15 June, 2021
Audited results for the year and unaudited results for the fourth quarter ended 30 April 2021
Read and download the audited results for the year and unaudited results for the fourth quarter ended 30 April 2021. You can also view the latest webcast.
|Adjusted2 profit before taxation||235||114||133%||998||1,061||-2%|
|Profit before taxation||220||98||158%||936||983||-1%|
|Adjusted2 earnings per share||38.8p||20.2p||122%||166.0p||175.0p||-1%|
|Earnings per share||36.3p||17.4p||143%||155.7p||162.1p||1%|
- Strong market outperformance
- Revenue up 3%1; rental revenue up 1%1
- Operating profit of £1,135m (2020: £1,224m)
- Adjusted pre-tax profit of £998m (2020: £1,061m)
- Adjusted earnings per share of 166.0p (2020: 175.0p)
- £718m of capital invested in the business (2020: £1.5bn)
- Record free cash flow of £1,382m (2020: £792m)
- £125m spent on bolt-on acquisitions (2020: £453m)
- Net debt to EBITDA leverage1,3 of 1.4 times (2020: 1.9 times)
- Proposed final dividend of 35.0p, making 42.15p for the full year (2020: 40.65p)
- Sunbelt 3.0, the next phase of our strategic plan, launched in April
1. Calculated at constant exchange rates applying current period exchange rates.
2. Adjusted results are stated before exceptional items and amortisation.
3. Throughout this announcement we refer to a number of alternative performance measures which provide additional useful information. The directors have adopted these to provide additional information on the underlying trends, performance and position of the Group. The alternative performance measures are not defined by IFRS and therefore may not be directly comparable with other companies’ alternative performance measures, but are defined and reconciled in the Glossary on page 39.
Ashtead’s chief executive, Brendan Horgan, commented:
“We returned to growth in the fourth quarter with rental revenue up 15% over last year and up 14% when compared with the fourth quarter of 2018/19, both at constant exchange rates. This completes a year of market outperformance across the business with full year rental revenue up 1% at constant exchange rates. I am extraordinarily proud of, and grateful to, all our dedicated team members who have made this possible, delivering for all our stakeholders, all while keeping our leading value of safety at the forefront of what we do.
Our performance this year illustrates the benefits of our long-term strategy to broaden and diversify our end markets and strengthen our balance sheet. This has enabled us to capitalise on our increasing scale while, at the same time, maintaining the business’ agility. The last year has proven the strength in our business model during a difficult period in the economic cycle, through responding in the manner we did to the challenges arising as a result of the pandemic. Our performance during this period resulted in record free cash flow for the twelve months of £1,382m (2020: £792m) contributing to reduced leverage of 1.4 times compared to 1.9 times a year ago and adjusted pre-tax profit of £998m, only 2% lower than a year ago on a constant currency basis.
We have shown that our business can perform in both good times and more challenging ones. We enter the new financial year with clear momentum, strong positions in all our markets, supported by high quality fleet, a strong financial position and our exciting new Sunbelt 3.0 strategic plan, positioning us well to respond to market conditions and capitalise on opportunities. We will invest to drive long-term sustainable growth and returns and strengthen the business. The benefit we derive from the diversity of our products, services and end markets, our investment in technology and ongoing structural change, enhanced by the environmental and social aspects of ESG, enables the Board to look to the future 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)7584 142665|
Brendan Horgan and Michael Pratt will hold a conference call for equity analysts to discuss the results and outlook at 10am on Tuesday, 15 June 2021. The call will be webcast live via the Company’s website at www.ashtead-group.com and a replay will be available via the website shortly after the call concludes. A copy of this announcement and the slide presentation used for the call are available for download on the Company’s website. 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 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.
Overview and markets
This year has been dominated by the impact of the COVID-19 pandemic. The response of our team members to these unprecedented times has been inspiring. Our robust model has enabled us to deliver for all our stakeholders in all our geographies. Throughout this period our focus has been on our people, our customers, our communities and our investors.
