2 September, 2015
Unaudited results for the first quarter ended 31 July 2015
Read and download the Unaudited results for the first quarter ended 31 July 2015. You can also view the latest webcast
|Profit before taxation||160.7||120.4||23%|
|Earnings per share||21.0p||15.3p||27%|
|Profit before taxation||155.4||117.5||23%|
|Earnings per share||20.3p||14.9p||26%|
1 at constant exchange rates
2 before intangible amortisation
- Group rental revenue up 20%1
- Q1 pre-tax profit2 of £161m, up 23% at constant exchange rates
- £349m of capital invested in the business (2014: £284m)
- Group RoI of 19% (2014: 19%)
- Senior debt facility increased to $2.6bn and maturity extended to 2020 at lower cost
- Net debt to EBITDA leverage1 of 1.8 times (2014: 1.9 times)
Ashtead’s Chief Executive, Geoff Drabble , commented:
"The Group delivered another strong quarter with underlying pre-tax profits of £161m, up 23% at constant exchange rates on the prior year. Group RoI was a very healthy 19% and the growth was achieved whilst reducing our leverage to 1.8 times EBITDA.
The strength of the quarter reflects the benefits of another strong execution of a consistent strategy to diversify the markets we serve, both in terms of geography and sector. Sunbelt's 23% rental revenue growth clearly demonstrates the overall health of our broader markets and the benefits of our more transactional business model. Particularly encouraging is that, after a weather-impacted Spring, our seasonal improvement in demand was very strong, resulting in record levels of physical utilisation in July on a fleet that was 26% larger. As a consequence, we confidently invested £349m in capital expenditure in the period, opened 19 greenfield locations and made one small bolt-on acquisition. We are therefore very much on track to achieve our plans of mid to high teens fleet growth in the US and open 50 new locations in the full year. We continue to invest and grow responsibly, generating strong returns and maintaining leverage within our stated objectives.
With both divisions performing well, strong end markets and our strategy clearly working, we expect full year results to be in line with our expectations and the Board looks forward to the medium term with confidence."
|Geoff Drabble||Chief executive||020 7726 9700|
|Suzanne Wood||Finance director||020 7726 9700|
|Will Shaw||Director of Investor Relations||020 7726 9700|
|Becky Mitchell||Maitland||020 7379 5151|
|Tom Eckersley||Maitland||020 7379 5151|
Geoff Drabble and Suzanne Wood will hold a conference call for equity analysts to discuss the results and outlook at 9.30am on Wednesday, 2 September 2015. The call will be webcast live via the link at the top of this release and a replay will also be available via the same link from shortly after the call concludes. A copy of this announcement and the slide presentation used for the meeting will also be available for download at the top of this release. There will, as usual, also be a separate call for bondholders at 4.00pm UK time (11.00am EST).
Analysts and bondholders have already been invited to participate in the analyst call and conference call for bondholders but any eligible person not having received dial-in details should contact the Company's PR advisers, Maitland (Astrid Wright) at +44 (0)20 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.
|Sunbelt in $m||820.8||638.4||390.4||311.1||258.2||206.9|
|Sunbelt in £m||528.6||376.7||251.4||183.6||166.2||122.1|
|Group central costs||-||-||(3.0)||(2.3)||(3.0)||(2.3)|
|Net financing costs||(19.5)||(13.1)|
|Profit before amortisation and tax||160.7||120.4|
|Profit before taxation||155.4||117.5|
|Profit attributable to equity holders of the Company||101.8||74.7|
Group revenue increased 35% to £619m in the quarter (2014: £458m) with strong growth in both businesses. This revenue growth, combined with ongoing operational efficiency, generated underlying profit before tax of £161m (2014: £120m).
The Group's strategy remains unchanged with growth being driven by strong same-store growth supplemented by greenfield openings and bolt-on acquisitions. Our growth in Sunbelt is across a range of market sectors with different characteristics, which is impacting a number of its metrics in the short term. This revenue growth can be explained as follows:
|2014 rental only revenue||459|
|Same stores (in existence at 1 May 2014)||13%||57|
|Bolt-ons and greenfields since 1 May 2014||10%||50|
|2015 rental only revenue||23%||566|
|2015 rental revenue||23%||718|
|2015 total revenue||29%||821|
We continue to capitalise on the opportunity presented by our markets which were up circa 7% last year and are forecast to grow at a similar rate this year. Our same-store growth of 13% demonstrates that we continue to take market share as we grow at approximately double the market rate. In addition, bolt-ons and greenfields have contributed another 10% growth as we execute our long-term structural growth strategy of expanding our geographic footprint and our specialty businesses.
