Last checked at 7 Mar 2023 07:00
7 March 2023
Unaudited results for the nine months and
third quarter ended 31 January 2023
Third quarter | Nine months | |||||
2023 | 2022 | Growth1 | 2023 | 2022 | Growth1 | |
$m | $m | % | $m | $m | % | |
Revenue | 2,427 | 2,000 | 23% | 7,224 | 5,884 | 25% |
Rental revenue | 2,189 | 1,815 | 22% | 6,572 | 5,360 | 25% |
EBITDA | 1,092 | 877 | 26% | 3,338 | 2,709 | 25% |
Operating profit | 609 | 449 | 36% | 1,947 | 1,503 | 31% |
Adjusted2 profit before taxation | 535 | 427 | 26% | 1,778 | 1,406 | 28% |
Profit before taxation | 505 | 393 | 29% | 1,690 | 1,282 | 33% |
Adjusted2 earnings per share | 91.9¢ | 72.7¢ | 27% | 304.2¢ | 235.1¢ | 30% |
Earnings per share | 86.9¢ | 66.9¢ | 30% | 289.3¢ | 214.4¢ | 36% |
Nine month highlights3
· | Strong third quarter performance with ongoing momentum in robust end markets |
· | Group revenue up 25%1; US rental revenue up 27% |
· | Adjusted2 earnings per share increased 30% to 304.2¢ (2022: 235.1¢) |
· | 120 locations added in North America |
· | $2.6bn of capital invested in the business (2022: $1.7bn) |
· | $970m spent on 38 bolt-on acquisitions (2022: $938m) |
· | Net debt to EBITDA leverage1,3 of 1.6 times (2022: 1.5 times) |
· | We now expect full year results ahead of our previous expectations |
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 35. |
Ashtead's chief executive, Brendan Horgan, commented:
"The Group delivered another strong quarter across all geographies, contributing to rental revenue growth of 25% for the nine months at constant currency. 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. In the period, we invested $2.6bn in capital across existing locations and greenfields and $970m on 38 bolt-on acquisitions, adding a combined 120 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 near the bottom of our target range.
We expect capital expenditure for the full year to be slightly ahead of our previous guidance at $3.5 - 3.7bn. Looking forward to 2023/24, our initial plans are for gross capital expenditure of $4.0 - 4.4bn, of which, US rental capital expenditure is $3.0 - 3.3bn. This should enable mid-teens rental revenue growth in the US.
Our business is performing well 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 operational flexibility to capitalise on the opportunities arising from these strong markets and the ongoing drivers of structural change, including supply chain constraints, inflation and labour scarcity. We now expect full year results ahead of our previous expectations and the Board looks to the future with confidence."
Contacts:
Will Shaw | Director of Investor Relations | +44 (0)20 7726 9700 | |
Neil Bennett | H/Advisors Maitland | +44 (0)20 7379 5151 | |
Sam Cartwright | H/Advisors Maitland | +44 (0)20 7379 5151 |
Brendan Horgan and Michael Pratt will hold a conference call for equity analysts to discuss the results and outlook at 10am on Tuesday, 7 March 2023. The call 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 call 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 3pm (10am 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.
Forward-looking statements
This announcement contains forward-looking statements. These have been made by the directors in good faith using information available up to the date on which they approved this report. The directors can give no assurance that these expectations will prove to be correct. Due to the inherent uncertainties, including both business and economic risk factors underlying such forward-looking statements, actual results may differ materially from those expressed or implied by these forward-looking statements. Except as required by law or regulation, the directors undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
Nine months' trading results
Revenue | EBITDA | Profit1 | ||||
2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |
UK in £m | 521.7 | 547.1 | 150.0 | 164.9 | 55.3 | 71.6 |
Canada in C$m | 608.9 | 463.1 | 254.5 | 211.8 | 131.5 | 110.4 |
US | 6,139.3 | 4,763.6 | 2,986.8 | 2,334.3 | 1,890.3 | 1,413.9 |
UK in $m | 623.4 | 750.3 | 179.2 | 226.2 | 66.1 | 98.2 |
Canada in $m | 460.9 | 370.2 | 192.7 | 169.3 | 99.5 | 88.2 |
Group central costs | - | - | (20.4) | (20.8) | (21.1) | (21.6) |
7,223.6 | 5,884.1 | 3,338.3 | 2,709.0 | 2,034.8 | 1,578.7 | |
Net financing costs | (257.2) | (173.0) | ||||
Adjusted profit before tax | 1,777.6 | 1,405.7 | ||||
Amortisation | (87.4) | (76.2) | ||||
Exceptional items | - | (47.1) | ||||
Profit before taxation | 1,690.2 | 1,282.4 | ||||
Taxation charge | (418.6) | (326.3) | ||||
Profit attributable to equity holders of the Company | 1,271.6 | 956.1 | ||||
Margins |
|
|
|
|
|
|
US |
|
| 48.7% | 49.0% | 30.8% | 29.7% |
UK |
|
| 28.7% | 30.1% | 10.6% | 13.1% |
Canada |
|
| 41.8% | 45.7% | 21.6% | 23.8% |
Group |
|
| 46.2% | 46.0% | 28.2% | 26.8% |
1 Segment result presented is adjusted operating profit.
Group revenue increased 23% (25% at constant currency) to $7,224m in the nine months (2022: $5,884m). This revenue growth, combined with strong operational execution, resulted in adjusted profit before tax increasing 26% to $1,778m (2022: $1,406m).
In the US, rental only revenue of $4,441m (2022: $3,549m) was 25% 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 19%, while bolt-ons since 1 May 2021 contributed 6% of rental only revenue growth. In the nine months, our general tool business grew 22%, while our specialty businesses grew 33%. 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 27% to $5,669m (2022: $4,468m). US total revenue, including new and used equipment, merchandise and consumable sales, increased 29% to $6,139m (2022: $4,764m).
The UK business generated rental only revenue of £321m, up 7% on the prior year (2022: £301m). Following the cessation of free mass COVID testing in April 2022, revenue from the Department of Health ended during the first quarter, and in the nine months was significantly lower than last year. Excluding the impact of the work for the Department of Health, rental only revenue increased 22%. Rental revenue increased 4% to £424m (2022: £406m). Total revenue decreased 5% to £522m (2022: £547m) reflecting the high level of sales revenue associated with the work for the Department of Health, which accounted for c. 6% of revenue in the nine months, compared with c. 32% of revenue a year ago.
Canada's rental only revenue increased 23% to C$417m (2022: C$340m). 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 25% to C$524m (2022: C$420m), while Canada's total revenue was C$609m (2022: C$463m).
In common with many businesses, we face inflationary pressures across most cost lines, but particularly in relation to labour, transportation and fuel. However, our strong performance on rate, combined with our scale, has enabled us to navigate this inflationary environment, driving strong revenue and profit growth. As expected, US rental revenue drop through to EBITDA has improved as we have progressed through the year, and in the third quarter it was 54%, resulting in drop through of 49% for the nine months. This contributed to an EBITDA margin of 48.7% (2022: 49.0%) and a 34% increase in segment profit to $1,890m (2022: $1,414m) at a margin of 30.8% (2022: 29.7%).
The UK business remains focused on delivering operational efficiency and improving returns in the business. However, this year is a transition year as we redeploy assets dedicated to the Department of Health testing centres elsewhere in the business. We took a charge of £4m in the third quarter to impair a convertible loan note due from Britishvolt, which entered administration in January. As a result, the UK generated an EBITDA margin of 28.7% (2022: 30.1%) and a segment profit of £55m (2022: £72m) at a margin of 10.6% (2022: 13.1%).
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 infrastructure, combined with drag from the lighting, grip and lens business contributed to a 41.8% EBITDA margin (2022: 45.7%) and a segment profit of C$131m (2022: C$110m) at a margin of 21.6% (2022: 23.8%).
Overall, Group adjusted operating profit increased to $2,035m (2022: $1,579m), up 30% at constant exchange rates. After increased net financing costs of $257m (2022: $173m), reflecting higher average debt levels and the higher interest rate environment, Group adjusted profit before tax was $1,778m (2022: $1,406m). After a tax charge of 25% (2022: 25%) of the adjusted pre-tax profit, adjusted earnings per share increased 30% at constant currency to 304.2ȼ (2022: 235.1ȼ).
Statutory profit before tax was $1,690m (2022: $1,282m). This is after amortisation of $87m (2022: $76m) and, in the prior year, exceptional interest costs of $47m. Included within the total tax charge is a tax credit of $22m (2022: $31m) which relates to the amortisation of intangibles and exceptional items. As a result, basic earnings per share were 289.3¢ (2022: 214.4¢).
Capital expenditure and acquisitions
Capital expenditure for the nine months was $2,618m gross and $2,194m net of disposal proceeds (2022: $1,708m gross and $1,469m net). As a result, the Group's rental fleet at 31 January 2023 at cost was $15.3bn and our average fleet age is now 37 months (2022: 40 months).
We continue to navigate supply chain challenges and, for the full year, now expect gross capital expenditure to be slightly ahead of our previous guidance at $3.5 - 3.7bn. For 2023/24, our initial plans are for gross capital expenditure to be in the range of $4.0 - 4.4bn, which should enable mid-teens revenue growth next year in the US.
We invested $970m (2022: $938m) including acquired borrowings in 38 bolt-on acquisitions during the nine months 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 $120m in bolt-ons.
Return on Investment
In the US, return on investment (excluding goodwill and intangible assets) for the 12 months to 31 January 2023 was 27% (2022: 24%). In the UK, return on investment (excluding goodwill and intangible assets) was 10% (2022: 15%). The decrease reflects reduced volumes, particularly service and sales, supporting the Department of Health as we have demobilised testing sites, and the lower margin. In Canada, return on investment (excluding goodwill and intangible assets) was 19% (2022: 22%). This reduction reflects predominantly the drag from the recent performance of our lighting, grip and lens business. For the Group as a whole, return on investment (including goodwill and intangible assets) was 19% (2022: 18%). Return on investment excludes the impact of IFRS 16.
Cash flow and net debt
The Group generated free cash flow of $295m (2022: $738m) during the period after capital expenditure payments of $2,509m (2022: $1,591m). However, as expected, debt increased as we continued to invest in bolt-ons and returned capital to shareholders. During the period, we spent $243m (£204m) on share buybacks (2022: $307m (£224m)) under the two-year buyback programme launched in May 2021 of up to £1bn.
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 31 January 2023 was $8,819m (2022: $6,894m). Excluding the effect of IFRS 16, net debt at 31 January 2023 was $6,536m (2022: $5,031m), 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 2.1 times (2022: 2.0 times) on a constant currency basis.
At 31 January 2023, availability under the senior secured debt facility was $2,642m with an additional $4,567m of suppressed availability - substantially above the $450m level at which the Group's entire debt package is covenant free.
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.
Current trading and outlook
Our business is performing well 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 to capitalise on the opportunities arising from these strong markets and ongoing drivers of structural change, including supply chain constraints, inflation and labour scarcity. We now expect full year results ahead of our previous expectations and the Board looks to the future with confidence.
