11 September, 2018
Unaudited results for the first quarter ended 31 July 2018
Read and download the unaudited results for the first quarter ended 31 July 2018. You can also view the latest webcast
|Profit before taxation||285.6||238.5||23%|
|Earnings per share||44.8p||31.5p||46%|
|Profit before taxation||274.4||228.9||23%|
|Profit after taxation||209.9||150.0||44%|
|Earnings per share||43.0p||30.2p||47%|
- Revenue up 22%1; rental revenue up 19%1
- Pre-tax profit2 of £286m (2017: £238m)
- Earnings per share2 up 46%1 to 44.8p (2017: 31.5p)
- Post-tax profit of £210m (2017: £150m)
- £465m of capital invested in the business (2017: £377m)
- £51m of free cash flow generation3 (2017: £51m)
- £145m spent on bolt-on acquisitions (2017: £116m)
- Net debt to EBITDA leverage1 of 1.6 times (2017: 1.7 times)
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:
"The Group delivered a strong quarter with rental revenue increasing 19% and underlying pre-tax profit increasing 23% to £286m, both at constant exchange rates.
Our end markets remain strong and are supported by continued structural change as customers rely increasingly on rental while we leverage the benefits of scale. We continue to execute well on our strategy through a combination of organic growth and bolt-on acquisitions, investing £465m by way of capital expenditure and £145m on bolt-on acquisitions in the quarter.
Our strong margins and lower replacement capital expenditure are delivering good earnings growth and significant free cash flow generation. This provides us with significant operational and financial flexibility, enabling us to invest in the long-term structural growth opportunity and enhance returns to shareholders while maintaining leverage within our target range of 1.5 to 2.0 times net debt to EBITDA.
We have spent £300m to date under the share buyback programme announced in December 2017. In line with our capital allocation priorities we have decided to increase and extend our current buyback plans. The level of share buyback will be increased to £125m per quarter resulting in a total outlay of £675m under the programme announced in December 2017. The programme will be extended for financial year 2019/20 with an anticipated spend of at least £500m.
Our business is performing well in supportive end markets. 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||+44 (0) 20 7726 9700|
|Michael Pratt||Finance director||+44 (0) 20 7726 9700|
|Will Shaw||Director of Investor Relations||+44 (0) 20 7726 9700|
|Neil Bennett||Maitland||+44 (0) 20 7379 5151|
|James McFarlane||Maitland||+44 (0) 20 7379 5151|
Geoff Drabble, Brendan Horgan and Michael Pratt will hold a conference call for equity analysts to discuss the results and outlook at 8.30am on Tuesday, 11 September 2018. The call will be webcast live via the link at the top of this release and a replay will be available from the same link from shortly after the call concludes. A copy of this announcement and the slide presentation used for the call are 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 US in $m||1,167.5||967.9||590.6||496.3||385.8||316.6|
|Sunbelt Canada in C$m||76.9||19.7||28.3||9.4||14.3||4.1|
|Sunbelt US in £m||877.4||749.8||443.8||384.4||289.9||245.2|
|Sunbelt Canada in £m||44.4||11.5||16.3||5.5||8.3||2.4|
|Group central costs||-||-||(3.9)||(3.5)||(4.0)||(3.5)|
|Profit before amortisation and tax||285.6||238.5|
|Profit before taxation||274.4||228.9|
|Profit attributable to equity holders of the Company||209.9||150.0|
Group revenue for the quarter increased 19% to £1,047m (2017: £880m) with good growth in each of our markets. This revenue growth, combined with our focus on drop-through, generated underlying profit before tax of £286m (2017: £238m).
The Group's strategy remains unchanged with growth being driven by strong organic growth (same-store and greenfield) supplemented by bolt-on acquisitions. Sunbelt US, A-Plant and Sunbelt Canada delivered 19%, 5% and 243% rental only revenue growth respectively. The significant growth in Sunbelt Canada reflects the impact of recent acquisitions, most notably the acquisition of CRS in August 2017.
Sunbelt US's revenue growth continues to benefit from cyclical and structural trends and can be explained as follows:
|2017 rental only revenue||734|
|Organic (same stores and greenfields)||+17%||124|
|Bolt-ons since 1 May 2017||+2%||14|
|2018 rental only revenue||+19%||872|
|2018 rental revenue||+18%||1,084|
|2018 total revenue||+21%||1,168|
Sunbelt US's revenue growth demonstrates the successful execution of our long-term structural growth strategy. We continue to capitalise on the opportunity presented by our markets through a combination of organic growth (same-store growth and greenfields) and bolt-ons as we expand our geographic footprint and our specialty businesses. We added 30 new stores in the US in the quarter, the majority of which were specialty locations.
