Nine month highlights

• Group revenue up 14%²; US revenue up 15% with rental revenue up 12%
• Adjusted³ earnings per share of 307.2¢ (2023: 304.2¢)
• 106 locations added in North America
• $3.5bn of capital invested in the business (2023: $2.6bn)
• $906m spent on 26 bolt-on acquisitions (2023: $970m)
• Net debt to EBITDA leverage² of 1.9 times (2023: 1.6 times)

<sub>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 34.
2. Calculated at constant exchange rates applying current period exchange rates.
3. Adjusted results are stated before amortisation.  </sub>

Ashtead’s chief executive, Brendan Horgan, commented:

“The Group’s operating performance continues to be strong with revenue up 14% and rental revenue growth of 11%, both at constant currency. 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 are executing well against all actionable components of our strategic growth plan, in end markets which remain robust. In the period, we invested $3.5bn in capital across existing locations and greenfields and $906m on 26 bolt-on acquisitions, adding a combined 106 locations in North America. This investment is enabling us to take advantage of the substantial structural growth opportunities that we see for the business as we deliver our strategic priorities to grow our General Tool and Specialty businesses and advance our clusters.  We are achieving all this while maintaining a strong and flexible balance sheet.

As outlined previously, our third quarter rental revenue growth in North America was affected by the lower level of emergency response activity related to natural disasters and the longer than anticipated actors’ and writers’ strikes. Taking into account Q3 performance, we now expect Group rental revenue growth for the full year to be at the low end of our 11 – 13% range and full year results broadly in line with expectations.

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. Looking to 2024/25, our initial plan for gross capital expenditure is $3.0 – 3.3bn (2023/24: c. $4.2bn), of which US rental capital expenditure is $2.0 – 2.3bn (2023/24: c. $3.1bn). This, in conjunction with scope for increased absorption of this year’s investment in rental fleet, is expected to drive mid to high single digit US rental revenue growth with significant free cash flow generation.

We look forward to launching our next strategic growth plan, Sunbelt 4.0, during our capital markets event in late April, which will detail our runway for further success. 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, 5 March 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.

Nine months' trading results

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

Group revenue increased 14% to $8,231m (2023: $7,224m) in the nine months.  This revenue growth resulted in EBITDA increasing 12% to $3,752m (2023: $3,338m), adjusted operating profit increased 7% to $2,185m (2023: $2,035m) and adjusted profit before tax was $1,785m (2023: $1,778m).  A higher 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 similar to last year.

In the US, rental only revenue of $4,993m (2023: $4,441m) 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 9%, while bolt-ons since 1 May 2022 contributed 3% of rental only revenue growth.  In the nine months, our General Tool business grew 12%, while our Specialty businesses grew 13%.  Year-over-year growth in our Specialty businesses was affected in October and the third quarter due to strong hurricane, wildfire and winter storm related revenue last year, that has not repeated this year. Rental only revenue growth has been driven by both volume and rate improvement.  Rental revenue increased 12% to $6,337m (2023: $5,669m).  US total revenue, including new and used equipment, merchandise and consumable sales, increased 15% to $7,072m (2023: $6,139m).  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, and bring forward some disposals scheduled for later this year and early 2024/25.

Canada’s rental only revenue increased 10% to C$457m (2023: C$417m).  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, the resumption of activity in January and February has been slower than we expected. Rental revenue increased 9% to C$573m (2023: C$524m), while total revenue was C$676m (2023: C$609m).

The UK business generated rental only revenue of £350m, up 9% on the prior year (2023: £321m).  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 4% to £441m (2023: £424m), while total revenue was flat at £524m (2023: £522m), reflecting the high level of ancillary and sales revenue associated with the work for the Department of Health in the first quarter of last 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.  These factors, combined with lower third quarter rental revenue growth of 8% resulted in US rental revenue drop through to EBITDA of 44% in the quarter and 51% for the nine-month period.  This contributed to an EBITDA margin of 48.0% (2023: 48.7%) and a 10% increase in segment profit to $2,081m (2023: $1,890m) at a margin of 29.4% (2023: 30.8%).

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 40.2% (2023: 41.8%) and a segment profit of C$106m (2023: C$131m) at a margin of 15.7% (2023: 21.6%).