Previous guidance | Current guidance | ||
Rental revenue1 | |||
- US | 20 to 23% | 23 to 25% | |
- Canada | 22 to 25% | 22 to 25% | |
- UK2 | Flat | 0 to 3% | |
- Group | 18 to 21% | 21 to 23% | |
Capital expenditure (gross)3 | $3.3 - 3.6bn | $3.5 - 3.7bn | |
Free cash flow3 | c. $300m | c. $300m |
1 Represents change in year-over-year rental revenue at constant exchange rates
2 UK total revenue down c. 6% due to NHS impact
3 Stated at C$1=$0.75 and £1=$1.20
CONSOLIDATED INCOME STATEMENT FOR THE THREE MONTHS ENDED 31 JANUARY 2023
2023 | 2022 | |||||
Before | Before | |||||
amortisation | Amortisation | Total | amortisation | Amortisation | Total | |
$m | $m | $m | $m | $m | $m | |
Third quarter - unaudited | ||||||
Revenue | ||||||
Rental revenue | 2,189.0 | - | 2,189.0 | 1,814.7 | - | 1,814.7 |
Sale of new equipment, | ||||||
merchandise and consumables | 81.3 | - | 81.3 | 91.8 | - | 91.8 |
Sale of used rental equipment | 157.1 | - | 157.1 | 93.6 | - | 93.6 |
2,427.4 | - | 2,427.4 | 2,000.1 | - | 2,000.1 | |
Operating costs | ||||||
Staff costs | (567.4) | - | (567.4) | (475.2) | - | (475.2) |
Other operating costs | (655.6) | - | (655.6) | (580.3) | - | (580.3) |
Used rental equipment sold | (112.1) | - | (112.1) | (67.7) | - | (67.7) |
(1,335.1) | - | (1,335.1) | (1,123.2) | - | (1,123.2) | |
EBITDA* | 1,092.3 | - | 1,092.3 | 876.9 | - | 876.9 |
Depreciation | (454.2) | - | (454.2) | (393.3) | - | (393.3) |
Amortisation of intangibles | - | (29.6) | (29.6) | - | (34.5) | (34.5) |
Operating profit | 638.1 | (29.6) | 608.5 | 483.6 | (34.5) | 449.1 |
Interest income | 0.2 | - | 0.2 | - | - | - |
Interest expense | (103.6) | - | (103.6) | (56.5) | - | (56.5) |
Profit on ordinary activities | ||||||
before taxation | 534.7 | (29.6) | 505.1 | 427.1 | (34.5) | 392.6 |
Taxation | (132.1) | 7.4 | (124.7) | (103.8) | 8.6 | (95.2) |
Profit attributable to equity | ||||||
holders of the Company | 402.6 | (22.2) | 380.4 | 323.3 | (25.9) | 297.4 |
Basic earnings per share | 91.9¢ | (5.0¢) | 86.9¢ | 72.7¢ | (5.8¢) | 66.9¢ |
Diluted earnings per share | 91.3¢ | (5.0¢) | 86.3¢ | 72.4¢ | (5.8¢) | 66.6¢ |
* EBITDA is presented here as an alternative performance measure as it is commonly used by investors and lenders.
All revenue and profit is generated from continuing operations.
Details of principal risks and uncertainties are given in the Review of Third Quarter, Balance Sheet and Cash Flow accompanying these condensed consolidated interim financial statements.
CONSOLIDATED INCOME STATEMENT FOR THE NINE MONTHS ENDED 31 JANUARY 2023
2023 | 2022 | |||||
Before | ||||||
exceptional | Exceptional | |||||
Before | items and | items and | ||||
amortisation | Amortisation | Total | amortisation | amortisation | Total | |
$m | $m | $m | $m | $m | $m | |
Nine months - unaudited | ||||||
Revenue | ||||||
Rental revenue | 6,572.1 | - | 6,572.1 | 5,359.9 | - | 5,359.9 |
Sale of new equipment, | ||||||
merchandise and consumables | 253.8 | - | 253.8 | 300.7 | - | 300.7 |
Sale of used rental equipment | 397.7 | - | 397.7 | 223.5 | - | 223.5 |
7,223.6 | - | 7,223.6 | 5,884.1 | - | 5,884.1 | |
Operating costs | ||||||
Staff costs | (1,646.1) | - | (1,646.1) | (1,340.0) | - | (1,340.0) |
Other operating costs | (1,950.0) | - | (1,950.0) | (1,657.2) | - | (1,657.2) |
Used rental equipment sold | (289.2) | - | (289.2) | (177.9) | - | (177.9) |
(3,885.3) | - | (3,885.3) | (3,175.1) | - | (3,175.1) | |
EBITDA* | 3,338.3 | - | 3,338.3 | 2,709.0 | - | 2,709.0 |
Depreciation | (1,303.5) | - | (1,303.5) | (1,130.3) | - | (1,130.3) |
Amortisation of intangibles | - | (87.4) | (87.4) | - | (76.2) | (76.2) |
Operating profit | 2,034.8 | (87.4) | 1,947.4 | 1,578.7 | (76.2) | 1,502.5 |
Interest income | 1.8 | - | 1.8 | 0.1 | - | 0.1 |
Interest expense | (259.0) | - | (259.0) | (173.1) | (47.1) | (220.2) |
Profit on ordinary activities | ||||||
before taxation | 1,777.6 | (87.4) | 1,690.2 | 1,405.7 | (123.3) | 1,282.4 |
Taxation | (440.6) | 22.0 | (418.6) | (357.2) | 30.9 | (326.3) |
Profit attributable to equity | ||||||
holders of the Company | 1,337.0 | (65.4) | 1,271.6 | 1,048.5 | (92.4) | 956.1 |
Basic earnings per share | 304.2¢ | (14.9¢) | 289.3¢ | 235.1¢ | (20.7¢) | 214.4¢ |
Diluted earnings per share | 302.2¢ | (14.8¢) | 287.4¢ | 234.2¢ | (20.6¢) | 213.6¢ |
* EBITDA is presented here as an alternative performance measure as it is commonly used by investors and lenders.
All revenue and profit is generated from continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE NINE MONTHS ENDED 31 JANUARY 2023
| Unaudited | |||
| Three months to | Nine months to | ||
| 31 January | 31 January | ||
| 2023 | 2022 | 2023 | 2022 |
$m | $m | $m | $m | |
Profit attributable to equity holders of the Company for the period | 380.4 | 297.4 | 1,271.6 | 956.1 |
Items that will not be reclassified to profit or loss: | ||||
Movements on equity instruments held at fair value | (36.8) | - | (36.8) | - |
(36.8) | - | (36.8) | - | |
Items that may be reclassified subsequently to profit or loss: | ||||
Foreign currency translation differences | 60.0 | (25.7) | (29.9) | (35.3) |
Loss on cash flow hedge | (2.6) | - | (3.2) | - |
57.4 | (25.7) | (33.1) | (35.3) | |
Total other comprehensive income for the period | 20.6 | (25.7) | (69.9) | (35.3) |
| ||||
Total comprehensive income for the period | 401.0 | 271.7 | 1,201.7 | 920.8 |
CONSOLIDATED BALANCE SHEET AT 31 JANUARY 2023
Unaudited 31 January | Audited 30 April | ||
2023 | 2022 | 2022 | |
$m | $m | $m | |
Current assets | |||
Inventories | 223.9 | 147.6 | 168.5 |
Trade and other receivables | 1,749.5 | 1,447.0 | 1,390.4 |
Current tax asset | 12.0 | 51.0 | 7.2 |
Cash and cash equivalents | 36.6 | 34.6 | 15.3 |
2,022.0 | 1,680.2 | 1,581.4 | |
| |||
Non-current assets | |||
Property, plant and equipment | |||
- rental equipment | 9,051.7 | 7,601.9 | 7,814.3 |
- other assets | 1,308.0 | 1,005.7 | 1,078.3 |
10,359.7 | 8,607.6 | 8,892.6 | |
Right-of-use assets | 2,128.8 | 1,761.5 | 1,864.8 |
Goodwill | 2,791.1 | 2,161.5 | 2,300.0 |
Other intangible assets | 542.4 | 443.2 | 475.3 |
Other non-current assets | 184.5 | 122.0 | 157.5 |
Net defined benefit pension plan asset | 20.3 | 7.9 | 18.5 |
16,026.8 | 13,103.7 | 13,708.7 | |
Total assets | 18,048.8 | 14,783.9 | 15,290.1 |
Current liabilities | |||
Trade and other payables | 1,333.0 | 1,060.5 | 1,197.1 |
Current tax liability | 26.9 | 4.8 | 20.2 |
Lease liabilities | 223.0 | 182.2 | 188.6 |
Provisions | 74.9 | 51.7 | 68.8 |
1,657.8 | 1,299.2 | 1,474.7 | |
| |||
Non-current liabilities | |||
Lease liabilities | 2,077.3 | 1,693.9 | 1,806.6 |
Long-term borrowings | 6,555.0 | 5,052.0 | 5,180.1 |
Provisions | 75.2 | 68.9 | 68.0 |
Deferred tax liabilities | 1,918.7 | 1,700.1 | 1,695.4 |
Other non-current liabilities | 35.5 | 33.5 | 31.6 |
10,661.7 | 8,548.4 | 8,781.7 | |
Total liabilities | 12,319.5 | 9,847.6 | 10,256.4 |
Equity | |||
Share capital | 81.8 | 81.8 | 81.8 |
Share premium account | 6.5 | 6.5 | 6.5 |
Capital redemption reserve | 20.0 | 20.0 | 20.0 |
Own shares held by the Company | (719.7) | (376.8) | (480.1) |
Own shares held by the ESOT | (38.8) | (44.9) | (44.9) |
Cumulative foreign exchange translation differences | (256.6) | (169.3) | (226.7) |
Retained reserves | 6,636.1 | 5,419.0 | 5,677.1 |
Equity attributable to equity holders of the Company | 5,729.3 | 4,936.3 | 5,033.7 |
| |||
Total liabilities and equity | 18,048.8 | 14,783.9 | 15,290.1 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE NINE MONTHS ENDED 31 JANUARY 2023
Own | Cumulative | |||||||
Own | shares | foreign | ||||||
Share | Capital | shares | held | exchange | ||||
Share | premium | redemption | held by the | through | translation | Retained | ||
capital | account | reserve | Company | the ESOT | differences | reserves | Total | |
$m | $m | $m | $m | $m | $m | $m | $m | |
Unaudited | ||||||||
At 1 May 2021 | 81.8 | 6.5 | 20.0 | (66.2) | (36.8) | (134.0) | 4,654.2 | 4,525.5 |
Profit for the period | - | - | - | - | - | - | 956.1 | 956.1 |
Other comprehensive income: | ||||||||
Foreign currency translation | ||||||||
differences | - | - | - | - | - | (35.3) | - | (35.3) |
Total comprehensive income | ||||||||
for the period | - | - | - | - | - | (35.3) | 956.1 | 920.8 |
Dividends paid | - | - | - | - | - | - | (215.3) | (215.3) |
Own shares purchased by | ||||||||
the ESOT | - | - | - | - | (23.8) | - | - | (23.8) |
Own shares purchased by the Company |
- |
- |
- |
(310.6) |
- |
- |
- |
(310.6) |
Share-based payments | - | - | - | - | 15.7 | - | 20.2 | 35.9 |
Tax on share-based payments | - | - | - | - | - | - | 3.8 | 3.8 |
At 31 January 2022 | 81.8 | 6.5 | 20.0 | (376.8) | (44.9) | (169.3) | 5,419.0 | 4,936.3 |
Profit for the period | - | - | - | - | - | - | 295.0 | 295.0 |
Other comprehensive income: | ||||||||
Foreign currency translation | ||||||||
differences | - | - | - | - | - | (57.4) | - | (57.4) |
Remeasurement of the defined benefit pension plan | - | - | - | - | - | - | 11.4 | 11.4 |
Tax on defined benefit | ||||||||
