07.12.2021

Another record result from Ashtead

Ashtead, owner of Sunbelt Rentals in North America and the UK has published its half year results, showing another quarter of substantial growth.

First half results
Total revenues for the six months to the end of October were $3.88 billion, up 18 percent on the same period last year. Pre-tax profits jumped 38 percent to $890 million due to first quarter comparative.

The first half results were made up as follows:

Sunbelt US: Half year revenues came in at $3.12 billion, an increase of almost 14 percent on the same period last year while operating profits increased 24 percent to $969 million. The company statement said: “While rental revenue growth has been driven by volume, it has benefited from improved rates in what is a better rate environment than we have seen for a number of years. We estimate that hurricane efforts contributed $60 to $65 million of revenue in the second quarter.”

Sunbelt Canada: Revenues increased 41 percent to C$310 million, while profits jumped 240 percent to C$81.1 million. The company says that the growth reflects, in part, the depressed comparatives last year, when lock downs affected Canada more severely than the USA, while its studio rental business generated minimal revenue in March to July 2020 as most film and TV production activities ceased.”

Sunbelt UK: Revenues were £368.4 million, up more than 35 percent on last year, while profits grew almost 270 percent to £53.8 million. The company says it continues to benefit from essential support to the Department of Health in its Covid-19 response efforts: "Our core business is performing strongly and is benefitting from the operational improvements in the business which are ongoing.”

Second quarter results
In the second quarter the group achieved revenues of just over $2 billion, up 15 percent on the same quarter last year with a pre-tax profit of $474 million, an increase of 17 percent.

Sunbelt US: Second quarter revenues were $1.66 billion, up 14 percent, with an operating profits up 17 percent to $537.3 million.

Sunbelt Canada: Revenues increase almost 24 percent to C$161.3 million, while profits jumped 40 percent to C$46.5million.

Sunbelt UK: Posted second quarter revenues of £178.2 million, an increase of almost 20 percent on the same quarter last year, while profits doubled to £22.3 million.

Capex

Capital expenditure in the first half more than doubled to $1.18 billion gross, or $1.03 billion net of used equipment sales, this compares with $438 million and $245 million last year. The company said: “Fleet deliveries were slower than expected throughout the half year due to supply chain delays and therefore we have deferred certain fleet disposals to meet strong demand. As a result, the group's rental fleet as of 31 October had an average age of 40 months, compared to 39 months 12 months earlier."

Between May and the end of October, the company spent $428 million on 10 small acquisitions in the USA which added 58 new locations to the Sunbelt branch network in North America. Net debt at the end of October was $6.1 billion compared to $6.77 billion at the end of April.

Chief executive Brendan Horgan said: "The group's strong performance continues with rental revenue up 20% for the half year over the prior year, but more importantly up 14% when compared with the first half of 2019/20, both at constant currency. This market outperformance across the business 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.”

“In the period, we invested $1.2bn in capital across existing locations and greenfields and $428m on 10 bolt-on acquisitions, adding a combined total of 58 locations in North America. We have a healthy bolt-on pipeline and have already spent a further $320m in the third quarter. This investment takes advantage of the ongoing structural growth opportunity that we continue to see in the business as we seek to deliver on our strategic priorities to grow general tool and amplify specialty.”

“Our business has strong momentum in supportive markets. 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. Notwithstanding the volatility that continues to arise from Covid, the fundamentals of our business are strong, and we now expect full year performance to be ahead of our previous expectations."

Vertikal Comment

Once again Ashtead breaks its previous records, maintaining this sort of consistent growth is a challenge and its longer term success will depend on how well it is integrating the almost weekly bolt on acquisitions. So far, all of the signs are encouraging, and after all it is an 'old hand' at this now.

Another point to consider - although it has much less impact - is how the UK business manages when it concludes what has been a very lucrative deal with the UK government to support its Covid measures. The signs in the rest of its business are encouraging, but it seems to be quietly losing a little market share in some sectors.

There is no question about it, the growth opportunities for Ashtead in the USA are significantly better than in the less fragmented and seemingly more competitive UK market, where the companies making most of the running in the markets we cover tend to be small to medium sized business, serving regional markets, where it is more challenging for a national company to compete on a day to day basis. But is also has to watch out for new entrants such as Boels which is expanding its product base in the country.

Having said all that, Ashtead is going from strength to strength with a strong seasoned management team in place and the resources to keep on growing and to take advantage of the opportunities that are coming in 'thick and fast' at the moment. With a strong start to the second half the business looks to be on course for a fantastic year.