4 September, 2012
Unaudited results for the first quarter ended 31 July 2012
Read and download the first quarter results for the Ashtead Group. You can also view the latest webcast.
|2012||2011||Actual||At constant rates|
|Profit before taxation||61.4||33.8||+82%||+76%|
|Earnings per share||7.7p||4.3p||+82%||+76%|
|Profit before taxation||34.9||33.1||+5%||+2%|
|Earnings per share||4.5p||4.2p||+8%||+4%|
1 Before exceptional items, intangible amortisation and fair value remeasurements
- Record Q1 pre-tax profits1 of £61m, up 76% at constant exchange rates
- Sunbelt's rental revenue increases 17%
- Group EBITDA margins rise to 40% (2011: 35%)
- Long-term debt refinanced giving significantly lower cost and longer maturities
- Board now anticipates a full year result materially ahead of its previous expectations
Ashtead’s Chief Executive, Geoff Drabble , commented:
"We are delighted with this record performance as we continue to benefit from the trends established in the business over a number of quarters.
The markets in which we operate have performed as anticipated with gently improving conditions in the US and a more challenging outlook in the UK. We do not anticipate any significant changes to this environment in the short term.
Against this back-drop our continued market share gains are again reflected in our strong growth in fleet on rent and improving margins demonstrate our operational efficiency. Given the momentum established in the business, we now anticipate a full year result materially ahead of our previous expectations."
|Geoff Drabble||Chief executive||020 7726 9700|
|Suzanne Wood||Finance director||020 7726 9700|
|Brian Hudspith||Maitland||020 7379 5151|
Geoff Drabble and Suzanne Wood will hold a conference call for equity analysts at 9.30am on Tuesday 4 September. Dial in details for this call have already been distributed but any analyst not having received them should contact the Company's PR advisors, Maitland (Astrid Wright) on 020 7379 5151. The call will be webcast live via the link at the top of this release and there will also be a replay available via the same link shortly after the call concludes. There will, as usual, also be a separate call for bondholders at 4.00pm UK time (11.00am EST).
|Sunbelt in $m||432.1||361.1||183.6||134.6||114.4||73.9|
|Sunbelt in £m||275.3||222.5||116.9||82.9||72.9||45.6|
|Group central costs||-||-||(2.0)||(1.6)||(2.1)||(1.7)|
|Net financing costs||(12.4)||(12.4)|
|Profit before tax, remeasurementsand amortisation||61.4||33.8|
|Fair value remeasurements||(7.4)||-|
|Profit before taxation||34.9||33.1|
|Profit attributable to equity holders of the Company||22.5||20.7|
Group revenue improved 21% in the quarter reflecting predominantly strong growth in fleet on rent and yield in the US. Sunbelt's rental revenue grew 17% to $384m (2011: $328m), including a 13% increase in fleet on rent and a 4% improvement in yield. In the UK, A-Plant's first quarter rental revenue grew by 6% to £45m (2011: £42m) including 7% growth in average fleet on rent offset by a small yield decline.
Total revenue growth for the Group included used equipment sales revenue of £22m (2011: £14m) as we increased capital expenditure and continued to reduce the fleet age.
Sunbelt delivered a strong EBITDA margin of 42.5% (2011: 37.3%) in the quarter resulting from the high 'drop through' of rental revenue to profit as we continue to benefit from improved operational efficiency. As a result, EBITDA rose to $184m (2011: $135m) and operating profit rose to $114m (2011: $74m). A-Plant's operating profit rose to £3m (2011: £2m).
Exceptional financing costs of £18m (including cash costs of £13m) in the quarter related to the redemption of our $550m 9.0% senior secured notes. The refinancing of these notes with the $500m 6.5% senior secured notes maturing in 2022 will generate an annual saving to our finance cost of circa £8m per annum.
There is also a non-cash charge of £7m relating to the remeasurement to fair value of the early repayment options in our long term debt. This charge follows the recognition of a £7m credit related to the $550m senior secured notes in Q4 last year which reflected our ability to issue similar debt at a lower interest rate as we did in June.
As a result, statutory profit before tax was £35m (2011: £33m). The effective tax rate on the underlying pre-tax profit was 37% (2011: 37%). Underlying earnings per share grew 82% to 7.7p (2011: 4.3p), whilst basic earnings per share were 4.5p (2011: 4.2p).
Capital expenditure this year will, as usual, be concentrated in the first half of the year as we maximise expenditure for the seasonally stronger summer months. Accordingly, Q1 expenditure was £223m gross and £199m net of disposal proceeds (2011: £156m gross and £140m net). As a result of this investment, the Group's rental fleet at 31 July 2012 was 14% larger than a year ago and has a reduced age of 33 months (2011: 40 months).
Sunbelt's fleet size at 31 July of $2.7bn is 15% larger than it was a year ago which supported strong fleet on rent growth of 13% year on year. Average first quarter physical utilisation was 70% (2011: 72%) as we put the new equipment out on rent gradually throughout the quarter.
For the year as a whole we continue to anticipate gross additions of £450m with net capex payments of £400m after £100m of disposal proceeds (reflecting additional equipment delivered in Q4 last year and paid for this year). This rate of investment will hold the fleet size at around the size reached at the end of the quarter for the remainder of the year.
Return on Investment
Sunbelt's pre-tax return on investment1 in the 12 months to 31 July 2012 continued to improve to 15.3% (2011: 10.0%), well ahead of the Group's pre-tax weighted average cost of capital. In the UK, return on investment remains weak at 3.2% (2011: 1.2%) reflecting continuing excess supply and weak end markets. For the Group as a whole, returns are 13.2% (2011: 8.1%).
Cash flow and net debt
As expected, debt increased during the quarter. This resulted from the capital expenditure to grow and renew the fleet and the usual seasonal increase in working capital that occurs as activity rises in the summer months. We expect the working capital increase to largely reverse in the second half. Net debt at 31 July 2012 was £988m (2011: £848m) whilst the ratio of net debt to EBITDA was 2.4 times (2011: 2.8 times).
The Group's debt package remains well structured to enable us to take advantage of prevailing end market conditions. Following the issue of the new 6.5% $500m senior secured notes due in 2022, and the redemption of the 9.0% $550m senior secured notes, the Group's debt facilities are committed for an average of 5.7 years. At 31 July 2012, ABL availability was $663m - substantially above the $216m level at which the Group's entire debt package is covenant free.
Current trading and outlook
The performance seen in the first quarter continued in August. Given the momentum established in the business, we now anticipate a full year result materially ahead of our previous expectations.
Forward looking statements
This announcement contains forward looking statements. These have been made by the directors in good faith using information available up to the date on which they approved this report. The directors can give no assurance that these expectations will prove to be correct. Due to the inherent uncertainties, including both business and economic risk factors underlying such forward looking statements, actual results may differ materially from those expressed or implied by these forward looking statements. Except as required by law or regulation, the directors undertake no obligation to update any forward looking statements whether as a result of new information, future events or otherwise.
1 Operating profit divided by the sum of net tangible and intangible fixed assets, plus net working capital but excluding net debt, deferred tax and fair value remeasurement