pension plan | - | - | - | - | - | - | (2.7) | (2.7) |
Total comprehensive income | ||||||||
for the period | - | - | - | - | - | (57.4) | 303.7 | 246.3 |
Dividends paid | - | - | - | - | - | - | (56.2) | (56.2) |
Own shares purchased by the Company |
- |
- |
- |
(103.3) |
- |
- |
- |
(103.3) |
Share-based payments | - | - | - | - | - | - | 12.2 | 12.2 |
Tax on share-based payments | - | - | - | - | - | - | (1.6) | (1.6) |
At 30 April 2022 | 81.8 | 6.5 | 20.0 | (480.1) | (44.9) | (226.7) | 5,677.1 | 5,033.7 |
Profit for the period | - | - | - | - | - | - | 1,271.6 | 1,271.6 |
Other comprehensive income: | ||||||||
Movements on equity | ||||||||
instruments held at fair value | - | - | - | - | - | - | (36.8) | (36.8) |
Foreign currency translation | ||||||||
differences | - | - | - | - | - | (29.9) | - | (29.9) |
Loss on cash flow hedge | - | - | - | - | - | - | (3.2) | (3.2) |
Total comprehensive income | ||||||||
for the period | - | - | - | - | - | (29.9) | 1,231.6 | 1,201.7 |
Dividends paid | - | - | - | - | - | - | (291.8) | (291.8) |
Own shares purchased by | ||||||||
the ESOT | - | - | - | - | (12.5) | - | - | (12.5) |
Own shares purchased by the Company |
- |
- |
- |
(239.6) |
- |
- |
- |
(239.6) |
Share-based payments | - | - | - | - | 18.6 | - | 14.7 | 33.3 |
Tax on share-based payments | - | - | - | - | - | - | 4.5 | 4.5 |
At 31 January 2023 | 81.8 | 6.5 | 20.0 | (719.7) | (38.8) | (256.6) | 6,636.1 | 5,729.3 |
CONSOLIDATED CASH FLOW STATEMENT FOR THE NINE MONTHS ENDED 31 JANUARY 2023
Unaudited | ||
2023 | 2022 | |
$m | $m | |
Cash flows from operating activities | ||
Cash generated from operations before | ||
changes in rental equipment | 2,897.0 | 2,481.3 |
Payments for rental property, plant and equipment | (2,129.1) | (1,324.9) |
Proceeds from disposal of rental property, | ||
plant and equipment | 335.1 | 205.1 |
Cash generated from operations | 1,103.0 | 1,361.5 |
Financing costs paid (net) | (233.1) | (172.9) |
Exceptional financing costs paid | - | (36.0) |
Tax paid (net) | (221.2) | (165.7) |
Net cash generated from operating activities | 648.7 | 986.9 |
Cash flows from investing activities | ||
Acquisition of businesses | (932.7) | (947.6) |
Financial asset investments | (42.4) | (20.0) |
Payments for non-rental property, plant and equipment | (379.6) | (265.8) |
Proceeds from disposal of non-rental | ||
property, plant and equipment | 25.7 | 16.8 |
Net cash used in investing activities | (1,329.0) | (1,216.6) |
Cash flows from financing activities | ||
Drawdown of loans | 3,200.1 | 2,794.2 |
Redemption of loans | (1,868.3) | (1,932.7) |
Repayment of principal under lease liabilities | (81.3) | (79.5) |
Dividends paid | (292.9) | (213.2) |
Purchase of own shares by the ESOT | (12.5) | (23.8) |
Purchase of own shares by the Company | (243.0) | (306.9) |
Net cash generated from financing activities | 702.1 | 238.1 |
Increase in cash and cash equivalents | 21.8 | 8.4 |
Opening cash and cash equivalents | 15.3 | 26.6 |
Effect of exchange rate differences | (0.5) | (0.4) |
Closing cash and cash equivalents | 36.6 | 34.6 |
| ||
Reconciliation of net cash flows to net debt | ||
Increase in cash and | ||
cash equivalents in the period | (21.8) | (8.4) |
Increase in debt through cash flow | 1,250.5 | 782.0 |
Change in net debt from cash flows | 1,228.7 | 773.6 |
Exchange differences | (28.7) | (30.9) |
Debt acquired | 180.5 | 81.0 |
Deferred costs of debt raising | 2.8 | 16.5 |
New lease liabilities | 275.4 | 252.6 |
Increase in net debt in the period | 1,658.7 | 1,092.8 |
Net debt at 1 May | 7,160.0 | 5,800.7 |
Net debt at 31 January | 8,818.7 | 6,893.5 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. General information
Ashtead Group plc ('the Company') is a company incorporated and domiciled in England and Wales and listed on the London Stock Exchange. The condensed consolidated interim financial statements as at, and for the nine months ended 31 January 2023, comprise the Company and its subsidiaries ('the Group').
The condensed consolidated interim financial statements for the nine months ended 31 January 2023 were approved by the directors on 6 March 2023.
The condensed consolidated interim financial statements do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The statutory accounts for the year ended 30 April 2022 were approved by the directors on 13 June 2022 and have been mailed to shareholders and filed with the Registrar of Companies. The auditor's report on those accounts was unqualified, did not include a reference to any matter by way of emphasis and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.
2. Basis of preparation
The annual financial statements of the Group are prepared in accordance with United Kingdom adopted International Financial Reporting Standards ('IFRS').
The condensed consolidated interim financial statements for the nine months ended 31 January 2023 have been prepared in accordance with IAS 34, Interim Financial Reporting, and the accounting policies set out in the Group's Annual Report & Accounts for the year ended 30 April 2022.
The directors have adopted various alternative performance measures to provide additional useful 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 within the Glossary of Terms on page 35.
The condensed consolidated interim financial statements have been prepared on the going concern basis. The Group's internal budgets and forecasts of future performance, available financing facilities and facility headroom (see Note 13), provide a reasonable expectation that the Group has adequate resources to continue in operation for the foreseeable future and consequently the going concern basis continues to be appropriate in preparing the financial statements.
In preparing the financial statements, the exchange rates used in respect of the pound sterling (£) and Canadian dollar (C$) are:
Pound sterling | Canadian dollar | |||
2023 | 2022 | 2023 | 2022 | |
Average for the three months ended 31 January | 1.20 | 1.34 | 0.74 | 0.79 |
Average for the nine months ended 31 January | 1.19 | 1.37 | 0.76 | 0.80 |
At 30 April | - | 1.26 | - | 0.78 |
At 31 January | 1.23 | 1.34 | 0.75 | 0.79 |
3. Segmental analysis
Three months to 31 January 2023 | |||||
| Corporate | ||||
US | UK | Canada | items | Group | |
$m | $m | $m | $m | $m | |
Revenue | |||||
Rental revenue | 1,894.9 | 158.2 | 135.9 | - | 2,189.0 |
Sale of new equipment, merchandise | |||||
and consumables | 42.1 | 19.8 | 19.4 | - | 81.3 |
Sale of used rental equipment | 133.3 | 15.3 | 8.5 | - | 157.1 |
2,070.3 | 193.3 | 163.8 | - | 2,427.4 | |
Segment profit | 607.6 | 9.2 | 29.4 | (8.1) | 638.1 |
Amortisation | (29.6) | ||||
Net financing costs | (103.4) | ||||
Profit before taxation | 505.1 | ||||
Taxation | (124.7) | ||||
Profit attributable to equity shareholders | 380.4 | ||||
Three months to 31 January 2022 | |||||
| Corporate | ||||
US | UK | Canada | items | Group | |
$m | $m | $m | $m | $m | |
Revenue | |||||
Rental revenue | 1,525.4 | 179.1 | 110.2 | - | 1,814.7 |
Sale of new equipment, merchandise | |||||
and consumables | 36.0 | 49.7 | 6.1 | - | 91.8 |
Sale of used rental equipment | 78.1 | 11.0 | 4.5 | - | 93.6 |
1,639.5 | 239.8 | 120.8 | - | 2,000.1 | |
Segment profit | 444.5 | 23.7 | 22.9 | (7.5) | 483.6 |
Amortisation | (34.5) | ||||
Net financing costs | (56.5) | ||||
Profit before taxation | 392.6 | ||||
Taxation | (95.2) | ||||
Profit attributable to equity shareholders | 297.4 | ||||
Nine months to 31 January 2023 | |||||
| Corporate | ||||
US | UK | Canada | items | Group | |
$m | $m | $m | $m | $m | |
Revenue | |||||
Rental revenue | 5,668.9 | 506.4 | 396.8 | - | 6,572.1 |
Sale of new equipment, merchandise | |||||
and consumables | 135.9 | 71.9 | 46.0 | - | 253.8 |
Sale of used rental equipment | 334.5 | 45.1 | 18.1 | - | 397.7 |
6,139.3 | 623.4 | 460.9 | - | 7,223.6 | |
Segment profit | 1,890.3 | 66.1 | 99.5 | (21.1) | 2,034.8 |
Amortisation | (87.4) | ||||
Net financing costs | (257.2) | ||||
Profit before taxation | 1,690.2 | ||||
Taxation | (418.6) | ||||
Profit attributable to equity shareholders | 1,271.6 | ||||
Nine months to 31 January 2022 |
| |||||
| Corporate |
| ||||
US | UK | Canada | items | Group |
| |
$m | $m | $m | $m | $m |
| |
Revenue |
| |||||
Rental revenue | 4,467.7 | 556.7 | 335.5 | - | 5,359.9 |
|
Sale of new equipment, merchandise |
| |||||
and consumables | 114.2 | 163.6 | 22.9 | - | 300.7 |
|
Sale of used rental equipment | 181.7 | 30.0 | 11.8 | - | 223.5 |
|
4,763.6 | 750.3 | 370.2 | - | 5,884.1 |
| |
| ||||||
Segment profit | 1,413.9 | 98.2 | 88.2 | (21.6) | 1,578.7 |
|
Amortisation | (76.2) |
| ||||
Exceptional items | (47.1) |
| ||||
Net financing costs | (173.0) |
| ||||
Profit before taxation | 1,282.4 |
| ||||
Taxation | (326.3) |
| ||||
Profit attributable to equity shareholders | 956.1 |
| ||||
|
US |
UK |
Canada | Corporate items |
Group |
|
| $m | $m | $m | $m | $m |
|
At 31 January 2023 |
| |||||
Segment assets | 15,003.1 | 1,400.5 | 1,545.0 | 51.6 | 18,000.2 |
|
Cash | 36.6 |
| ||||
