Ashtead Group plc

Good. Good morning, everyone. Slightly smaller crowd than what we had recently. But anyway, welcome to our Q4 and full year results. We'll start by saying that we were really pleased that many of our investors, our analysts, of course, customers and suppliers had the opportunity to interact in person with thousands of our team members during our powerhouse and CMD event that we recently held in Atlanta. you were able to experience firsthand the culture throughout our organization and the commitment not only to the ongoing success and the opportunities ahead that our business has to offer, but also the prioritization we place on the safety and well-being of our people, our customers, and members of the community that we serve. So it's in the spirit of safety first that I'll begin as usual by recognizing our Sunbelt team members listening in today. We recorded the best safety year in our company's history in both our leading metrics and our lagging measures, such as total recordable incident rate and vehicle incident rate. Both of these statistics and our results in them demonstrate a world-class safety culture, which can only be the reality that they are with our team members' daily engagement. Our cultural mindset and determination is not one of reaching a destination, rather achieving milestones. As in the world of safety, complacency is the ultimate threat. So to our team, thank you, thank you, thank you for your efforts throughout the year and for your ongoing commitment to engage for life. Moving into the slides, which I'll preface by saying, will be reasonably brief this morning considering the in-depth update we just delivered during our CMD and our views on our end markets, the opportunities that this business has, and our confidence in our strategic plan are unchanged from what they were, of course, in April. So let's begin with the highlights for the year on slide three. The business delivered another year of record revenue and operating profit, driven by strength in our North American end markets, the ongoing momentum and execution in our business, and the very clear structural progression being realized in our industry. For the year, group revenue and rental revenues increased 12% and 10% respectively, while U.S. revenue improved by 13% and rental revenue by 11%. Group EBITDA improved 11% to $4.9 billion, while adjusted PBT was broadly flat at $2.2 billion, reflecting disproportionately higher depreciation and interest costs, leading to EPS of $3.87. From a capital allocation standpoint and in accordance with our priorities, we invested $4.3 billion in CapEx, which fueled our existing location growth and Greenfield additions with new rental fleet and delivery vehicles. We expanded our North America footprint by 113 locations with 66 through Greenfield openings and a further 47 through Bolton, investing $900 million in 26 targeted acquisitions. Following these investments, our net debt to EBITDA leverage was 1.7 times well within our new long-term range of one to two times. These activities demonstrate our confidence in the ongoing health of our end markets and the fundamental strength in our cash generating growth model. At the end of the year, we completed our Sunbelt 3.0 plan, which I will reflect on only briefly beginning on slide four. Beyond the physical expansion of our network, of general tool and specialty locations, and the advancement of our market share, presence, and cluster levels, 3.0 delivered a remarkable financial performance. This slide is from CMD, which we'll have updated to reflect the results for the full year rather than just the LTM January figures we would have shared at the time. Demonstrated where we were in fiscal year 2021, what our range was at the onset of 3.0 and what we ultimately performed or delivered on. Inside the table to the right there, you'll see we have the checks in terms of significantly meeting our ambitions and a couple of hashes or neutral measures. We grew our revenue by 4 billion in three years. an 18% CAGR. We grew our EBITDA at a 17% CAGR, and our operating profit margin improved by nearly two percentage points, growing EPS again from 219 to 387. The plans for U.S. drop-through and group EBITDA margin were impacted, of course, by the higher than planned level of store additions, where we added on average, as I would have shared in April, two and three-quarter locations per week throughout 3.0, and by the significant inflation which was not foreseen during the plan of or the launch of 3.0. So as I said in April, if I had to pick one or the other over the course of the last three years, growing more than our originally planned ambitions, or having had the 55% drop through, I would take the EPS that was achieved as a result of our growth over the course of 3.0. By any measure, Sunbelt 3.0 was a tremendous success. Of course, none of you came here today or tuned in to hear about the past, rather what's ahead. So thinking about that and contributing, of course, to the performance we did have over 3.0, as it will going forward, is this clear structural progression in our industry, which is now ever present. And with that, we'll turn to slide five. During the Sunbelt 4.0 CMD, there was a lively and somewhat playful debate over who had the best slide among the presenters that were on the stage. And I will confess that my colleagues