7 March, 2017
Unaudited results for the nine months and third quarter ended 31 January 2017
Read and download the Unaudited results for the nine months and third quarter ended 31 January 2017. You can also view the latest webcast
|Third quarter||Nine months|
|Profit before taxation||178.7||139.1||8%||604.6||481.8||9%|
|Earnings per share||23.0p||18.0p||8%||79.0p||63.1p||9%|
|Profit before taxation||171.2||133.5||8%||584.5||465.4||9%|
|Earnings per share||22.0p||17.2p||7%||76.3p||60.9p||8%|
- Group rental revenue up 13%1
- Nine month underlying pre-tax profit2 of £605m (2016: £482m)
- £812m of capital invested in the business (2016: £932m)
- Group RoI3 of 18% (2016: 19%)
- Net debt to EBITDA leverage1 of 1.7 times (2016: 1.9 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 continues to perform well and delivered a strong quarter with reported rental revenue increasing 30% (13% at constant exchange rates) for the nine months and underlying pre-tax profit of £605m. In the nine months, the reported results were positively impacted by weaker sterling (£82m). The underlying performance of the business continues to benefit from a clear and consistent strategy of organic growth supplemented by bolt-on acquisitions.
We continue to grow responsibly, adhering to the capital allocation priorities we have outlined. We invested £812m by way of capital expenditure and a further £196m on bolt-on acquisitions. With the continuing opportunity for profitable growth, we expect capital expenditure this year to be towards the upper end of our guidance (c. £1.2bn). As is customary, we have given our early guidance to growth for 2017/18. This is consistent with the strategic plan we recently outlined to the market which anticipates circa double-digit growth in the US through to 2021. Our end markets remain supportive and we continue to benefit from ongoing structural change as our customers increasingly rely on the flexibility of rental.
Both divisions continue to perform well. Accordingly, we expect full year results to be in line with 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 8am on Tuesday, 7 March 2017. 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 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 (Amy Fife) 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' trading results
|Sunbelt in $m||2,689.9||2,468.0||1,342.1||1,190.3||840.5||770.9|
|Sunbelt in £m||2,054.5||1,615.8||1,025.1||779.3||642.0||504.7|
|Group central costs||-||-||(11.3)||(9.0)||(11.4)||(9.0)|
|Net financing costs||(76.4)||(60.9)|
|Profit before amortisation and tax||604.6||481.8|
|Profit before taxation||584.5||465.4|
|Profit attributable to equity holders of the Company||380.8||305.4|
Group revenue increased 25% to £2,356m in the nine months (2016: £1,880m) 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 £605m (2016: £482m).
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 17% 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||1,745|
|Same stores (in existence at 1 May 2015)||+7%||122|
|Bolt-ons and greenfields since 1 May 2015||+7%||126|
|2017 rental only revenue||+14%||1,993|
|2017 rental revenue||+13%||2,490|
|2017 total revenue||+9%||2,690|
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 samestore 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 58 added in the nine months through greenfields and bolt-ons, almost 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 nine month physical utilisation was 72% (2016: 72%). Sunbelt's total revenue, including new and used equipment, merchandise and consumable sales, increased 9% to $2,690m (2016: $2,468m), 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 £227m, up 17% on the prior year (2016: £193m). This reflects increased fleet on rent. A-Plant's total revenue increased 14% to £302m (2016: £264m), again reflecting lower used equipment sales.
We continue to focus on operational efficiency and driving improving margins. In Sunbelt, 61% of revenue growth dropped through to EBITDA (62% 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 67% of revenue growth dropthrough to EBITDA (68% US only). This strong drop-through drove an improved EBITDA margin of 50% (2016: 48%) and contributed to an operating profit of $841 m (2016: $771 m). Excluding the impact of gains on used equipment sales, operating profit increased 12% over the prior year.
A-Plant's drop-through of 37%, 45% on a same store basis, contributed to an EBITDA margin of 37% (2016: 37%) and operating profit rose to £50m (2016: £47m). Excluding the impact of gains on used equipment sales, operating profit increased 19% over the prior year.
Reflecting the strong performance of the divisions, and with the benefit of weaker sterling, Group underlying operating profit increased 25% to £681 m (2016: £543m). Net financing costs increased to £76m (2016: £61 m), reflecting higher average debt and weaker sterling.
Group profit before amortisation of intangibles and taxation was £605m (2016: £482m). After a tax charge of 35% (2016: 34%) of the underlying pre-tax profit, underlying earnings per share increased 25% to 79.0p (2016: 63.1 p).
With amortisation of £20m (2016: £16m), statutory profit before tax was £585m (2016: £465m). After a tax charge of 35% (2016: 34%), basic earnings per share were 76.3p (2016: 60.9p). The cash tax charge was 5%.
Capital expenditure and acquisitions
Capital expenditure for the nine months was £812m gross and £716m net of disposal proceeds (2016: £932m gross and £790m net). This expenditure includes the Hewden assets acquired from the administrator for £29m. Reflecting this investment, the Group's rental fleet at 31 January 2017 at cost was £5.8bn. Our average fleet age is now 28 months (2016: 25 months).
We invested £196m, including acquired debt, (2016: £60m) on 13 bolt-on acquisitions during the nine months as we continue to both expand our footprint and diversify into specialty markets.
For the full year, we expect gross capital expenditure towards the upper end of our previous guidance, around £1.2bn at current exchange rates. We expect a similar level of capital expenditure next year, consistent with the strategic plan we recently outlined to the market, which anticipates circa double-digit growth through to 2021.
Return on Investment
Sunbelt's pre-tax return on investment (excluding goodwill and intangible assets) in the 12 months to 31 January 2017 was 22% (2016: 24%). This remains well ahead of the Group's pretax 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% (2016: 13%). For the Group as a whole, return on investment (including goodwill and intangible assets) was 18% (2016: 19%).
Cash flow and net debt
As expected, debt increased during the nine months as we invested in the fleet and made a number of bolt-on acquisitions. In addition, weaker sterling increased reported debt by £304m. During the nine months, we spent £48m on share buybacks.
Net debt at 31 January 2017 was £2,588m (2016: £2,169m) while, reflecting our strong earnings growth, the ratio of net debt to EBITDA reduced to 1.7 times (2016: 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.
In December the Group increased the size of its senior credit facility ('ABL facility') to $3.1bn, while other terms and conditions remained unchanged. This ensures 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 committed for an average of five years. At 31 January 2017, availability under the senior secured debt facility was $1,334m, with an additional $1,454m of suppressed availability - substantially above the $310m level at which the Group's entire debt package is covenant free.
Current trading and outlook
Both divisions continue to perform well. Accordingly, we expect full year results to be in line with our expectations and the Board continues to look to the medium term with confidence.