Taxation assets | 12.0 |
| ||||
Total assets | 18,048.8 |
| ||||
| ||||||
At 30 April 2022 |
| |||||
Segment assets | 12,839.6 | 1,162.3 | 1,212.7 | 53.0 | 15,267.6 |
|
Cash | 15.3 |
| ||||
Taxation assets | 7.2 |
| ||||
Total assets | 15,290.1
|
| ||||
4. Operating costs and other income
2023 | 2022 | |||||
Before amortisation |
Amortisation |
Total | Beforeamortisation |
Amortisation |
Total | |
$m | $m | $m | $m | $m | $m | |
Three months to 31 January | ||||||
Staff costs: | ||||||
Salaries | 517.0 | - | 517.0 | 432.3 | - | 432.3 |
Social security costs | 40.3 | - | 40.3 | 34.0 | - | 34.0 |
Other pension costs | 10.1 | - | 10.1 | 8.9 | - | 8.9 |
567.4 | - | 567.4 | 475.2 | - | 475.2 | |
Other operating costs: | ||||||
Vehicle costs | 149.3 | - | 149.3 | 120.3 | - | 120.3 |
Spares, consumables & external repairs | 117.4 | - | 117.4 | 109.3 | - | 109.3 |
Facility costs | 29.8 | - | 29.8 | 21.4 | - | 21.4 |
Other external charges | 359.1 | - | 359.1 | 329.3 | - | 329.3 |
655.6 | - | 655.6 | 580.3 | - | 580.3 | |
Used rental equipment sold | 112.1 | - | 112.1 | 67.7 | - | 67.7 |
| ||||||
Depreciation and amortisation: | ||||||
Depreciation of tangible assets | 409.8 | - | 409.8 | 356.3 | - | 356.3 |
Depreciation of right-of-use assets | 44.4 | - | 44.4 | 37.0 | - | 37.0 |
Amortisation of intangibles | - | 29.6 | 29.6 | - | 34.5 | 34.5 |
454.2 | 29.6 | 483.8 | 393.3 | 34.5 | 427.8 | |
1,789.3 | 29.6 | 1,818.9 | 1,516.5 | 34.5 | 1,551.0 | |
2023 | 2022 | |||||
Before | Before | |||||
amortisation | Amortisation | Total | amortisation | Amortisation | Total | |
$m | $m | $m | $m | $m | $m | |
Nine months to 31 January | ||||||
Staff costs: | ||||||
Salaries | 1,502.4 | - | 1,502.4 | 1,222.8 | - | 1,222.8 |
Social security costs | 114.2 | - | 114.2 | 91.0 | - | 91.0 |
Other pension costs | 29.5 | - | 29.5 | 26.2 | - | 26.2 |
1,646.1 | - | 1,646.1 | 1,340.0 | - | 1,340.0 | |
Other operating costs: | ||||||
Vehicle costs | 475.1 | - | 475.1 | 376.8 | - | 376.8 |
Spares, consumables & external repairs | 363.7 | - | 363.7 | 310.4 | - | 310.4 |
Facility costs | 79.9 | - | 79.9 | 57.0 | - | 57.0 |
Other external charges | 1,031.3 | - | 1,031.3 | 913.0 | - | 913.0 |
1,950.0 | - | 1,950.0 | 1,657.2 | - | 1,657.2 | |
| ||||||
Used rental equipment sold | 289.2 | - | 289.2 | 177.9 | - | 177.9 |
| ||||||
Depreciation and amortisation: | ||||||
Depreciation of tangible assets | 1,177.6 | - | 1,177.6 | 1,022.3 | - | 1,022.3 |
Depreciation of right-of-use assets | 125.9 | - | 125.9 | 108.0 | - | 108.0 |
Amortisation of intangibles | - | 87.4 | 87.4 | - | 76.2 | 76.2 |
1,303.5 | 87.4 | 1,390.9 | 1,130.3 | 76.2 | 1,206.5 | |
5,188.8 | 87.4 | 5,276.2 | 4,305.4 | 76.2 | 4,381.6 | |
5. Exceptional items and amortisation
Exceptional items are those items of financial performance that are material and have limited predictive value. Amortisation relates to the write-off of intangible assets over their estimated useful economic life. The Group believes these items should be disclosed separately within the consolidated income statement to assist in the understanding of the financial performance of the Group. Adjusted profit and earnings per share are stated before exceptional items and amortisation of intangibles.
Three months to | Nine months to | |||
31 January | 31 January | |||
2023 | 2022 | 2023 | 2022 | |
$m | $m | $m | $m | |
Amortisation of intangibles | 29.6 | 34.5 | 87.4 | 76.2 |
Write-off of deferred financing costs | - | - | - | 11.1 |
Early redemption fee | - | - | - | 36.0 |
Taxation | (7.4) | (8.6) | (22.0) | (30.9) |
22.2 | 25.9 | 65.4 | 92.4 | |
In the prior year, the costs associated with the redemption of the $600m 4.125% senior notes and the $600m 5.25% senior notes in August 2021 were classified as exceptional items. The write-off of deferred financing costs consisted of the unamortised balance of the costs relating to the notes. In addition, an early redemption fee of $36m was paid to redeem the notes prior to their scheduled maturity. Of these items, total cash costs were $36m.
The items detailed in the table above are presented in the income statement as follows:
Three months to | Nine months to | |||
31 January | 31 January | |||
2023 | 2022 | 2023 | 2022 | |
$m | $m | $m | $m | |
Amortisation of intangibles | 29.6 | 34.5 | 87.4 | 76.2 |
Charged in arriving at operating profit | 29.6 | 34.5 | 87.4 | 76.2 |
Interest expense | - | - | - | 47.1 |
Charged in arriving at profit before tax | 29.6 | 34.5 | 87.4 | 123.3 |
Taxation | (7.4) | (8.6) | (22.0) | (30.9) |
22.2 | 25.9 | 65.4 | 92.4 | |
6. Net financing costs
Three months to | Nine months to | |||
31 January | 31 January | |||
2023 | 2022 | 2023 | 2022 | |
$m | $m | $m | $m | |
| ||||
Interest income: | ||||
Net income on the defined benefit plan asset | - | - | 0.2 | 0.1 |
Other interest | 0.2 | - | 1.6 | - |
0.2 | - | 1.8 | 0.1 | |
| ||||
Interest expense: | ||||
Bank interest payable | 39.0 | 8.8 | 83.2 | 22.2 |
Interest payable on senior notes | 36.1 | 25.6 | 96.4 | 85.6 |
Interest payable on lease liabilities | 26.4 | 20.3 | 73.2 | 59.2 |
Non-cash unwind of discount on provisions | 0.3 | 0.3 | 0.9 | 0.8 |
Amortisation of deferred debt raising costs | 1.8 | 1.5 | 5.3 | 5.3 |
103.6 | 56.5 | 259.0 | 173.1 | |
Net financing costs before exceptional items | 103.4 | 56.5 | 257.2 | 173.0 |
Exceptional items | - | - | - | 47.1 |
Net financing costs | 103.4 | 56.5 | 257.2 | 220.1 |
7. Taxation
The tax charge for the period has been determined by applying the expected effective tax rates in each jurisdiction for the year as a whole, based on the tax rates in force as at 31 January 2023 of 25% in the US (2022: 25%), 19% in the UK, rising to 25% from 1 April 2023 (2022: 19%) and 26% in Canada (2022: 26%). This results in a blended effective rate for the Group as a whole of 25% (2022: 25%) for the period.
The tax charge of $441m (2022: $357m) on the adjusted profit before taxation of $1,778m (2022: $1,406m) can be explained as follows:
Nine months to 31 January | ||
2023 | 2022 | |
$m | $m | |
Current tax | ||
- current tax on income for the period | 235.5 | 153.5 |
- adjustments to prior year | (2.6) | 6.6 |
232.9 | 160.1 | |
Deferred tax | ||
- origination and reversal of temporary differences | 209.8 | 196.2 |
- adjustment due to change in UK corporate tax rate | - | 9.7 |
- adjustments to prior year | (2.1) | (8.8) |
207.7 | 197.1 | |
Tax on adjusted profit | 440.6 | 357.2 |
Comprising: | ||
- UK | 19.9 | 39.0 |
- US | 403.4 | 299.7 |
- Canada | 17.3 | 18.5 |
440.6 | 357.2 | |
In addition, the tax credit of $22m (2022: $31m) on amortisation of $87m (2022: on exceptional items and amortisation of $123m) consists of a current tax credit of $9m (2022: $22m) relating to the US, $0.2m (2022: $0.4m) relating to the UK and $0.6m (2022: $0.3m) relating to Canada and a deferred tax credit of $8m (2022: $3m) relating to the US, $0.8m (2022: $0.6m) relating to the UK and $4m (2022: $4m) relating to Canada.
8. Earnings per share
Basic and diluted earnings per share for the three and nine months ended 31 January 2023 have been calculated based on the profit for the relevant period and the weighted average number of ordinary shares in issue during that period (excluding shares held by the Company and the ESOT over which dividends have been waived). Diluted earnings per share is computed using the result for the relevant period and the diluted number of shares (ignoring any potential issue of ordinary shares which would be anti-dilutive). These are calculated as follows:
Three months to | Nine months to | |||
31 January | 31 January | |||
2023 | 2022 | 2023 | 2022 | |
Profit for the financial period ($m) | 380.4 | 297.4 | 1,271.6 | 956.1 |
Weighted average number of shares (m) -basic |
438.1 |
444.7 |
439.5 |
446.0 |
-diluted | 441.0 | 446.3 | 442.5 | 447.6 |
Basic earnings per share | 86.9¢ | 66.9¢ | 289.3¢ | 214.4¢ |
Diluted earnings per share | 86.3¢ | 66.6¢ | 287.4¢ | 213.6¢ |
Adjusted earnings per share (defined in any period as the earnings before exceptional items and amortisation for that period divided by the weighted average number of shares in issue in that period) may be reconciled to the basic earnings per share as follows:
Three months to | Nine months to | ||||
31 January | 31 January | ||||
2023 | 2022 | 2023 | 2022 | ||
Basic earnings per share | 86.9 | 66.9 | 289.3 | 214.4 | |
Amortisation of intangibles | 6.7 | 7.7 | 19.9 | 17.0 | |
Exceptional items | - | - | - | 10.6 | |
Tax on exceptional items and amortisation | (1.7) | (1.9) | (5.0) | (6.9) | |
Adjusted earnings per share | 91.9 | 72.7 | 304.2 | 235.1 | |
9. Dividends
During the period, a final dividend in respect of the year ended 30 April 2022 of 67.5¢ (2022: 48.24¢) per share was paid to shareholders resulting in a cash outflow of $293m (2022: $213m). The interim dividend in respect of the year ending 30 April 2023 of 15.0¢ (2022: 12.5¢) per share announced on 6 December 2022 was paid on 9 February 2023 to shareholders and cost $65m (2022: $56m).
