9 December, 2015
Unaudited results for the half year and second quarter ended 31 October 2015
Read and download the unaudited results for the half year and second quarter ended 31 October 2015. You can also view the latest webcast
|Second quarter||First half|
|Profit before taxation||182.0||145.1||18%||342.7||265.5||21%|
|Earnings per share||24.1p||18.6p||23%||45.1p||33.9p||25%|
|Profit before taxation||176.5||141.7||18%||331.9||259.2||20%|
|Earnings per share||23.4p||18.1p||22%||43.7p||33.0p||24%|
1 at constant exchange rates
2 before intangible amortisation
- Group rental revenue up 18%1
- First half pre-tax profit2 of £343m, up 21% at constant exchange rates
- £696m of capital invested in the business (2014: £588m) and full year guidance increased
- Group RoI of 19% (2014: 19%)
- Net debt to EBITDA leverage1 of 1.9 times (2014: 2.0 times)
- Interim dividend raised 33% to 4.0p per share (2014: 3.0p)
Ashtead’s Chief Executive, Geoff Drabble , commented:
"I am pleased to be able to report another strong quarter resulting in underlying pre-tax profits of £343m for the six months, up 21% at constant exchange rates on the prior year. Even with significant levels of investment, we continue to grow responsibly, generating strong returns and maintaining leverage within our stated objectives. Group RoI was a healthy 19% and our leverage reduced to 1.9 times EBITDA.
We continue to execute on our strategy to diversify the markets we serve, both in terms of geography and sector. Sunbelt's 22% rental only revenue growth demonstrates clearly the benefits of this strategy and the overall health of our broader markets. We invested £696m in capital expenditure and opened 38 new locations in the US. Given the profitable growth opportunities evident in our markets, we are increasing our full year guidance for capital expenditure to c. £1.1bn.
With both divisions performing well, strong end markets and our strategy clearly working, we now anticipate a full year result ahead of our previous 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|
020 7379 5151
Geoff Drabble and Suzanne Wood will hold a meeting for equity analysts to discuss the results and outlook at 9.30am on Wednesday, 9 December 2015 at The London Stock Exchange, 10 Paternoster Square, London, EC4M 7LS. The meeting will be webcast live via the link at the top of this release and a replay will also be available from shortly after the meeting concludes. A copy of this announcement and the slide presentation used for the meeting are also available for download at the top of this release. The usual conference call for bondholders will begin at 3.30pm (10.30am EST).
Analysts and bondholders have already been invited to participate in the analyst meeting 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.
First half results
|Sunbelt in $m||1,685.1||1,367.9||819.3||666.5||547.4||449.3|
|Sunbelt in £m||1,089.2||821.7||529.6||400.4||353.8||269.9|
|Group central costs||-||-||(6.7)||(5.0)||(6.7)||(5.0)|
|Net financing costs||(39.4)||(29.1)|
|Profit before tax, and amortisation||342.7||265.5|
|Profit before taxation||331.9||259.2|
|Profit attributable to equity holders of the Company||218.9||165.6|
Group revenue increased 28% to £1,267m in the first half (2014: £987m) with strong growth in both businesses. This revenue growth, combined with ongoing operational efficiency, generated record underlying profit before tax of £343m (2014: £266m).
The Group's strategy remains unchanged with growth being driven by strong same-store growth supplemented by greenfield openings and bolt-on acquisitions. The principal driver of this performance is Sunbelt where rental revenue growth benefited from cyclical and structural trends. Sunbelt's revenue growth can be explained as follows:
|2014 rental only revenue||971|
|Same stores (in existence at 1 May 2014)||+ 13%||121|
|Bolt-ons and greenfields since 1 May 2014||+ 9%||95|
|2015 rental only revenue||+ 22%||1,187|
|Ancillary revenue||+ 15%||317|
|2015 rental revenue||+ 21%||1,504|
|2015 total revenue||1,685|
We continue to capitalise on the opportunity presented by our markets which were up circa 7% in the US 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 9% growth as we execute our long-term structural growth strategy of expanding our geographic footprint and our specialty businesses. During the first half of the year our focus has been on greenfields with 38 opened compared with 20 in the same period last year. In addition, we spent $28m (2014: $176m) on bolt-on acquisitions.
