04.03.2021

Impressive numbers from Ashtead

Ashtead, owner of Sunbelt Rentals in the USA, Canada and the UK has published its third quarter results which disclose an impressive performance.

Looking first at the year to date numbers, for the nine months to the end of January, group revenues were two percent lower at £3.76 billion, while pre-tax profits dropped 17 percent to £716 million. Revenues in the USA declined almost six percent to $4.03 billion while operating profits were just over 18 percent lower at $1.1 billion.

In Canada revenues increased 11 percent to $356.6 million, thanks the William F. White acquisition, without which they would have come in eight percent lower. Profits also increased 11 percent to $63.9 million.

In the UK, Sunbelt posted revenues of £444.1, an increase of more than 21 percent, thanks to a huge surge in sales and rental business with the UK's Department of Health. Operating profit was almost three percent higher at £38.8 million.

Capital expenditure for the nine months was £518 million compared to £1.26 billion at the same point the previous year. As a result, the average age of the group's rental fleet increased to 40 months compared to 34 months a year earlier.

The company says that it expects capital expenditure for the full year to come in at the upper end of its previous forecasts at around £700 million. The company is planning on increasing this to £1.3 - 1.5 billion in the year commencing April. Net debt at the end of January was £4.3 billion, down from £5.4 billion 12 months earlier.

The third quarter numbers for the group show revenues of £1.21 billion, just one percent below the same quarter a year earlier. Pre-tax profits were four percent lower at £210 million.

Third quarter revenues in the USA slipped 11 percent to $1.28 billion, while operating profits fell 20 percent to $320 million. In contrast Canadian revenues were 12 percent higher at $136.8 million with a profit of $30.8 million, up 78 percent on the year. In the UK third quarter revenues jumped a whopping 58 percent to £171.5 million, with an operating profit £18.8 million, almost two and half times the £7.8 million achieved last year.

Chief executive, Brendan Horgan said: "We have delivered another strong quarter of market out performance across the business contributing to rental revenue down only three percent in the nine months 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.”

“This performance illustrates the successful execution of our long-term strategy, which we embarked upon after the last recession, 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. This has been demonstrated over the last year as the Group has responded to the challenges arising as a result of the pandemic. The actions we took to optimise cash flow during this period resulted in record free cash flow for the nine months of £1.06 billion contributing to reduced leverage of 1.6 times compared to 1.9 times at year end, towards the lower end of our target range.”

“We expect capital expenditure for the full year to be at the upper end of our previous guidance at around £700 million. Looking forward to 2021/22, we expect to return to growth and anticipate gross capital expenditure of £1.3 - 1.5 billion, which should enable mid-single digit revenue growth in the US.”

“The strength of our business model and balance sheet positions the Group well in markets that are likely to remain uncertain. With our businesses performing well, we now expect full year results ahead of our previous expectations. The benefit we derive from the diversity of our products, services and end markets, coupled with ongoing structural change, enables the Board to look to the future with confidence."

Vertikal Comment

Well this is unusual – Sunbelt UK outperforming Sunbelt USA! Having said that the overall results are very impressive given the challenges presented throughout the Ashtead financial year which kicked off in at the start of May 2020 in full lockdown.

It is quite likely that the fourth quarter will show similar results, and then we start the new financial year which be of particular interest. Will the UK hold on to some or all of its exceptional gains? Will the US bounce back as the country opens up? And what of Canada now that the acquisition revenue boost will be ‘baked in’.

Regardless of all this, these numbers are impressive, and it is good to see the company looking to reboot the fleet investment levels rather than taking a conservative line and stretching the cuts for another year.

No question about it a very positive set of numbers.

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