Ashtead Group plc (LON:AHT) has announced its audited results for the year and unaudited results for the fourth quarter ended 30 April 2023.
| Fourth quarter | Year | |||||
| 2023 | 2022 | Growth1 | 2023 | 2022 | Growth1 | |
| $m | $m | % | $m | $m | % | |
| Revenue | 2,444 | 2,078 | 19% | 9,667 | 7,962 | 24% |
| Rental revenue | 2,126 | 1,875 | 15% | 8,698 | 7,235 | 22% |
| EBITDA | 1,074 | 900 | 20% | 4,412 | 3,609 | 24% |
| Operating profit | 575 | 445 | 30% | 2,522 | 1,948 | 30% |
| Adjusted2 profit before taxation | 496 | 418 | 19% | 2,273 | 1,824 | 26% |
| Profit before taxation | 466 | 386 | 21% | 2,156 | 1,668 | 30% |
| Adjusted2 earnings per share | 84.3¢ | 72.0¢ | 18% | 388.5¢ | 307.1¢ | 27% |
| Earnings per share | 79.1¢ | 66.5¢ | 19% | 368.4¢ | 280.9¢ | 32% |
Full-year highlights3
· Record performance with ongoing momentum in robust end markets
· Group revenue up 24%1; US rental revenue up 24%
· Adjusted2 earnings per share increased 27% to 388.5¢ (2022: 307.1¢)
· 165 locations added in North America
· $3.8bn of capital invested in the business (2022: $2.4bn)
· $1.1bn spent on 50 bolt-on acquisitions (2022: $1.3bn)
· Net debt to EBITDA leverage1,3 of 1.6 times (2022: 1.5 times)
· Proposed final dividend of 85.0¢, making 100.0¢ for the full year (2022: 80.0¢)
| 1 | Calculated at constant exchange rates applying current period exchange rates. |
| 2 | Adjusted results are stated before exceptional items and amortisation. |
| 3 | Throughout this announcement we refer to a number of alternative performance measures which provide additional useful information. The directors have adopted these to provide additional information on the underlying trends, performance and position of the Group. The alternative performance measures are not defined by IFRS and therefore may not be directly comparable with other companies’ alternative performance measures but are defined and reconciled in the Glossary of Terms on page 39. |
Ashtead’s chief executive, Brendan Horgan, commented:
“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 $1.1bn on 50 bolt-on acquisitions which, when combined with greenfield openings, added 165 locations in North America. This significant investment is enabling us to take advantage of the substantial structural growth opportunities that we see for the business as we deliver our strategic priorities to grow our general tool and specialty businesses and advance our clusters. We are achieving all this while maintaining a strong and flexible balance sheet with leverage towards the lower end of our target range.
We enter the final year of Sunbelt 3.0 with clear momentum in strong end markets, which are enhanced by the increasing number of mega projects and recent US legislative acts. We are in a position of strength, with the operational flexibility and financial capacity to capitalise on the opportunities arising from these strong markets and ongoing structural change. The Board looks to the future with confidence.”
Brendan Horgan and Michael Pratt will hold a conference call for equity analysts to discuss the results and outlook at 09:30am on Tuesday, 13 June 2023 at Numis, 45 Gresham Street, London, EC2V 7EH. The meeting will be webcast live via the Company’s website at www.ashtead-group.com and a replay will be available via the website shortly after the meeting concludes. A copy of this announcement and the slide presentation used for the call are available for download on the Company’s website. The usual conference call for bondholders will begin at 3:00pm (10:00am EST).
Analysts and bondholders have already been invited to participate in the analyst call and conference call for bondholders but any eligible person not having received details should contact the Company’s PR advisers, H/Advisors Maitland (Audrey Da Costa) at +44 (0)20 7379 5151.
