05.09.2023

Another record quarter for Ashtead

Ashtead - owner of Sunbelt Rentals in the USA, Canada and the UK - posted strong first quarter revenue growth, while profit growth lagged behind.

Group result
Total revenues for the three months to the end of July were 19 percent higher at $2.7 billion, while pre-tax profits improved 11 percent to $585 million, the slower growth due to higher debt levels and interest rate increases. Net debt at the end of July was $9.68 billion compared to $7.72 billion - up 25 percent on this time last year.

The revenues were made up as follows:
Sunbelt USA
Revenues: $2.31 billion +22%
Profit: $692 million +22%
13% of the revenue improvement was organic, while 3% came from acquisitions made since last July.

Sunbelt Canada
Revenues: c$213 million +21%
Profit: c$40 million +5%

Sunbelt UK
Revenues: £177 million (2%)
Profit: £15.8 million (38%)
Rental revenues improved 15%, while sales dropped, partly due to the ending of the Covid contracts with the UK Department of Health which closed during the first quarter 2022.

Capital expenditure
Capital expenditure for the quarter was $1.13 billion gross, up 45% and $899 million net of used equipment sales, an increase of more than 51 percent. As a result, the average age of the group's rental fleet at the end of July was 33 months compared to 40 months a year earlier.

Acquisitions
In the three months to the end of July, Ashtead made nine acquisitions - eight in the USA and one in Canada - which added a total of 40 new locations, they are as follows:
Sunbelt USA
17 May Beattie Construction Services in Michigan.
24 May Jones & Hollands in Michigan.
24 May West Coast Equipment in California.
14 June American Covers in Louisiana.
16 June AGF Machinery in Alabama.
23 June Miele Central Equipment in Pennsylvania.
28 June J & J Equipment Rentals in Virginia.
31 July Runyon Equipment Rental in Indiana.
Sunbelt Canada
1 June Loue Froid, in Quebec, Ontario, Alberta and British Columbia.
In August the company spent a further $41 million on bolt-on acquisitions.

Chief executive Brendan Horgan said: "The group delivered another record quarter with revenue up 19%, rental revenue growth of 14% and adjusted profit before tax increasing 11% both at constant currency. We are executing well against all actionable components of our strategic growth plan in end markets which remain robust.”

“In the quarter, we invested $1.1billion in capital across existing locations and greenfields and $361m on nine bolt-on acquisitions, adding a combined 40 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.”

“Our business has clear momentum with robust end markets in North America, which are 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 change. Despite UK market conditions softening, we expect overall performance to be in line with our expectations and the Board looks to the future with confidence."

Vertikal Comment

This is yet another strong quarter from Ashtead although the growing debt pile is clearly having an impact on profit growth. That said the company is well placed to service it and it is still below full year revenues which are surely set to go comfortably beyond $10 billion this year.

There is nothing much else to be said apart from yet another amazing result from Ashtead.