Ashtead Group Plc (LON:AHT) has announced its unaudited results for the half year and second quarter ended 31 October 2020.
| Second quarter 2020 | Second quarter 2019 | Second quarter Growth1 | First half 2020 | First half 2019 | First half Growth1 | |
| £m | £m | % | £m | £m | % | |
| Underlying results2,3 | ||||||
| Rental revenue | 1,216 | 1,282 | -1% | 2,297 | 2,447 | -4% |
| EBITDA | 663 | 700 | -1% | 1,211 | 1,327 | -7% |
| Profit before taxation | 330 | 371 | -7% | 538 | 690 | -21% |
| Earnings per share | 54.3p | 60.5p | -6% | 89.0p | 111.8p | -19% |
| Statutory results | ||||||
| Revenue | 1,351 | 1,403 | – | 2,554 | 2,681 | -3% |
| Operating profit | 365 | 413 | -8% | 614 | 771 | -19% |
| Profit before taxation | 314 | 356 | -8% | 506 | 660 | -22% |
| Earnings per share | 51.6p | 57.9p | -7% | 83.6p | 107.0p | -20% |
Half-year highlights3
· Strong market outperformance during the COVID-19 pandemic
· Revenue down 3%1; rental revenue down 4%1
· Operating profit of £614m (2019: £771m)
· Pre-tax profit2 of £538m (2019: £690m)
· Earnings per share2 of 89.0p (2019: 111.8p)
· Record free cash flow of £822m (2019: £228m)
· Net debt to EBITDA leverage1,3 of 1.7 times (2019: 1.9 times)
· Interim dividend maintained at 7.15p per share (2019: 7.15p per share)
· Expect full-year results ahead of our previous expectations
1 Calculated at constant exchange rates applying current period exchange rates.
2 Underlying results are stated before intangible 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 in the Glossary on page 32.
Overview and markets
Our first half has been dominated by the impact of the COVID-19 pandemic. Our response to these unprecedented times has been impressive. Our robust model has enabled us to continue to serve all our customers in all our geographies. Throughout this period our focus has been on our people, our customers, our communities and our investors, in particular:
· ensuring the health and safety of our team members and customers;
· continuing to serve the needs of our customers and communities, including supporting government and private sector responses to the pandemic; and
· taking steps to optimise cash flow, reduce operating costs and strengthen further our liquidity position during a period of suppressed activity.
While trading volumes were lower than last year as a result of the pandemic, this has been mitigated, in part, by emergency response efforts throughout our business but particularly within our specialty businesses. Sunbelt Rentals is designated as an essential business in the US, UK and Canada and has supported government and private sector responses to the pandemic. This includes providing vital equipment and services to first responders, hospitals, alternative care facilities, testing sites, food services and telecommunications and utility companies, while continuing to service ongoing construction sites and increased facility maintenance and cleaning. In addition, we have responded to other emergencies across the US including wild fires in the west and an active storm season impacting a number of states.
As a result of these market dynamics, first half rental only revenue in the US was only 6% lower than last year. Within this overall performance, our general tool business was 8% lower than last year (second quarter 7% lower than prior year), while the specialty businesses demonstrated the benefit of a broader range of products and end markets with rental only revenue 12% higher than last year, including a storm impacted second quarter that was 18% higher than last year. This contributed to Group rental revenue in the first half 4% lower than the prior year at constant exchange rates. The degree of impact on volume has varied significantly across our geographical markets and is correlated to the severity of infection rates and associated market level restrictions. Activity levels have increased consistently through the period such that fleet on rent is now broadly in line with prior year in the US and Canada and higher in the UK.
The Group’s skilled workforce is instrumental to our long-term success and we made every effort to preserve our committed workforce for when markets recovered. Therefore, we have not made any team members redundant as a result of the impact of COVID-19 and have not sought assistance from any government support programmes such as the UK’s Coronavirus Job Retention Scheme or similar schemes in Canada.
Our performance, in a challenging environment, reflects the benefit of our long-term strategy which is focused on broadening and diversifying our end markets, while at the same time increasing our scale and market share. Our business model allows us to operate successfully in wide ranging market conditions as we allocate capital strategically, based on a consistently applied policy which takes account of the macroeconomic backdrop and our leverage.
Looking forward, we believe that the impact of the COVID-19 pandemic will continue to give rise to market uncertainties over the coming months. However, with strong positions in all our markets, supported by good quality fleets and a strong financial position, we believe that we are well positioned to respond to this market uncertainty and continue to support our customers and team members as well as taking advantage of opportunities to invest for the longer-term strength of the business.
Ashtead Group’s chief executive, Brendan Horgan, commented:
“I am delighted to report a strong quarter of market outperformance across the business contributing to rental revenue down only 4% in the half year at constant exchange rates. Our dedicated team members throughout North America and the United Kingdom have made this possible, once again delivering for all our stakeholders. I am extraordinarily proud of, and grateful for, their collective response and execution, all while keeping our leading value of safety at the forefront of what we do.
This performance illustrates the successful execution of our long-term strategy, which we embarked upon after the last recession, to broaden and diversify our end markets and strengthen our balance sheet. This positioned us to capitalise on our ever increasing scale, while remaining agile, particularly during these unprecedented times. The actions we took to optimise cash flow, reducing capital expenditure and operating costs, resulted in record free cash flow for the first half of £822m (2019: £228m) contributing to reduced leverage of 1.7 times compared to 1.9 times at year end, in the lower half of our target range.
Looking forward, the strength of our business model and balance sheet positions the Group well in markets that are likely to remain uncertain. Based on our half year performance and assuming no further significant adverse impact on our business resulting from the COVID-19 pandemic, we now expect full year results ahead of our previous expectations. The benefit we derive from the diversity of our products, services and end markets, coupled with ongoing structural change, enables the Board to look to the future with confidence.”