Trading results
| Revenue | EBITDA | Profit1 | ||||
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |
| UK in £m | 684.8 | 725.7 | 192.2 | 214.6 | 65.0 | 86.8 |
| Canada in C$m | 827.1 | 626.0 | 337.0 | 281.4 | 167.4 | 143.6 |
| US | 8,222.4 | 6,477.0 | 3,955.3 | 3,120.6 | 2,464.7 | 1,852.3 |
| UK in $m | 822.8 | 986.3 | 231.0 | 291.7 | 78.1 | 118.0 |
| Canada in $m | 622.1 | 499.0 | 253.5 | 224.3 | 125.9 | 114.4 |
| Group central costs | – | – | (28.0) | (27.2) | (29.0) | (28.3) |
| 9,667.3 | 7,962.3 | 4,411.8 | 3,609.4 | 2,639.7 | 2,056.4 | |
| Net financing costs | (366.2) | (232.6) | ||||
| Adjusted profit before tax | 2,273.5 | 1,823.8 | ||||
| Amortisation | (117.7) | (108.6) | ||||
| Exceptional items | – | (47.1) | ||||
| Profit before taxation | 2,155.8 | 1,668.1 | ||||
| Taxation charge | (538.1) | (417.0) | ||||
| Profit attributable to equity holders of the Company | 1,617.7 | 1,251.1 | ||||
| Margins | ||||||
| US | 48.1% | 48.2% | 30.0% | 28.6% | ||
| UK | 28.1% | 29.6% | 9.5% | 12.0% | ||
| Canada | 40.7% | 45.0% | 20.2% | 22.9% | ||
| Group | 45.6% | 45.3% | 27.3% | 25.8% | ||
1 Segment result presented is adjusted operating profit.
Group revenue increased 21% (24% at constant currency) to $9,667m during the year (2022: $7,962m). This revenue growth, combined with strong operational execution, resulted in adjusted profit before tax increasing 25% to $2,273m (2022: $1,824m).
In the US, rental only revenue of $5,879m (2022: $4,782m) was 23% higher than the prior year, representing continued market outperformance and demonstrating the benefits of our strategy of growing our Specialty businesses and broadening our end markets. Organic growth (same-store and greenfields) was 18%, while bolt-ons since 1 May 2021 contributed 5% of rental only revenue growth. In the year, our General Tool business grew 21%, while our Specialty businesses grew 29%. Rental only revenue growth has been driven by both volume and rate improvement in what continues to be a good rate environment. Rental revenue increased 24% to $7,503m (2022: $6,042m). US total revenue, including new and used equipment, merchandise and consumable sales, increased 27% to $8,222m (2022: $6,477m).
The UK business generated rental only revenue of £429m, up 6% on the prior year (2022: £403m). Excluding the impact of the work for the Department of Health, which ended during the first quarter of 2022/23, rental only revenue increased 22%. Bolt-ons since 1 May 2021 contributed 9% of this growth. Rental revenue increased 3% to £559m (2022: £544m) or 26% excluding the impact of the work for the Department of Health. Total revenue decreased 6% to £685m (2022: £726m) reflecting the high level of sales revenue associated with the work for the Department of Health, which overall accounted for only c. 4% of revenue in the year, compared with c. 30% of revenue last year.
Canada’s rental only revenue increased 20% to C$548m (2022: C$456m). Markets are robust and the major part of the Canadian business is growing in a similar manner to the US with strong volume growth and rate improvement, in a good rate environment. As highlighted previously, the lighting, grip and lens business was affected by market uncertainty, with the threat earlier this financial year of strikes by production staff in Vancouver, resulting in productions being delayed or moved elsewhere. Rental revenue increased 22% to C$696m (2022: C$569m), while Canada’s total revenue was C$827m (2022: C$626m).
In common with many businesses, we have faced inflationary pressures across most cost lines, but particularly in relation to labour, transportation and fuel. However, our strong performance on rate, combined with operating efficiencies and inherent economies of scale, has enabled us to navigate this inflationary environment, driving strong revenue and profit growth in the US. As expected, US rental revenue drop through to EBITDA has improved as we have progressed through the year, and in the fourth quarter was 54%, resulting in drop through of 50% for the year. This contributed to an EBITDA margin of 48.1% (2022: 48.2%) and a 33% increase in segment profit to $2,465m (2022: $1,852m) at a margin of 30.0% (2022: 28.6%).