had some great slides, all of which we put in the appendix of today's presentation. But I still think the slide that really presents the big picture story about this business. The structural growth story that this has been and the structural growth story this will continue to be is really the structural progression that is so evident today. First, rental continues to take share from ownership. This has been happening for decades and there's every reason to believe that this will continue to happen. Second, which is relatively new in terms of how this is expressed or how it's talked about, our customers have built their businesses around relying on us in an essential manner. Rental is essential for our customers to begin to run and to complete their projects across many, many sectors and markets. This is not something we take for granted. Rather, we see it as an honored obligation. It's our role in what we do. And finally, the larger, more capable rental companies have and will get disproportionately larger as we move forward. The outputs of these are as you see. Rental is now core. It's no longer the top-up it would have been once upon a time. There is indeed pricing discipline as a result of the progressed organization of this industry, whereas we believe the ongoing pricing progression is a notable fixture of our future growth, all amounting to a more secular business than what it has been in the past. It doesn't mean that there will be no cyclicality. It simply means that it will be far less cyclical than the business would have been before this structural progression that is so clear today. Moving on to Sunbelt 4.0, the plan itself on slide 6. Here we have our Sunbelt 4.0 as we call it, plan on a page. Don't worry, I'm not going to go through all the details of each of these actionable components. Rather, just put emphasis on what our plan is and focus on these five actionable components. our customer, growth, performance, sustainability, and investment. And as we did throughout 3.0, we will provide you periodically with updates on each of these in terms of how we're progressing against the roadmap that we set out when we were together in Atlanta. In terms of revenues, margins, and capex within the 4.0 design, let's turn to slide seven. We designed Sumbot 4.0 to leverage these structural tailwinds that we've just gone through and execute on each of our actual components to deliver our next phase of growth, setting our sights on achieving these five-year targets, which we reiterate our confidence in today. Execution and achievement of this order will amount to an ever-powerful strategic position and financial position. delivering earnings growth, strong free cash flow, and low leverage, given a significant operational and capital allocation optionality for the benefit of all of our stakeholders. As we were explicit in saying at our CMD, this slide is not guidance, rather a direction of travel within a five-year strategic growth plan. One we are confident is a when, not if scenario. However, in a few minutes, Michael will give our guidance for the current year, not to be confused with our Sunbelt 4.0 targets. So on that note, I'll hand it over to Michael.

Thanks, Brendan, and good morning. The group's results for the year end of April 2024 are shown on slide nine. In North America, the fourth quarter saw growth in our specialty businesses return to levels similar to those that we saw in the first half of the year, while the film and TV business improved throughout the quarter as following the resolution of the accident writer's strike in December last year. As a result, the group increased fourth quarter rental revenue 9% at constant currency and full year rental revenue at 10%. This growth was delivered with strong margins, an EBITDA margin of 45% and an operating profit margin of 26%, delivering an operating profit 5% higher at $2.77 billion. After an interest expense of $545 million, 49% higher than this time last year. which reflects both higher absolute debt levels, but also the high interest rate environment. Adjusted pre-tax profit was slightly lower at $2.23 billion. Adjusted earnings per share were 387 cents. Turning now to the businesses, slide 10 shows the performance in the US. Rental revenue for the year grew at 11%, which was on top of growth of 24% last year. Rental revenue has been driven by a combination of volume growth and rate improvement in end markets which continue to be strong, despite the impacts of inflation and the higher interest rate environment. The rate piece continues to be an important part of the equation, given the costs that we face, whether it be interest costs, as you saw on the previous slide, or the impact of inflation on both our rental fleet and our operating cost base. The total revenue increase of 13% reflects high levels of used equipment sales this year. As we discussed in previous quarters, improvements in the supply chain during the year have enabled us to reduce physical utilization from the record levels that we've seen over the last couple of years, although the absorption of this additional fleet has been slightly lower than we anticipated. We've used this opportunity to take advantage of strong secondhand markets to catch up on delayed disposals and accelerate the disposal of some older fleet where utilization was suboptimal. As we've discussed