10. Property, plant and equipment
2023 | 2022 | |||
Rental | Rental | |||
equipment | Total | equipment | Total | |
Net book value | $m | $m | $m | $m |
At 1 May | 7,814.3 | 8,892.6 | 6,908.9 | 7,776.1 |
Exchange differences | (31.6) | (36.9) | (36.4) | (42.1) |
Reclassifications | (0.8) | - | (0.5) | - |
Additions | 2,241.2 | 2,617.7 | 1,442.6 | 1,708.5 |
Acquisitions | 324.5 | 353.9 | 349.4 | 373.5 |
Disposals | (275.7) | (290.0) | (173.9) | (186.1) |
Depreciation | (1,020.2) | (1,177.6) | (888.2) | (1,022.3) |
At 31 January | 9,051.7 | 10,359.7 | 7,601.9 | 8,607.6 |
11. Right-of-use assets
2023 | 2022 | |||||
Property | Other | Property | Other | |||
Net book value | leases | leases | Total | leases | leases | Total |
$m | $m | $m | $m | $m | $m | |
At 1 May | 1,849.1 | 15.7 | 1,864.8 | 1,533.5 | 12.4 | 1,545.9 |
Exchange differences | (11.2) | (0.3) | (11.5) | (10.2) | (0.4) | (10.6) |
Additions | 229.4 | 6.5 | 235.9 | 204.7 | 4.0 | 208.7 |
Acquisitions | 124.8 | - | 124.8 | 81.0 | - | 81.0 |
Remeasurement | 45.0 | - | 45.0 | 49.3 | - | 49.3 |
Disposals | (3.6) | (0.7) | (4.3) | (3.7) | (1.1) | (4.8) |
Depreciation | (123.3) | (2.6) | (125.9) | (105.9) | (2.1) | (108.0) |
At 31 January | 2,110.2 | 18.6 | 2,128.8 | 1,748.7 | 12.8 | 1,761.5 |
12. Lease liabilities
31 January | 30 April | |
2023 | 2022 | |
$m | $m | |
Current | 223.0 | 188.6 |
Non-current | 2,077.3 | 1,806.6 |
2,300.3 | 1,995.2 |
13. Borrowings
31 January | 30 April | |
2023 | 2022 | |
$m | $m | |
Non-current | ||
First priority senior secured bank debt | 2,000.1 | 2,108.1 |
1.500% senior notes, due 2026 | 546.4 | 545.8 |
4.375% senior notes, due 2027 | 595.5 | 594.8 |
4.000% senior notes, due 2028 | 594.9 | 594.3 |
4.250% senior notes, due 2029 | 594.4 | 593.9 |
2.450% senior notes, due 2031 | 743.7 | 743.2 |
5.500% senior notes, due 2032 | 737.6 | - |
5.550% senior notes, due 2033 | 742.4 | - |
6,555.0 | 5,180.1 |
The senior secured bank debt is secured by way of fixed and floating charges over substantially all the Group's property, plant and equipment, inventory and trade receivables. The senior notes are guaranteed by Ashtead Group plc and all its principal subsidiary undertakings.
Our debt facilities are committed for the long term, with an average maturity of six years. Our $4.5bn asset-based senior credit facility is committed until August 2026. The $550m 1.500% senior notes mature in August 2026, the $600m 4.375% senior notes mature in August 2027, the $600m 4.000% senior notes mature in May 2028, the $600m 4.250% senior notes mature in November 2029, the $750m 2.450% senior notes mature in August 2031, the $750m 5.500% senior notes mature in August 2032 and the $750m 5.550% senior notes mature in May 2033.
The weighted average interest cost of these facilities (including non-cash amortisation of deferred debt raising costs) is 5%.
There is one financial performance covenant under the first priority senior credit facility. That is the fixed charge ratio (comprising LTM EBITDA before exceptional items less LTM net capital expenditure paid in cash over the sum of scheduled debt repayments plus cash interest, cash tax payments and dividends paid in the last twelve months) which, must be equal to, or greater than, 1.0. This covenant does not apply when availability exceeds $450m. The covenant ratio is calculated each quarter. At 31 January 2023, the fixed charge ratio exceeded the covenant requirement.
At 31 January 2023, availability under the senior secured bank facility was $2,642m ($2,537m at 30 April 2022), with an additional $4,567m of suppressed availability, meaning that the covenant did not apply at 31 January 2023 and is unlikely to apply in forthcoming quarters.
Fair value of financial instruments
At 31 January 2023, the Group had no derivative financial instruments.
With the exception of the Group's senior notes detailed in the table below, the carrying value of non-derivative financial assets and liabilities is considered to equate materially to their fair value.
At 31 January 2023 | At 30 April 2022 | |||
Book | Fair | Book | Fair | |
value | value | value | value | |
$m | $m | $m | $m | |
1.500% senior notes | 549.0 | 479.9 | 548.8 | 487.4 |
4.375% senior notes | 600.0 | 574.5 | 600.0 | 583.5 |
4.000% senior notes | 600.0 | 562.5 | 600.0 | 564.7 |
4.250% senior notes | 600.0 | 558.8 | 600.0 | 566.2 |
2.450% senior notes | 748.3 | 600.0 | 748.2 | 607.5 |
5.500% senior notes | 742.9 | 750.9 | - | - |
5.550% senior notes | 748.3 | 750.0 | - | - |
4,588.5 | 4,276.6 | 3,097.0 | 2,809.3 | |
Deferred costs of raising finance | (33.6) | - | (25.0) | - |
4,554.9 | 4,276.6 | 3,072.0 | 2,809.3 | |
The fair value of the senior notes has been calculated using quoted market prices at 31 January 2023.
14. Share capital
Ordinary shares of 10p each: | ||||
31 January | 30 April | 31 January | 30 April | |
2023 | 2022 | 2023 | 2022 | |
Number | Number | $m | $m | |
Issued and fully paid | 451,354,833 | 451,354,833 | 81.8 | 81.8 |
During the period, the Company purchased 4.8m ordinary shares at a total cost of $240m (£201m) under the Group's share buyback programme, which are held in treasury. At 31 January 2023, 12.5m (April 2022: 7.7m) shares were held by the Company ($720m; April 2022: $480m) and a further 1.0m (April 2022: 1.2m) shares were held by the Company's Employee Share Ownership Trust ($39m; April 2022: $45m).
15. Notes to the cash flow statement
a) Cash flow from operating activities
Nine months to 31 January | ||
2023 | 2022 | |
$m | $m | |
Operating profit | 1,947.4 | 1,502.5 |
Depreciation | 1,303.5 | 1,130.3 |
Amortisation | 87.4 | 76.2 |
EBITDA | 3,338.3 | 2,709.0 |
Profit on disposal of rental equipment | (108.5) | (45.6) |
Profit on disposal of other property, plant and equipment | (11.4) | (5.5) |
Increase in inventories | (44.7) | (44.3) |
Increase in trade and other receivables | (289.5) | (194.5) |
Increase in trade and other payables | (22.0) | 27.0 |
Exchange differences | 1.5 | (0.7) |
Other non-cash movement | 33.3 | 35.9 |
Cash generated from operations before | ||
changes in rental equipment | 2,897.0 | 2,481.3 |
b) Analysis of net debt
Net debt consists of total borrowings and lease liabilities less cash and cash equivalents. Borrowings exclude accrued interest. Non-US dollar denominated balances are translated to US dollars at rates of exchange ruling at the balance sheet date.
| Non-cash movements | ||||||
| 1 May | Cash | Exchange | Debt | New lease | Other | 31 January |
| 2022 | flow | movement | acquired | liabilities | movements | 2023 |
| $m | $m | $m | $m | $m | $m | $m |
| |||||||
Long-term borrowings | 5,180.1 | 1,331.8 | (17.0) | 57.3 | - | 2.8 | 6,555.0 |
Lease liabilities | 1,995.2 | (81.3) | (12.2) | 123.2 | 275.4 | - | 2,300.3 |
Total liabilities from | |||||||
financing activities | 7,175.3 | 1,250.5 | (29.2) | 180.5 | 275.4 | 2.8 | 8,855.3 |
Cash and cash | |||||||
equivalents | (15.3) | (21.8) | 0.5 | - | - | - | (36.6) |
Net debt | 7,160.0 | 1,228.7 | (28.7) | 180.5 | 275.4 | 2.8 | 8,818.7 |
Non-cash movements | |||||||
1 May | Cash | Exchange | Debt | New lease | Other | 31 January | |
2021 | flow | movement | acquired | liabilities | movements | 2022 | |
$m | $m | $m | $m | $m | $m | $m | |
Long-term borrowings | 4,194.0 | 861.5 | (20.0) | - | - | 16.5 | 5,052.0 |
Lease liabilities | 1,633.3 | (79.5) | (11.3) | 81.0 | 252.6 | - | 1,876.1 |
Total liabilities from | |||||||
financing activities | 5,827.3 | 782.0 | (31.3) | 81.0 | 252.6 | 16.5 | 6,928.1 |
Cash and cash | |||||||
equivalents | (26.6) | (8.4) | 0.4 | - | - | - | (34.6) |
Net debt | 5,800.7 | 773.6 | (30.9) | 81.0 | 252.6 | 16.5 | 6,893.5 |
Details of the Group's cash and debt are given in Notes 12 and 13 and the Review of Third Quarter, Balance Sheet and Cash Flow accompanying these condensed consolidated interim financial statements.
c) Acquisitions
Nine months to 31 January | ||
2023 | 2022 | |
$m | $m | |
Cash consideration paid: | ||
- acquisitions in the period | 910.8 | 935.0 |
- contingent consideration | 21.9 | 12.6 |
932.7 | 947.6 | |
During the period, 38 businesses were acquired with cash paid of $911m (2022: $935m), after taking account of net cash acquired of $30m (2022: $3m). Further details are provided in Note 16.
Contingent consideration of $22m (2022: $13m) was paid relating to prior year acquisitions.
