The Ashstead Group, operating in the U.S. as Sunbelt Rentals, is reporting a 20 percent surge in revenue – and 21 percent in rental revenue – for fourth quarter 2018. The growth includes 62 new U.S. stores in the past year and also solid demand for Ashtead’s diggers and tools during clean-up after hurricanes Harvey, Irma and Maria
Rental revenues climbed to 3.4 billion pounds ($4.5 billion) between April 30, 2017, and April 30, 2018, with profits before taxes rising to $927 million pounds ($1.2 billion).
“I am delighted to be able to report another very successful year for Ashtead with rental revenue increasing 21 percent and underlying pre-tax profit increasing 21 percent (both at constant exchange rates,” says Chief Executive Geoff Drabble.
“Our end markets remain strong and are supported by the continued structural changes in our market as customers rely increasingly on rental while we leverage the benefits of scale. We continue to execute well on our strategy through a combination of organic growth and bolt-on acquisitions, investing £1.2bn by way of capital expenditure and £392m on bolt-on acquisitions in the year.”
Sunbelt U.S.’s revenue growth demonstrates the successful execution of the company’s long-term structural growth strategy. Sunbelt says it continues to capitalize on a combination of organic growth (same-store growth and greenfields) and bolt-ons as Sunbelt expands its geographic footprint and our specialty businesses.
Sunbelt plans to expand its footprint in North America by 50 percent in the next three years.
Adds 62 new stores in past year; half are specialty
Sunbelt added 62 new stores in the U.S. in the past year, about half of which were specialty locations.
Rental-only revenue growth was 20 percent in strong end markets. This growth was driven by increased fleet on rent, with yield flat year-over-year.
“Sunbelt has made a significant contribution to the clean-up efforts following hurricanes Harvey, Irma and Maria,” Drabble says.
“While it is difficult to assess the overall revenue impact of these efforts, we estimate that these events resulted in incremental total rental revenue in the year of c. $100m. Average physical utilisation for the year was 72 percent (2017: 71 percent). Sunbelt US’s total revenue, including new and used equipment, merchandise and consumable sales, increased 18 percent to $4,153m (2017: $3,525m).
Last Tuesday, after annual profits at the equipment rental company came in lower than expected, shares in Ashtead dropped.
Rental revenues climbed to £3.4bn in the year to 30 April, with underlying profits before tax rising to £927m. The company’s US division, Sunbelt, delivered its 20 percent increase in rental revenue. That soar was stoked by solid demand for Ashtead’s diggers and tools during the clean-up efforts after hurricanes Harvey, Irma and Maria.
The UK arm, A-Plant, generated rental revenue of £344m, up 13 percent on the previous year.
Drabble says: “We continue to execute well on our strategy through a combination of organic growth and bolt-on acquisitions, investing £1.2bn by way of capital expenditure and £392m on bolt-on acquisitions in the year.”
A-Plant generated rental only revenue of £344m, up 13 percent on the prior year (2017: £304m). This was driven by increased fleet on rent, partially offset by yield. The adverse yield reflects a combination of product mix and rate pressure in the competitive UK market. A-Plant’s total revenue increased 13% to £472m (2017: £418m).
The acquisition of CRS in August 2017 more than doubled the size of the Sunbelt Canada business, the company says. The underlying business performed strongly with rental revenue growth of 20 percent and, with the addition of CRS, Sunbelt Canada generated revenue of C$223m (2017: C$77m) in the year.
“We continue to focus on operational efficiency and improving margins,” the company says in a press release.
In Sunbelt US, 50 percent of revenue growth dropped through to EBITDA.
20-percent increase in operating profit
“The strength of our mature stores’ incremental margin is reflected in the fact that this was achieved despite the drag effect of greenfield openings and acquisitions. This resulted in an EBITDA margin of 50 percent (2017: 50 percent) and contributed to a 20 percent increase in operating profit to $1,293m (2017: $1,081m).”
A-Plant’s drop-through of 36 percent reflects its greater proportion of specialty businesses and ongoing integration of recent acquisitions. This contributed to an EBITDA margin of 35 percent (2017: 37 percent) and an operating profit of £70m (2017: £72m), representing a good performance in a competitive market, the company says.
Other highlights reported:
- Pre-tax profit of £927m (2017: £793m)
- Earnings per share, up 26 percent to 127.5p (2017: 104.3p)
- Post-tax profit of £969m (2017: £501m)
- £1.2bn of capital invested in the business (2017: £1.1bn)
- £386m of free cash flow generation (2017: £319m)
- £392m spent on bolt-on acquisitions (2017: £437m)
- Net debt to EBITDA leverage1 of 1.6 times (2017: 1.7 times)
- Proposed final dividend of 27.5p, making 33.0p for the full year, up 20 percent (2017: 27.5p)