3 December, 2009
Unaudited results for the half year and second quarter ended 31 October 2009
|Second quarter||First half|
|Underlying profit before taxation1||11.3||40.7||-72%||20.1||76.6||-74%|
|Profit before taxation||10.4||4.3||+137%||18.6||39.5||-53%|
|Basic earnings per share||0.9p||(0.3p)||n/a||2.0p||15.8p||-87%|
1 See explanatory note below
- Continuing to gain market share across both geographies
- First half pre-tax profit before amortisation of £20.1m in line with expectations (2008: £76.6m before exceptional items & amortisation)
- £97m of cash generated from operations in the first half with full year cash generation target raised to £125m from the £100m previously stated
- Net debt reduced by £189m to £847m (30 April 2009: £1,036m)
- Interim dividend unchanged at 0.9p per share (2008: 0.9p)
- $1.3bn refinancing of our asset-based loan through November 2013 provides the Group with substantial resources and flexibility for future growth
Ashtead’s Chief Executive, Geoff Drabble , commented:
"These results show that, while market conditions have remained difficult throughout the first half, the actions we took last winter to cut costs and reduce fleet size prepared our businesses for the conditions ahead and ensured that margins held up well.
Our operational performance is strong and we are clearly gaining market share. This has helped protect our profitability and deliver strong cash generation in the first half.
Whilst we remain focused on current trading, our timely decision to extend the maturity of our asset-based loan until November 2013 allows us to turn our attention to preparing for the recovery.
We continue to believe in the fundamentals of our markets. With a restructured business delivering good margins and gaining market share, together with the flexibility given by the recently extended debt facilities, the Board believes that Ashtead is well placed to benefit when markets recover."
|Geoff Drabble||Chief executive||020 7726 9700|
|Ian Robson||Finance director||020 7726 9700|
|Brian Hudspith||Maitland||020 7379 5151|
Underlying revenue, 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 full release pdf at the top of this page. 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 full release pdf at the top of this page.
Geoff Drabble and Ian Robson will host a meeting for equity analysts to discuss the results at 9.30am on Thursday 3 December at the offices of UBS at 100 Liverpool Street, London EC2M 2RH. For the information of shareholders and other interested parties, the analysts' meeting will be webcast live via the link at the top of this page and there will also be a replay available via the website from shortly after the call concludes. A copy of the announcement and slide presentation used for the meeting is also available for download from the link at the top of this page. There will, as usual, also be a separate call for bondholders at 3.00pm UK time (10.00am EST).
Analysts and bondholders have already been invited to participate in the meeting and conference call but anyone not having received dial in details should contact the Company's PR advisers, Maitland (Ashley Forget) on 020 7379 5151.
First half results
|Sunbelt in $m||576.1||870.2||199.3||320.8||80.0||187.0|
|Sunbelt in £m||355.4||462.6||122.9||170.6||49.3||99.4|
|Group central costs||-||-||(2.7)||(3.6)||(2.7)||(3.6)|
|Net financing costs||(29.6)||(33.4)|
|Profit before tax, exceptionals and|
|amortisation from continuing operations||20.1||76.6|
|Exceptional items (net)||-||30.5|
|Total Group profit before taxation||18.6||108.5|
|Profit attributable to equity holders of the Company||10.0||80.7|
First half results reflected the prevailing market conditions with rental revenues declining in Sunbelt by 31% to $534.4m and in A-Plant by 26% to £78.9m. Total revenue reductions were 34% in Sunbelt and 29% in A-Plant due to the greater reduction in sales of new and used equipment, merchandise and consumables.
The volume of fleet on rent held up well as a result of market share gains. Average fleet on rent in the first half reduced 13% year on year at Sunbelt and 16% at A-Plant. Pricing continued to be under pressure in both markets with yield declining 20% in Sunbelt and 11% in A-Plant compared to the same period in the prior year. Encouragingly, yield was broadly stable from month to month during the first half.
