Highlights¹

Highlights³

• Group rental revenue up 7%²; revenue up 2%²
• US rental revenue up 6%; revenue up 1%
• Operating profit of $688m (2023: $703m)
• Adjusted³ profit before taxation of $573m (2023: $615m)
• Adjusted³ earnings per share of 97.4¢ (2023: 107.5¢)
• 33 locations added in North America
• $855m of capital invested in the business (2023: $1,132m)
• $53m spent on two bolt-on acquisitions (2023: $361m)
• Net debt to EBITDA leverage² of 1.7 times (2023: 1.6 times)
• We expect full year results in line with our previous expectations

Ashtead’s chief executive, Brendan Horgan, commented:

“We launched our Sunbelt 4.0 strategic growth plan in April and the business is focused on executing against our five actionable components: Customer, Growth, Performance, Sustainability and Investment. I want to thank all our team members for the hard work and professionalism they exhibit every day as we deliver on this strategy and our commitment to provide exceptional service to our customers, safely.

The Group is performing well with rental revenue up 7% and revenue up 2% in the first quarter. In North America, the increasing proportion of mega projects and the strength of our Specialty businesses has more than offset the lower activity levels in local commercial construction markets. As expected, lower used equipment sales and a higher increase in depreciation and interest costs, resulted in adjusted profit before taxation of $573m (2023: $615m).

The investments in and expansion of the business over Sunbelt 3.0 and into Sunbelt 4.0 are enabling us to take advantage of the diverse opportunities that we see while maintaining a balance sheet that affords us considerable flexibility and optionality.  In the quarter we invested $855 million in capital across existing locations and greenfields and $53m on two bolt-ons, adding a total of 33 new locations in North America.

We are in a position of strength, with the operational flexibility and financial capacity to capitalise on the structural growth opportunities we see for the business.  We have started the year well and expect full-year results will be in line with our expectations. 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 10am on Tuesday, 3 September 2024.  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

Group revenue for the quarter increased 2% to $2,754m (2023: $2,696m).  This revenue growth resulted in EBITDA increasing 5% to $1,288m (2023: $1,229m), but with lower used equipment sales and after higher depreciation and interest costs, adjusted operating profit decreased 2% to $717m (2023: $733m) and adjusted profit before tax was $573m (2023: $615m).  The higher increase in the depreciation charge relative to revenue growth reflects lower utilisation of a larger fleet and the ongoing impact of life cycle fleet inflation, contributing to the decline in operating profit.  In addition, increased financing costs due to higher average debt levels  resulted in adjusted profit before tax being 7% lower than the comparative period.

In the US, rental only revenue of $1,727m (2023: $1,615m) was 7% higher than the prior year, driven by both volume and rate improvement, 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 5%, while bolt-ons since 1 May 2023 contributed 2% of rental only revenue growth.  In the period, our General Tool business grew 3%, while our Specialty businesses grew 17%.  Rental revenue increased 6% to $2,174m (2023: $2,048m).  US total revenue, including new and used equipment, merchandise and consumable sales, increased 1% to $2,335m (2023: $2,311m).  As expected, this reflects a lower level of used equipment sales than last year when we took advantage of improving fleet deliveries and strong second-hand markets to catch up on deferred disposals.

Canada’s rental only revenue increased 21% to C$180m (2023: C$149m).  Markets relating to the major part of the Canadian business are performing in a manner similar to the US with volume growth and rate improvement.  In addition, following settlement of the Writers Guild of America and Screen Actors Guild strikes, activity in the Specialty Film & TV business has recovered, although it has yet to reach pre-strike levels.  Rental revenue increased 21% to C$222m (2023: C$183m), while total revenue was C$248m (2023: C$213m).  

The UK business generated rental only revenue of £124m, up 3% on the prior year (2023: £120m).  Rental only revenue growth has been driven by both rate and volume improvement.  Rental revenue increased 6% to £160m (2023: £150m), while total revenue increased 5% to £186m (2023: £178m).  

We invested in the infrastructure of the business during Sunbelt 3.0 to support the growth of the business now and into the future. Our intention is to leverage this infrastructure during Sunbelt 4.0 as we look to improve operating performance. This, combined with our focus on the cost base and lower erection and dismantling revenue, contributed to US rental revenue drop through to EBITDA of 69% for the quarter.  This resulted in an EBITDA margin of 49.2% (2023: 47.8%).  Following the impact of lower gains due to lower used equipment sales and higher depreciation on a larger fleet, segment profit decreased by 3% to $669m (2023: $692m) with a margin of 28.7% (2023: 29.9%).    

Our Canadian business continues to develop and invest to expand its network and broaden its markets.  This, combined with the recovery in the Film & TV business contributed to an EBITDA margin of 43.3% (2023: 43.8%) and a segment profit of C$46m (2023: C$40m) at a margin of 18.7% (2023: 18.9%).

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 28.7% (2023: 28.1%) and a segment profit of £18m (2023: £16m) at a margin of 9.5% (2023: 8.9%).

Overall, Group adjusted operating profit decreased to $717m (2023: $733m), down 2% at constant exchange rates.  After increased financing costs of $144m (2023: $118m), reflecting higher average debt levels, Group adjusted profit before tax was $573m (2023: $615m).  After a tax charge of 26% (2023: 24%) of the adjusted pre-tax profit, adjusted earnings per share were 97.4ȼ (2023: 107.5ȼ).

Statutory profit before tax was $544m (2023: $585m).  This is after amortisation of $29m 
(2023: $30m).  Included within the total tax charge is a tax credit of $7m (2023: $8m) which relates to the amortisation of intangibles.  As a result, basic earnings per share were 92.4¢ (2023: 102.3¢).

Capital expenditure and acquisitions

Capital expenditure for the quarter was $855m gross and $722m net of disposal proceeds (2023: $1,132m gross and $899m net).  As a result, the Group’s rental fleet at 31 July 2024 at cost was $18bn and our average fleet age is 46 months (2023: 48 months) on an original cost basis.

We invested $53m (2023: $361m) in two bolt-on acquisitions during the period, as we continue to both expand our footprint and diversify our end markets.  Further details are provided in Note 15.

Return on Investment

The Group return on investment was 16% (2023: 19%).  In the US, return on investment (excluding goodwill and intangible assets) for the 12 months to 31 July 2024 was 22% (2023: 27%), while in Canada it was 11% (2023: 17%).  The reduction in US and Canada return on investment reflects principally the impact of lower utilisation of a larger fleet.  In the UK, return on investment (excluding goodwill and intangible assets) was 7% (2023: 7%).  Return on investment excludes the impact of IFRS 16.

Cash flow and net debt

The Group generated free cash flow of $161m (2023: outflow of $139m) during the quarter, which is after capital expenditure payments of $933m (2023: $1,164m).  

Net debt at 31 July 2024 was $10,761m (2023: $9,679m).  Excluding the effect of IFRS 16, net debt at 31 July 2024 was $8,033m (2023: $7,200m), while the ratio of net debt to EBITDA was 1.7 times (2023: 1.6 times) on a constant currency basis.  The Group’s 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: 2.1 times) on a constant currency basis.

At 31 July 2024, availability under the senior secured debt facility was $2,757m with an additional $7,100m of suppressed availability – substantially above the $450m level at which the Group’s entire debt package is covenant free.

The Group’s debt facilities are committed for an average of six years at a weighted average cost of 5%.

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

We are in a position of strength, with the operational flexibility and financial capacity to capitalise on the structural growth opportunities we see for the business.  We have started the year well and expect full-year results will be in line with our expectations. The Board looks to the future with confidence.