14 June, 2016
Audited results for the year and unaudited results for the fourth quarter ended 30 April 2016
Read and download the Audited results for the year and unaudited results for the fourth quarter ended 30 April 2016. You can also view the latest webcast
|Profit before taxation||163.5||110.2||42%||645.3||489.6||24%|
|Earnings per share||22.0p||14.2p||47%||85.1p||62.6p||28%|
|Profit before taxation||151.3||104.7||38%||616.7||473.8||24%|
|Earnings per share||20.4p||13.4p||44%||81.3p||60.5p||27%|
1 at constant exchange rates
2 before exceptionals and intangible amortisation
- Group rental revenue up 17%1
- Group EBITA margins up to 29% (2015: 27%)
- Group pre-tax profit2 of £645m, up 24% at constant exchange rates
- £1.2bn of capital invested in the business (2015: £1.1bn)
- Group RoI of 19% (2015: 19%)
- Net debt to EBITDA leverage1 of 1.7 times (2015: 1.8 times)
- Proposed final dividend of 18.5p, making 22.5p for the full year, up 48% (2015: 15.25p)
- Commencing a share buy-back of up to £200m in 2016/17
Ashtead’s Chief Executive, Geoff Drabble , commented:
"2015/16 was another very successful year for Ashtead with Group rental revenue increasing 17% and underlying pre-tax profit up 24% to £645m at constant exchange rates.
We continue to deliver on our well-established strategy of organic growth, supplemented by bolt-on acquisitions. We have broadened both our geographic footprint and the markets we serve and the benefits of this diversification are evident, both in our financial performance and our market share gains.
Particularly encouraging is the continued improvement in our margins, with Group EBITDA margins now a record 46%. These strong margins, together with the natural moderation of our replacement fleet expenditure, mean we are entering a phase where we anticipate both good earnings growth and significant free cash flow generation. We therefore have the flexibility to continue both to invest in our long-term structural growth opportunity and enhance returns to shareholders. As a consequence, we have announced today both a proposed 48% increase in our full year dividend to 22.5p and a share buyback of up to £200m. As always, we will continue to grow responsibly and will operate within our 1.5 to 2.0 times net debt to EBITDA range.
We have seen a good seasonal upward trend in fleet on rent throughout the Spring which has continued into the new financial year. Our end markets remain strong, the structural drivers are still in place and we have a strong balance sheet which allows us to execute our plans responsibly. As a consequence, the Board continues to look to the medium term with confidence."
|Geoff Drabble||Chief executive||+44 (0)20 7726 9700|
|Suzanne Wood||Finance director||+44 (0)20 7726 9700|
|Will Shaw||Director of Investor Relations||+44 (0)20 7726 9700|
|Becky Mitchell||Maitland||+44 (0)20 7379 5151|
|Tom Eckersley||Maitland||+44 (0)20 7379 5151|
Geoff Drabble and Suzanne Wood will hold a meeting for equity analysts to discuss the results and outlook at 9.00am on Tuesday, 14 June 2016 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 via the same link from shortly after the meeting concludes. A copy of this announcement and the slide presentation used for the call is also available for download via links 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 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||3,276.6||2,742.3||1,583.7||1,293.2||1,013.7||832.6|
|Sunbelt in £m||2,180.9||1,715.9||1,054.1||809.2||674.7||520.9|
|Group central costs||-||-||(13.5)||(10.3)||(13.5)||(10.3)|
|Net financing costs||(82.9)||(67.3)|
|Profit before exceptionals, amortisation and tax||645.3||489.6|
|Profit before taxation||616.7||473.8|
|Profit attributable to equity holders of the Company||407.6||303.4|
Group revenue for the year increased 25% to £2,546m (2015: £2,039m) with strong growth in both Sunbelt and A-Plant. This revenue growth, combined with ongoing operational efficiency and strong drop through, generated underlying profit before tax of £645m (2015: £490m).
