3 March, 2009
Unaudited results for the third quarter and nine months ended 31 January 2009
Read and download the third quarter results for the Ashtead Group. You can also view the latest webcast.
|Third quarter||Nine months|
|Underlying operating profit1||28.6||38.0||-25%||138.6||147.7||-6%|
|Underlying profit before taxation1||11.0||18.7||-41%||87.6||90.2||-3%|
|Underlying earnings per share1||1.6p||2.5p||-36%||11.6p||11.4p||+2%|
|(Loss)/profit attributable to equity shareholders||(1.0)||13.4||-||79.7||60.1||+33%|
|Basic earnings per share||(0.1p)||2.4p||-||15.7p||10.9p||+45%|
1 See notes below
- Third quarter performance in line with our expectations in our seasonally most uncertain quarter
- The programme announced in December to lower the cost base by £45m is now substantially implemented
- £162m of net cash inflow in the nine months (2008: £44m outflow) of which £137m was applied to pay down debt
- All our debt is committed for the long term and structured to remain covenant free
Ashtead’s Chief Executive, Geoff Drabble , commented:
"As anticipated market conditions became more difficult in Q3. Revenues in both markets were adversely affected both by volume and yield whilst we continued to benefit from the stronger dollar. Our strong market positions have also ensured a good relative performance and we anticipate continuing to gain market share.
We have generated strong net cash inflow which demonstrates the ongoing flexibility of our business model through the cycle as we reduce capital expenditure and adjust our cost base to market conditions.
In the medium term, the recently enacted US infrastructure package will also help support our end markets although we continue to be cautious as to the timing and likely quantum of the benefit. We also anticipate that the recession will lead to both increased rental penetration and a greater market share for the larger, better financed rental companies such as ourselves.
Our debt package remains committed for the long term and is structured to support us through the cycle.
Whilst we are operating in difficult and uncertain markets we have been preparing for these conditions for some time. Our actions in right sizing the business, which are already evident in our performance, together with our strong balance sheet allow the Board to anticipate full year results for profit and cash in line with our expectations."
|Geoff Drabble||Chief executive||020 7726 9700|
|Ian Robson||Finance director||020 7726 9700|
|Brian Hudspith||Maitland||020 7379 5151|
- Underlying profit and earnings per share are stated before exceptional items and amortisation of acquired intangibles. The definition of exceptional items is set out in note 4 in the pdf at the top of this release. The reconciliation of underlying earnings per share and underlying cash tax earnings per share to basic earnings per share is shown in note 7 in the pdf at the top of this release.
- IFRS requires that, as a disposed business, Ashtead Technology's after tax profits and total assets and liabilities are reported in the Group's accounts as single line items within our income statement and balance sheet with the result that revenues, operating profit and pre-tax profits as reported in the Group accounts exclude Ashtead Technology. Prior year figures have been restated accordingly.
Geoff Drabble and Ian Robson will host a conference call with equity analysts to discuss the results at 9.30am on Tuesday 3 March. This call will be webcast live via the webcast link at the top of this page and there will also be a replay available from shortly after the call concludes. There will also be a conference call for bondholders at 3pm (10am EST).
Please contact the Company's PR advisers, Maitland (Kerryn Jahme) at +44 (0)20 7379 5151 for more details if you are an equity analyst or an Ashtead bondholder.
|Third quarter||Revenue||EBITDA||Operating profit|
|Sunbelt in $m||307.9||362.7||101.4||137.2||37.5||69.4|
|Sunbelt in £m||208.3||179.5||70.5||67.9||28.8||34.4|
|Group central costs||–||–||(0.5)||(1.8)||(0.5)||(1.8)|
|Net financing costs||(17.6)||(19.3)|
|Profit before tax, exceptionals and amortisation from continuing operations||11.0||18.7|
|Total Group (loss)/profit before taxation||(9.5)||20.2|
|Sunbelt in $m||1,129.6||1,171.8||422.2||467.7||224.5||266.0|
|Sunbelt in £m||645.1||581.4||241.1||232.0||128.2||132.0|
|Group central costs||–||–||(4.1)||(6.2)||(4.1)||(6.2)|
|Net financing costs||(51.0)||(57.5)|
|Profit before tax, exceptionals and amortisation from continuing operations||87.6||90.2|
|Total Group profit before taxation||99.0||95.9|
Third quarter results reflect the difficult market conditions in both our US and UK markets with Sunbelt's revenue in dollars declining 15% and A-Plant's 14% in the quarter. This reflected a reduction in Sunbelt's fleet size of 3%, physical utilisation of 62% (2008: 66%) and a 7% reduction in yield. At A-Plant, fleet size was 2% larger than the prior year, whilst utilisation was 62% (2008: 68%) and yield reduced 7%.
