10 September, 2019

Unaudited results for the first quarter ended 31 July 2019

Read and download the unaudited results for the first quarter ended 31 July 2019. You can also view the latest webcast

Financial summary

Underlying results3
Rental revenue1,164.5961.016%
Profit before taxation319.0285.69%
Earnings per share51.4p44.8p12%
Statutory results
Operating profit358.3305.211%
Profit before taxation304.7274.48%
Earnings per share49.1p43.0p12%


  • Revenue up 17%2; rental revenue up 16%2
  • Operating profit of £358m (2018: £305m)
  • Pre-tax profit3 of £319m (2018: £286m); £326m excluding the impact of IFRS 16
  • Earnings per share3 up 12%2
  • £521m of capital invested in the business (2018: £465m)
  • £196m spent on bolt-on acquisitions (2018: £145m)
  • Net debt to EBITDA leverage2 of 1.8 times (2018: 1.6 times)

1   The results for Q1 2019 are not comparable directly to the prior year due to the adoption of IFRS 16, Leases. Further details are provided in note 2 to the interim financial statements where we set out the impact of IFRS on the results and present the income statement on a comparable basis to the prior year.
2   Calculated at constant exchange rates applying current period exchange rates and excluding the impact of IFRS 16.
3   Underlying results are stated before intangible amortisation.
4   Throughout this announcement we refer to a number of alternative performance measures which are defined in the Glossary on page 31.

Ashtead's Chief Executive, Brendan Horgan, commented:

"The Group delivered a strong quarter with rental revenue increasing 16% and underlying pre-tax profit increasing 9%, excluding the impact of IFRS 16, both at constant exchange rates.

Our North American end markets remain strong and we continue to execute well on our strategy of organic growth supplemented by targeted bolt-on acquisitions. We invested £521m in capital and a further £196m on bolt-on acquisitions in the period, which has added 27 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 1.9 to 2.4 times net debt to EBITDA (1.5 to 2.0 times excluding IFRS 16). We spent £125m under our share buyback programme in the quarter, and expect to spend a minimum of £500m on share buybacks in 2019/20.

Our business continues to perform well in supportive end markets. Accordingly we expect business performance in line with our expectations and the Board continues to look to the medium term with confidence."


Will ShawDirector of Investor Relations+44 (0) 20 7726 9700
Neil BennettMaitland/AMO+44 (0) 20 7379 5151
James McFarlaneMaitland/AMO+44 (0) 20 7379 5151

Brendan Horgan and Michael Pratt will hold a conference call for equity analysts to discuss the results and outlook at 8.30am on Tuesday, 10 September 2019. 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 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.

Trading results

Sunbelt US in $m1,380.91,167.5716.0590.6446.6385.8
Sunbelt Canada in C$m94.876.937.628.316.014.3
Sunbelt US in £m1,090.4877.4565.3443.8352.7289.9
Sunbelt Canada in £m56.444.422.416.39.58.3
Group central costs  -  -(4.7)(3.9)(5.0)(4.0)
Net financing costs    (53.6)(30.8)
Profit before amortisation and tax319.0285.6
Amortisation    (14.3)(11.2)
Profit before taxation    304.7274.4
Taxation charge    (76.5)(64.5)
Profit attributable to equity holders of the Company228.2209.9
Margins as reported  
Sunbelt US  51.9%50.6%32.3%33.0%
A-Plant  33.2%37.8%11.7%17.6%
Sunbelt Canada  39.7%36.8%16.8%18.6%
Group  49.0%48.1%29.2%30.2%

1   Segment result presented is operating profit before amortisation.

The Group adopted IFRS 16, Leases ('IFRS 16') on 1 May 2019. The Group elected to apply IFRS 16 using the modified retrospective approach with no restatement of comparative figures. As a result, the results for the quarter are not comparable directly to the prior year with the adoption of IFRS 16 resulting in higher EBITDA and operating profit but lower profit before amortisation and tax than under the previous accounting standard. As a result, our comments below are on both the reported figures and those excluding the impact of IFRS 16 to aid comparability. Margins excluding the impact of IFRS 16 are summarised below. Further details on the adoption and impact of IFRS 16 are provided in note 2 to the interim financial statements.

Margins excluding the impact of IFRS 16
Sunbelt US50.0%50.6%32.1%33.0%
Sunbelt Canada37.0%36.8%16.6%18.6%

Group revenue for the quarter increased 22% to £1,278m (2018: £1,047m) 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 £319m (2018: £286m) or £326m excluding the impact of IFRS 16. This performance reflects strong profit growth in the US, a more moderate improvement in Canada as we invest in the business and a slight drag from weakness in the UK.

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 and Sunbelt Canada delivered 18% and 26% rental only revenue growth respectively, while A-Plant's rental only revenue decreased by 1% reflecting the more competitive landscape within a flatter UK market. The growth in Sunbelt Canada continues to reflect the impact of recent acquisitions.

