1 March, 2016
Unaudited results for the nine months and third quarter ended 31 January 2016
Read and download the unaudited results for the nine months and third quarter ended 31 January 2016. You can also view the latest webcast
|Third quarter||Nine months|
|Profit before taxation||139.1||113.9||17%||481.8||379.4||20%|
|Earnings per share||18.0p||14.5p||18%||63.1p||48.4p||23%|
|Profit before taxation||133.5||109.9||16%||465.4||369.1||19%|
|Earnings per share||17.2p||14.1p||18%||60.9p||47.1p||22%|
1 at constant exchange rates
2 before intangible amortisation
- Group rental revenue up 17%1
- Nine month pre-tax profit2 of £482m, up 20% at constant exchange rates
- £932m of capital invested in the business (2015: £783m)
- Group RoI of 19% (2015: 19%)
- Net debt to EBITDA leverage1 of 1.9 times (2015: 2.0 times)
Ashtead’s Chief Executive, Geoff Drabble , commented:
“The Group delivered another strong quarter resulting in underlying pre-tax profits of £482m for the nine months, up 20% at constant exchange rates on the prior year. 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. Our continued success demonstrates both the strength of our strategy and the overall health of the markets we serve
Looking forward, while we are watchful of the broader economic environment, we continue to see encouraging growth opportunities and expect double digit fleet growth in the US in 2016/17. As our fleet replacement expenditure naturally moderates, we enter a phase of the cycle where we anticipate both good earnings growth and significant cash generation. As a consequence our leverage will trend towards the lower end of our range of 1.5 to 2.0 times net debt to EBITDA which provides the Group with a high degree of flexibility and security.
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|
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 Tuesday, 1 March 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 shortly after the call concludes. A copy of this announcement and the slide presentation used for the call will also be available for download at the top of this release. The usual conference call for bondholders will begin at 3pm (10am 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.
Nine months' results
|Sunbelt in $m||2,468.0||2,047.5||1,190.3||983.3||770.9||646.9|
|Sunbelt in £m||1,615.8||1,257.8||779.3||604.1||504.7||397.4|
|Group central costs||-||-||(9.0)||(7.7)||(9.0)||(7.7)|
|Net financing costs||(60.9)||(48.0)|
|Profit before amortisation and tax||481.8||379.4|
|Profit before taxation||465.4||369.1|
|Profit attributable to equity holders of the Company||305.4||235.9|
Group revenue increased 25% to £1,880m in the nine months (2015: £1,500m) with strong growth in both businesses. This revenue growth, combined with ongoing operational efficiency, generated underlying profit before tax of £482m (2015: £379m).
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 continues to benefit from cyclical and structural trends. Sunbelt's revenue growth can be explained as follows:
|2015 rental only revenue||1,456|
|Same stores (in existence at 1 May 2014)||+ 12%||162|
|Bolt-ons and greenfields since 1 May 2014||+ 8%||127|
|2016 rental only revenue||+ 20%||1,745|
|Ancillary revenue||+ 13%||460|
|2016 rental revenue||+ 18%||2,205|
|2016 total revenue||2,468|
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 again this year. Our same-store growth of 12% demonstrates that we continue to take market share as we grow more rapidly than the market. In addition, bolt-ons and greenfields have contributed another 8% growth as we execute our long-term structural growth strategy of expanding our geographic footprint and our specialty businesses. During the nine months our focus has been on greenfields with 51 opened compared with 25 in the same period last year. In addition, we spent $73m (2015: $263m) on bolt-on acquisitions, which added a further nine locations.
Total rental only revenue growth was 20% in strong end markets, despite the slow-down in oil and gas markets that provided a headwind which will continue in the fourth quarter. This growth was driven by increased fleet on rent with yield flat year over year. Excluding oil and gas, same-store yield improved 2% in the nine months but good yield development in greenfields and bolt-ons was more than offset by the adverse impact of oil and gas, resulting in overall yield being flat.
Average nine month physical utilisation was 72% (2015: 72%). Sunbelt's total revenue, including new and used equipment, merchandise and consumable sales, increased 21 % to $2,468m (2015: $2,047m) 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 £193m, up 9% on the prior year (2015: £177m), in markets which remain competitive. This reflects increased fleet on rent with yield flat year-on-year. A-Plant's total revenue increased 9% to £264m (2015: £242m).
Sunbelt continues to focus on operational efficiency and driving improving margins, with 56% 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 63% of revenue growth drop through to EBITDA. The EBITDA margin of 48% (2015: 48%) reflects a higher level of lower margin used equipment sales. Excluding used equipment sales, EBITDA margins improved to 50% (2015: 49%). This contributed to an operating profit of $771m (2015: $647m). A-Plant's EBITDA margin improved to 37% (2015: 35%) and operating profit rose to £47m (2015: £38m), with drop through of 74%. As a result, Group underlying operating profit increased 27% to £543m (2015: £427m)
Net financing costs increased to £61 m (2015: £48m), 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 £482m (2015: £379m). After a tax charge of 34% (2015: 36%) of the underlying pre-tax profit, underlying earnings per share increased 30% to 63.1 p (2015: 48.4p).
Statutory profit before tax was £465m (2015: £369m) and, after a tax charge of 34% (2015: 36%), basic earnings per share were 60.9p (2015: 47.1 p). Following the introduction of accelerated tax depreciation by the US government in 2015, we no longer expect to be a significant cash tax payer in the US until 2016/1 7. As a result, the cash tax charge for the nine months was 4%.
Capital expenditure and acquisitions
Capital expenditure for the nine months was £932m gross and £790m net of disposal proceeds (2015: £783m gross and £701 m net). As a result of this investment, the Group's rental fleet at 31 January 2016 at cost was £4.4bn. Our average fleet age is now 25 months (2015: 26 months).
We spent £60m (2015: £162m) on 11 bolt-on acquisitions during the period as we continue to both expand our footprint and diversify into specialty markets
For the full year, we expect gross capital expenditure at the top end of our previous guidance, around £1.2bn at current exchange rates, reflecting both strong activity levels and the impact of weaker sterling.
We are now entering a very different replacement cycle as we lap our low capital expenditure years of 2009, 2010 and 2011 and therefore our replacement spend will be much lower than 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 next year's capital expenditure of £0.7 to £1bn
Return on Investment1
Sunbelt's pre-tax return on investment (excluding goodwill and intangible assets) in the 12 months to 31 January 2016 was 24% (2015: 26%). This remains well ahead of the Group's pre tax weighted average cost of capital although RoI has been affected in the short term by our investment in greenfields and bolt-on acquisitions. In the UK, return on investment (excluding goodwill and intangible assets) was 13% (2015: 13%). For the Group as a whole, returns (including goodwill and intangible assets) are 19% (2015: 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 nine months as we invested in the fleet, made a number of bolt-on acquisitions and due to increased working capital to support the growth in the business. In addition, weaker sterling increased reported debt by £146m in the period.
Net debt at 31 January 2016 was £2,169m (2015: £1,769m) while, reflecting our strong earnings growth, the ratio of net debt to EBITDA reduced to 1.9 times (2015: 2.0 times) on a constant currency basis. The Group's strong cash generation capability and capital expenditure plans for 2016/17 mean that net debt to EBITDA leverage is likely to trend towards the lower end of a 1.5 to 2 times net debt to EBITDA range. 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 31 January 2016, ABL availability was $984m, with an additional $1,610m 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.