16. Acquisitions
During the period, the following acquisitions were completed:
i) | On 5 May 2022, Sunbelt UK acquired the entire share capital of Movietech Camera Rentals Limited and Movietech Cymru Limited (together 'Movietech'). Movietech is a specialty business.
|
ii) | On 13 May 2022, Sunbelt US acquired the business and assets of the power rental division of Filmwerks, LLC ('Filmwerks'). Filmwerks is a specialty business in North Carolina.
|
iii) | On 20 May 2022, Sunbelt US acquired the business and assets of Mashburn Equipment, L.L.C. ('Mashburn'). Mashburn is a general tool business in Georgia.
|
iv) | On 1 June 2022, Sunbelt Canada acquired the entire share capital of MacFarlands Limited ('MacFarlands'). MacFarlands is a general tool business in Nova Scotia and New Brunswick.
|
v) | On 8 June 2022, Sunbelt US acquired the business and assets of Amos Metz Rentals & Sales, LLC ('Amos Metz'). Amos Metz is a general tool business in California.
|
vi) | On 29 June 2022, Sunbelt US acquired the business and assets of George's Tool Rental, Inc. ('GTR'). GTR is a general tool business in Pennsylvania.
|
vii) | On 7 July 2022, Sunbelt UK acquired the entire share capital of PKE Lighting Holdings Limited ('PKE'). PKE is a specialty business.
|
viii) | On 13 July 2022, Sunbelt US acquired the business and assets of Milford Rent-All, Inc. ('Milford'). Milford is a general tool business in Maine.
|
ix) | On 15 July 2022, Sunbelt US acquired the business and assets of R&N Tool Rental, Inc. ('R&N'). R&N is a general tool business in Indiana.
|
x) | On 20 July 2022, Sunbelt US acquired the business and assets of Chump Management, L.C., trading as Power Equipment Rental ('PER'). PER is a general tool business in Utah.
|
xi) | On 22 July 2022, Sunbelt US acquired the business and assets of Harmar Contractors Equipment, Inc, ('Harmar'). Harmar is a general tool business in Pennsylvania.
|
xii) | On 28 July 2022, Sunbelt US acquired the business and assets of A-V Equipment Rentals, Inc. ('A-V'). A-V is a general tool business in California.
|
xiii) | On 2 August 2022, Sunbelt Canada acquired the entire share capital of Compact Rentals Limited ('Compact'). Compact is a general tool business in Alberta.
|
xiv) | On 3 August 2022, Sunbelt US acquired the business and assets of Rental Country Inc. ('Rental Country'). Rental Country is a general tool business in New Jersey.
|
xv) | On 10 August 2022, Sunbelt US acquired the business and assets of R.J. Lalonde, Inc. ('Lalonde'). Lalonde is a general tool business in California.
|
xvi) | On 24 August 2022, Sunbelt US acquired the business and assets of Alaska Pacific Rental, LLC ('APR'). APR is a general tool business in Alaska.
|
xvii) | On 31 August 2022, Sunbelt UK acquired the entire share capital of Optimum Power Services Limited ('OPS'). OPS is a specialty business.
|
xviii) | On 1 September 2022, Sunbelt Canada acquired the entire share capital of Flagro Industries Limited ('Flagro'). Flagro is a specialty business in Ontario.
|
xix) | On 1 September 2022, Sunbelt Canada acquired the entire share capital of Xtreme Rentals Ltd. ('Xtreme'). Xtreme is a general tool business in Alberta.
|
xx) | On 16 September 2022, Sunbelt US acquired the business and assets of Tel-Power Tool & Equipment Rental, Inc. ('Tel-Power'). Tel-Power is a general tool business in Pennsylvania.
|
xxi) | On 21 September 2022, Sunbelt US acquired the business and assets of Rent Mart, Inc. ('Absolute Equipment'). Absolute Equipment is a general tool business in Pennsylvania.
|
xxii) | On 3 October 2022, Sunbelt UK acquired the entire share capital of Media Access Solutions (MAS) Limited ('MAS'). MAS is a specialty business.
|
xxiii) | On 5 October 2022, Sunbelt US acquired the business and assets of Runjesnor, Limited Partnership ('Bilt Rite'). Bilt Rite is a specialty business in Texas.
|
xxiv) | On 11 October 2022, Sunbelt US acquired the business and assets of Comeback Rentals, LLC ('Comeback'). Comeback is a general tool business in South Carolina.
|
xxv) | On 12 October 2022, Sunbelt US acquired the business and assets of Presbone Corporation d/b/a Pinellas Rental Center ('PRC'). PRC is a general tool business in Florida.
|
xxvi) | On 19 October 2022, Sunbelt US acquired the business and assets of Meco Miami, Inc. ('Meco Miami'). Meco Miami is a general tool business in Florida.
|
xxvii) | On 26 October 2022, Sunbelt US acquired the business and assets of Heater Rental Services, LLC ('HRS'). HRS is a general tool and specialty business in Minnesota.
|
xxviii) | On 1 November 2022, Sunbelt Canada acquired the entire share capital of Modu-Loc Fence Rentals LP and Sunbelt US acquired the entire share capital of Modu-Loc USA (together, 'Modu-Loc'). Modu-Loc is a specialty business operating across Canada and in Texas, US.
|
xxix) | On 4 November 2022, Sunbelt US acquired the business and assets of Iron Oak Energy, LLC and Spoonbill Logistics, LLC (together 'IOS'). IOS is a general tool business in Louisiana.
|
xxx) | On 9 November 2022, Sunbelt US acquired the business and assets of Wagner Rental & Supply, Inc., Wagner Tool Rental of Jackson, Inc., Wagner Rental and Supply of Ashland, Inc., and Wagner Rental and Supply of Chillicothe, LLC (together 'Wagner'). Wagner is a general tool business in Ohio and Kentucky.
|
xxxi) | On 10 November 2022, Sunbelt US acquired the business and assets of QxTwo Equipment Sales, LLC ('QX Two'). QxTwo is a specialty business in South Carolina.
|
xxxii) | On 16 November 2022, Sunbelt US acquired the business and assets of Ohio Rental Mt. Vernon, Inc. and Ohio Rental of Johnstown, Inc. (together 'Ohio Rental'). Ohio Rental is a general tool business in Ohio.
|
xxxiii) | On 2 December 2022, Sunbelt Canada acquired the entire share capital of Studio City Scaffold Ltd. ('Studio City'). Studio City is a specialty business operating in Toronto and Vancouver, Canada and in Los Angeles, US.
|
xxxiv) | On 7 December 2022, Sunbelt US acquired the business and assets of Portable Air, L.C. ('Portable Air'). Portable Air is a specialty business operating in Florida, Texas, and Louisiana.
|
xxxv) | On 8 December 2022, Sunbelt UK acquired the entire share capital Alpha Grip (UK) Limited ('Alpha Grip'). Alpha Grip is a specialty business.
|
xxxvi) | On 14 December 2022, Sunbelt US acquired the business and assets of Diamond Rentals, Inc. ('Diamond'). Diamond is a general tool business operating in Washington.
|
xxxvii) | On 12 January 2023, Sunbelt US acquired the entire share capital of Lift Works, Inc. ('Lift Works'). Lift Works is a specialty business operating in Illinois.
|
xxxviii) | On 18 January 2023, Sunbelt US acquired the business and assets of Straight Up Equipment LLC ('Straight Up'). Straight Up is a specialty business operating in Ohio.
|
The following table sets out the fair value of the identifiable assets and liabilities acquired by the Group. The fair values have been determined provisionally at the balance sheet date.
Fair value | |
to the Group | |
$m | |
Net assets acquired | |
Trade and other receivables | 49.0 |
Inventory | 8.6 |
Property, plant and equipment | |
- rental equipment | 324.5 |
- other assets | 29.4 |
Right-of-use asset | 124.8 |
Creditors | (37.4) |
Current tax | (2.2) |
Deferred tax | (34.0) |
Debt | (57.3) |
Lease liabilities | (123.2) |
Intangible assets (non-compete agreements | |
and customer relationships) | 158.3 |
440.5 | |
Consideration: | |
- cash paid and due to be paid (net of cash acquired) | 912.5 |
- contingent consideration | 27.2 |
939.7 | |
Goodwill | 499.2 |
The goodwill arising can be attributed to the key management personnel and workforce of the acquired businesses and to the synergies and other benefits the Group expects to derive from the acquisitions. The synergies and other benefits include elimination of duplicate costs, improving utilisation of the acquired rental fleet, using the Group's financial strength to invest in the acquired business and drive improved returns through a semi-fixed cost base and the application of the Group's proprietary software to optimise revenue opportunities. $289m of the goodwill is expected to be deductible for income tax purposes.
The gross value and the fair value of trade receivables at acquisition was $49m.
Due to the operational integration of acquired businesses post acquisition, in particular due to the merger of some stores, the movement of rental equipment between stores and investment in the rental fleet, it is not practical to report the revenue and profit of the acquired businesses post-acquisition.
The revenue and operating profit of these acquisitions from 1 May 2022 to their date of acquisition was not material.
17. Contingent liabilities
Following its state aid investigation, in April 2019 the European Commission announced its decision that the Group Financing Exemption in the UK controlled foreign company ('CFC') legislation constitutes state aid in some circumstances. In common with the UK Government and other UK-based international companies, the Group does not agree with the decision and has therefore lodged a formal appeal with the General Court of the European Union. In common with other UK taxpayers, the Group's appeal has been stayed while the appeals put forward by the UK Government and ITV plc proceed.
On 8 June 2022 the General Court of the European Union dismissed the appeals put forward by the UK Government and ITV plc. However, there remains a high degree of uncertainty in the final outcome given the UK Government and ITV plc have both appealed against the decision to the EU Court of Justice. The Group will continue to monitor proceedings closely.
Despite the UK Government appealing the European Commission's decision, Her Majesty's Revenue & Customs ('HMRC') was required to make an assessment of the tax liability which would arise if the decision is not successfully appealed and collect that amount from taxpayers. HMRC issued a charging notice stating that the tax liability it believes to be due on this basis is £36m, including interest payable. The Group has appealed the charging notice and has settled the amount assessed on it, including interest, in line with HMRC requirements. On successful appeal in whole or in part, all or part of the amount paid in accordance with the charging notice would be returned to the Group. If either the decision reached by the General Court of the European Union or the charging notice issued by HMRC are not ultimately appealed successfully, we have estimated the Group's maximum potential liability to be £36m as at 31 January 2023 ($44m at January 2023 exchange rates), including any interest payable. Based on the current status of proceedings, we have concluded that no provision is required in relation to this matter.
The £36m ($44m at January 2023 exchange rates) paid has been recognised as a non-current asset on the balance sheet.
18. Events after the balance sheet date
Since the balance sheet date, the Group has completed seven acquisitions for total purchase consideration of $120m, including acquired debt of $20m, as follows:
i) | On 7 February 2023, Sunbelt US acquired the business and assets of Key Rentals Group, LLC and TBG Equipment, LLC (together 'Key Rentals'). Key Rentals is a specialty business operating in Montana.
|
ii) | On 17 February 2023, Sunbelt US acquired the business and assets of West Ashley Tool & Rental LLC ('West Ashley'). West Ashley is a general tool business operating in South Carolina.
|
iii) | On 21 February 2023, Sunbelt US acquired the business and assets of C2 Equipment Rental, LLC ('C2'). C2 is a general tool business operating in Florida.
|
iv) | On 22 February 2023, Sunbelt US acquired the business and assets of BigSky Rents & Events, Inc. ('BigSky'). BigSky is a general tool business operating in Montana.
|
v) | On 28 February 2023, Sunbelt US acquired the entire share capital of Bullet Rentals & Sales, Inc. ('Bullet'). Bullet is a general tool business operating in Oregon.
|
vi) | On 1 March 2023, Sunbelt Canada acquired the entire share capital of Ottawa Rental and Supply Ltd., trading as Ontario Rental & Supply ('ORS'). ORS is a general tool business operating in Ontario.
|
vii) | On 3 March 2023, Sunbelt US acquired the business and assets of Ned R. Werbe, Inc., trading as A Rental Service Company ('ARS'). ARS is a general tool business operating in Indiana.
|
The initial accounting for these acquisitions is incomplete. Had these acquisitions taken place on 1 May 2022, their contribution to revenue and operating profit would not have been material.