Rental only revenue growth was 19% in strong end markets. This growth was driven by increased fleet on rent, with yield also positive year-over-year. Average three month physical utilisation was 73% (2017: 73%). Sunbelt US's total revenue, including new and used equipment, merchandise and consumable sales, increased 21% to $1,168m (2017: $968m).
A-Plant generated rental only revenue of £95m, up 5% on the prior year (2017: £91m). This was driven by increased fleet on rent, partially offset by yield. The adverse yield reflects a combination of product mix and rate pressure in the competitive UK market. A-Plant's total revenue increased 6% to £126m (2017: £119m).
In Canada, the acquisitions of CRS and Voisin's are distortive to year-over-year comparisons as they have tripled the size of the Sunbelt Canada business. For western Canada, rental only revenue growth was 26% in the quarter, driven by increased fleet on rent. For Sunbelt Canada overall, total revenue was C$77m (2017: C$20m) in the quarter.
We continue to focus on operational efficiency and improving margins. In Sunbelt US, 50% 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 and acquisitions. This resulted in an EBITDA margin of 51% (2017: 51%) and contributed to a 22% increase in operating profit to $386m (2017: $317m).
While the UK market remains competitive, A-Plant's focus on driving improved performance within the existing business resulted in drop-through of 83%. This contributed to an EBITDA margin of 38% (2017: 38%) and an operating profit of £22m (2017: £22m).
Reflecting the strong performance of the divisions, Group underlying operating profit increased 19% to £316m (2017: £267m). Net financing costs increased to £31m (2017: £28m) reflecting higher average debt levels. As a result, Group profit before amortisation of intangibles and taxation was £286m (2017: £238m). After a tax charge of 24% (2017: 34%) of the underlying pretax profit, underlying earnings per share increased 42% to 44.8p (2017: 31.5p). The reduction in the Group's underlying tax charge from 34% to 24% reflects the reduction in the US federal rate of tax from 35% to 21% with effect from 1 January 2018, following the enactment of the Tax Cuts and Jobs Act of 2017. The underlying cash tax charge was 6%.
With amortisation of £11m (2017: £10m), statutory profit before tax was £274m (2017: £229m). After a tax charge of 24% (2017: 34%), basic earnings per share were 43.0p (2017: 30.2p).
Capital expenditure and acquisitions
Capital expenditure for the quarter was £465m gross and £415m net of disposal proceeds (2017: £377m gross and £354m 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 2018 at cost was £7.3bn. Our average fleet age is now 32 months (2017: 29 months).
We invested £145m (2017: £116m), including acquired debt, in five bolt-on acquisitions during the period as we continue to both expand our footprint and diversify into specialty markets.
Return on Investment
Sunbelt US's pre-tax return on investment (excluding goodwill and intangible assets) in the 12 months to 31 July 2018 was 24% (2017: 22%). In the UK, return on investment (excluding goodwill and intangible assets) was 11% (2017: 13%). In Canada, return on investment (excluding goodwill and intangible assets) was 12% (2017: 7%). For the Group as a whole, return on investment (including goodwill and intangible assets) was 18% (2017: 18%).
Cash flow and net debt
As expected, debt increased during the quarter as we continued to invest in the fleet and made a number of bolt-on acquisitions. In addition, weaker sterling increased reported debt by £122m. During the quarter, we spent £93m on share buybacks.
In July, the Group issued $600m 5.25% senior secured notes maturing in August 2026. The proceeds of the issue were used to pay related fees and expenses and repay an element of the amount outstanding under the senior credit facility. This ensures our debt package remains well structured and flexible, enabling us to take advantage of prevailing end market conditions. The Group's debt facilities are now committed for an average of six years.
Net debt at 31 July 2018 was £3,033m (2017: £2,569m) while, reflecting our strong earnings growth, the ratio of net debt to EBITDA was 1.6 times (2017: 1.7 times) on a constant currency basis. The Group's target range for net debt to EBITDA is 1.5 to 2 times.
At 31 July 2018, availability under the senior secured debt facility was $1,468m, with an additional $2,703m of suppressed availability – substantially above the $310m level at which the Group's entire debt package is covenant free.
In line with our capital allocation priorities we have decided to increase and extend our current buyback plans. The level of share buyback will be increased to £125m per quarter, resulting in an outlay of £675m under the programme announced in December 2017. The programme will be extended for financial year 2019/20 with an anticipated spend of at least £500m.
Current trading and outlook
Our business is performing well in supportive end markets. 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.