Full year highlights

• Group revenue up 12%²; US revenue up 13% with rental revenue up 11%
• Operating profit of $2,654m (2023: $2,522m)
• Adjusted³ profit before taxation of $2,230m (2023: $2,273m)
• Adjusted³ earnings per share of 386.5¢ (2023: 388.5¢)
• 113 locations added in North America
• $4.3bn of capital invested in the business (2023: $3.8bn)
• $905m spent on 26 bolt-on acquisitions (2023: $1.1bn)
• Net debt to EBITDA leverage² of 1.7 times (2023: 1.6 times)
• Proposed final dividend of 89.25¢, making 105.0¢ for the full year (2023: 100.0¢)

_{1 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 of Terms on page 39.
2 Calculated at constant exchange rates applying current period exchange rates.
3 Adjusted results are stated before amortisation.}

Ashtead’s chief executive, Brendan Horgan, commented:

“The Group’s operating performance continues to be strong with record revenue and operating profit, up 12% and 5% respectively, both at constant currency.  After a higher interest expense, reflecting the interest rate environment and increased average debt levels, adjusted profit before taxation was slightly lower than last year at $2,230m (2023: $2,273m).  This performance is only possible through the dedication of our team members who deliver for all our stakeholders every day, while ensuring our leading value of safety remains at the forefront of all we do.

We completed Sunbelt 3.0 in April, executing well against all actionable components of that plan and developing a strong foundation for the next phase of our growth.  During the year, we invested $4.3bn in capital across existing locations and greenfields and $905m on 26 bolt-on acquisitions, adding a combined 113 locations in North America.  This investment is enabling us to take advantage of the substantial structural growth opportunities that we see for the business, while maintaining a strong and flexible balance sheet.

Our end markets in North America remain robust with healthy demand, supported in the US by the increasing proportion of mega projects and the ongoing impact of the legislative acts.  We are in a position of strength, with the operational flexibility and financial capacity to capitalise on the opportunities arising from these market conditions and ongoing structural changes.  Through the actionable components of our new strategic growth plan, Sunbelt 4.0, we will drive long-term sustainable growth and returns for all stakeholders and the Board looks to the future with confidence.”

Contacts:

Brendan Horgan and Michael Pratt will hold a conference call for equity analysts to discuss the results and outlook at 9.30am on Tuesday, 18 June 2024 at Deutsche Numis, 45 Gresham Street, London, EC2V 7EH.  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 3pm (10am EST).

Analysts and bondholders have already been invited to participate in the analyst and bondholder calls but any eligible person not having received details should contact the Company’s PR advisers, H/Advisors 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.

Trading results

_{1 Segment result presented is adjusted operating profit.}

Group revenue increased 12% to $10,859m (2023: $9,667m) during the year.  This revenue growth resulted in EBITDA increasing 11% to $4,893m (2023: $4,412m), adjusted operating profit increasing 5% to $2,775m (2023: $2,640m) and adjusted profit before tax was $2,230m (2023: $2,273m).  The higher increase in the depreciation charge relative to revenue growth reflects lower utilisation of a larger fleet, resulting in the lower rate of operating profit growth while increased financing costs due to increased average debt levels and the higher interest rate environment resulted in adjusted profit before tax slightly lower than last year.

In the US, rental only revenue of $6,558m (2023: $5,879m) was 12% higher than the prior year, representing continued market outperformance and demonstrating the benefits of our strategy of growing our Specialty businesses and broadening our end markets.  Organic growth (same-store and greenfields) was 8%, while bolt-ons since 1 May 2022 contributed 4% of rental only revenue growth.  In the year, our General Tool business grew 11%, while our Specialty businesses grew 14%.  The fourth quarter saw growth in our Specialty businesses return to levels similar to those seen in the first half. Rental only revenue growth has been driven by both volume and rate improvement.  Rental revenue increased 11% to $8,321m (2023: $7,503m).  US total revenue, including new and used equipment, merchandise and consumable sales, increased 13% to $9,307m (2023: $8,222m).  This reflects a higher level of used equipment sales, as we took advantage of improved fleet deliveries and strong second-hand markets to catch up on delayed disposals and bring forward some disposals scheduled for early 2024/25.

Canada’s rental only revenue increased 10% to C$605m (2023: C$548m).  Markets relating to the major part of the Canadian business are growing in a similar manner to the US with strong volume growth and rate improvement.  However, the Writers Guild of America and Screen Actors Guild strikes, which were settled in December, had a significant impact on the performance of the Specialty Film & TV business and some impact on the rest of the Canadian business, which rents into that space.  Parts of the US and UK businesses have been affected similarly.  Following the settlement, activity levels recovered progressively in the fourth quarter.  Rental revenue increased 10% to C$765m (2023: C$696m), while total revenue was C$897m (2023: C$827m).

The UK business generated rental only revenue of £466m, up 9% on the prior year (2023: £429m).  Bolt-ons since 1 May 2022 contributed 2% of this growth.  Rental only revenue growth has been driven by both rate and volume improvement.  Rental revenue increased 6% to £590m (2023: £559m), while total revenue increased 3% to £706m (2023: £685m).  This lower rate of total revenue growth reflects a higher level of ancillary and sales revenue associated with the work for the Department of Health last year, which did not repeat this year.

We have invested in the infrastructure of the business during Sunbelt 3.0, to support the growth of the business now and into the future.  This has been combined with inflationary pressures across most cost lines, particularly in relation to labour.  During the second half of the year, in recognition of the lower US revenue growth, we increased our focus on the cost base.  US rental revenue drop through to EBITDA of 40% in the fourth quarter was after an additional receivables provision following a customer filing for Chapter 11 bankruptcy protection post year-end, due to a contract dispute.  This resulted in drop through of 49% for the year.  Excluding this provision, drop through was 57% for the quarter and 52% for the full year.  As a result, the EBITDA margin was 47.3% (2023: 48.1%) and segment profit increased 7% to $2,633m (2023: $2,465m) at a margin of 28.3% (2023: 30.0%).   

