15.06.2021

Strong finish for Ashtead

Ashtead, owner of Sunbelt Rentals in the US, UK and Canada, has reported its full year results to the end of April.

Total revenues for the year were £5.03 billion, roughly the same as last year, although in constant exchange rates revenues would have been three percent higher. Pre-tax profits came in 6.5 percent lower at £936 million. Fourth quarter revenues were 13 percent higher at £1.27 billion as the US market fully recovered. Pre-tax profits more than double to £220 million.

Looking at the revenue and profit detail by country:

Sunbelt USA saw revenues decline around one percent to $5.4 billion, while operating profits were 7.5 percent lower at $1.44 billion.

Sunbelt Canada saw revenues jump 19 percent higher thanks entirely to the acquisition of William F White, without which revenues would have been just two percent lower. Operating profits leapt more than 80 percent to $97.8 million.

Sunbelt UK (previously A-Plant) reported a 35 percent jump in revenues to £635.1 million, thanks to sales to the Department of Health which represented 29 percent of all UK revenues. Operating profits increased 65 percent to £60.9 million.

Capital expenditure for the year was more than halved to £718 million compared to almost £1.5 billion for the prior 12 months. This led to the average age of the fleet increasing from 36 to 41 months, while the plan for this year is to spend between £1.37 and £1.54 billion. The company also spent £125 million on five ‘bolt on' acquisitions. Net debt at the end of the period was almost 22 percent lower at £4.19 billion, thanks to strong cash flow.

Moving to dollars
At the same time the company has announced that it is switching its reporting currency from Sterling to Dollars, reflecting the fact that the US business makes up 76 percent of the group’s revenues - closer to 80 percent in a normal year.

Chief executive Brendan Horgan said: "We returned to growth in the fourth quarter with rental revenues up 15 percent over last year and up 14 percent when compared with the fourth quarter of 2018/19, both at constant exchange rates. This completes a year of market out performance across the business with full year rental revenue up one percent 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 £1,382 million contributing to reduced leverage of 1.4 times compared to 1.9 times a year ago and adjusted pre-tax profit of £998 million, only two percent 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."

Vertikal Comment

This is an excellent result from Ashtead, in what has been a challenging year and with the entire financial year affected by the Covid 19 pandemic. The only downside was the overcautious cut in capital expenditure, which has aged the fleet. Hindsight is of course a wonderful thing, but as the year progressed perhaps it ought to have boosted spending, the problem now is that lead times are rising fast, and prices are sure to follow.

The move to dollars makes sense and is probably overdue given that the UK business usually represents only around 10 percent of the business.

All in all, a very positive result.