before, this lower level of utilization is a principle explanation for the depreciation charge increasing at a faster rate than rental revenue. This factor, combined with the increased level of used equipment sales, is a drag on margins in the near term. Fourth quarter drop through of 40% resulted in drop through for the year of 49%. This was after we recognized an additional receivables provision following one of our customers filing for Chapter 11 bankruptcy protection in May due to a contract dispute. While we expect to collect the amounts due to us, we've adopted a cautious approach in preparing the financial statements and made an additional provision. Excluding this late event, fourth quarter drop-through was 57% and four-year drop-through was 52%. This resulted in EBITDA margin of 47% while operating profit was $2.63 billion at a 28% margin and ROI was still healthy at 23%. Excluding the impact of the lower margin used equipment sales and this additional provision, EBITDA margins were slightly better than last year. Turning now to Canada on slide 11. Rental revenue was 10% higher than a year ago at $765 million. The major part of our Canadian business is performing well as it takes advantage of its increasing scale and breadth of product offering as we expand our specialty businesses and look to build out our clusters in that market. The fourth quarter saw increasing activity levels in our film and TV business following the settlement of the strikes in North America in December, with revenues now approaching pre-strike levels. The disconnect between the rental revenue increase and the increased depreciation charge is exaggerated by the film and TV impact, but as in the U.S., physical utilization is lower than we anticipated. Despite these challenges, Canada delivered an EBITDA margin of 40% and generated an operating profit of $138 million at a 15% margin, while ROI is 11%. Excluding the drag from the film and TV business, EBITDA margins were slightly better than last year. Turning now to slide 12, UK rental revenue was 6% higher than a year ago at £590 million, while total revenue increased 3% to £706 million. While we continue to make progress on rental rates, there is more to be done to keep pace with the increase in our cost base, and this is a headwind to improving margins. The disconnect between the rate of revenue growth and depreciation reflects lower utilisation of a slightly larger fleet and also higher non-rental depreciation as we replaced aged vehicles. The UK business delivered an EBITDA margin of 28% and generated an operating profit of £58 million at an 8% margin and ROI was 7%. Slide 13 sets out the group cash flows for the year. This emphasizes the strong cash generation capability of the business. And this cash has been deployed in accordance with our capital allocation policy, with capital expenditure of $4.4 billion, funding principally fleet replacement and growth, and $876 million invested in bolt-ons. The significant increase in capital expenditure results in lower free cash inflow this year of $216 million. Slide 14 updates our net debt position and leverage at the end of April. As expected, overall debt levels increased as we allocated capital in accordance with our capital allocation policy. In addition to the capital expenditure and bolt-ons, we returned $436 million to shareholders through dividends and $108 million through buybacks. As a result, leverage was 1.7 times, excluding the impact of RFS 16. Our expectation continues to be we'll operate within our new target leverage range of one to two times net debt to EBITDA, and generally more towards the middle of that range as we continue to deploy capital in accordance with our policy. As we move into Sunbelt 4.0, we remain committed to a disciplined approach to capital as we drive profitable growth, strong cash generation, and enhance shareholder value. An integral part of this is a strong balance sheet, which gives us a competitive advantage and positions as well to optimize the structural growth opportunities that we see in the market. We accessed the debt markets last July and again in January in order to strengthen that balance sheet position further and ensure we have appropriate financial flexibility to take advantage of these opportunities. Following the notes issues, our debt facilities are committed for an average of six years at a weighted average cost of 5%. Turning now to slide 15 and our initial guidance for revenue, capital expenditure, and free cash flow for 24-25. In the US, consistent with the overall direction of travel we discussed in Atlanta, we're expecting rental revenue growth of 4% to 7%, or in the range of 4% to 7%. This takes account of current activity levels, our view of non-residential construction markets, and a lull in the large project that I referred to earlier. In Canada, we're assuming a rental revenue growth of 15% to 19% as the film and TV business returns to pre-strike revenue levels. While in the UK, we're looking for rental revenue growth of 3% to 6%. From a capital expenditure standpoint, our initial guidance is for $3 to $3.3 billion of capital expenditure, of which $2.3 to $2.6 is on new rental fleet. This level of capital expenditure and anticipated business performance leads to expected free cash flow of around $1.2 billion. And with that, I'll hand back to Brendan.