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, which remains an area of focus, this has been insufficient to offset the inflation impact on the cost base.  These factors, together with the loss of revenue from the work for the Department of Health, contributed to the UK generating an EBITDA margin of 27.9% (2023: 28.7%) and a segment profit of £41m (2023: £55m) at a margin of 7.9% (2023: 10.6%).

Overall, Group adjusted operating profit increased to $2,185m (2023: $2,035m), up 7% at constant exchange rates.  After increased financing costs of $400m (2023: $257m), reflecting higher average debt levels and the higher interest rate environment, Group adjusted profit before tax was $1,785m (2023: $1,778m).  After a tax charge of 25% (2023: 25%) of the adjusted pre-tax profit, adjusted earnings per share were 307.2ȼ (2023: 304.2ȼ).

Statutory profit before tax was $1,692m (2023: $1,690m).  This is after amortisation of $92m
(2023: $87m). Included within the total tax charge is a tax credit of $23m (2023: $22m) which relates to the amortisation of intangibles.  As a result, basic earnings per share were 291.4¢ (2023: 289.3¢).

Capital expenditure and acquisitions

Capital expenditure for the nine months was $3,509m gross and $2,848m net of disposal proceeds (2023: $2,618m gross and $2,194m net). As a result, the Group’s rental fleet at 31 January 2024 at cost was $18bn and our average fleet age is 31 months (2023: 37 months).

For the full year, we expect capital expenditure to be in line with our previous guidance at
c. $4.2bn. For 2024/25, our initial plans are for gross capital expenditure to be in the range of $3.0-3.3bn, which is consistent with the middle point of mid to high single digit rental revenue growth in the US next year.

We invested $906m (2023: $970m) including acquired borrowings in 26 bolt-on acquisitions during the nine months 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 17% (2023: 19%). In the US, return on investment (excluding goodwill and intangible assets) for the 12 months to 31 January 2024 was 25% (2023: 27%), while in Canada it was 12% (2023: 19%). The reduction in US return on investment reflects principally the impact of a lower utilisation of a larger fleet. Canada’s lower return on investment reflects predominantly the drag from the recent performance of our Film & TV business. In the UK, return on investment (excluding goodwill and intangible assets) was 6% (2023: 10%). The decrease reflects the lower profit margin together with the impact of the demobilisation of the Department of Health testing sites in the prior year. Return on investment excludes the impact of IFRS 16.

Cash flow and net debt

The Group had a free cash outflow of $463m (2023: inflow of $295m) during the period, which reflects increased capital expenditure payments of $3,752m (2023: $2,509m). As expected, this combined with continued investment in bolt-ons and returns to shareholders increased debt during the period. We spent $60m (£48m) on share buybacks (2023: $243m (£204m)).

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 31 January 2024 was $11,166m (2023: $8,819m). Excluding the effect of IFRS 16, net debt at 31 January 2024 was $8,563m (2023: $6,536m), while the ratio of net debt to EBITDA was 1.9 times (2023: 1.6 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 2.3 times (2023: 2.1 times) on a constant currency basis.

At 31 January 2024, availability under the senior secured debt facility was $2,208m with an additional $6,781m of suppressed availability – substantially above the $450m 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 1.5 to 2.0 times target range for net debt to EBITDA pre IFRS 16.

Current trading and outlook

As outlined previously, our third quarter rental revenue growth in North America was affected by the lower level of emergency response activity related to natural disasters and the longer than anticipated actors’ and writers’ strikes. Taking into account Q3 performance, we now expect Group rental revenue growth for the full year to be at the low end of our 11 – 13% range and full year results broadly in line with expectations.

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. Looking to 2024/25, our initial plan for gross capital expenditure is $3.0 – 3.3bn (2023/24: c. $4.2bn), of which US rental capital expenditure is $2.0 – 2.3bn (2023/24: c. $3.1bn). This, in conjunction with scope for increased absorption of this year’s investment in rental fleet, is expected to drive mid to high single digit US rental revenue growth with significant free cash flow generation.

We look forward to launching our next strategic growth plan, Sunbelt 4.0, during our capital markets event in late April, which will detail our runway for further success. The Board looks to the future with confidence.

_{1. Represents change in year-over-year rental revenue at constant exchange rates 2. Reflects impact of Writers Guild of America and Screen Actors Guild strikes 3. Stated at C$1=$0.75 and £1=$1.25}