12 September, 2017
Unaudited results for the first quarter ended 31 July 2017
Read and download the Unaudited results for the first quarter ended 31 July 2017. You can also view the latest webcast
|Profit before taxation||238.5||183.6||21%|
|Earnings per share||31.5p||24.2p||21%|
|Profit before taxation||228.9||177.9||19%|
|Earnings per share||30.2p||23.4p||20%|
- Group rental revenue up 17%1
- Group underlying pre-tax profit2 of £238m (2016: £184m)
- £377m of capital invested in the business (2016: £328m)
- £51m of free cash flow generation3 (2016: £46m outflow)
- £116m spent on bolt-on acquisitions (2016: £64m)
- Net debt to EBITDA leverage1 of 1.7 times (2016: 1.7 times)
- Refinanced debt facilities enhance financial strength and flexibility
1 Calculated at constant exchange rates applying current period exchange rates.
2 Underlying results are stated before intangible amortisation.
3 Throughout this announcement we refer to a number of alternative performance measures which are defined in the Glossary.
Ashtead’s Chief Executive, Geoff Drabble , commented:
"I am delighted to be able to report another strong quarter for Ashtead with Group rental revenue increasing 25% and underlying pre-tax profit increasing by 30% to £238m. The reported results were impacted favourably by weaker sterling but, with 17% growth in Group rental revenue at constant exchange rates, we have continuing good momentum.
Our end markets remain strong and a wide range of metrics have shown consistent improvement. We continue to execute well on our strategy through a combination of organic growth and bolt-on acquisitions. We made significant investments in the quarter, spending £377m on capital expenditure and £116m on bolt-on acquisitions.
Our strong margins ensured that, despite these levels of investment, we remain comfortably within our target range for net debt to EBITDA of 1.5 to 2 times. A successful refinancing has provided us with a low cost, long-term platform for further responsible growth.
At the end of the quarter both businesses were performing well, in line with expectations and with positive momentum. Hurricane season has already generated significant activity which will require a major clean-up effort and then a multi-year rebuild programme. Currently, our efforts are focussed on supporting our colleagues, neighbours and customers and we stand ready to provide further assistance. It is too early to attempt to quantify the impact of Hurricanes Harvey and Irma accurately on our business. However, it is evident that it will result in an increase in demand for our fleet and we will provide an update at the end of Q2. Looking forward, as a minimum, we expect that the impact will help to underpin the current market assumptions in our 2021 plan and therefore 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 8.30am on Tuesday, 12 September 2017. The call will be webcast live via the link at the top of this release and a replay will be available via the same link shortly after the call concludes. A copy of this announcement and the slide presentation used for the call are also 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 (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.
|Sunbelt in $m||982.8||853.1||503.4||428.9||319.7||268.9|
|Sunbelt in £m||761.3||610.7||389.9||307.0||247.6||192.4|
|Group central costs||-||-||(3.5)||(3.4)||(3.5)||(3.4)|
|Profit before amortisation and tax||238.5||183.6|
|Profit before taxation||228.9||177.9|
|Profit attributable to equity holders of the Company||150.0||117.2|
Group revenue for the quarter increased 24% to £880m (2016: £707m) with strong growth in both Sunbelt and A-Plant. Overall revenue growth reflects good performance by both divisions and the benefit of weaker sterling. This revenue growth, combined with strong drop-through, generated underlying profit before tax of £238m (2016: £184m).
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 17% and 21% rental only revenue growth respectively.
Sunbelt's revenue growth continues to benefit from cyclical and structural trends and can be explained as follows:
|2016 rental only revenue||639|
|Same stores (in existence at 1 May 2016)||+9%||54|
|Bolt-ons and greenfields since 1 May 2016||+8%||52|
|2017 rental only revenue||+17%||745|
|2017 rental revenue||+16%||932|
|2017 total revenue||+15%||983|
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 9% and bolt-ons and greenfields contributing another 8% growth as we expand our geographic footprint and our specialty businesses. As we continue with our plan for 2021, we have made good progress on new stores with 20 added in North America in the quarter through greenfields and bolt-ons, half of which were specialty locations.
Rental only revenue growth was 17% in generally strong end markets. This growth was driven by increased fleet on rent, partially offset by yield. Average three month physical utilisation was 73% (2016: 72%). Sunbelt's total revenue, including new and used equipment, merchandise and consumable sales, increased 15% to $983m (2016: $853m).