Our Canadian business continues to develop and enhance its performance as it invests to expand its network and broaden its markets.  Despite the drag from the strike-affected Film & TV business, Canada generated an EBITDA margin of 40.5% (2023: 40.7%) and a segment profit of C$138m (2023: C$167m) at a margin of 15.4% (2023: 20.2%).

In the UK, the focus remains on delivering operational efficiency and long-term, sustainable returns in the business.  While we continue to improve rental rates, this remains an area of focus.  The UK generated an EBITDA margin of 28.2% (2023: 28.1%) and a segment profit of £58m (2023: £65m) at a margin of 8.2% (2023: 9.5%).

Overall, Group adjusted operating profit increased to $2,775m (2023: $2,640m), up 5% at constant exchange rates.  After increased financing costs of $545m (2023: $366m), reflecting higher average debt levels and the higher interest rate environment, Group adjusted profit before tax was $2,230m (2023: $2,273m).  After a tax charge of 24% (2023: 25%) of the adjusted pre-tax profit, adjusted earnings per share were 386.5ȼ (2023: 388.5ȼ).

Statutory profit before tax was $2,110m (2023: $2,156m).  This is after amortisation of $121m
(2023: $118m).  Included within the total tax charge is a tax credit of $30m (2023: $30m) which relates to the amortisation of intangibles.  As a result, basic earnings per share were 365.8¢ (2023: 368.4¢).

Capital expenditure and acquisitions

Capital expenditure for the year was $4,311m gross and $3,404m net of disposal proceeds (2023: $3,772m gross and $3,105m net).  As a result, the Group’s rental fleet at 30 April 2024 at cost was $18bn and our average fleet age is 45 months (2023: 50 months) on an original cost basis.

We invested $905m (2023: $1,146m) including acquired borrowings in 26 bolt-on acquisitions during the year, as we continue to both expand our footprint and diversify our end markets.  Further details are provided in Note 16.

Return on Investment

The Group return on investment was 16% (2023: 19%).  In the US, return on investment (excluding goodwill and intangible assets) was 23% (2023: 27%), while in Canada it was 11% (2023: 18%).  The reduction in US return on investment reflects principally the impact of lower utilisation of a larger fleet.  Canada’s lower return on investment reflects the drag from the recent performance of our Film & TV business combined with lower utilisation of a larger fleet.  In the UK, return on investment (excluding goodwill and intangible assets) was 7% (2023: 9%).  The decrease reflects the lower utilisation of a slightly larger fleet and increased non-rental depreciation.  Return on investment excludes the impact of IFRS 16.

Cash flow and net debt

The Group generated free cash flow of $216m (2023: $531m) during the year, which is after increased capital expenditure payments of $4,445m (2023: $3,530m).  As expected, this combined with continued investment in bolt-ons and returns to shareholders increased debt during the year.  We spent $78m (£62m) on share buybacks (2023: $264m (£221m)).

In July 2023, the Group issued $750m 5.950% senior notes maturing in October 2033 and in January 2024, the Group issued $850m 5.800% senior notes maturing in April 2034. The net proceeds were used to reduce the amount outstanding under the ABL facility.  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 now committed for an average of six years at a weighted average cost of 5%.

Net debt at 30 April 2024 was $10,655m (2023: $8,960m).  Excluding the effect of IFRS 16, net debt at 30 April 2024 was $8,014m (2023: $6,588m), while the ratio of net debt to EBITDA was 1.7 times (2023: 1.6 times) on a constant currency basis.  The Group’s revised target range for net debt to EBITDA is 1.0 to 2.0 times, excluding the impact of IFRS 16 (1.4 to 2.4 times post IFRS 16).  Including the effect of IFRS 16, the ratio of net debt to EBITDA was 2.2 times (2023: 2.0 times) on a constant currency basis.

At 30 April 2024, availability under the senior secured debt facility was $2,771m with an additional $6,740m of suppressed availability – substantially above the $450m level at which the Group’s entire debt package is covenant free.

DIVIDENDS

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.  In accordance with this policy, and reflecting its confidence in the future, the Board is recommending a final dividend of 89.25¢ per share (2023: 85.0¢) making 105.0¢ for the year (2023: 100.0¢), an increase of 5%.  If approved at the forthcoming Annual General Meeting, the final dividend will be paid on 10 September 2024 to shareholders on the register on 9 August 2024.

The dividend is declared in US dollars but will be paid in sterling unless shareholders elect to receive their dividend in US dollars.  Those shareholders who wish to receive their dividend in US dollars and have not yet made an election may do so by contacting Equiniti on +44 (0) 371 384 2085.  The last day for election for the proposed final dividend is 23 August 2024.

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 1.0 to 2.0 times target range for net debt to EBITDA pre IFRS 16.

Current trading and outlook

Our end markets in North America remain robust with healthy demand, supported in the US by the increasing number of mega projects and recent legislative acts.  We are in a position of strength, with the operational flexibility and financial capacity to capitalise on the opportunities arising from these market conditions and ongoing structural changes.  Through the actionable components of our new strategic growth plan, Sunbelt 4.0, we will drive long-term sustainable growth and returns for all stakeholders and the Board looks to the future with confidence.

_{1 Represents change in year-over-year rental revenue at constant exchange rates
2 Stated at C$1=$0.75 and £1=$1.27}