Our performance in these challenging conditions has been impressive with rental only revenue in the US only 2% lower than last year, as we returned to growth in the fourth quarter. Within this overall performance, our general tool business was 4% lower than last year (fourth quarter 7% higher than prior year), while the specialty businesses demonstrated the benefit of a broader range of products and end markets with rental only revenue 13% higher than last year. This contributed to Group rental revenue for the year 1% higher than the prior year at constant exchange rates.
The Group’s skilled workforce is instrumental to our long-term success and we made every effort to preserve our committed workforce for when markets recovered. Therefore, we did not make any team members redundant as a result of the impact of COVID-19 and did not seek assistance from any government support programmes. Furthermore, we have recognised the hard work and dedication of our skilled trade workforce, making additional discretionary payments during the year.
Our performance, in a challenging environment, reflects the benefit of our long-term strategy which is focused on broadening and diversifying our end markets, while at the same time increasing our scale and market share. Our business model allows us to operate successfully in wide ranging market conditions as we allocate capital strategically, based on a consistently applied policy which takes account of the macroeconomic backdrop and our leverage.
Looking forward, the COVID-19 pandemic may continue to contribute to some market uncertainty in the coming months. However, on the back of the vaccination roll-out, we expect all of our end markets to continue to recover well. In April we launched the next phase of our strategic plan, Sunbelt 3.0, based on growth and resilience. This is a plan imbued with ambition and purpose to engage all our stakeholders and is designed to capitalise on the many growth opportunities available, while enhancing the Group’s resilience in more challenging times. With leadership positions in all our markets, supported by high quality fleet and a strong financial position, we are well positioned to respond to market conditions and support our customers and team members as we embark on Sunbelt 3.0.
|US in $m||5,417.5||5,489.9||2,634.5||2,721.0||1,444.6||1,560.0|
|Canada in C$m||500.9||420.7||218.9||157.0||97.8||54.5|
|US in £m||4,105.7||4,335.7||1,996.6||2,149.0||1,094.8||1,232.1|
|Canada in £m||290.3||248.7||126.8||92.8||56.7||32.2|
|Group central costs||-||-||(14.8)||(14.6)||(15.6)||(15.4)|
|Net financing costs||(199.3)||(224.5)|
|Profit before amortisation,|
exceptional items and tax
|Profit before taxation||936.0||982.8|
|Profit attributable to equity holders of the Company||697.4||739.7|
1 Segment result presented is operating profit before amortisation.
Group revenue of £5,031m was 3% higher than the prior year at constant exchange rates
(2020: £5,054m). Our performance relative to the prior year improved as we progressed through the year, with all our geographies delivering year-over-year growth in the fourth quarter. The lower activity levels, particularly in the first half of the year, had a significant impact on profit in the year as a large proportion of our costs are fixed in the short term. This profit impact reflects, in part, our decision to not make team members redundant as a result of COVID-19 and ensure we had a committed workforce ready to take advantage of improving market conditions, when the recovery came. As a result, adjusted profit before tax for the year was £998m (2020: £1,061m).
Although COVID-19 impacted the Group’s performance adversely, it highlighted the benefits of our strategy to broaden and diversify our end markets, which has contributed to this resilient performance. This has provided the foundation for the launch of the next phase of our strategy, Sunbelt 3.0, again underpinned with long-term growth being driven by organic investment (same-store and greenfield) supplemented by bolt-on acquisitions.
In the US, rental only revenue of $3,976m was only 2% lower than the prior year
(2020: $4,065m), representing a strong market outperformance and demonstrating the benefits of our strategy of growing our specialty businesses and broadening our end markets. In the year, our specialty businesses grew 13% while the general tool business declined 4%. US total revenue, including new and used equipment, merchandise and consumable sales, decreased 1% to $5,418m (2020: $5,490m).