A-Plant continues to perform well and delivered rental only revenue of £91m, up 21% on the prior year (2016: £75m). This reflects increased fleet on rent, partially offset by yield. A-Plant's total revenue increased 23% to £119m (2016: £96m).
We continue to focus on operational efficiency and improving margins. In Sunbelt, 56% of revenue growth dropped through to EBITDA (55% US only). The strength of our mature stores' incremental margin is reflected in the fact that this was achieved despite the drag effect of yield, greenfield openings and acquisitions. Stores open for more than one year saw 61% of revenue growth drop-through to EBITDA (60% US only). This strong drop-through drove an improved EBITDA margin of 51% (2016: 50%) and contributed to a 19% increase in operating profit to $320m (2016: $269m).
A-Plant's drop-through of 43%, 48% on a same store basis, contributed to an EBITDA margin of 38% (2016: 38%) and operating profit of £22m (2016: £18m), a 28% increase over the prior year.
Reflecting the strong performance of the divisions, and with the benefit of weaker sterling, Group underlying operating profit increased 29% to £267m (2016: £207m). Net financing costs increased to £28m (2016: £23m), reflecting higher average debt and higher interest rates. As a result, Group profit before amortisation of intangibles and taxation was £238m (2016: £184m). After a tax charge of 34% (2016: 34%) of the underlying pre-tax profit, underlying earnings per share increased 30% to 31.5p (2016: 24.2p).
With amortisation of £10m (2016: £6m), statutory profit before tax was £229m (2016: £178m). After a tax charge of 34% (2016: 34%), basic earnings per share were 30.2p (2016: 23.4p). The cash tax charge was 21%.
Capital expenditure and acquisitions
Capital expenditure for the quarter was £377m gross and £354m net of disposal proceeds (2016: £328m gross and £310m net). This level of capital expenditure is in line with our expectations at this stage of the year. Reflecting this investment, the Group's rental fleet at 31 July 2017 at cost was £6.2bn. Our average fleet age is now 29 months (2016: 26 months).
We spent £116m (2016: £64m) on five bolt-on acquisitions during the period as we continue to both expand our footprint and diversify into specialty markets. In August, we expanded our presence in Canada through the acquisition of CRS for C$287m, including acquired debt.
Return on Investment1
Sunbelt's pre-tax return on investment (excluding goodwill and intangible assets) in the 12 months to 31 July 2017 was 22% (2016: 23%). 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 13% (2016: 15%). This continues to be impacted adversely by the large number of acquisitions which we are in the process of integrating and optimising their potential. For the Group as a whole, return on investment (including goodwill and intangible assets) was 18% (2016: 18%).
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. This was partially offset by £40m of currency translation benefit as sterling has strengthened since the year end.
Net debt at 31 July 2017 was £2,569m (2016: £2,348m) while, reflecting our strong earnings growth, the ratio of net debt to EBITDA remained at 1.7 times (2016: 1.7 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.
At 31 July 2017, availability under the senior secured debt facility was $1,198m, with an additional $1,878m of suppressed availability - substantially above the $310m level at which the Group's entire debt package is covenant free.
In July and August, the Group took advantage of good debt markets and refinanced its debt facilities. In July, we extended the maturity of our asset-based senior bank facility ('ABL facility') which is now committed until July 2022, whilst the other principal terms and conditions remain unchanged. In August, we issued $600m 4.125% senior secured notes maturing in August 2025 and $600m 4.375% senior secured notes maturing in August 2027. The net proceeds of the issues were used to repurchase the Group's $900m 6.5% senior secured notes maturing in 2022, pay related fees and expenses and repay an element of the amount outstanding under the ABL facility. These actions ensure the Group's debt package continues to be well structured and flexible, enabling us to optimise the opportunity presented by end market conditions. The Group's debt facilities are now committed for an average of seven years at lower cost (c. 40bp).
Current trading and outlook
At the end of the quarter both businesses were performing well, in line with expectations and with positive momentum. Hurricane season has already generated significant activity which will require a major clean-up effort and then a multi-year rebuild programme. Currently, our efforts are focussed on supporting our colleagues, neighbours and customers and we stand ready to provide further assistance. It is too early to attempt to quantify the impact of Hurricanes Harvey and Irma accurately on our business. However, it is evident that it will result in an increase in demand for our fleet and we will provide an update at the end of Q2. Looking forward, as a minimum, we expect that the impact will help to underpin the current market assumptions in our 2021 plan and therefore the Board continues to look to the medium term with confidence.