Including some early benefit from the cost reduction measures in our right sizing programme, costs, before depreciation, declined 8% in both Sunbelt and A-Plant in the quarter. Despite the cost reductions, underlying operating profits declined in both businesses whilst the stronger exchange rate and lower central costs helped bring the underlying operating profit at Group level to £28.6m (2008: £38.0m).
Lower interest rates and reduced underlying debt levels, partially offset by the stronger dollar, brought about a reduction in the interest charge to £17.6m (2008: £19.3m) whilst the underlying pre-tax profit for the quarter was £11.0m (2008: £18.7m). Exceptional items of £19.7m comprise £16.1m and £4.1m relating to, respectively, the US and UK cost reduction programmes less a profit on sale of property from closed sites of £0.5m. The quarter's results also included a £0.8m expense for amortisation of acquired intangibles.
Nine months ended 31 January
The nine months' results reflect the previously announced profit growth for the first half largely achieved before the current weakness in our end markets took hold and the third quarter performance outlined above. For the nine months, Sunbelt's rental revenues reduced by 3% to $1,061m reflecting a rental fleet which over this period was 2% larger than last year, physical utilisation of 67% (2008: 69%) and a decline in yield of 4% whilst A-Plant's rental revenues reduced by 3% to £150m reflecting a 10% increase in fleet size, physical utilisation of 67% (2008: 70%) and an 8% reduction in yield.
Including the benefit of lower finance costs and the translation benefit from the stronger dollar the nine months underlying pre-tax profit decline is 3% to £87.6m (2008: £90.2m). The effective tax rate for the nine months was stable at 35% whilst the weighted average share count reduced reflecting earlier share repurchases. As a result underlying earnings per share for the nine months increased 2% to 11.6p (2008: 11.4p).
The nine months results also include a net exceptional gain of £10.8m comprising the pre-tax gain of £66.2m from the sale of Ashtead Technology in June 2008 and a one-time charge of £55.4m relating to the right sizing programme. This includes £39m in respect of asset impairments, £14m of provisions for future lease expense at closed stores and £1m of other costs, principally severance payments. Approximately half of the used rental equipment being disposed of in the programme had been sold by 31 January raising £17m with the remainder expected to be sold in the fourth quarter. In cash terms we now expect the programme to generate a cash inflow of at least £30m this year, slightly ahead of our initial estimate.
Reflecting these one time items, the total Group profit before taxation for the nine months was £99.0m (2008: £95.9m) whilst basic earnings per share for the nine months were 15.7p (2008: 10.9p).
Capital expenditure for the nine months totalled £234.0m (2008: £301.2m), including £206.2m on rental fleet replacement. Disposal proceeds totalled £72.0m (2008: £56.8m) giving net expenditure in the period of £162.0m (2008: £244.4m). The average age of the Group's rental fleet at 31 January 2009 was 34 months (2008: 29 months).
Next year's capital expenditure is expected to be entirely for replacement rather than growth. We currently anticipate spending around 70% of depreciation or £150m gross and £125m net of disposal proceeds but, with short lead times and no forward commitments, we will be able to adjust this as required to reflect actual market conditions.
Cash flow and net debt
£161.6m of net cash inflow was generated in the nine months. £24.3m of this net inflow was applied in returns to equity shareholders with £137.3m used to reduce outstanding debt. As a result net debt at 31 January 2009 was £1,147m (30 April 2008: £963m) which includes a translation increase of £318m since year end, reflecting sterling's 27% decline against the dollar. The ratio of net debt to underlying EBITDA at constant rates was 2.6 times at 31 January 2009 well within our 2-3 times target range.
Our debt package is well structured for the challenges of current market conditions. We retain substantial headroom on facilities which are committed for the long term, an average of 4.8 years at 31 January 2009, with the first maturity on our asset based senior bank facility not being due until August 2011.
Availability under the $1.75bn asset based loan facility was $523m at 31 January 2009 ($602m at 30 April 2008) well above the $125m level at which the entire debt package is covenant free.
Current trading and outlook
Whilst we are operating in difficult and uncertain markets we have been preparing for these conditions for some time. Our actions in right sizing the business, which are already evident in our performance, together with our strong balance sheet allow the Board to anticipate full year results for profit and cash in line with our expectations.