Total rental only revenue growth was 22% in strong end markets, despite the slow down in oil and gas markets that provided a headwind which will continue through the third quarter. 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 first half 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 first half physical utilisation was 73% (2014: 73%). We have seen good sequential improvement during the period with utilisation for the second quarter of 75% (2014: 75%). Sunbelt's total revenue, including new and used equipment, merchandise and consumable sales, increased 23% to $1,685m (2014: $1,368m) as it sold more used equipment than last year, largely in response to the downturn in oil and gas markets.
A-Plant continues to perform well and delivered rental only revenue of £131m, up 9% on the prior year (2014: £120m), in markets which, following uncertainty around the general election, remain competitive. This reflects 8% more fleet on rent and yield up 1%. A-Plant's total revenue increased 8% to £178m (2014: £166m).
Sunbelt continues to focus on operational efficiency and driving improving margins, with 55% 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 62% of revenue growth drop through to EBITDA. The EBITDA margin of 49% (2014: 49%) reflects a higher level of lower margin used equipment sales. Excluding used equipment sales, EBITDA margins improved to 51% (2014: 50%). This contributed to an operating profit of $547m (2014: $449m). A-Plant's EBITDA margin improved to 39% (2014: 36%) and operating profit rose to £35m (2014: £30m), with drop through of 70%. As a result, Group underlying operating profit increased 30% to £382m (2014: £295m).
Net financing costs increased to £39m (2014: £29m), 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 £343m (2014: £266m). After a tax charge of 34% (2014: 36%) of the underlying pre-tax profit, underlying earnings per share increased 33% to 45.1p (2014: 33.9p).
Statutory profit before tax was £332m (2014: £259m) and, after a tax charge of 34% (2014: 36%), basic earnings per share were 43.7p (2014: 33.0p). The cash tax charge increased to 18% following the expected utilisation of brought forward tax losses during the year.
Capital expenditure for the first half of the year was £696m gross and £598m net of disposal proceeds (2014: £588m gross and £538m). As a result of this investment, the Group's rental fleet at 31 October 2015 at cost was £4bn. Our average fleet age is now 24 months (2014: 26 months).
We continue to see strong demand in the US and, with high utilisation of the rental fleet, we are increasing our planned capital expenditure for the year to take advantage of this opportunity. In the UK where, although demand remains good, utilisation is lower than expected so we have responded by lowering our planned level of capital expenditure. The net result is an increase in our full year capital guidance to c. £1.1bn from our earlier guidance of c. £1bn. As always, our capital expenditure plans remain flexible and we will continue to monitor market conditions and adjust our plans appropriately.
Return on Investment 1
Sunbelt's pre-tax return on investment (excluding goodwill and intangible assets) in the 12 months to 31 October 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: 12%). 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 first half as we invested in the fleet, made a small number of bolt-on acquisitions and experienced the usual seasonal increase in working capital.
Net debt at 31 October 2015 was £1,982m (2014: £1,571m) while, reflecting our strong earnings growth, the ratio of net debt to EBITDA reduced to 1.9 times (2014: 2.0 times) on a constant currency basis.
The Group's debt package is well structured and flexible, enabling us to take advantage of prevailing end market conditions. Following the increase and extension of the senior credit facility in July, the Group's debt facilities are committed for an average of six years. At 31 October 2015, ABL availability was $1,008m, with an additional $1,599m of suppressed availability - substantially above the $260m 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 increased the interim dividend 33% to 4.0p per share (2014: 3.0p per share). This will be paid on 3 February 2016 to shareholders on record on 15 January 2016.
Current trading and outlook
With both divisions performing well, strong end markets and our strategy clearly working, we now anticipate a full year result ahead of our previous expectations and the Board looks forward to the medium term with confidence.
Directors' responsibility statement
We confirm that to the best of our knowledge:
- the condensed consolidated interim financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting'; and
- the interim management report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year) and Disclosure and Transparency Rule 4.2.8R (disclosure of related parties' transactions and changes therein).
By order of the Board of Directors
8 December 2015