6 December, 2016
Unaudited results for the half year and second quarter ended 31 October 2016
Read and download the Unaudited results for the half year and second quarter ended 31 October 2016. You can also view the latest webcast
|Second quarter||First half|
|Profit before taxation||242.3||182.0||14%||425.9||342.7||9%|
|Earnings per share||31.8p||24.1p||13%||56.0p||45.1p||9%|
|Profit before taxation||235.4||176.5||14%||413.3||331.9||9%|
|Earnings per share||30.9p||23.4p||13%||54.3p||43.7p||9%|
- Group rental revenue up 13%1
- First half underlying pre-tax profit2 of £426m, up 9% at constant exchange rates
- Group EBITDA margins at a record 49% (2015: 47%)
- Group RoI3 of 18% (2015: 19%)
- Net debt to EBITDA leverage1 of 1.8 times (2015: 1.9 times)
- Interim dividend raised 19% to 4.75p per share (2015: 4.0p)
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 reported rental revenue increasing 28% (13% at constant exchange rates) for the six months and underlying pre-tax profit of £426m. 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 six months, the reported results were positively impacted by weaker sterling (£53m) but this was partially offset by the impact of lower gains on fleet disposals (£14m) as we reduced our replacement capital expenditure.
I am pleased with the continued improvement in our margins - Group EBITDA margin is now a record 49% (2015: 47%). 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 continue to grow responsibly, adhering to the capital allocation priorities we have outlined. We have therefore invested £683m by way of capital expenditure and a further £142m on bolt-on acquisitions. With the continuing opportunity for profitable growth, we have increased our full year capital expenditure guidance. In addition, we spent £48m under the share buyback programme and increased the interim dividend by 19%. 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 continue to perform at the upper end of expectations. This, together with the benefit of significantly weaker sterling, means 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 meeting for equity analysts to discuss the results and outlook at 9am on Tuesday, 6 December 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 link from shortly after the meeting concludes. A copy of this announcement and the slide presentation used for the call will also be available for download from the 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 meeting and conference call for bondholders but any eligible person not having received dial-in details should contact the Company's PR advisers, Maitland (Audrey Da Costa) 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 trading results
|Sunbelt in $m||1,814.4||1,685.1||923.8||819.3||595.7||547.4|
|Sunbelt in £m||1,352.4||1,089.2||688.6||529.6||444.0||353.8|
|Group central costs||-||-||(7.4)||(6.7)||(7.5)||(6.7)|
|Net financing costs||(48.5)||(39.4)|
|Profit before tax, and amortisation||425.9||342.7|
|Profit before taxation||413.3||331.9|
|Profit attributable to equity holders of the Company||271.5||218.9|
Group revenue increased 22% to £1,552m in the first half (2015: £1,267m) with strong growth in both Sunbelt and A-Plant. Overall revenue growth reflects the benefit of weaker sterling, partially offset as expected by a lower level of used equipment sales due to lower replacement capital expenditure. This revenue growth, combined with strong drop-through, generated underlying profit before tax of £426m (2015: £343m).
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 14% and 16% rental only revenue growth respectively. Sunbelt's revenue growth continues to benefit from cyclical and structural trends which can be explained as follows:
|2015 rental only revenue||1,187|
|Same stores (in existence at 1 May 2015)||+ 7%||80|
|Bolt-ons and greenfields since 1 May 2015||+ 7%||86|
|2016 rental only revenue||+ 14%||1,353|
|Ancillary revenue||+ 8%||341|
|2016 rental revenue||+ 13%||1,694|
|Sales revenue||- 34%||120|
|2016 total revenue||+ 8%||1,814|
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 7% and bolt-ons and greenfields contributing another 7% growth as we expand our geographic footprint and our specialty businesses. As we embark on our US plan for 2021, we have made good progress on new stores with 42 added in the first half through greenfields and bolt-ons, half of which were specialty locations.
Rental only revenue growth was 14% in generally strong end markets. This growth was driven by increased fleet on rent. Average first half physical utilisation was 73% (2015: 73%). Sunbelt's total revenue, including new and used equipment, merchandise and consumable sales, increased 8% to $1,814m (2015: $1,685m), 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 £152m, up 16% on the prior year (2015: £131m). This reflects increased fleet on rent. A-Plant's total revenue increased 12% to £199m (2015: £178m), again reflecting lower used equipment sales.
We continue to focus on operational efficiency and driving improving margins. In Sunbelt, 64% of revenue growth dropped through to EBITDA (66% US only). The strength of our mature stores' incremental margin is reflected in the fact that this was achieved despite the drag effect of greenfield openings and acquisitions. Stores open for more than one year saw 72% of revenue growth drop-through to EBITDA (73% US only). This strong drop-through drove an improved EBITDA margin of 51% (2015: 49%) and contributed to an operating profit of $596m (2015: $547m). Excluding the impact of gains on used equipment sales, operating profit increased 12% over the prior year.
A-Plant's drop-through of 41%, 48% on a same store basis, contributed to an EBITDA margin of 38% (2015: 39%) and operating profit rose to £38m (2015: £35m). Excluding the impact of gains on used equipment sales, EBITDA margins were the same as a year ago and operating profit increased 20%.
Reflecting the strong performance of the divisions, and with the benefit of weaker sterling, Group underlying operating profit increased 24% to £474m (2015: £382m). Net financing costs increased to £49m (2015: £39m), reflecting higher average debt and weaker sterling.
Group profit before amortisation of intangibles and taxation was £426m (2015: £343m). After a tax charge of 34% (2015: 34%) of the underlying pre-tax profit, underlying earnings per share increased 24% to 56.0p (2015: 45.1p).
With amortisation of £13m (2015: £11m), statutory profit before tax was £413m (2015: £332m). After a tax charge of 34% (2015: 34%), basic earnings per share were 54.3p (2015: 43.7p). The cash tax charge was 6%.
Capital expenditure and acquisitions
Capital expenditure for the first half was £683m gross and £631m net of disposal proceeds (2015: £696m gross and £598m net). This level of capital expenditure is towards the upper end of our expectations at this stage of the year for 2016/17. As a result, we have revised our capital expenditure guidance for the full year to £1 - 1.2bn at current exchange rates. Reflecting this investment, the Group's rental fleet at 31 October 2016 at cost was £5.9bn. Our average fleet age is now 26 months (2015: 24 months).
We invested £142m, including acquired debt, (2015: £25m) on 11 bolt-on acquisitions during the first half 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 October 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 14% (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 first half as we invested in the fleet and made a number of bolt-on acquisitions. In addition, weaker sterling increased reported debt by £377m. During the first half, we spent £48m on share buybacks.
Net debt at 31 October 2016 was £2,694m (2015: £1,982m) while, reflecting our strong earnings growth, the ratio of net debt to EBITDA reduced to 1.8 times (2015: 1.9 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 October 2016, availability under the senior secured debt facility was $768m, with an additional $1,967m 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 19% to 4.75p per share (2015: 4.0p per share). This will be paid on 8 February 2017 to shareholders on record on 20 January 2017.
Current trading and outlook
Both divisions continue to perform at the upper end of expectations. This, together with the benefit of significantly weaker sterling, means we expect full year results to be ahead of our expectations and the Board continues to look 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
5 December 2016