18 June, 2019
Audited results for the year and unaudited results for the fourth quarter ended 30 April 2019
Read and download the audited results for the year and unaudited results for the fourth quarter ended 30 April 2019. You can also view the latest webcast
|Profit before taxation||222.5||185.3||11%||1,110.2||927.3||17%|
|Earnings per share||35.0p||25.1p||29%||174.2p||127.5p||33%|
|Profit before taxation||208.6||174.7||10%||1,059.5||862.1||20%|
|Profit after taxation4||154.5||99.9||34%||796.9||968.8||-20%|
|Earnings per share4||32.8p||20.6p||40%||166.1p||195.3p||-17%|
Full Year Highlights
- Revenue up 19%1; rental revenue up 18%1
- Pre-tax profit2 of £1,110m (2018: £927m)
- Earnings per share2 up 33%1 to 174.2p (2018: 127.5p)
- Post-tax profit4 of £797m (2018: £969m)
- £1.6bn of capital invested in the business (2018: £1.2bn)
- £622m spent on bolt-on acquisitions (2018: £392m)
- Net debt to EBITDA leverage1 of 1.8 times (2018: 1.6 times)
- Proposed final dividend of 33.5p, making 40.0p for the full year, up 21% (2018: 33.0p)
1 Calculated at constant exchange rates applying current period exchange rates.
2 Underlying results are stated before exceptional items and intangible amortisation.
3 Throughout this announcement we refer to a number of alternative performance measures which are defined in the Glossary on page 39 of the full release.
4 Prior year profit after tax and earnings per share figures include a one-off benefit from the US Tax Cuts and Jobs Act of 2017.
Ashtead's Chief Executive, Brendan Horgan, commented:
"The Group delivered a strong quarter with good performance across the business. As a result, Group rental revenue increased 18% for the year and underlying pre-tax profit increased 17% to £1,110m, both at constant exchange rates.
We continue to experience strong end markets in North America and are executing well on our strategy of organic growth supplemented by targeted bolt-on acquisitions. We invested £1.6bn in capital and a further £622m on bolt-on acquisitions in the period, which has added 146 locations across the Group. This investment reflects the structural growth opportunity that we continue to see in the business as we broaden our product offering, geographic reach and end markets, thus increasing market share and diversifying our business.
We remain focused on responsible growth. Our increasing scale and strong margins are delivering good earnings growth and significant free cash flow generation. This provides 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 £675m under our share buyback programme announced in December 2017, which has now concluded, and expect to spend a minimum of £500m on share buybacks in 2019/20.
Our business continues to perform well in supportive end markets. Looking forward, we anticipate a similar level of capital expenditure in 2019/20, consistent with our strategic plan. So, with our business performing well and a strong balance sheet to support our plans, the Board continues to look to the medium term with confidence."
|Will Shaw||Director of Investor Relations||+44 (0)20 7726 9700|
|Neil Bennett||Maitland/AMO||+44 (0)20 7379 5151|
|James McFarlane||Maitland/AMO||+44 (0)20 7379 5151|
Brendan Horgan and Michael Pratt will hold a meeting for equity analysts to discuss the results and outlook at 9am on Tuesday, 18 June 2019. The meeting will be webcast live via the link at the top of this release and a replay will also be available from that link shortly after the meeting concludes. A copy of this announcement and the slide presentation used for the meeting is also 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 meeting and conference call for bondholders but any eligible person not having received details should contact the Company's PR advisers, Maitland/AMO (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 $m||4,988.9||4,153.1||2,453.5||2,062.9||1,545.0||1,293.4|
|Sunbelt Canada in C$m||344.0||223.4||124.1||68.1||54.8||28.4|
|Sunbelt US in £m||3,824.3||3,103.7||1,880.9||1,541.7||1,184.3||966.6|
|Sunbelt Canada in £m||200.2||130.6||72.2||39.9||31.9||16.6|
|Group central costs||-||-||(14.9)||(15.8)||(14.9)||(15.9)|
|Net financing costs||(153.4)||(110.2)|
|Profit before amortisation, exceptional items and tax||1,110.2||927.3|
|Profit before taxation||1,059.5||862.1|
|Profit attributable to equity holders of the Company||796.9||968.8|
Group revenue for the year increased 21% to £4,500m (2018: £3,706m) with strong growth in the US and Canadian markets. This revenue growth, combined with our focus on drop-through, generated underlying profit before tax of £1,110m (2018: £927m).
