Sunbelt Rentals Posts Solid Results in U.S. and Canada in Fiscal Third Quarter
Sunbelt Rentals posted fiscal third quarter rental revenue of £1,121 million (about U.S. $1,452.7) compared to £1,049 million in the fiscal third quarter a year ago, a 6.9 percent increase. For the first nine months of the fiscal year 2020, Sunbelt U.S. posted $4,279.9 million in total revenue, compared to $3,759.1 million in the first nine months of fiscal year 2019, a 13.9-percent hike. EBITDA for the first nine months in the U.S. was $2,188.9 million compared to $1,876.5 million for the first nine months of fiscal 2019, a 16.6-percent leap.
Sunbelt Canada posted CDN $320.8 in revenue for the first nine months of the fiscal year, compared to $256.6 million a year ago, a 25-percent increase. EBITDA jumped from CDN $95.5 a year ago to CDN $131 million, a 37.2-percent hike.
A-Plant posted £365.1 million in revenue for the nine-month period compared to $360.4 million a year ago, a 1.3-percent increase.
“We have enjoyed another quarter of industry-leading rental revenue growth, resulting in an increase in rental revenue of 12 percent in the nine months and an increase in underlying earnings per share of 11 percent, excluding the impact of IFRS 16, both at constant exchange rates,” said Brendan Horgan, Ashtead’s chief executive Brendan Horgan. “Our North American end markets remain supportive and we continue to execute well on our strategy of organic growth supplemented by targeted bolt-on acquisitions in a moderating growth environment. This strategy reflects the structural growth opportunity we see in the business as we broaden our product offering, geographic reach and end markets.
“In contrast, the U.K. market remains challenging and we are therefore refocusing A-Plant on leveraging its platform to deliver long-term sustainable results, while generating strong cash flow. We invested £1.3 billion in capital and a further £407 million on bolt-on acquisitions in the period, which added 82 locations across the group. As discussed at the half year, we expect capital expenditure for the year to be at the lower end of our previous guidance (c. £1.4 billion). Looking forward to 2020-21, we anticipate gross capital expenditure of £1.1 to £1.3 billion, which should result in mid- to-high single digit revenue growth in the U.S.”
Horgan said the company would remain focused on responsible growth. “Our increasing scale and strong margins are delivering growing earnings and significant free cash flow,” he added. “This provides significant operational and financial flexibility, enabling us to invest in the long-term structural growth opportunity and enhance returns to shareholders, while maintaining leverage within our target range of 1.5 to 2.0 times net debt to EBITDA excluding IFRS 16. We spent £376 million under our share buyback program in the period, in line with our expectation to spend a minimum of £500 million on share buybacks in 2019-20. The program will be extended for the financial year 2020-21, with an anticipated spend of at least £500 million.
“In North America our business continues to perform well in supportive end markets, while in the U.K. we have taken decisive strategic action to refocus the business in the challenging market conditions. Although construction markets are moderating, we expect results to be in line with expectations and the board continues to look to the medium term with confidence.”
Sunbelt U.S. and Sunbelt Canada delivered 13 percent and 29 percent rental-only revenue growth respectively, while A-Plant's rental-only revenue decreased 1 percent, reflecting the more competitive landscape within a more uncertain U.K. market. The growth in Sunbelt Canada continues to reflect the impact of recent acquisitions, including William F. White acquired in December 2019.
Sunbelt U.S.' revenue growth continues to benefit from cyclical and structural trends and can be explained as follows:
$m
2019 rental only revenue
2,802
Organic (same-store and greenfields)
8%
219
Bolt-ons since 1 May 2018
5%
139
2020 rental only revenue
13%
3,160
Ancillary revenue
10%
760
2020 rental revenue
12%
3,920
Sales revenue
35%
360
2020 total revenue
14%
4,280
Sunbelt U.S.'s said its revenue growth demonstrates the successful execution of its long-term structural growth strategy. This growth is against a backdrop of a construction industry, just less than half of its end markets, which did not grow in 2019 and is forecast to be again flat in 2020.
“In this moderating growth environment, we continue to capitalize on the market opportunity through a combination of organic growth (same-store growth and greenfields) and bolt-ons as we expand our geographic footprint and our specialty businesses,” the company said in its statement. “We added 64 new stores in the U.S. in the nine months, approximately half of which were specialty locations.”
Rental-only revenue growth was 13 percent, driven by increased fleet on rent. This is a good performance after the last two years which were impacted favorably by significant hurricane activity, whereas the 2019 hurricane season was much quieter. Sunbelt U.S.'s total revenue, including new and used equipment, merchandise and consumable sales, increased 14 percent to $4,280 million compared to $3,759 million in the first nine months of fiscal 2019.
In the U.K., A-Plant generated rental-only revenue of £272 million, down 1 percent on the prior year (2019: £274m). This resulted from a 1 percent reduction in fleet on rent. The rate environment in the U.K. market remains competitive. A-Plant's total revenue increased 1 percent to £365 million (2019: £360m) reflecting higher used equipment sales as A-Plant de-fleeted, selling under-utilized and lower returning assets. This de-fleet program combined with targeted fleet investment has contributed to improved utilization.
Sunbelt Canada's rental-only revenue included the benefit of recent acquisitions. On an organic basis, rental-only revenue increased 11 percent. Sunbelt Canada's total revenue was CDN$321 million compared to CDN$257 million.
Sunbelt Canada is in a growth phase, the company said, as it invests to expand its network and develop the business.