The UK business generated rental only revenue of £362m, an increase of 10% on a comparable basis (2020: £349m). This was a strong performance as the breadth of our product offering and commitment of our team members enabled us to provide essential support to the Department of Health in its COVID-19 response efforts. Total revenue increased 35% to £635m (2020: £469m) reflecting the higher level of ancillary and sales revenue associated with the work for the Department of Health, which accounted for c. 29% of UK revenue in the year.
Canada’s rental only revenue increased 27% on a reported basis. Excluding the contribution from William F. White (‘WFW’), rental only revenue of the legacy business declined only 2% and returned to growth in the fourth quarter (18%). Canadian total revenue was C$501m
In all our markets we took action to reduce operating costs and eliminate discretionary expenditure. However, our broad customer base ensures there continues to be good opportunities to grow the business and we focused on disciplined investment as the Group returned to growth towards the end of the year. We took early decisions not to make any team members redundant as a result of COVID-19 or seek assistance from any government support programmes but to continue investment in the business, including our technology platform and our rental fleet. As a result, in the US, 50% of the rental revenue decline dropped through to EBITDA. This contributed to a reported EBITDA margin of 49% (2020: 50%) and a 7% decrease in operating profit to $1,445m (2020: $1,560m) at a margin of 27% (2020: 28%).
Last financial year we launched Project Unify in the UK with the objective of improving operational efficiency and returns in the business. This has resulted in significant investment in the operational infrastructure of the business which, when combined with the impact of COVID-19, contributed to an EBITDA margin of 30% (2020: 32%). Operating profit of £61m (2020: £36m) at a margin of 10% (2020: 8%) reflected these factors and a property impairment charge of c. £10m as we reshape the business to drive operational improvement.
Canada is in a growth phase as we invest to expand its network and develop the business. In December 2019 we acquired WFW, which serves the film and TV production industries. While WFW contributed virtually no revenue in the first quarter, it bounced back strongly from September onwards generating record levels of revenue for the business and an operating profit of C$29m at a 23% margin. The legacy Canadian business, excluding WFW, increased its EBITDA margin to 43% (2020: 38%) and generated an operating profit of C$69m (2020: C$56m) at a 18% margin (2020: 15%). This performance reflects a strong focus on operational efficiency and the cost base.
Overall, Group adjusted operating profit decreased to £1,197m (2020: £1,285m), down 3% at constant exchange rates. After financing costs of £199m (2020: £224m), Group profit before amortisation of intangibles and taxation was £998m (2020: £1,061m). After a tax charge of 25% (2020: 25%) of the adjusted profit before taxation, adjusted earnings per share decreased to 166.0p (2020: 175.0p).
Statutory profit before taxation was £936m (2020: £983m). This is after amortisation of £62m
(2020: £62m) and, in the prior year, an exceptional interest cost of £16m. After a tax charge of 25%, basic earnings per share were 155.7p (2020: 162.1p). The overall cash tax charge was 34%.
Capital expenditure for the year was £718m gross and £410m net of disposal proceeds
(2020: £1,483m gross and £1,208m net). This was slightly ahead of our plans as we took delivery of some equipment at the end of the year early to meet strong demand. As a result, the Group’s rental fleet at 30 April 2021 at cost was £8.6bn and our average fleet age is now 41 months (2020: 36 months).
We invested £125m (2020: £453m), including acquired borrowings, in five bolt-on acquisitions during the year as we continue to both expand our footprint and diversity of our end markets.
For 2021/22, our plan is for gross capital expenditure to be in the range of £1.37 – 1.54bn, consistent with Sunbelt 3.0.
Return on Investment
Despite the adverse impact of COVID-19, return on investment (excluding goodwill and intangible assets) in the US for the 12 months to 30 April 2021 was 20% (2020: 21%). In the UK, reflecting improvement as a result of Project Unify and increased volumes supporting the Department of Health, return on investment (excluding goodwill and intangible assets) increased to 10% (2020: 5%). We expect returns in the UK to continue to improve, based on the strategic plans for the business. In Canada, return on investment (excluding goodwill and intangible assets) was 16% (2020: 9%). This reflects the improved performance of the legacy business and the impact of the acquisition of WFW in December 2019. As we develop the potential of the market, we expect returns to improve further. For the Group as a whole, return on investment (including goodwill and intangible assets) was 15% (2020: 15%). Return on investment excludes the impact of IFRS 16.
