14.06.2023
Another strong year from Ashtead
Ashtead - owner of Sunbelt Rentals in the US, Canada and the UK - has reported its full year results for the 12 months to the end of April, with strong revenue growth and even higher growth in profit.
Total revenues were $9.67 billion, up 24 percent on the same period last year, with all of the growth coming from North America. The revenues were made up as follows:
Sunbelt USA: revenues increased more than 27% to $8.26 billion, while operating profit jumped almost 33 percent to $2.45 billion. Organic growth (same store and greenfield locations) was 18%, while acquisitions made since May 2021 - so a two year period - contributed five percent of rental revenue growth.
Sunbelt Canada: saw revenues grow by more than 32% to C$827 million, with an operating profit of C$ 167.4 million, an increase of almost 17%.
Sunbelt UK: saw revenues dip almost six percent to £684.8 million, while operating profit dropped 25% to £65 million. It is important however to understand that rental revenues increased six percent to £429 million, highlighting the high sales to the UK Department of Health.
came in 30 percent higher than last yeat at $2.25 billion.
Capital expenditure for the year was almost 58% higher at $3.77 billion, slightly ahead of plan as it took early delivery of around $100 million of equipment scheduled for the first fiscal quarter of this year. The average age of the group’s fleet has been reduced from 40 months last year to 35 months as of the end of April. Planned capital expenditure for this year is in the range of $3.9 - $4.3 billion.
The company also invested $1.15 billion in 50 bolt-on acquisitions during the year, down marginally on the previous year, which added 165 additional locations.
Net debt at the end of April increased more than 25 percent - or $1.8 billion - to $8.96 billion, due to the capital expenditure, acquisitions and share buyback programme.
Chief executive, Brendan Horgan said: “I am delighted to report another year of strong performance across all geographies, with rental revenue growth of 22% for the year at constant currency, delivering record revenue and profitability for the group. This market outperformance 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 strong. We invested $3.8bn in capital across existing locations and greenfields. This capital investment was funded from operating cash flow highlighting the cash generative nature of our business across the cycle. In addition, we spent $1.1 billion on 50 bolt-on acquisitions which, when combined with greenfield openings, added 165 locations in North America. This significant 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 with leverage towards the lower end of our target range.”
“We enter the final year of Sunbelt 3.0 with clear momentum in strong end markets, which are enhanced by the increasing number of mega projects and recent US legislative acts. We are in a position of strength, with the operational flexibility and financial capacity to capitalise on the opportunities arising from these strong markets and ongoing structural change. The Board looks to the future with confidence.”
Vertikal Comment
Commenting on Ashtead results is getting boring as every quarter and every year end its almost always the same story, another period with 20 to 25 percent growth, words like sparkling, dazzling and stellar spring to mind. So here we have another year of normal of growth for Ashtead and its Sunbelt operations.
The company has managed to continue the consistent upward trajectory over many years and through economic crisis, but also through chief executive and other senior executive handovers and changes. All of which indicates the exceptional work that former chief executive George Burnett did when he moved to the USA in early 2003 to try and rescue the company from almost certain meltdown following the discovery of ‘accounting irregularities’. Not to mention the current chief executive Brendan Horgan who Burnett promoted to chief operating officer of the US Sunbelt business in 2004.
In 2003 you could have bought an Ashtead share for 6.6 pence - less than a dime a share - if you were brave enough. Today those same shares hit £55.86 or to keep it in pence 5,586p ($71), although they have been as high as £65 (83)!
When a company’s growth record seems almost too good to be true, I usually smell a rat, but I gave up trying to sniff that one out several years ago. The company clearly has a strong culture and a winning formula, and long may it last.
So, the big question is, will Ashtead manage revenues of $12 billion this year? Or will this year come in slightly below the round number? The other big question is - will it catch up with United Rentals this year which has been making larger and larger acquisitions to maintain growth, while Ashtead does “bolt-ons”?
All in all, another stellar result from Ashtead.
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