REVIEW OF THIRD QUARTER, BALANCE SHEET AND CASH FLOW
Third quarter
Revenue | EBITDA | Profit1 | ||||
2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |
UK in £m | 160.3 | 178.7 | 40.0 | 49.6 | 7.5 | 17.8 |
Canada in C$m | 220.4 | 153.1 | 85.3 | 64.2 | 39.8 | 29.3 |
US | 2,070.3 | 1,639.5 | 988.6 | 767.2 | 607.6 | 444.5 |
UK in $m | 193.3 | 239.8 | 48.3 | 66.4 | 9.2 | 23.7 |
Canada in $m | 163.8 | 120.8 | 63.3 | 50.6 | 29.4 | 22.9 |
Group central costs | - | - | (7.9) | (7.3) | (8.1) | (7.5) |
2,427.4 | 2,000.1 | 1,092.3 | 876.9 | 638.1 | 483.6 | |
Net financing costs | (103.4) | (56.5) | ||||
Adjusted profit before tax |
|
|
|
| 534.7 | 427.1 |
Amortisation | (29.6) | (34.5) | ||||
Profit before taxation | 505.1 | 392.6 | ||||
Margins as reported | ||||||
US | 47.8% | 46.8% | 29.4% | 27.1% | ||
UK | 24.9% | 27.8% | 4.7% | 10.0% | ||
Canada | 38.7% | 42.0% | 18.1% | 19.1% | ||
Group | 45.0% | 43.8% | 26.3% | 24.2% | ||
1 Segment result presented is operating profit before amortisation.
Group revenue for the quarter increased 21% (23% at constant currency) to $2,427m (2022: $2,000m). Adjusted profit before tax for the quarter increased to $535m (2022: $427m).
US rental only revenue in the quarter was 23% higher than a year ago. This consisted of our general tool business which was 21% higher than last year while our specialty businesses were 31% higher than a year ago.
The UK generated rental only revenue in the quarter of £106m (2022: £98m), 8% higher than the prior year. Total revenue decreased 10% to £160m (2022: £179m) arising from the higher level of ancillary and sales revenue associated with the services provided to the Department of Health last year, which did not recur this year. We took a £4m charge in the quarter to impair a convertible loan note due from Britishvolt, which entered administration in January.
Canada's rental only revenue increased 29% to C$138m (2022: C$107m), while total revenue was C$220m (2022: C$153m).
Group operating profit increased 32% to $638m (2022: $484m). After net financing costs of $103m (2022: $57m), Group adjusted profit before tax was $535m (2022: $427m). After amortisation of $30m (2022: $34m), statutory profit before taxation was $505m (2022: $393m).
Balance sheet
Fixed assets
Capital expenditure in the nine months totalled $2,618m (2022: $1,708m) with $2,241m invested in the rental fleet (2022: $1,443m). Expenditure on rental equipment was 86% of total capital expenditure with the balance relating to the delivery vehicle fleet, property improvements and IT equipment. Capital expenditure by division was:
2023 | 2022 | |||
Replacement | Growth | Total | Total | |
UK in £m | 95.0 | 27.4 | 122.4 | 108.6 |
Canada in C$m | 47.0 | 143.4 | 190.4 | 166.8 |
US | 814.4 | 1,136.4 | 1,950.8 | 1,160.4 |
UK in $m | 113.5 | 32.8 | 146.3 | 148.9 |
Canada in $m | 35.5 | 108.6 | 144.1 | 133.3 |
Total rental equipment | 963.4 | 1,277.8 | 2,241.2 | 1,442.6 |
Delivery vehicles, property improvements & IT equipment | 376.5 | 265.9 | ||
Total additions | 2,617.7 | 1,708.5 | ||
In a strong US rental market, $1,136m of rental equipment capital expenditure was spent on growth while $814m was invested in replacement of existing fleet. The growth proportion is estimated based on the assumption that replacement capital expenditure in any period is equal to the original cost of equipment sold.
The average age of the Group's serialised rental equipment, which constitutes the substantial majority of our fleet, at 31 January 2023 was 37 months (2022: 40 months) on a net book value basis. The US fleet had an average age of 37 months (2022: 41 months), the UK fleet had an average age of 35 months (2022: 37 months) and the Canadian fleet had an average age of 35 months (2022: 35 months).
LTM | ||||||
Rental fleet at original cost | LTM rental | dollar | ||||
31 January 2023 | 30 April 2022 | LTM average | revenue | utilisation | ||
UK in £m | 1,074 | 988 | 1,023 | 562 | 55% | |
Canada in C$m | 1,374 | 1,116 | 1,202 | 674 | 56% | |
US | 12,912 | 11,425 | 11,914 | 7,243 | 61% | |
UK in $m | 1,321 | 1,241 | 1,254 | 689 | 55% | |
Canada in $m | 1,030 | 873 | 920 | 515 | 56% | |
15,263 | 13,539 | 14,088 | 8,447 | |||
Dollar utilisation was 61% in the US (2022: 56%), 55% for the UK (2022: 59%) and 56% for Canada (2022: 55%). The improvement in US and Canadian dollar utilisation reflects strong fleet utilisation and an improved rate environment, while in the UK, the decrease reflects the lower level of ancillary revenue due to the reduction in Department of Health work.
Trade receivables
Receivable days at 31 January 2023 were 53 days (2022: 53 days). The bad debt charge for the last twelve months ended 31 January 2023 as a percentage of total turnover was 0.5% (2022: nil%). Trade receivables at 31 January 2023 of $1,481m (2022: $1,228m) are stated net of allowances for bad debts and credit notes of $118m (2022: $86m), with the provision representing 7% (2022: 7%) of gross receivables.
Other non-current assets
Included within 'other non-current assets' are financial assets investments of $41m (April 2022: $40m). These represent a small number of targeted investments in early development-stage companies, which have been made in the US as part of the Group's activity to support the transition to a lower carbon economy. These financial asset investments are Level 3 financial assets where the fair value is estimated based on the latest transaction price and any subsequent investment-specific factors or events.
During the period, the Group made one new investment, namely Britishvolt ($42m), a UK company involved in the development of electric vehicle battery technology. In January 2023, Britishvolt entered administration following failure to secure additional funding and as a result, the Group has estimated the fair value of its investment as $nil and consequently recognised a movement in the fair value of the equity component of its investment ($37m) through other comprehensive income and an impairment of the $5m convertible loan through the income statement.
Trade and other payables
Group payable days were 46 days at 31 January 2023 (2022: 50 days) with capital expenditure related payables totalling $472m (2022: $249m). Payment periods for purchases other than rental equipment vary between seven and 60 days and for rental equipment between 30 and 120 days.
Cash flow and net debt
| Nine months to 31 January | LTM to 31 January | Year to 30 April | |
| 2023 | 2022 | 2023 | 2022 |
$m | $m | $m | $m | |
EBITDA | 3,338.3 | 2,709.0 | 4,238.7 | 3,609.4 |
Cash inflow from operations before changes in rental equipment |
2,897.0 |
2,481.3 |
3,822.2 |
3,406.5 |
Cash conversion ratio* | 86.8% | 91.6% | 90.2% | 94.4% |
Replacement rental capital expenditure | (949.7) | (598.6) | (1,180.8) | (829.7) |
Payments for non-rental capital expenditure | (379.6) | (265.8) | (512.2) | (398.4) |
Rental equipment disposal proceeds | 335.1 | 205.1 | 473.8 | 343.8 |
Other property, plant and equipment disposal proceeds | 25.7 | 16.8 | 33.7 | 24.8 |
Tax (net) | (221.2) | (165.7) | (274.3) | (218.8) |
Net financing costs before exceptional items | (233.1) | (172.9) | (291.3) | (231.1) |
Cash inflow before growth capex and | ||||
payment of exceptional costs | 1,474.2 | 1,500.2 | 2,071.1 | 2,097.1 |
Growth rental capital expenditure | (1,179.4) | (726.3) | (1,388.8) | (935.7) |
Exceptional costs | - | (36.0) | - | (36.0) |
Free cash flow | 294.8 | 737.9 | 682.3 | 1,125.4 |
Business acquisitions | (932.7) | (947.6) | (1,262.5) | (1,277.4) |
Financial asset investments | (42.4) | (20.0) | (62.4) | (40.0) |
Total cash absorbed | (680.3) | (229.7) | (642.6) | (192.0) |
Dividends | (292.9) | (213.2) | (349.0) | (269.3) |
Purchase of own shares by the Company | (243.0) | (306.9) | (345.7) | (409.6) |
Purchase of own shares by the ESOT | (12.5) | (23.8) | (12.5) | (23.8) |
Increase in net debt due to cash flow | (1,228.7) | (773.6) | (1,349.8) | (894.7) |
* Cash inflow from operations before changes in rental equipment as a percentage of EBITDA.
Cash inflow from operations before the net investment in the rental fleet was $2,897m (2022: $2,481m). The conversion ratio for the period was 87% (2022: 92%).
Total payments for capital expenditure (rental equipment and other PPE) in the nine months were $2,509m (2022: $1,591m). Disposal proceeds received totalled $361m (2022: $222m), giving net payments for capital expenditure of $2,148m in the period (2022: $1,369m). Financing costs paid totalled $233m (2022: $173m) while tax payments were $221m (2022: $166m). Financing costs paid typically differ from the charge in the income statement due to the timing of interest payments in the year and non-cash interest charges.
Accordingly, the Group generated free cash flow of $295m (2022: $738m) and, after acquisition and investment related expenditure of $975m (2022: $968m), a net cash outflow of $680m (2022: $230m), before returns to shareholders.
