7 September, 2016
Unaudited results for the first quarter ended 31 July 2016
Read and download the unaudited results for the first quarter ended 31 July 2016. You can also view the latest webcast
|Profit before taxation||183.6||160.7||4%|
|Earnings per share||24.2p||21.0p||4%|
|Profit before taxation||177.9||155.4||4%|
|Earnings per share||23.4p||20.3p||5%|
- Group rental revenue up 12%1
- Group underlying pre-tax profit2 of £184m
- £328m of capital invested in the business (2015: £349m)
- Group RoI3 of 18% (2015: 19%)
- Net debt to EBITDA leverage1 of 1.7 times (2015: 1.8 times)
1 Calculated at constant exchange rates applying current period exchange rates.
2 Underlying results are stated before intangible amortisation.
3 Last 12-month underlying operating profit divided by the last 12-month average of the sum of net tangible and intangible fixed assets, plus net working capital but excluding net debt and deferred tax.
Ashtead’s Chief Executive, Geoff Drabble , commented:
“The Group delivered a strong quarter with rental revenue increasing 12% and underlying pre-tax profit of £184m. The underlying performance of the business continues to benefit from a clear and consistent strategy of organic growth supplemented by bolt-on acquisitions. In the quarter, the reported results were positively impacted by weaker sterling (£17m) but this was broadly balanced by the impact of lower gains on fleet disposals (£12m) as we reduced our replacement capital expenditure.
The continued improvement in our margins is particularly encouraging – with Group EBITDA now a record 48% (2016: 46%). These healthy margins and our strong balance sheet provide flexibility to continue to invest in our long-term structural growth opportunity and enhance returns to shareholders.
We will continue to grow responsibly, adhering to the capital allocation priorities we have outlined. We have therefore invested £328m by way of capital expenditure and a further £64m on bolt-on acquisitions. In addition, we spent £17m under the share buyback programme and all of this was achieved whilst maintaining leverage well within our stated range of 1.5 to 2.0 times net debt to EBITDA.
Both divisions are performing well, our end markets are strong and with the benefit of weaker sterling, we expect full year results to be ahead of our expectations and the Board continues to look 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 9.00am on Wednesday, 7 September 2016. 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. The usual conference call for bondholders will begin at 4.00pm (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||853.1||820.8||428.9||390.4||268.9||258.2|
|Sunbelt in £m||610.7||528.6||307.0||251.4||192.4||166.2|
|Group central costs||-||-||(3.4)||(3.0)||(3.4)||(3.0)|
|Profit before amortisation and tax||183.6||160.7|
|Profit before taxation||177.9||155.4|
|Profit attributable to equity holders of the Company||117.2||101.8|
Group revenue increased 14% to £707m (2015: £619m) with strong growth in both Sunbelt and A-Plant. As expected, Group revenue reflects a lower level of used equipment sales due to lower replacement capital expenditure, broadly offset by the benefit from weaker sterling. This revenue growth, combined with ongoing operational efficiency and strong drop-through, generated underlying profit before tax of £184m (2015: £161m).
The Group's strategy remains unchanged with growth being driven by strong same-store growth supplemented by greenfield openings and bolt-on acquisitions, with Sunbelt and A-Plant delivering 13% and 15% rental only revenue growth respectively. Reported revenue growth in the quarter was affected by fewer billing days than the prior year, which reduced reported rental only revenue growth by circa 2% in Sunbelt. Sunbelt's revenue growth can be explained as follows:
|2015 rental only revenue||566|
|Same stores (in existence at 1 May 2015)||+6%||33|
|Bolt-ons and greenfields since 1 May 2015||+7%||40|
|2016 rental only revenue||+13%||639|
|2016 rental revenue||+11%||800|
|2016 total revenue||+4%||853|
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 6% and bolt-ons and greenfields contributing another 7% growth as we expand our geographic footprint and our specialty businesses. Same-store rental only revenue growth excluding oil and gas was 10% on a normalised billing day basis. We have made good progress on new stores with 24 added in the quarter through greenfields and bolt-ons, more than half of which were specialty locations.
Total rental only revenue growth was 13% in generally strong end markets. This growth was driven by increased fleet on rent.
Average three month physical utilisation was 72% (2015: 72%). Sunbelt's total revenue, including new and used equipment, merchandise and consumable sales, increased 4% to $853m (2015: $821m), reflecting the lower level of used equipment sales as a result of lower replacement capital expenditure.
A-Plant continues to perform well and delivered rental only revenue of £75m, up 15% on the prior year (2015: £65m). This reflects increased fleet on rent with yield flat year-on-year. A-Plant's total revenue increased 7% to £96m (2015: £90m), again reflecting lower used equipment sales.
We continue to focus on operational efficiency and driving improving margins. In Sunbelt, 65% of revenue growth dropped through to EBITDA. 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 oil and gas sector. Stores open for more than one year saw 79% of revenue growth drop-through to EBITDA. This strong drop-through drove an improved EBITDA margin of 50% (2015: 48%) and contributed to an operating profit of $269m (2015: $258m). Excluding the impact of gains on used equipment sales, operating profit increased 10% over the prior year.
A-Plant's drop-through of 45%, 61% on a same store basis, contributed to an EBITDA margin of 38% (2015: 38%) and operating profit rose to £18m (2015: £17m). Excluding the impact of gains on used equipment sales, operating profit increased 23% over the prior year. As a result, Group underlying operating profit increased 15% to £207m (2015: £180m).
Net financing costs increased to £23m (2015: £19m), reflecting higher average debt and weaker sterling.
Group profit before amortisation of intangibles and taxation was £184m (2015: £161m). After a tax charge of 34% (2015: 34%) of the underlying pre-tax profit, underlying earnings per share increased 15% to 24.2p (2015: 21.0p).
With amortisation of £6m (2015: £5m), statutory profit before tax was £178m (2015: £155m). After a tax charge of 34% (2015: 34%), basic earnings per share were 23.4p (2015: 20.3p). The cash tax charge was 12%.
Capital expenditure and acquisitions
Capital expenditure for the quarter was £328m gross and £310m net of disposal proceeds (2015: £349m gross and £291m net). This level of capital expenditure is towards the upper end of our expectations at this stage of the year for 2016/17. We will review the overall level in December, once we have a better perspective on economic trends into 2017. As a result of this investment, the Group's rental fleet at 31 July 2016 at cost was £5.2bn. Our average fleet age is now 26 months (2015: 25 months).
We spent £64m (2015: £1m) on four bolt-on acquisitions during the period as we continue to both expand our footprint and diversify into specialty markets.
Return on Investment
Sunbelt's pre-tax return on investment (excluding goodwill and intangible assets) in the 12 months to 31 July 2016 was 23% (2015: 25%). 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 18% (2015: 19%).
Cash flow and net debt
As expected, debt increased during the quarter as we invested in the fleet and made a number of bolt-on acquisitions. During the quarter, we spent £17m on our share buyback programme of up to £200m in 2016/17. In addition, weaker sterling increased reported debt by £197m.
Net debt at 31 July 2016 was £2,348m (2015: £1,804m) 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.
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 five years. At 31 July 2016, availability under the senior secured debt facility was $941m, with an additional $2,025m of suppressed availability - substantially above the $260m level at which the Group's entire debt package is covenant free.
Current trading and outlook
Both divisions are performing well, our end markets are strong and with the benefit of weaker sterling, we expect full year results to be ahead of our expectations and the Board continues to look to the medium term with confidence.