The UK remains focused on delivering operational efficiency and improving returns in the business. However, this year has been one of transition as we redeployed assets dedicated to the Department of Health testing centres elsewhere in the business, resulting in lower fleet utilisation than last year. While we have managed to improve rental rates during the year, this has been insufficient to offset the inflation impact on the cost base. These factors, combined with a £4m charge to impair a convertible loan note due from Britishvolt, which entered administration in January, contributed to the UK generating an EBITDA margin of 28.1% (2022: 29.6%) and a segment profit of £65m (2022: £87m) at a margin of 9.5% (2022: 12.0%).
Our Canadian business continues to develop and enhance its performance as it invests to expand its network and broaden its markets. However, this ongoing investment, including greenfields, acquisitions and the infrastructure of the business, combined with drag from the lighting, grip and lens business, contributed to an EBITDA margin of 40.7% (2022: 45.0%) and a segment profit of C$167m (2022: C$144m) at a margin of 20.2% (2022: 22.9%).
Overall, Group adjusted operating profit increased to $2,640m (2022: $2,056m), up 29% at constant exchange rates. After increased net financing costs of $366m (2022: $233m), reflecting higher average debt levels and the higher interest rate environment, Group adjusted profit before tax was $2,273m (2022: $1,824m). After a tax charge of 25% (2022: 25%) of the adjusted pre-tax profit, adjusted earnings per share increased 27% at constant currency to 388.5ȼ (2022: 307.1ȼ).
Statutory profit before tax was $2,156m (2022: $1,668m). This is after amortisation of $118m (2022: $109m) and, in the prior year, exceptional interest costs of $47m. Included within the total tax charge is a tax credit of $30m (2022: $39m) which relates to the amortisation of intangibles and in the prior year exceptional items. As a result, basic earnings per share were 368.4¢ (2022: 280.9¢).
Capital expenditure and acquisitions
Capital expenditure for the year was $3,772m gross and $3,105m net of disposal proceeds (2022: $2,397m gross and $2,032m net). This was slightly ahead of our plans as we took delivery of c. $100m of planned first quarter 2023/24 deliveries early. Accordingly, we have reduced our plan for 2023/24 by $100m. As a result, the Group’s rental fleet at 30 April 2023 at cost was $16bn and our average fleet age is now 35 months (2022: 40 months).
We invested $1,146m (2022: $1,274m) including acquired borrowings in 50 bolt-on acquisitions during the year as we continue to both expand our footprint and diversify our end markets. Further details are provided in Note 16. Since the period end, we have invested a further $237m in bolt-ons.
Reflecting the early first quarter fleet deliveries, our plan for 2023/24 now is for gross capital expenditure to be in the range of $3.9 – 4.3bn.
Return on Investment
The Group return on investment was 19% (2022: 18%). In the US, return on investment (excluding goodwill and intangible assets) was 27% (2022: 25%), while in the UK it was 9% (2022: 14%). The decrease in the UK reflects reduced volumes, particularly service and sales, supporting the Department of Health as we have demobilised testing sites, and the lower profit margin. In Canada, return on investment (excluding goodwill and intangible assets) was 18% (2022: 20%). This reduction reflects predominantly the drag from the recent performance of our lighting, grip and lens business. Return on investment excludes the impact of IFRS 16.
Cash flow and net debt
The increased scale of the business enabled the Group to generate free cash flow of $531m (2022: $1,125m) during the year after capital expenditure payments of $3,530m (2022: $2,164m). However, as expected, debt increased as we continued to invest in bolt-ons and returned capital to shareholders. During the period, we spent $264m (£221m) on share buybacks (2022: $410m (£302m)) under the two-year buyback programme which concluded in April 2023.
