased to 4.4p (2003 – 2.4p). After goodwill amortisation and exceptional items, and the accounting tax charge, earnings per share were 2.0p in 2004 compared to the loss of 3.4p in 2003.
The Group again performed strongly in the second quarter. Group profit before tax, goodwill amortisation and, in 2003, exceptional items rose 52% to £14.4m (2003 - £9.5m) and by 71% at constant exchange rates. After goodwill amortisation and exceptional items, the pre-tax profit was £12.2m compared with the loss of £0.5m in 2003.
Review of first half trading
|Turnover*||EBITDA*||Divisional operating profit**|
|Sunbelt Rentals in|
|Sunbelt Rentals in|
|Group central costs||-||-||(3.1)||(2.7)||(3.1)||(2.7)|
|Profit before tax **||20.1||11.1|
*In 2003, before exceptional items
**Before goodwill amortisation and, in 2003, exceptional items.
The impact of the 11% year on year decline in the US dollar limited the increase in first half sterling Group turnover to 1.5%. At actual rates of exchange first half EBITDA grew 5.3% to £89.4m and operating profit before goodwill amortisation and exceptional items increased 35.1% to £40.8m. The underlying growth was stronger. Measured at constant exchange rates, to eliminate the translation effect of the weak US dollar, turnover grew 8.8%, EBITDA grew 13.1% and operating profit before goodwill amortisation and exceptional items grew 47.9%. The Group’s profit margins also improved. The first half EBITDA margin rose from 31.4% to 32.5% and the operating profit margin (before goodwill amortisation and exceptional items) from 11.2% to 14.9%.
Sunbelt continued to perform strongly in the first half with both rental rates and utilisation continuing to rise, particularly in the second quarter. As a result first half turnover grew 15.6% to US$342.0m reflecting growth of approximately 7% in rental rates and an increase in utilisation rates from 67% to 72% whilst its fleet size remained broadly constant. Turnover growth was broadly based with all regions and all major product areas trading ahead of last year.
Turnover also benefited from additional work in the second quarter from the aftermath of the Florida hurricanes. Construction volumes in Florida are expected to continue to be strong for at least the next year. New profit centres were opened in Houston, Chicago and Vancouver ( Washington State) in the first half and further new profit centres are planned for Miami and Phoenix.
Sunbelt’s turnover improvement reflected market share gains and growth in non-residential construction activity as well as a continued shift from ownership to rental. Sunbelt’s first half "OLE_LINK2">divisional operating profit grew 49.9% to US$61.9m (2003 - US$41.3m) representing a margin of 18.1% (2003 - 14.0%).
A-Plant continued to build on the improvements in performance seen in Q4 last year and Q1 this year. Although total turnover for the six months declined to £80.6m from £83.5m in 2003 as a result of last year’s non-core disposal programme, on a same store basis turnover increased 3.6%. This reflected a fleet size which was approximately 5% smaller than in the equivalent period last year, an increase in utilisation from 60% to 66% and broadly constant rental rates. All three of A-Plant’s divisions improved with the Tool Hire division achieving the highest growth rate. New Tool Hire shops were opened in Harlow and Croydon and trading has just commenced at our new accommodation business in Cumbria .
A-Plant’s first half divisional operating profit grew 51.8% to £8.5m (2003 - £5.6m) representing a margin of 10.5% (2003 – 6.7%).
Technology’s turnover declined 11.8% to £6.0m at actual exchange rates as growth in its onshore environmental rental businesses was offset by slow offshore market conditions. Our first UK environmental rental store was opened in Hitchin at the beginning of the period and the US expansion continued with an opening in Atlanta in October. First half divisional operating profit was £1.4m (2003 - £2.1m). Towards the end of the period, activity levels in the North Sea market improved. Commentators are now increasingly confident that the oil majors will be funding greater offshore exploration and construction activity in 2005 from which Ashtead Technology should benefit in due course.
Capital expenditure and net debt
Capital expenditure in the six months was £63.3m of which £60.5m was on the fleet. These expenditure levels were significantly higher than last year reflecting the improving US economic conditions. £18.2m of the fleet expenditure was for growth with the remainder being spent to replace existing equipment. Disposal proceeds of £15.5m (2003 - £19.4m) were realised in the period generating a profit on disposal of £2.5m (2003 - £1.8m).
The tax effect on cash flow was again minimal and is expected to remain so.
Net debt at 31 October was £509.4m, a reduction of £17.3m since year-end and £66.1m in the twelve months since 31 October 2003. At constant exchange rates these reductions were £10.2m and £38.4m respectively.
New asset based bank facility
As previously announced, the Group completed syndication of a new US$675m five year asset based first priority senior debt facility on 12 November 2004. At closing US$490m (£265m) was drawn under the facility and was used, together with cash on hand, to repay the amount outstanding under the previous first priority senior debt facility and the debtors securitisation. Demand for participation in the facility was very strong enabling improvement in interest margin to be achieved during syndication.
As well as reducing costs, the new facility offers greater flexibility on capital expenditure levels. Indeed, in light of the positive trading trends in Sunbelt and the Group’s strong cash performance, capital expenditure for the current financial year is now expected to be in the region of £120m - £130m as opposed to the previous guidance of £100m - £105m and last year’s figure of £72.3m.
Current trading and outlook
Current trading conditions in both our main markets remain strong. Whilst the continuing weakness of the US dollar and any further interest rate rises may adversely impact second half performance, the Board remains encouraged by the underlying performance of both our main businesses and by the Group’s long term growth potential.
There will be a presentation to equity analysts at 9.30am this morning at the offices of JP Morgan at 60 Victoria Embankment, London, EC4 (entrance on John Carpenter Street). A simultaneous webcast of this presentation will be available through the Company’s website, www.ashtead-group.com and there will also be a recorded playback from shortly after the call finishes.