Growth Continues at Slower Pace for Sunbelt Rentals in Fiscal Second Quarter
Ashtead plc, including Sunbelt Rentals in the United States, Canada and the United Kingdom, reported $2.941 billion in fiscal second quarter 2024 revenue, compared to $2.877 billion in the fiscal second quarter of 2023, a 2.2-percent increase. The quarter ended Oct. 31. For the first six months of the fiscal year, total revenue was $5.695 billion compared to $5.573 million for the same period a year ago, also a 2.2-percent increase.
Rental revenue fared better than the overall. For the fiscal second quarter, rental revenue totaled $2.725 billion, compared to $2.585 billion in the year-ago quarter, a 5.4-percent incline. For the first six months of the fiscal year, rental revenue totaled $5.265 billion compared to $4.960 billion a year ago, a 6.1-percent clip.
Total revenue in the U.S. for the first six months was $4.844 billion compared to $4.792 billion a year ago, a 1.1-percent increase. EBITDA rose from $2.331 billion to $2.402 billion.
Canadian revenue for the first half, in U.S. dollars, was $371.5 million compared to $331.5 million in the year-ago half, a 12-percent hike. In the U.K., the company posted $478.8 million in the first half, compared to $449.8 million a year ago, a 6.4-percent jump.
In the U.S., rental only revenue growth was driven by volume and rate improvement. Organic growth was 4 percent, while bolt-ons since May 1, 2023, contributed 2 percent of rental-only revenue growth. In this year’s fiscal first half, Sunbelt’s General Tool business grew 2 percent while its Specialty businesses jumped 15 percent. The company estimates that hurricane response efforts contributed $55 to $60 million to rental revenue in the period, helping to mitigate further weakening in the local commercial construction market.
Canada’s rental only revenue increased 21 percent, with volume growth and rate improvement. Activity in the Specialty Film & TV business has recovered, but below pre-strike levels.
The U.K. business generated rental only revenue of £248 million, up 3 percent on the prior year’s six-month total of £239 million.
Demand remains strong
“We launched our Sunbelt 4.0 strategic growth plan in April and the business is focused on executing against our five actionable components: Customer, Growth, Performance Sustainability and Investment,” said Ashtead chief executive Brendan Horgan. “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 stabilize. As expected, lower used equipment sales and a higher increase in depreciation and interest costs resulted in adjusted profit before taxation of $1,255 million.
“The investments in and expansion of the business over Sunbelt 3.0 and into Sunbelt 4.0 are enabling us to take advantage of the diverse opportunities that we see while maintaining discipline and balance sheet strength that affords us considerable flexibility and optionality. In the period we invested $1.7 billion in capital across existing locations and greenfields and $53 million 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 about $1.4 billion. Accordingly with this strong free cash flow and leverage towards the middle of our target range of 1.0 to 2.0 times net debt to EBITDA, we are commencing a share buyback program of up to $1.5 billion over the next 18 months.”
Horgan added that the company’s guidance for group rental revenue growth for the full fiscal year will be in the range of 3 to 5 percent, with full year profit lower than previous expectations.
“We remain in a position of strength, with the operational flexibility and financial capacity to capitalize on the ongoing structural growth opportunities we see for the business and enhance returns to shareholders,” Horgan added.
Through the end of October, Sunbelt said it has 1,220 rental stores in the United States, 140 in Canada and 188 in the U.K., for a total of 1,548.
During the first six months of the fiscal year, the company made two acquisitions for a total of $53.1 million. On May 21, Sunbelt U.S. acquired the business and assets of RentalMax, a general tool business with multiple locations in Illinois. Then on June 25, Sunbelt Canada acquired the business and assets of Wave Equipment Ltd., a general tool business operating in the province of Ontario.
Sunbelt Rentals is No. 2 on the RER 100.