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 20%, 4% and 66% rental only revenue growth respectively. The significant growth in Sunbelt Canada reflects the impact of 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:
|2018 rental only revenue||3,091|
|Organic (same-store and greenfields)||15%||472|
|Bolt-ons since 1 May 2017||5%||148|
|2019 rental only revenue||20%||3,711|
|2019 rental revenue||19%||4,637|
|2019 total revenue||20%||4,989|
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 123 new stores in the US in the year, the majority of which were specialty locations.
Rental only revenue growth was 20% in strong end markets. This growth was driven by increased fleet on rent year-over-year with yield flat. While revenue was impacted by our involvement in the clean-up efforts following hurricanes Florence and Michael, it was much less than last year with estimated incremental rental revenue of $30-35m (2018: c. $100m). Average physical utilisation for the year was 71% (2018: 72%). Sunbelt US's total revenue, including new and used equipment, merchandise and consumable sales, increased 20% to $4,989m (2018: $4,153m).
A-Plant generated rental only revenue of £357m, up 4% on the prior year (2018: £344m). This was driven by increased fleet on rent with a 1% improvement in yield, mainly due to product mix. The rate environment in the UK market remains competitive. A-Plant's total revenue increased 1% to £475m (2018: £472m).
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. On a pro forma basis, Canadian rental only revenue increased 18%. Sunbelt Canada's total revenue was C$344m (2018: C$223m).
We continue to focus on operational efficiency as we look to maintain or improve margins. In Sunbelt US, 49% 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 185 greenfield openings and acquired stores in the last two years. This resulted in an EBITDA margin of 49% (2018: 50%) and contributed to a 19% increase in operating profit to $1,545m (2018: $1,293m) at a margin of 31% (2018: 31%).
The UK market remains competitive and after a period of sustained growth for the business, the focus is now on operational efficiency and improving returns. Drop-through of 52% contributed to an EBITDA margin of 35% (2018: 35%) while operating profit of £62m (2018: £70m) at a margin of 13% (2018: 15%) reflected the higher depreciation charge of a larger average fleet.
Sunbelt Canada is in a growth phase as it invests to expand its network and develop the business. Significant growth has been achieved while delivering a 36% EBITDA margin and generating an operating profit of C$55m (2018: C$28m) at a margin of 16% (2018: 13%). We continue to expect the Canadian business to generate EBITDA and operating profit margins of around 40% and 20% respectively in the near term.
Reflecting the strong performance of the divisions, Group underlying operating profit increased to £1,264m (2018: £1,037m), up 19% at constant exchange rates. Net financing costs increased to £153m (2018: £110m) reflecting a higher average interest rate and higher average debt levels. As a result, Group profit before amortisation of intangibles, exceptional items and taxation was £1,110m (2018: £927m). After a tax charge of 25% (2018: 32%) of the underlying pre-tax profit, underlying earnings per share increased 33% at constant currency to 174.2p (2018: 127.5p). The reduction in the Group's underlying tax charge from 32% to 25% 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 5%. We anticipate the cash tax charge to increase to c.10% in 2019/20.
Statutory profit before tax was £1,059m (2018: £862m). This is after amortisation of £51m (2018: £43m) and, in the prior year, an exceptional charge of £22m. The exceptional tax credit of £12m (2018: £401m) relates to a tax credit of £12m (2018: £13m) in relation to the amortisation 5 of intangibles. In addition, the prior year includes a £7m tax credit in relation to exceptional net financing costs and a £381m credit as a result of the change in the US federal tax rate. As a result, basic earnings per share were 166.1p (2018: 195.3p).
Capital expenditure and acquisitions
Capital expenditure for the year was £1,587m gross and £1,385m net of disposal proceeds (2018: £1,239m gross and £1,081m net). This level of capital expenditure reflects the strong market and our ability to take market share. Reflecting this investment, the Group's rental fleet at 30 April 2019 at cost was £8.3bn. Our average fleet age is now 34 months (2018: 32 months).
We invested £622m (2018: £392m), including acquired debt, in 24 bolt-on acquisitions during the year as we continue to both expand our footprint and diversify our specialty markets.