In August 2022, the Group issued $750m 5.500% senior notes maturing in August 2032 and in January 2023, the Group issued $750m 5.550% senior notes maturing in May 2033. The net proceeds were used to reduce the amount outstanding under the ABL facility. This ensures the Group’s debt package continues to be well structured and flexible, enabling us to optimise the opportunity presented by end market conditions. The Group’s debt facilities are now committed for an average of six years at a weighted average cost of 5%.
Net debt at 30 April 2023 was $8,960m (2022: $7,160m). Excluding the effect of IFRS 16, net debt at 30 April 2023 was $6,588m (2022: $5,179m), while the ratio of net debt to EBITDA was 1.6 times (2022: 1.5 times) on a constant currency basis. The Group’s target range for net debt to EBITDA is 1.5 to 2.0 times, excluding the impact of IFRS 16 (1.9 to 2.4 times post IFRS 16). Including the effect of IFRS 16, the ratio of net debt to EBITDA was 2.0 times (2022: 2.0 times) on a constant currency basis.
At 30 April 2023, availability under the senior secured debt facility was $2,573m with an additional $4,968m of suppressed availability – substantially above the $450m level at which the Group’s entire debt package is covenant free.
Dividends
The Company has a progressive dividend policy, which considers both profitability and cash generation, and results in a dividend that is sustainable across the cycle. Our intention has always been to increase the dividend as profits increase and be able to maintain it when profits decline. In accordance with this policy, the Board is recommending a final dividend of 85.0¢ per share (2022: 67.5¢) making 100.0¢ for the year (2022: 80.0¢), an increase of 25%. If approved at the forthcoming Annual General Meeting, the final dividend will be paid on 12 September 2023 to shareholders on the register on 11 August 2023.
The dividend is declared in US dollars but will be paid in sterling unless shareholders elect to receive their dividend in US dollars. Those shareholders who wish to receive their dividend in US dollars and have not yet made an election may do so by contacting Equiniti on +44 (0) 371 384 2085. The last day for election for the proposed final dividend is 25 August 2023.
Capital allocation
The Group remains disciplined in its approach to allocation of capital with the overriding objective being to enhance shareholder value.
Our capital allocation framework remains unchanged and prioritises:
· organic fleet growth;
– same-stores;
– greenfields;
· bolt-on acquisitions; and
· a progressive dividend with consideration to both profitability and cash generation that is sustainable through the cycle.
Additionally, we consider further returns to shareholders. In this regard, we assess continuously our medium-term plans which take account of investment in the business, growth prospects, cash generation, net debt and leverage. Therefore, the amount allocated to buybacks is simply driven by that which is available after organic growth, bolt-on M&A and dividends, whilst allowing us to operate within our 1.5 to 2.0 times target range for net debt to EBITDA pre IFRS 16.
We spent $675m (£523m) under the two-year buyback programme which concluded in April 2023. We launched a new buyback programme in May 2023 of up to $500m over the year to April 2024.
Current trading and outlook
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.
| Guidance | |||
| Rental revenue1 | |||
| -US | 13 to 16% | ||
| -Canada2 | 15 to 20% | ||
| -UK | 10 to 13% | ||
| -Group | 13 to 16% | ||
| Capital expenditure (gross)3 | $3.9 – 4.3bn | ||
| Free cash flow3 | c. $300m |
1 Represents change in year-over-year rental revenue at constant exchange rates
2 Reflects impact of Writers Guild of America strike which commenced in May 2023
3 Stated at C$1=$0.75 and £1=$1.20
Directors’ responsibility statement on the annual report
The responsibility statement below has been prepared in connection with the Company’s Annual Report & Accounts for the year ended 30 April 2023. Certain parts thereof are not included in this announcement.
We confirm that to the best of our knowledge:
a) the consolidated financial statements, prepared in accordance with IFRS in conformity with the requirements of the Companies Act 2006, give a true and fair view of the assets, liabilities, financial position and profit of the Group;
b) the Strategic report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces; and
c) the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess Ashtead Group’s position, performance, business model and strategy.
By order of the Board
Eric Watkins
Company secretary
12 June 2023