Our prompt action on cost reduction measures is reflected in the first half results with operating costs down 31% in Sunbelt and 24% in A-Plant. As a result, Group EBITDA margins remain above 30% and operating profit margins above 10%. The pre-tax profit before amortisation for the first half was in line with the Board's expectations at £20.1m (2008: £76.6m).
Whilst we continue to take appropriate actions on cost control, we are balancing this with the ongoing needs of the business. We remain confident as to the fundamentals of our markets and therefore continue to focus on developing long-term relationships across a wide range of market sectors. Our success in market share gains is demonstrated by our relatively strong volumes of fleet on rent and rental revenues. These successes will provide the springboard for improving margins and revenues as markets recover.
The effective current year tax rate for the first half was broadly stable at 35% (2008: 36%). In addition, there was an adjustment of £2.1m to prior year deferred tax. Basic earnings per share for the first half were 2.0p (2008: 15.8p, including the 11.0p impact of June 2008's exceptional gain on disposal of Ashtead Technology).
Capital expenditure in the first half was £28.5m (2008: £201.5m) of which £24.4m was rental fleet replacement. Disposal proceeds were £13.2m (2008: £40.7m), including £1.6m from the disposal of the remaining assets held for sale at year end, giving net capital expenditure in the first half of £15.3m (2008: £160.8m). We retain a significant ability to age our fleet and sustain our free cash flow at a time of lower earnings. The average age of the Group's rental fleet at 31 October 2009 was 39 months (2008: 32 months).
In the year as a whole, we continue to anticipate spending around £100m gross, all of which will be for replacement, or £75m net of disposal proceeds. With short lead times and no forward commitments, we have the flexibility to adjust this as required to reflect market conditions.
Cash flow and net debt
£97m of net cash inflow (2008: £19m) was generated from operations in the first half, of which £8m was returned to equity shareholders by way of dividends and £89m applied to reduce outstanding debt. As a result, including the benefit of a translation gain of £102m, closing net debt at 31 October 2009 reduced to £847m (30 April 2009: £1,036m). This substantial cash flow has helped to keep the ratio of net debt to EBITDA at 31 October 2009 to 2.9 times, within our 2-3 times target range despite the decline in our earnings due to the downturn.
Our revised debt package remains well structured for the challenges of current market conditions. Under the terms of the recent amendment of our asset-based senior bank facility, $1.3bn is now committed for four years until November 2013 with an additional $0.5bn available on the original terms until August 2011. Our debt facilities continue to be committed for the long term, with an average of 5.3 years at 31 October 2009 pro forma for the recent amendment. Based on August 2009 asset values, which were 27% below Spring 2007 peak values, availability at 31 October 2009 was $500m ($550m at 30 April 2009 based on November 2008 asset values which were 17% below peak). Availability therefore remains well above $150m, the level at which the entire debt package is covenant free.
As we have stated previously, the Board's dividend policy is to seek to increase cash returns to shareholders progressively over time, considering both the underlying performance of the Group and the ongoing cash flow of the business. In light of the impact of the recession on earnings, the Board has declared an unchanged interim dividend of 0.9p per share which will be paid on 3 February 2010 to shareholders on record on 15 January 2010.
Current trading and outlook
We maintain the view that market conditions will remain difficult throughout the second half of the current financial year as more private sector projects funded prior to the downturn are completed and overall activity declines.
However, there are reasons to believe that this seasonally difficult period may represent the bottom or near bottom of our cycle. Beyond the end of this fiscal year, we anticipate that markets will remain difficult in 2010 but that the effect of US stimulus work and a recovering residential construction market will benefit us until general economic recovery brings an improvement in commercial construction, most likely towards the end of our 2010/11 fiscal year.
We continue to believe in the fundamentals of our markets. With a restructured business delivering good margins and gaining market share, together with the flexibility given by the recently extended debt facilities, the Board believes that Ashtead is well placed to benefit when markets recover.