We expect a similar level of capital expenditure in 2019/20, consistent with our strategic plan. This should result in low teens revenue growth in 2019/20.
Return on Investment
Sunbelt US's pre-tax return on investment (excluding goodwill and intangible assets) in the 12 months to 30 April 2019 was 24% (2018: 24%). In the UK, return on investment (excluding goodwill and intangible assets) was 9% (2018: 11%). This decline reflects the competitive nature of the UK market and the rate environment. In Canada, return on investment (excluding goodwill and intangible assets) was 12% (2018: 11%). We have made a significant investment in Canada and, as we develop the potential of the market, we expect returns to increase. For the Group as a whole, return on investment (including goodwill and intangible assets) was 18% (2018: 18%).
Cash flow and net debt
As expected, debt increased during the year as we continued to invest in the fleet and made a number of bolt-on acquisitions. In addition, weaker sterling increased reported debt by £126m. During the year, we spent £460m 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. In December, the Group also increased and extended its asset-based senior bank facility, with $4.1bn committed until December 2023 at a lower cost. Other principal terms and conditions remain unchanged. 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 at a weighted average interest cost of less than 5%.
Net debt at 30 April 2019 was £3,745m (2018: £2,712m) while, reflecting our strong earnings growth, the ratio of net debt to EBITDA was 1.8 times (2018: 1.6 times) on a constant currency basis. The Group's target range for net debt to EBITDA is 1.5 to 2 times.
IFRS 16, Leases, is applicable to the Group from 1 May 2019. On transition, this will increase our reported debt by in the region of £900m and on a pro forma basis, the ratio of net debt to EBITDA as at 30 April 2019 would have been 2.1 times compared with the 1.8 times above. Accordingly, as a result of the application of IFRS 16, we expect our reported leverage to be 0.3 – 0.4 times higher than previously reported and so we have adjusted our target leverage range to 1.9 - 2.4 times to reflect this change. In the near term, we will continue to report leverage pre and post the impact of IFRS 16. Further details on the impact of IFRS 16 are provided on page 14 of the full release.
At 30 April 2019, availability under the senior secured debt facility was $1,622m, with an additional $2,385m of suppressed availability – substantially above the $410m level at which the Group's entire debt package is covenant free.
In accordance with our progressive dividend policy, with consideration to both profitability and cash generation at a level that is sustainable across the cycle, the Board is recommending a final dividend of 33.5p per share (2018: 27.5p) making 40.0p for the year (2018: 33.0p), an increase of 21%. If approved at the forthcoming Annual General Meeting, the final dividend will be paid on 13 September 2019 to shareholders on the register on 16 August 2019.
The Group remains disciplined in its approach to allocation of capital with the overriding objective being to enhance shareholder value. Our capital allocation framework remains unchanged and prioritises:
- organic fleet growth;
- bolt-on acquisitions; and
- a progressive dividend with consideration to both profitability and cash generation that is sustainable through the cycle.
Additionally, we consider further returns to shareholders. In this regard, we assess continuously our medium term plans which take account of investment in the business, growth prospects, cash generation, net debt and leverage. Therefore the amount allocated to buybacks is simply driven by that which is available after organic growth, bolt-on M&A and dividends, whilst allowing us to operate within our 1.5 to 2.0 times target range for net debt to EBITDA (amended to 1.9 to 2.4 times post IFRS 16).
In line with these priorities, we have spent £675m under the share buyback programme announced in December 2017, which has now concluded, and expect to spend at least £500m in 2019/20.
Current trading and outlook
Our business continues to perform well in supportive end markets. Looking forward, we anticipate a similar level of capital expenditure in 2019/20, consistent with our strategic plan. So, with our business performing well and a strong balance sheet to support our plans, the Board continues to look to the medium term with confidence.
Directors' responsibility statement on the annual report
The responsibility statement below has been prepared in connection with the Company's Annual Report & Accounts for the year ended 30 April 2019. Certain parts thereof are not included in this announcement.
"We confirm to the best of our knowledge:
- the consolidated financial statements, prepared in accordance with IFRS as issued by the International Accounting Standards Board and IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group;
- the Strategic Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces; and
- the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide information necessary for shareholders to assess the Group's performance, business model and strategy.
By order of the Board
17 June 2019"