11 December, 2012
Unaudited results for the half year and second quarter ended 31 October 2012
Read and download the half year and second quarter results for the Ashtead Group. You can also view the latest webcast.
|Second quarter||First half|
|Profit before taxation||79.3||50.6||56%||140.7||84.4||64%|
|Earnings per share||10.0p||6.4p||53%||17.7p||10.7p||62%|
|Profit before taxation||78.0||49.8||56%||112.9||82.9||34%|
|Earnings per share||9.7p||6.3p||53%||14.2p||10.5p||33%|
1 at constant exchange rates
2 before exceptional items, intangible amortisation and fair value remeasurements
- Momentum continues with first half revenue growth of 17%
- Record first half pre-tax profit2 of £141m (2011: £84m)
- Group EBITDA margin rises to 41% (2011: 36%)
- Strategy of specialty bolt-ons continued with acquisition of JMR Industries
- Board now anticipates full year profit ahead of its earlier expectations
- Interim dividend raised 50% to 1.5p per share (2011: 1.0p)
Ashtead’s Chief Executive, Geoff Drabble , commented:
"It is pleasing to report another quarter where strong revenue growth and ongoing operational efficiency have delivered record first half pre-tax profits of £141m. With this momentum clearly established in the business we now anticipate a full year profit ahead of our earlier expectations.
Beyond the current financial year we remain well-placed to see growth over the medium term from either continued structural change or end market recovery. We are also generating high margins which, together with our much larger and younger fleet, results in an ability to fund significant growth whilst continuing to reduce leverage. Therefore, we expect net debt to EBITDA leverage to be sustained below two times.
With a broad range of metrics already at record levels at this stage in the cycle, together with a strong balance sheet to support medium term growth opportunities, the Board looks forward with confidence."
|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 host a meeting for equity analysts to discuss the results and outlook at 9.00am on Tuesday 11 December at the offices of UBS at 1 Finsbury Avenue, London, EC2M 2PP. This meeting will be webcast live for the information of shareholders and investors via the link at the top of this release and there will also be a replay available via the same link shortly after the meeting concludes. A copy of the announcement and slide presentation used for the meeting is also available for download at the top of this release. 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 these meetings but any eligible person not holding an invitation should contact Astrid Wright at Maitland, on 020 7379 5151.
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.
First half results
|Sunbelt in $m||913.2||775.8||394.8||296.2||254.1||173.5|
|Sunbelt in £m||576.8||481.8||249.5||183.9||160.5||107.8|
|Group central costs||-||-||(4.5)||(3.4)||(4.5)||(3.5)|
|Net financing costs||(22.7)||(25.2)|
|Profit before tax, exceptionals,remeasurements and amortisation||140.7||84.4|
|Fair value remeasurements||(7.4)||-|
|Profit before taxation||112.9||82.9|
|Profit attributable to equity holders of the Company||71.1||52.2|
The trends seen in the first quarter continued in the second quarter. As a result, Group revenue improved 18% in the first half reflecting predominantly strong growth in fleet on rent and yield in the US. Sunbelt's rental revenue grew 17% to $811m (2011: $694m), including a 10% increase in fleet on rent and a 5% improvement in yield. In the UK, A-Plant's first half rental revenue grew by 8% to £92m (2011: £86m) including 9% growth in average fleet on rent offset by a 2% yield decline.
Total revenue growth for the Group included used equipment sales revenue of £48m (2011: £37m) as we increased capital expenditure and continued to reduce the fleet age.
Sunbelt delivered a strong EBITDA margin of 43% (2011: 38%) in the first half 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 $395m (2011: $296m) and operating profit to $254m (2011: $174m). A-Plant's operating profit rose to £7m (2011: £5m).
Exceptional financing costs of £18m (including cash costs of £13m) related to the redemption of our $550m 9.0% senior secured notes in the first quarter. The refinancing of these notes with the $500m 6.5% senior secured notes maturing in 2022 will generate an annual saving in our finance cost of circa £8m.
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 £113m (2011: £83m). The effective tax rate on the underlying pre-tax profit was 37% (2011: 37%). Underlying earnings per share grew 65% to 17.7p (2011: 10.7p), whilst basic earnings per share were 14.2p (2011: 10.5p).
Capital expenditure in the first half of the year was £341m gross and £288m net of disposal proceeds (2011: £253m gross and £212m net) as we maximised the benefit of new fleet investment during the seasonally stronger summer months. As a result of this investment, the Group's rental fleet at 31 October 2012 at cost was £2.1bn with a reduced age of 32 months (2011: 39 months).
Sunbelt's fleet size at 31 October was $2.7bn. This larger fleet supported strong fleet on rent growth of 10% year on year. Utilisation improved throughout the period as we put the new equipment out on rent and reached last year's peak levels in October. Average first half physical utilisation was 72% (2011: 73%).
For the year as a whole we anticipate gross capital expenditure of £500m and net payments after disposal proceeds of £400m.
Return on Investment
Sunbelt's pre-tax return on investment1 in the 12 months to 31 October 2012 continued to improve to 16.4% (2011: 12.0%), well ahead of the Group's pre-tax weighted average cost of capital. In the UK, return on investment remains weak at 3.6% (2011: 1.6%) reflecting continuing excess supply and weak end markets. For the Group as a whole, returns are 14.2% (2011: 9.9%).
Cash flow and net debt
As expected, debt increased during the first half. 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 October 2012 was £1,069m (2011: £889m) whilst the ratio of net debt to EBITDA was 2.4 times (2011: 2.7 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, the Group's debt facilities are committed for an average of 5.2 years. At 31 October 2012, ABL availability was $685m - substantially above the $216m level at which the Group's entire debt package is covenant free.
In line with its policy of providing a progressive dividend having regard to both underlying profit and cash generation and to sustainability through the economic cycle, the Board has declared an interim dividend of 1.5p per share (2011: 1.0p per share). This will be paid on 6 February 2013 to shareholders on record on 18 January 2013.
Current trading and outlook
Our strong performance continued into November with Sunbelt's rental revenue being 26% ahead of the prior year. Whilst there was no impact from Hurricane Sandy in the Q2 results, in November we estimate that approximately 5% of the year on year improvement can be attributed to this one-off event.
With this momentum clearly established in the business we now anticipate a full year profit ahead of our earlier expectations.
Beyond the current financial year we remain well-placed to see further growth over the medium term from either continued structural change or end market recovery. We are also generating high margins which, together with our much larger and younger fleet, results in an ability to fund further significant growth whilst continuing to reduce leverage. Therefore, we expect net debt to EBITDA leverage to be sustained below two times.
With a broad range of metrics already at record levels at this stage in the cycle, together with a strong balance sheet to support medium term growth opportunities, the Board looks forward with confidence.
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 remeasurements.
Directors' responsibility statement in respect of the interim financial report
We confirm that to the best of our knowledge:
- the consolidated set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the International Accounting Standards Board; and
- the interim management report includes a fair review of the information required by:
- DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the consolidated set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
- DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.