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 the Group's performance is Sunbelt where rental revenue growth continues to benefit from cyclical and structural trends. Sunbelt's revenue growth can be explained as follows:
|2015 rental only revenue||1,935|
|Same stores (in existence at 1 May 2014)||+12%||212|
|Bolt-ons and greenfields since 1 May 2014||+7%||157|
|2016 rental only revenue||+19%||2,304|
|2016 rental revenue||+18%||2,924|
|2016 total revenue||3,277|
The mix of our revenue growth demonstrates the successful execution of our long-term structural growth strategy. We continue to capitalise on the opportunity presented by our markets with same-store growth of 12%, as we take market share and grow more rapidly than the market. Our markets were up circa 6% in the US during the year and are forecast to grow again this year. In addition, bolt-ons and greenfields have contributed another 7% growth as we expand our geographic footprint and our specialty businesses. During the year our focus has been on greenfields with 58 opened compared with 31 last year. In addition, we spent $81m (2015: $365m) on bolt-on acquisitions in the US and Canada, which added a further 10 locations.
Total rental only revenue growth was 19% in strong end markets, despite the slow-down in oil and gas markets. This growth was driven by increased fleet on rent.
Average physical utilisation for the year was 70% (2015: 70%). Sunbelt's total revenue, including new and used equipment, merchandise and consumable sales, increased 19% to $3,277m (2015: $2,742m) as it sold more used equipment than last year. The higher level of used equipment sales reflects higher replacement capital expenditure and a response to the downturn in oil and gas markets. This offsets relatively lower growth in ancillary revenue, principally due to lower fuel prices.
A-Plant continues to perform well and delivered rental only revenue of £264m, up 11% on the prior year (2015: £238m), in markets which remain competitive. This reflects fleet on rent up 10% with yield up 1% year-on-year. A-Plant's total revenue increased 13% to £365m (2015: £323m).
We continue to focus on operational efficiency and driving improving margins. In Sunbelt, 60% of revenue growth dropped through to EBITDA in the year. The strength of our mature stores' incremental margin is reflected in the fact that this was achieved despite the drag effect of greenfield openings, acquisitions and the challenging oil and gas sector. Excluding oil and gas, stores open for more than one year saw 67% of revenue growth drop through to EBITDA. Despite the effect of increased lower margin used equipment sales, the EBITDA margin increased to 48% (2015: 47%). Excluding used equipment sales, EBITDA margins improved to 50% (2015: 49%). This contributed to an operating profit of $1,014m (2015: $833m). Strong drop-through of 84% drove improvement in A-Plant's EBITDA margin to 38% (2015: 34%) and operating profit rose to £67m (2015: £46m). As a result, Group underlying operating profit increased 31% to £728m (2015: £557m).
Net financing costs increased to £83m (2015: £67m), reflecting the higher average debt during the period and the full year impact of the $500m senior secured notes issued in September 2014.
Group profit before exceptional items, amortisation of intangibles and taxation was £645m (2015: £490m). After a tax charge of 34% (2015: 36%) of the underlying pre-tax profit, underlying earnings per share increased 36% to 85.1p (2015: 62.6p).
The exceptional items relate to the impairment of acquired customer lists within our Oil & Gas business (£12m), reflecting our expectation that revenue from these customers will be significantly lower than initially anticipated when the businesses were acquired due to the fall in the oil price and its impact on the oil and gas industry, and the release of a provision for contingent consideration on acquisitions which we no longer expect to be payable (£6m).
After a net exceptional charge of £6m (2015: nil) and amortisation of £22m (2015: £16m), statutory profit before tax was £617m (2015: £474m). After a tax charge of 34% (2015: 36%), basic earnings per share were 81.3p (2015: 60.5p). The cash tax charge for 2015/16 was 4%. Following the announcement in 2015 of a continuation of accelerated tax depreciation by the US government, brought forward tax losses will not be utilised until 2016/17 when we expect to become a more significant cash tax payer in the US.
Capital expenditure and acquisitions
Capital expenditure for the year was £1,240m gross and £1,040m net of disposal proceeds (2015: £1,063m gross and £942m net). As a result of this investment, the Group's rental fleet at 30 April 2016 at cost was £4.5bn. Our average fleet age is now 25 months (2015: 26 months).
We spent £65m (2015: £236m) on 12 bolt-on acquisitions during the period as we continue to both expand our footprint and diversify into specialty markets.