Thanks, Michael. We'll go on to U.S. trading on slide 17. As you'll see, the U.S. business delivered good rental revenue growth in the quarter of 9%. This growth is on top of very strong growth last year in the fourth quarter of 18%. Specialty worth noting was up 15% in the quarter, back to the levels that we would have experienced in the first half. Overall, for the year, rental revenue growth was a strong 12%. Consistent with what we've said previously and others in the industry have been noting, time utilization throughout the year was below the record levels that we experienced in the previous two years. This continues to reflect the ongoing improvements and today the normalization in the supply chain. Importantly, Rental rates have continued to grow year on year, doing so despite the utilization movements that I've just covered. This is affirmation of the ongoing positive rate dynamics in the industry. Further, there is capacity for us to do better in terms of absorbing more of the fleet investment we made last year in the business as we progress through this year. Moving on to slide 18, we'll cover the outlook for our largest single and market, which is construction. Consistent with our usual reporting of construction activity and forecast, this slide lays out the dodge figures in starts, momentum, and put in place. If I draw your attention to the top right there, the put in place chart, and in particular, the top three rows where you'll see non-res, non-building, and then the two subtotal there to capture both of them. Partially fueling our growth over 3.0 was the significant recovery and indeed record growth and absolute levels in non-res and non-building. If we look at this just from 2021 to 2023, in just two years, those top two lines that I've mentioned, grew from $817 billion to $1.1 trillion. That's 35% or about $300 billion. That's a big, a really big step change in pace and in total. When we look at these forecasts with a 2023 starting point, it goes from a $1.1 trillion actual to a forecast of $1.4 trillion in 2028. So again, that's about $300 billion in growth. However, that's over the course of five years rather than that two-year period that we've just described. So growth is indeed forecasted, and it's favoring a bit more toward the non-building pieces, infrastructure, public works, utilities, et cetera, get a boost. And of course, we continue to see mega projects taking more of the non-res and non-building pot. Overall, the construction environment looks to be positive for the foreseeable future. And as we progress throughout this next year, I think we'll get an even better feel for the growth that we'll extract from the changes to the construction makeup whereas megaprojects and non-building are taking on a larger portion. Let's touch on megaprojects activity in a bit more detail on slide 19. Again, we have a slide here from what we would have shared in April. The last three years were very active, 565 billion in starts, which was 442 projects that started from May of 2021 and were started by April of 24. Further, there's a strong lineup of forecasted mega projects over the next three years, as you'll see there, about 500 projects and 760 billion overall. Will all of these happen that are forecasted? No. Will all these happen on time? No. Will most of these take longer than planned? Yes. Will most of these cost more than what's in the plans? Yes, they will. Will some projects start over the next three years that aren't even in the bucket of 501 projects that's on the list today? Yes, they will. However, despite all that noise from one quarter to the next, or as we put up these tables periodically, The key themes to understand here are, one, this era of megaprojects will carry on for some time. And it's all being influenced by the drivers that we've talked about so many times, deglobalization, technology, legislative acts, et cetera. And two, how essential rental and the related services are for the success of our customers on these projects and for the delivery of these projects overall. Turning now to our non-construction markets on slide 20. This was our latest attempt at the difficult task of trying to scope the huge non-construction opportunity all on one slide. This was better showcased by our Anytown exhibit in Atlanta where we demonstrated just how capable our products and services are at germinating new market segments or those that are less rental penetrated than the better known areas. So many of our product categories have remarkably universal applications, which presents a vast opportunity to progress rental ever more broadly. This can range from temporary HVAC solutions in a hotel to cleaning to inspecting or repairing buildings by utilizing our aerial work platform or the scaffold services that we have. to supplying essential solutions required to put on