19.06.2024

Profit slip at Ashtead

Ashtead, owner of Sunbelt rentals in the USA, Canada and the UK has published its full year results for the 12 months to the end of April.

Group revenues increased12 percent to $10.86 billion, driven by growth in the US and UK slightly offset by lower sales in Canada. At the same time Pre-tax profits dipped two percent to $2.1 billion, due to higher costs and a substantial jump in interest cost and some bad debt write offs.
The results are broken down as follows

Full year by country
US Revenues: totalled $9.36 billion +13.9% with an Operating profit of $2.63 billion +7%
Canadian Revenues: were c$896.8 million +8.5% with an Operating profit of c$117.9 million -18%
UK Revenues: came in at £706 million +3.1% with an Operating profit of £57.9 million -11%

Capital expenditure & fleet age Capital expenditure for the year was $4.4 billion, with disposals of $900 million. The average age of the fleet at the end of the period was 45 months, compared with 50 months at the same point last year.

The capex was split as follows:
USA - $3.75 billion,
Canada c$405 million
UK £208 million.

Acquisitions: The company has also spent $905 million on 26 ‘bolt on' acquisitions, adding 113 new locations – see below - while it continues with its share buyback programme.

Net Debt at the end of January was 19 percent higher at $10.56 billion, due to high capex, acquisitions and share buybacks.

Fourth quarter
Total revenues in the last three months were seven percent higher at $2.6 billion, while pre-tax profits dropped 10 percent to $417 million.

Fourth quarter by country in dollars
US Revenues: totalled $2.2 billion +6% with an Operating profit of $551.7 million -4%
Canadian Revenues: were $163.1 million +1% with an Operating profit of $23.7 million -10%
UK Revenues: came in at $229.8 million +15% with an Operating profit of £20.9 million +74%

In the USA organic growth (same-store and greenfield startups) was eight percent, while acquisitions contributed four percent of rental only revenue growth.
In the UK organic growth added nine percent while acquisitions contributed two percent of the growth, while rental revenue growth has been driven by both rate and volume improvements.

Forecast for current year revenue growth
USA: +4 to 7%
Canada: 15 to 19%
UK: 3 to 6%
Total: 5 to 8%

Chief executive, Brendan Horgan said:
"The group's operating performance continues to be strong with record revenue and operating profit, up 12% and 5% respectively, both at constant currency. After a higher interest expense, reflecting the interest rate environment and increased average debt levels, adjusted profit before taxation was slightly lower than last year at $2,230m (2023: $2,273m). This 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.”

“During the year, we invested $4.3 billion in capital across existing locations and greenfields and $905m on 26 bolt-on acquisitions, adding a combined 113 locations in North America. This investment is enabling us to take advantage of the substantial structural growth opportunities that we see for the business, while maintaining a strong and flexible balance sheet.”

“Our end markets in North America remain robust with healthy demand, supported in the US by the increasing proportion of mega projects and the ongoing impact of the 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 changes, the Board looks to the future with confidence."

Acquisition list
May
Sunbelt USA acquired:
Beattie Construction Services in Michigan.
Jones & Hollands in Michigan.
West Coast Equipment in California.

June
Sunbelt Canada acquired:
Loue Froid in Quebec, Ontario, Alberta and British Columbia.
Sunbelt USA acquired:
American Covers in Louisiana.
AGF Machinery in Alabama.
Miele Central Equipment in Pennsylvania.
J & J Equipment Rentals in Virginia.

July
Sunbelt US acquired:
Runyon Equipment Rental in Indiana.

August
Sunbelt US acquired:
A-One Rental and Holmes A-One in Wyoming.
Caribbean Rentals & Sales and International Rental Services in the Bahamas.
Timp Rental Center in Utah.
Sunbelt Canada acquired:
Modu-Loc Maritimes Fence Rentals, and Modu-Loc Maritimes in Nova Scotia and New Brunswick.

September
Sunbelt US acquired:
2-C Equipment in Texas.
Casale Rent-All in New York.

October
Sunbelt Canada acquired: Able Rental & Supply in Ontario.

November
Sunbelt US acquired:
A to Z Equipment Rentals & Sales in Arizona.
Sunbelt UK acquired Acorn Film & Video
Sunbelt US acquired: Farmers Rental & Power Equipment in North Carolina.
Southwest Ohio Temporary Heat in Ohio.

December
Sunbelt Canada acquired: Nor-Val Rentals in British Columbia.
Sunbelt US acquired: Freedom Scaffold in Oklahoma.

January
Sunbelt US acquired: Falcon Shoring Company in Oregon.
Root Rents in Idaho.
ABC Equipment Rental in Maryland.
Bosk Equipment Rental in Michigan.

Vertikal Comment

This is yet another decent set of numbers from Ashtead, although the cost of carrying such a massive debt pile is beginning to impinge on profitability. Having said all the business is ploughing ahead like a well-oiled machine with plenty left to go after. The US economy in terms of infrastructure and commercial developments bodes well for business over the next few years. Add to this the ongoing consolidation of the US rental industry and the future looks bright, especially of interest rates begin to fall.

There is not too much else to say really – steady as she goes perhaps.