06.12.2023

Growth continues at Ashtead

UK based Ashtead , owner of Sunbelt Rentals in the USA, Canada and the UK has reported its preliminary first half results to the end of October, showing a 16 percent improvement in revenues to $5.57 billion, most of which came from the North American operations. Pre-tax profit however was just five percent higher at $1.25 billion, due to several factors.

First half by country
US Revenues: totalled $4.79 billion +17.5% with an Operating profit of $1.48 billion +15.5%
Canadian Revenues: were c$446.2 million +15% with an Operating profit of c$80.4 million -12%
UK Revenues: came in at £358.7 million -1% with an Operating profit of £32.7 million -32%

Capex & fleet age Capital expenditure so far this year has been $2.5 billion, almost 21 percent higher than the previous year, the average age of the fleet at the end of the period was 31 months, compared with 38 months, thanks to the selling off around $450 million worth of older machines over the six months. The company is maintaining its full year capex forecasts at $3.9 to $4.3 billion.

Net Debt at the end of October was almost 27 percent higher at $10.6 billion, due to spending $705 million in acquisitions, the previously mentioned capex and share buybacks.

Second Half
Total revenues in the last three months were 13 percent higher at $2.88 billion, while pre-tax profits came in just one percent higher at $666 million.

Second quarter by country
US Revenues: totalled $2.48 billion +14.2% with an Operating profit of $789.2 million +10.5%
Canadian Revenues: were $171.8 million +7.5% with an Operating profit of $29.6 million -7.4%
UK Revenues: came in at $224.8 million +8.5% with an Operating profit of £21 million -18%

First Half acquisitions
Sunbelt US made the following acquisitions
17 May Beattie Construction Services of Michigan.
24 May Jones & Hollands, in Michigan.
24 May West Coast Equipment, in California.
14 June American Covers Incorporated 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.
9 August A-One Rental and Holmes A-One in Wyoming.
25 August Caribbean Rentals & Sales and International Rental Services in the Bahamas.
30 August Timp Rental Center in Utah.
15 September 2-C Equipment in Texas.
22 September Casale Rent-All in New York.
Sunbelt Canada made the following acquisitions:
1 June Loue Froid, Quebec, Ontario, Alberta and British Columbia
30 August Modu-Loc Maritimes in Nova Scotia and New Brunswick.
25 October Able Rental & Supply in Ontario.

Chief executive, Brendan Horgan said: "The Group continues to perform strongly with revenue up 16% and rental revenue growth of 13%, both at constant currency. This strong performance 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 robust. In the period, we invested $2.5 billion in capital across existing locations and greenfields and $705 millon on 16 bolt-on acquisitions, adding a combined 74 locations in North America. This 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 in the middle of our target range.”

“On the 20th of November we issued a trading update lowering our revenue growth and earnings guidance for the full year, to reflect the lower level of emergency response activity related to natural disasters in North America in late Q2 and into Q3 and the longer than anticipated actors' and writers' strikes, impacting both the Film & TV business and adjacencies within our Canadian, US and UK businesses.”

“Notwithstanding these factors, our end markets in North America remain robust with healthy demand, 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. As we prepare our next strategic plan, Sunbelt 4.0, the board looks to the future with confidence."

Vertikal Comment

While these are decent numbers, things do appear to be slowing, as Ashtead had warned last month. In the second half the ending of the writers and actors strikes should allow this part of the business to bounce back, while some of the differences in North America are down to a strong boost to business last year of natural disasters which have been fewer and less damaging this year.

Canada has been badly affected by the strikes, so ought to show the strongest bounce back.

The UK numbers are better than they seem, in that rental revenues were higher in both the first half and second quarter, with improving rental rates, all of which is offset by lower sales, part due to the last few months of the deal with the UK health department.

The company is still in a strong position and likely to see growth continue at a solid pace. It has reduced its second half rental revenue forecasts for North America by two to three percent, while UK rental revenue growth remains at six to nine percent. The challenge of course is to maintain the same sort of percentage growth as the business grows larger. It’s one thing to increase revenues by 30 percent if they are $1 million, a great deal more challenging when they are $10 billion!

Excluding any major acquisitions in the second half, it looks as though Ashtead will just about break through the $11 billion level, achieving yet another record year - for both revenues and profits.

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