We are now entering a very different phase of replacement expenditure as we lap our low capital expenditure years of 2009, 2010 and 2011 and therefore our replacement spend will be much lower in 2016/17 than in recent years. However, we continue to expect strong growth capital expenditure generating double digit fleet growth. Our operating model, and short delivery lead times, allow us to flex our capital spend quickly. Reflecting our desire to be watchful of broader economic trends before finalising our Q3 and Q4 2016/17 spend, we have a broad range for 2016/17 capital expenditure of £0.7bn to £1bn.
Return on Investment1
Sunbelt's pre-tax return on investment (excluding goodwill and intangible assets) in the 12 months to 30 April 2016 was 24% (2015: 26%). This remains well ahead of the Group's pre-tax weighted average cost of capital although it has been affected in the short term by our investment in greenfields and bolt-on acquisitions and our young fleet age. In the UK, return on investment (excluding goodwill and intangible assets) was 15% (2015: 13%). For the Group as a whole, return on investment (including goodwill and intangible assets) was 19% (2015: 19%).
Cash flow and net debt
As expected, debt increased during the year as we invested in the fleet and made a number of bolt-on acquisitions. In addition, weaker sterling increased reported debt by £82m in the year.
Net debt at 30 April 2016 was £2,002m (2015: £1,687m) while, reflecting our strong earnings growth, the ratio of net debt to EBITDA reduced to 1.7 times (2015: 1.8 times) on a constant currency basis. This is in the middle of the Group's target range for net debt to EBITDA of 1.5 to 2 times, broadly where we expect to remain. This range of leverage is appropriate for the business given our strong EBITDA margins, young fleet age and strong asset base. We believe that these levels of leverage are prudent and provide the Group with a high degree of flexibility and security.
The Group's debt package is well structured and flexible, enabling us to optimise the opportunity presented by end market conditions. The Group's debt facilities are committed for an average of six years. At 30 April 2016, availability under the senior secured debt facility was $1,126m, with an additional $1,796m of suppressed availability - substantially above the $260m level at which the Group's entire debt package is covenant free.
In accordance with our progressive dividend policy, with consideration to both profitability and cash generation at a level that is sustainable across the cycle, the Board is recommending a final dividend of 18.5p per share (2015: 12.25p) making 22.5p for the year (2015: 15.25p), an increase of 48%. If approved at the forthcoming Annual General Meeting, the final dividend will be paid on 9 September 2016 to shareholders on the register on 12 August 2016.
The Group remains disciplined in its approach to allocation of capital with the overriding objective being to enhance shareholder value. Our capital allocation framework prioritises:
- same-store fleet growth;
- greenfield openings;
- bolt-on acquisitions; and
- a progressive dividend with consideration to both profitability and cash generation that is sustainable through the cycle.
Additionally, we are now considering further returns to shareholders, balancing capital efficiency and security with financial flexibility in a cyclical business and an assessment of whether it would be accretive to shareholder value. In this regard, we have reviewed our medium term plans which take account of investment in the business, growth prospects, cash generation, net debt and leverage.
Balancing these factors, we are commencing a share buyback programme of up to £200m in 2016/17, for which we will seek continued shareholder approval at the Annual General Meeting. Additional capital returns to shareholders will be kept under regular review reflecting the factors set out above.
Current trading and outlook
We have seen a good seasonal upward trend in fleet on rent throughout the Spring which has continued into the new financial year. Our end markets remain strong, the structural drivers are still in place and we have a strong balance sheet which allows us to execute our plans responsibly. As a consequence, the Board continues to look to the medium term with confidence.
Directors' responsibility statement on the annual report
The responsibility statement below has been prepared in connection with the Company's Annual Report & Accounts for the year ended 30 April 2016. Certain parts thereof are not included in this announcement.
"We confirm to the best of our knowledge:
- the consolidated financial statements, prepared in accordance with IFRS as issued by the International Accounting Standards Board and IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group;
- the Strategic Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces; and
- the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide information necessary for shareholders to assess the Group's performance, business model and strategy.
By order of the Board
13 June 2016"