Total rental only revenue growth was 23% in strong end markets, despite the slow down in oil and gas markets that provided a headwind which will continue through the year. This growth was driven by increased fleet on rent with yield flat year over year. Excluding oil and gas, same-store yield improved 1% in the quarter but good yield development in greenfields and bolt-ons was more than offset by the adverse impact of oil and gas, resulting in flat yield year over year. Average three month physical utilisation was 72% (2014: 72%). We have seen good sequential improvement during the quarter with utilisation at the end of July 2% higher than a year ago. Sunbelt's total revenue, including new and used equipment, merchandise and consumable sales, increased 29% to $821m (2014: $638m) as it sold more used equipment than last year in response to the downturn in oil and gas markets.
A-Plant continues to perform well and delivered rental only revenue of £65m, up 10% on the prior year (2014: £59m), in markets which, despite some uncertainty around the general election, continue to improve. This reflects 10% more fleet on rent and flat yield. A-Plant's total revenue increased 11% to £90m (2014: £81m).
Sunbelt continues to focus on operational efficiency and driving improving margins, with 52% of revenue growth dropping through to EBITDA. Drop through reflects the drag effect of greenfield openings, acquisitions and oil and gas. Excluding oil and gas, stores open for more than one year saw 58% of revenue growth drop through to EBITDA. The first quarter EBITDA margin of 48% (2014: 49%) reflects a higher level of lower margin used equipment sales. Excluding used equipment sales, EBITDA margins improved slightly. This contributed to an operating profit of $258m (2014: $207m). A-Plant's EBITDA margin improved to 38% (2014: 35%) and operating profit rose to £17m (2014: £14m), with drop through of 59%. As a result, Group underlying operating profit increased 35% to £180m (2014: £133m).
Net financing costs increased to £19m (2014: £13m), reflecting the higher average debt during the period and the $500m senior secured notes issued in September 2014.
Group profit before amortisation of intangibles and taxation was £161m (2014: £120m). After a tax charge of 34% (2014: 36%) of the underlying pre-tax profit, underlying earnings per share increased 37% to 21 .0p (2014: 15.3p).
Statutory profit before tax was £155m (2014: £118m) and, after a tax charge of 34% (2014: 36%), basic earnings per share were 20.3p (2014: 14.9p). The cash tax charge increased to 17% following the expected utilisation of brought forward tax losses during the year.
Capital expenditure and acquisitions
Capital expenditure for the quarter was £349m gross and £291m net of disposal proceeds (2014: £284m gross and £264m net). As a result of this investment, the Group's rental fleet at 31 July 2015 at cost was £3.8bn. Our average fleet age is now 25 months (2014: 26 months).
With the strong demand in both our end markets and an ongoing greenfield opening programme, we continue to expect full year capital expenditure of around £1bn. As always, our capital expenditure plans remain flexible and we will continue to monitor market conditions and adjust our plans appropriately.
Return on Investment1
Sunbelt's pre-tax return on investment (excluding goodwill and intangible assets) in the 12 months to 31 July 2015 was 25% (2014: 26%), well ahead of the Group's pre-tax weighted average cost of capital. In the UK, return on investment (excluding goodwill and intangible assets) was 13% (2014: 11 %). For the Group as a whole, returns (including goodwill and intangible assets) are 19% (2014: 19%).
1 Underlying operating profit divided by the sum of net tangible and intangible fixed assets, plus net working capital but excluding net debt and deferred tax.
Cash flow and net debt
As expected, debt increased during the quarter as we invested in the fleet and due to increased working capital to support the growth in the business.
Net debt at 31 July 2015 was £1,804m (2014: £1,300m) while, reflecting our strong earnings growth, the ratio of net debt to EBITDA reduced to 1.8 times (2014: 1.9 times) on a constant currency basis.
The Group took advantage of good debt markets in July and increased the size of its senior credit facility (‘ABL facility') to $2.6bn. The ABL facility's maturity has been extended to July 2020 and the pricing grid reduced. Depending on availability under the facility, the pricing grid ranges from LIBOR plus 125bp to LIBOR plus 175bp. This ensures our debt package remains well structured and flexible, enabling us to take advantage of prevailing end market conditions. The Group's amended debt facilities are now committed for an average of six years. At 31 July 2015, availability under the ABL was $1,258m, with an additional $1,324m of suppressed availability - substantially above the $260m level at which the Group's entire debt package is covenant free.
Current trading and outlook
With both divisions performing well, strong end markets and our strategy clearly working, we expect full year results to be in line with our expectations and the Board looks forward to the medium term with confidence.