Sunbelt US's revenue growth continues to benefit from cyclical and structural trends and can be explained as follows:

2018 rental only revenue 872
Organic (same-store and greenfields)12%105
Bolt-ons since 1 May 20186%53
2019 rental only revenue18%1,030
Ancillary revenue17%249
2019 rental revenue18%1,279
Sales revenue23%102
2019 total revenue18%1,381


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 22 new stores in the US in the quarter, almost half of which were specialty locations.

Rental only revenue growth was 18% in strong end markets. This growth was driven by increased fleet on rent year-over-year. Sunbelt US's total revenue, including new and used equipment, merchandise and consumable sales, increased 18% to $1,381m (2018: $1,168m).

A-Plant generated rental only revenue of £94m, down 1% on the prior year (2018: £95m). This resulted from a 3% reduction in fleet on rent offset substantially by an improvement in yield, mainly due to product mix. The rate environment in the UK market remains competitive. A-Plant's total revenue increased 5% to £131m (2018: £126m) reflecting higher used equipment sales as A-Plant defleeted, selling under-utilised and low returning assets.

Sunbelt Canada's rental only revenue increased 26%, including the benefit of recent acquisitions. On an organic basis, Sunbelt Canada's rental only revenue increased 13%. Sunbelt Canada's total revenue was C$95m (2018: C$77m).

We continue to focus on operational efficiency as we look to maintain or improve margins. In Sunbelt US, excluding the impact of IFRS 16, 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 acquired stores. This contributed to a reported EBITDA margin of 52% (2018: 51%) and a 16% increase in operating profit to $447m (2018: $386m) at a margin of 32% (2018: 33%). Excluding the impact of IFRS 16, the EBITDA and operating profit margins were 50% and 32% respectively for the current period.

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. The EBITDA margin of 33% (2018: 38%) included the drag effect of increased fleet disposals in relation to under-utilised and poor returning assets. Excluding the impact of these disposals and the adoption of IFRS 16, A-Plant generated an EBITDA margin of 36% (2018: 39%). Operating profit of £15m (2018: £22m) at a margin of 12% (2018: 18%) also reflected these impacts.

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 40% EBITDA margin (2018: 37%) and generating an operating profit of C$16m (2018: C$14m) at a margin of 17% (2018: 19%). Excluding the impact of IFRS 16, the EBITDA and operating profit margins were 37% and 17%, respectively. 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 £373m (2018: £316m), up 12% at constant exchange rates. Net financing costs increased to £54m (2018: £31m) reflecting the impact of the adoption of IFRS 16 which resulted in an incremental interest charge of £10m in the quarter, and higher average debt levels. As a result, Group profit before amortisation of intangibles and taxation was £319m (2018: £286m). After a tax charge of 25% (2018: 24%) of the underlying pre-tax profit, underlying earnings per share increased 10% at constant currency to 51.4p (2018: 44.8p). Excluding the impact of IFRS 16, Group profit before amortisation of intangibles and taxation was £326m and underlying earnings per share increased 12% at constant currency. The underlying cash tax charge was 9%.

Statutory profit before tax was £305m (2018: £274m). This is after amortisation of £14m (2018: £11m). The tax credit of £3m (2018: £3m) relates to a tax credit in relation to the amortisation of intangibles. As a result, basic earnings per share were 49.1p (2018: 43.0p).


Capital expenditure and acquisitions

Capital expenditure for the quarter was £521m gross and £451m net of disposal proceeds (2018: £465m gross and £415m 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 31 July 2019 at cost was £9.2bn. Our average fleet age is now 33 months (2018: 32 months).

We invested £196m (2018: £145m), including acquired debt, in six bolt-on acquisitions during the period as we continue to expand our footprint and look to diversify our 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 2019 was 24% (2018: 24%). In the UK, return on investment (excluding goodwill and intangible assets) was 8% (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 11% (2018: 12%). 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 17% (2018: 18%). For comparability, return on investment excludes the impact of IFRS 16.


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 but also due to the adoption of IFRS 16, which added £883m to debt as at 1 May 2019. In addition, weaker sterling increased reported debt by £291m. During the quarter, we spent £125m on share buybacks.

As a result net debt at 31 July 2019 was £5,161m (2018: £3,033m), resulting in a net debt to EBITDA ratio of 2.1 times on a pro forma basis. The Group's target range for net debt to EBITDA is 1.9 to 2.4 times following the adoption of IFRS 16. Excluding the effect of the transition to IFRS 16, net debt at 31 July 2019 was £4,184m, while the ratio of net debt to EBITDA was 1.8 times (2018: 1.6 times) on a constant currency basis. The Group's debt facilities are committed for an average of five years at a weighted average interest cost of less than 5%.

At 31 July 2019, availability under the senior secured debt facility was $1,375m, with an additional $2,686m of suppressed availability – substantially above the $410m level at which the Group's entire debt package is covenant free.


Capital allocation

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;
    • same-stores;
    • greenfields;
  • 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 1.9 to 2.4 times target range for net debt to EBITDA (1.5 to 2.0 times pre IFRS 16).


Current trading and outlook

Our business continues to perform well in supportive end markets. Accordingly we expect business performance in line with our expectations and the Board continues to look to the medium term with confidence.