10.12.2024

Sluggish first half for Ashtead

UK based Ashtead, owner of Sunbelt Rentals in the USA, Canada and the UK has reported its first half results to the end of October, showing a two percent improvement in revenues to $5.69 billion, which unusually came from all three operations. Pre-tax profit however slipped four percent to $1.25 billion, due to higher depreciation and interest costs.

First half by country
US Revenues: totalled $4.84 billion +2% with an Operating profit of $1.43 billion -3.4%
Canadian Revenues: were c$508 million +14% with an Operating profit of c$11.3 million +39%
UK Revenues: came in at £371.1 million +3.5% with an Operating profit of £36.5 million +12%

Capex & fleet age Capital expenditure so far this year has been $168 billion, 33.5 percent lower than for the same period last year, the average age of the fleet at the end of the period was 47 months. The company has also said that it will underspend on its original full year capital expenditure guidance at $2.5 - 2.7 billion. Substantially lower than in 2023.

Net Debt at the end of October was almost three percent higher at $10.95 billion.

Second quarter
Total revenues in the last three months were almost three percent higher at $2.94 billion, while pre-tax profits came in two percent lower at $652 million.

Second quarter by country
US Revenues: totalled $2.51 billion +1.2% with an Operating profit of $789.2 million -3.%
Canadian Revenues: were $190.1 million +11% with an Operating profit of $47.5 million +61%
UK Revenues: came in at $241.5 million +7.5% with an Operating profit of £24.7 million +18%

Chief executive, Brendan Horgan said: “In North America, the strength of mega projects and hurricane response efforts have more than offset the lower activity levels in local commercial construction markets. These local construction markets have been affected by the prolonged higher interest rate environment. However, underlying demand continues to be strong, and we expect this segment to recover as interest rates stabilise.”

“In the period we invested $1.7billion in capital across existing locations and green fields and $53m on two bolt-ons, adding a total of 47 new locations in North America. We now expect capital expenditure for the year to be $550 million lower than our previous guidance at the mid-point, as we flex our plans to reflect market conditions. Illustrating the cash generative nature of our model, this lower level of capital expenditure means our guidance for free cash flow increases to c.$1.4billion. Accordingly, with this strong free cash flow we are commencing a share buyback programme of up to $1.5billion over the next 18 months.”

“As a result of local commercial construction market dynamics in the US, we now guide group rental revenue growth for the full year in the range of three to five percent and hence, full year profit lower than our previous expectations. We remain in a position of strength, with the operational flexibility and financial capacity to capitalise on the ongoing structural growth opportunities we see for the business and enhance returns to shareholders as we follow our Sunbelt 4.0 plan, and the Board looks to the future with confidence.”

Vertikal Comment

We have become used to the Ashtead constantly posting strong revenue and profit growth, particularly in the USA. This year is not quite as sparkling, partly due to a substantial reduction in bolt on acquisitions for the period. However the top level trend remains positive, and the results are certainly not to be sneezed at.

It is very encouraging to see good positive growth in both the UK and Canada, rather than all the heavy lifting left to The US. It will, of course have to watch the fleet age with lower capital expenditure. It does make sense though to reduce the indebtedness given all the uncertainty in the global economic environment.

The company also announced to day that it is looking at moving its primary listing the United States, where values are typically higher. It would also reflect the fact that the US is and has been for many years, the major source of revenue and profit.
Interesting times.