big live events like the F1 races in Las Vegas and in Miami or the Kentucky Derby, all the way down to the little 10K runs or food festivals, which happen in all of our geographic markets virtually every day of the year. The key to this is that these MRO and live events examples that I've just given and the other non-construction markets illustrated here on the slide produce activities or projects that often happen the same week, the same month, year in and year out, time and time again. And increasingly so, we're there to service them, and the power of Sunbelt, Once our team gets an opportunity to service one of these, very rarely do we lose the opportunity the following year. Events and projects like these very much become annuity opportunities. So these are big end markets with very big opportunities for growth as we move forward. Moving on to Canada on slide 21. Our business in Canada continues to deliver good growth, coming from existing general tool and specialty locations, as well as the green fields and bolt-on activity that we've demonstrated. In the year, we added 17 locations, further contributing to advancing our clusters in line with what the 3.0 plan was. This progress enables us to increase our addressable markets beyond construction, as we have done so well over the years in the U.S., Our runway for growth, improved density, market diversification, and margin improvement remains significant in Canada. And as is the case in the US, rental rates continue to grow year on year, which we expect to continue to be the case as we move forward. We've now experienced a good pickup in activity in the film and TV business, as Michael has talked about. following the end of the strikes in December with activity levels now close to what they were pre-strikes. Turning to the UK on slide 22. The business delivered strong rental-only revenue growth of 9%, driven by market share gains in an end-market composition, which favors our unique positioning through the industry's broadest offering of general tool and specialty products and services, which are, frankly, unmatched in the UK. We simultaneously launched Sunbelt 4.0 in the UK business while we were together in Atlanta, and the team has since carried on town hall meetings throughout the business to add emphasis to each of the actionable components. What we have is a plan that will lead to an ever more diverse customer base and increased TAMs. While bringing greater focus and discipline, necessary levers and actions to deliver sustainable levels of returns and ongoing free cash flow within the UK business. This business has transformed in recent years and Sunbelt 4.0 aims to add the final piece to this transformation and I would say that the team is off to the right start. Let's move on to our initial CapEx outlook for next fiscal year on slide 23. CAPEX for the full year just gone by was 4.3 billion in line with the guidance range that we gave in March. Our guidance for fiscal year 25 is unchanged from the initial guidance. We anticipate rental fleet CAPEX in the US to be between 2 and 2.3 billion. And after our non-rental CAPEX across the group and ongoing rental fleet investment in Canada and the UK, we guide to 3 to 3.3 billion for the group for the full year. This investment will fuel our ongoing ambitious growth plans incumbent in Sunbelt 4.0 and demonstrates our confidence in the current and forecasted demand environment, competitive positioning, and the strong relationships we have with our key suppliers and our business model in general. However, these plans can be flexed as we progress through the year to reflect our latest views on future market conditions. And that's, again, a nice return to have to the more ordinary times, as I mentioned earlier, from a supply constraint standpoint. This leads on to capital allocation on slide 24. Michael or I have covered every capital allocation element for the current year and the framework for the new year throughout this morning's presentation, all incredibly consistent with our long-held policy, and we will continue to allocate capital on this basis throughout 4.0. So to summarize, we'll turn to slide 25. This has been another good year of performance and the full year delivery of Sunbelt 3.0 and positioning for the future as we embark on our execution of Sunbelt 4.0. Throughout which we will extract the benefits of the ongoing structural progression, which we've shared again today. Delivering strong performance through volume, pricing, margin, and return on investment. resulting in an even stronger financial position through earnings growth, strength in free cash flow, and operational and capital allocation optionality greater than any point in our company's history. So for these reasons, we look to the future with confidence. And with that, we'll be happy to take some questions. James, there.