Cash flow and net debt
The Group generated free cash flow of £1,382m (2020: £792m) during the year, a record for the business, which was used to reduce debt. Free cash flow benefitted from strong cash collections in the fourth quarter. Net debt at 30 April 2021 was £4,190m (2020: £5,363m). Excluding the effect of IFRS 16, net debt at 30 April 2021 was £3,019m (2020: £4,256m), while the ratio of net debt to EBITDA was 1.4 times (2020: 1.9 times) on a constant currency basis. The Group’s target range for net debt to EBITDA is 1.5 to 2.0 times excluding the impact of IFRS 16 (1.9 to 2.4 times post IFRS 16). Including the effect of IFRS 16, the ratio of net debt to EBITDA was 1.9 times (2020: 2.3 times) on a constant currency basis. The Group’s borrowing facilities are committed for an average of five years at a weighted average cost of 4%.
At 30 April 2021, availability under the senior secured debt facility was $3,011m with an additional $2,054m of suppressed availability – substantially above the $410m level at which the Group’s entire debt package is covenant free.
The Company has a progressive dividend policy, which considers both profitability and cash generation, and results in a dividend that is sustainable across the cycle. Our intention has always been to increase the dividend as profits increase and be able to maintain it when profits decline. However, in a year of slightly lower profit but strong cash generation, a strong balance sheet and a positive outlook, the Board is recommending an increased final dividend of 35.0p per share (2020: 33.5p) making 42.15p for the year (2020: 40.65p). If approved at the forthcoming Annual General Meeting, the final dividend will be paid on 21 September 2021 to shareholders on the register on 20 August 2021.
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 pre IFRS 16.
The Group paused its greenfield opening, bolt-on and share buyback programmes in March 2020 as we took action to optimise our cash flow and strengthen further our liquidity position due to the uncertainty arising from the COVID-19 pandemic. We resumed greenfield openings towards the end of the first quarter, returned to bolt-ons in February 2021 and launched a new buyback programme in May 2021. Under this programme, the Group anticipates buying back up to £1bn in shares over the next two financial years. We commenced the programme at a run rate of £75m a quarter.
Change in presentational currency
Effective from 1 May 2021, the Group has decided to change its presentational currency from sterling to US dollars to allow for greater transparency in the Group’s performance to investors and other stakeholders and reduced foreign currency exchange volatility, given that c. 80% of the Group’s revenue and c. 90% of the Group’s operating profit originate in US dollars. As such, the Group will present its consolidated financial statements for the year ended 30 April 2022 in US dollars. Its first report in US dollars will be for the first quarter ending 31 July 2021, due to be published on 16 September 2021. The Group has issued a separate press release today providing further details on the change and five years of historical financial information retranslated into US dollars.
Current trading and outlook
We have shown that our business can perform in both good times and more challenging ones. We enter the new financial year with clear momentum, strong positions in all our markets, supported by high quality fleet, a strong financial position and our exciting new Sunbelt 3.0 strategic plan, positioning us well to respond to market conditions and capitalise on opportunities. We will invest to drive long-term sustainable growth and returns and strengthen the business. The benefit we derive from the diversity of our products, services and end markets, our investment in technology and ongoing structural change, enhanced by the environmental and social aspects of ESG, enables the Board to look to the future with confidence.
|- US||6 – 9%|
|- Canada||20 – 25%|
|- UK||5 – 8%|
|- Group||6 – 9%|
|Capital expenditure (gross) 2||£1.37 – 1.54bn|
Free cash flow2
|£600 – 800m|
1 Represents change in year-over-year rental revenue at constant exchange rates
2 Stated at £1=$1.40 and £1=C$1.70
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 2021. 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 adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, 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
14 June 2021”