Net debt | 31 January | 30 April | |
2023 | 2022 | 2022 | |
$m | $m | $m | |
First priority senior secured bank debt | 2,000.1 | 1,981.0 | 2,108.1 |
1.500% senior notes, due 2026 | 546.4 | 545.6 | 545.8 |
4.375% senior notes, due 2027 | 595.5 | 594.6 | 594.8 |
4.000% senior notes, due 2028 | 594.9 | 594.0 | 594.3 |
4.250% senior notes, due 2029 | 594.4 | 593.7 | 593.9 |
2.450% senior notes, due 2031 | 743.7 | 743.1 | 743.2 |
5.500% senior notes, due 2032 | 737.6 | - | - |
5.550% senior notes, due 2033 | 742.4 | - | - |
Total external borrowings | 6,555.0 | 5,052.0 | 5,180.1 |
Lease liabilities | 2,300.3 | 1,876.1 | 1,995.2 |
Total gross debt | 8,855.3 | 6,928.1 | 7,175.3 |
Cash and cash equivalents | (36.6) | (34.6) | (15.3) |
Total net debt | 8,818.7 | 6,893.5 | 7,160.0 |
Net debt at 31 January 2023 was $8,819m with the increase since 30 April 2022 reflecting the net cash outflow set out above and additional lease commitments as we continue our greenfield and bolt-on expansion. The Group's EBITDA for the twelve months ended 31 January 2023 was $4,239m. Excluding the impact of IFRS 16, the ratio of net debt to EBITDA was 1.6 times (2022: 1.5 times) on a constant currency and a reported basis as at 31 January 2023. Including the impact of IFRS 16, the ratio of net debt to EBITDA was 2.1 times (2022: 2.0 times) as at 31 January 2023.
Principal risks and uncertainties
Risks and uncertainties in achieving the Group's objectives for the remainder of the financial year, together with assumptions, estimates, judgements and critical accounting policies used in preparing financial information remain broadly unchanged from those detailed in the 2022 Annual Report and Accounts on pages 34 to 39.
The principal risks and uncertainties facing the Group are:
· | economic conditions - in the longer term, there is a link between levels of economic activity and demand for our services. The most significant end market which affects our business is construction. The construction market is cyclical and typically lags the general economic cycle by between 12 and 24 months.
The economic uncertainties resulting from the impact of COVID-19 or other pandemics are considered as part of this risk.
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· | competition - the already competitive market could become even more competitive and we could suffer increased competition from large national competitors or small companies operating at a local level resulting in reduced market share and lower revenue.
This could negatively affect rental rates and physical utilisation. Continuing industry consolidation could also have a similar effect.
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· | cyber security - a cyber-attack or serious uncured failure in our systems could result in us being unable to deliver service to our customers and / or the loss of data. In particular, we are heavily dependent on technology for the smooth running of our business given the large number of both units of equipment we rent and our customers. As a result, we could suffer reputational loss, revenue loss and financial penalties.
This is the most significant factor in our business continuity planning.
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· | health and safety - a failure to comply with laws and regulations governing health and safety and ensure the highest standards of health and safety across the Group could result in accidents which may result in injury to or fatality of an individual, claims against the Group and/or damage to our reputation.
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· | people and culture - retaining and attracting good people is key to delivering superior performance and customer service, and maintaining and enhancing our culture.
Excessive staff turnover is likely to impact on our ability to maintain the appropriate quality of service to our customers and would ultimately impact our financial performance adversely.
At a leadership level, succession planning is required to ensure the Group can continue to inspire the right culture, leadership and behaviours and meet its strategic objectives.
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· | environmental - the Group has made a long-term commitment to reduce its Scope 1 and 2 carbon intensity by 35% by 2030 from its level in 2018, with a near-term commitment to reduce its carbon intensity by 15% by 2024, and set out a roadmap to achieve this. Failure to do so could adversely impact the Group and its stakeholders.
A significant part of our rental fleet is reliant on diesel engines. Over time, 'greener' alternatives will become available as technology advances. If we do not remain at the forefront of technological advances, and invest in the latest equipment, our rental fleet could become obsolete.
In addition, we need to comply with the numerous laws governing environmental protection matters. These laws regulate such issues as wastewater, stormwater, solid and hazardous wastes and materials, and air quality. Breaches potentially create hazards to our employees, damage to our reputation and expose the Group to, amongst other things, the cost of investigating and remediating contamination and fines and penalties for non-compliance.
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· | laws and regulations - failure to comply with the frequently changing regulatory environment could result in reputational damage or financial penalty.
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Further details, including actions taken to mitigate these risks, are provided within the 2022 Annual Report & Accounts.
Our business is subject to significant fluctuations in performance from quarter to quarter as a result of seasonal effects. Commercial construction activity tends to increase in the summer and during extended periods of mild weather and to decrease in the winter and during extended periods of inclement weather. Furthermore, due to the incidence of public holidays in the US, Canada and the UK, there are more billing days in the first half of our financial year than the second half leading to our revenue normally being higher in the first half. On a quarterly basis, the second quarter is typically our strongest quarter, followed by the first and then the third and fourth quarters.
In addition, the current trading and outlook section of the interim statement provides commentary on market and economic conditions for the remainder of the year.
Fluctuations in the value of the pound sterling and Canadian dollars with respect to US dollars may have an impact on our financial condition and results of operations as reported in US dollars. The Group's financing is arranged such that the majority of its debt and interest expense is in US dollars. At 31 January 2023, 83% of its debt (including lease liabilities) was denominated in US dollars. Based on the current currency mix of our profits and on non-US dollar debt levels, interest and exchange rates at 31 January 2023, a 1% change in the pound sterling and Canadian dollar exchange rate would impact adjusted pre-tax profit by approximately $0.1m.
OPERATING STATISTICS
Number of rental stores | Staff numbers | |||||
31 January | 30 April | 31 January | 30 April | |||
2023 | 2022 | 2022 | 2023 | 2022 | 2022 | |
US | 1,056 | 929 | 967 | 18,225 | 15,485 | 16,068 |
UK | 184 | 177 | 177 | 4,239 | 3,880 | 3,983 |
Canada | 113 | 87 | 89 | 2,090 | 1,649 | 1,682 |
Corporate office | - | - | - | 21 | 19 | 19 |
Group | 1,353 | 1,193 | 1,233 | 24,575 | 21,033 | 21,752 |
GLOSSARY OF TERMS
The glossary of terms below sets out definitions of terms used throughout this announcement. Included are a number of alternative performance measures ('APMs') which the directors have adopted in order to provide additional useful information on the underlying trends, performance and position of the Group. The directors use these measures, which are common across the industry, for planning and reporting purposes. These measures are also used in discussions with the investment analyst community and credit rating agencies. The APMs are not defined by IFRS and therefore may not be directly comparable with other companies' APMs and should not be considered superior to or a substitute for IFRS measures.
Term | Closest equivalent statutory measure | Definition and purpose | ||||||||||||||||||||||||||||||||||||||||||||||||||
Drop through | None | Calculated as the change in rental revenue which converts into EBITDA (excluding gains from sale of new equipment, merchandise and consumables and used equipment).
This measure is utilised by the Group to demonstrate the change in profitability generated by the Group as a result of the change in rental revenue in the period. | ||||||||||||||||||||||||||||||||||||||||||||||||||
Free cash flow | Net cash generated from operating activities | Net cash generated from operating activities less non-rental net property, plant and equipment expenditure. Non-rental net property, plant and equipment expenditure comprises payments for non-rental capital expenditure less disposal proceeds received in relation to non-rental asset disposals.
This measure shows the cash retained by the Group prior to discretionary expenditure on acquisitions and returns to shareholders. | ||||||||||||||||||||||||||||||||||||||||||||||||||
Growth at constant exchange rates | None | Calculated by applying the current period exchange rate to the comparative period result. The relevant foreign currency exchange rates are provided within Note 2, Basis of preparation, to the financial statements. This measure is used as a means of eliminating the effects of foreign exchange rate movements on the period-on-period changes in reported results.
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Leverage | None | Leverage calculated at constant exchange rates uses the period end exchange rate for the relevant period and is determined as net debt divided by EBITDA.
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This measure is used to provide an indication of the strength of the Group's balance sheet and is widely used by investors and credit rating agencies. It also forms part of the remuneration targets of the Group and has been identified as one of the Group's key performance indicators. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Return on Investment ('RoI') | None | Last 12-month ('LTM') adjusted operating profit divided by the last 12-month average of the sum of net tangible and intangible fixed assets, plus net working capital but excluding net debt and tax. RoI is calculated excluding the impact of IFRS 16.
RoI is used by management to help inform capital allocation decisions within the business and has been identified as one of the Group's key performance indicators. It also forms part of the remuneration targets of the Group.
A reconciliation of Group RoI is provided below:
RoI for the businesses is calculated in the same way, but excludes goodwill and intangible assets:
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Other terms used within this announcement include:
· | Adjusted: adjusted results are results stated before exceptional items and the amortisation of acquired intangibles. A reconciliation is shown on the income statement. |
· | Availability: represents the headroom on a given date under the terms of our $4.5bn asset-backed senior bank facility, taking account of current borrowings. |
· | Capital expenditure: represents additions to rental equipment and other property, plant and equipment (excluding assets acquired through a business combination). |
· | Cash conversion ratio: represents cash flow from operations before changes in rental equipment as a percentage of EBITDA. Details are provided within the Review of Third Quarter, Balance Sheet and Cash Flow section. |
· | Dollar utilisation: dollar utilisation is trailing 12-month rental revenue divided by average fleet size at original (or 'first') cost measured over a 12-month period. Dollar utilisation has been identified as one of the Group's key performance indicators. Details are shown within the Review of Third Quarter, Balance Sheet and Cash Flow section. |
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| EBITDA and EBITDA margin: EBITDA is earnings before interest, tax, depreciation and amortisation. A reconciliation of EBITDA to profit before tax is shown on the income statement. EBITDA margin is calculated as EBITDA divided by revenue. Progression in EBITDA margin is an important indicator of the Group's performance and this has been identified as one of the Group's key performance indicators. |
· | Exceptional items: those items of income or expense which the directors believe should be disclosed separately by virtue of their significant size or nature and limited predictive value to enable a better understanding of the Group's financial performance. Excluding these items provides readers with helpful additional information on the performance of the business across periods and against peer companies. It is also consistent with how business performance is reported to the Board and the remuneration targets set by the Company. |
· | Fleet age: net book value weighted age of serialised rental assets. Serialised rental assets constitute the substantial majority of our fleet. |
· | Fleet on rent: quantity measured at original cost of our rental fleet on rent. Fleet on rent has been identified as one of the Group's key performance indicators. |
· | Net debt: net debt is total borrowings (bank, bonds) and lease liabilities less cash balances, as reported. This measure is used to provide an indication of the Group's overall level of indebtedness and is widely used by investors and credit rating agencies. An analysis of net debt is provided in Note 15. |
· | Operating profit and operating profit margin: Operating profit is earnings before interest and tax. A reconciliation of operating profit to profit before tax is shown on the income statement. Operating profit margin is calculated as operating profit divided by revenue. Progression in operating profit margin is an important indicator of the Group's performance. |
· | Organic: organic measures comprise all locations, excluding locations arising from a bolt-on acquisition completed after the start of the comparative financial period. |
· | Rental only revenue: rental revenue excluding loss damage waiver, environmental fees and revenue from rental equipment delivery and collection. |
· | Same-store: same-stores are those locations which were open at the start of the comparative financial period. |
· | Segment profit: operating profit before amortisation and exceptional items by segment. |
· | Suppressed availability: represents the amount on a given date that the asset base exceeds the facility size under the terms of our $4.5bn asset-backed senior bank facility. |