Ashtead Group plc

and welcome to the Ashtab Group PLC full year and Q4 results analyst call. I will shortly be handing you over to Brendan Horgan and Alex Peace, who will take you through today's presentation. There will be an opportunity for Q&A later in the call. For now, over to Brendan Horgan and Alex Peace at Ashtab Group PLC.

Thank you, Operator, and good morning, all. Welcome to the Ashton Group for your results presentation. I'm joined, as usual, this morning by Alex Pease and Will Shaw. But in addition, we have Kevin Powers with us, who joined in May to lead our investor relations for Sundial Rentals when the primary listing moves to the U.S. early next year. Kevin, now, as you would expect, is working very closely with Will and the team. And most of all, we're happy to have him on board. Turning to slide three, I'll begin this morning as I always do by addressing our Sunbelt team members listening in or perhaps more significantly on the recorded call later in the morning U.S. time. Referencing slide three to specifically recognize their leadership and the health and safety of our people, our customers, and the members of the communities that we serve. Your commitment and efforts resulted in a fiscal year with a total recordable incident rate 0.65 and a lost time rate of 0.1. Both of these metrics represent record performance in frequency and severity. This is all achieved through the team's collective and ongoing progress of our Engage for Life program, which is central to the Sunbelt culture. Part of this progression, and importantly, keeping our guards up against complacency, was the holding of our 13th annual safety throughout which every single branch, every day, the week of May 12th, held engaging sessions with all of our team members introducing and reinforcing practices and habits of a world-class safety organization. So to the team, thank you. Thank you for your efforts to date and your ongoing commitment to Engage for Life. Turning now to the highlights for the year on slide four. We delivered strong performance in the year, with group and North America rental revenues up 4%, which was consistent with the guidance that we gave in December. These rental revenues and strong fall through delivered group EBITDA growth of 3% to $5 billion, PBT of $2.1 billion, and earnings per share of $3.70. These are record rental revenues and EBITDA for the year, with group EBITDA also progressing from a margin standpoint to 47%. From a capital allocation standpoint and in accordance with our Sunbelt Ford Auto priorities, we invested $2.4 billion in capex. This fueled existing location fleet needs and greenfield openings. Despite this level of investment, we delivered near record free cash flow of $1.8 billion. This fueled for us record returns to shareholders of $886 million through dividends paid in the year of $544 million and share buybacks of $342 million. Our current $1.5 billion buyback program, which as you know was initiated just in December, we fully intend to complete the balance in the current year. This year's results were achieved as we executed our plans to gain from the clear and ongoing structural momentum in our business and our industry and our ever-strong positioning within it, such as gaining shares, among large strategic customers across many construction and non-construction market segments, including the exciting Mega Projects Arena, which continues to expand in this era of deglobalization, technology-related construction, and infrastructure. This also came from the rapid growth of our newly opened 3.0 location and the everyday winning of new customers, gaining market share through new customers, who seek solutions through a broad range of general and specialist products and services. I'll give some added color on these points in just a moment. This was a year of execution and investment in the ongoing improvement in our business while capturing the available growth from the current market conditions and positioning us for even more growth and success in the future. This leads me nicely into an update on our 4.0 progress of the year And we'll begin that on slide six. We launched Dumbbell 4.0 at our powerhouse event in April of 24. And since then, our team has been laser focused on advancing each of the five actual components, which you know as customer, growth, performance, sustainability, and investment. Over the next few slides, I'll highlight some of the successes we have delivered in the first year and the plans to progress to deliver even more. starting with customer and growth on 5.7. Our customer obsession journey is well underway. During the year, we introduced enhanced training programs touching every one of our team members and recently launched a new customer obsession metric to provide real-time customer feedback to our team members. Illustrating our customer obsession and growth are the 42,000 new customers added in the year, on top of the 118,000 new customers added during 3.0. In total, these market share gains, these customers generated $1.9 billion of rental revenue growth in the year. Contributing to these market share gains and ongoing growth is our ability to leverage our expanded network of locations and density to further advance the cross-selling prowess between our general tool and specialty businesses. We successfully added 61 locations throughout North America in the year, with a nice mix of general tool and specialty businesses. These are helping to drive growth and advance our clustered market strategy by delivering added convenience, depth and breadth of products and solutions. Importantly, growth in the year continued to be supported by rate progression, as we were able to demonstrate to our customers the value of our extensive range of products, services, and value-add solutions. Moving to performance on slide eight. Our performance actual component is designed to leverage our platform, optimize our processes, and energize our technology, all with the output of improved customer experience and operational efficiencies, contributing to margin improvement over the course of Sunbelt 4.0. There were three main areas of focus you'll remember that were embedded in this actionable component. First, leveraging our SG&A through extracting the value from the investments we made during 3.0. In the year, we delivered efficiencies allowing us to reduce G&A costs while still delivering expansion and growth. Second, is the growth and maturation of the 401 locations. These locations which were opened or added during the three years of SubBot 3.0. These locations have grown to over $1.9 billion in revenue, which is 19% higher than last year, and $900 million in EBITDA, while also progressing margin by 280 basis points in a year. These locations are on average only 33 months young, So I think we can agree there's ample runway for growth and covet in these 401 new locations. There's a detailed scorecard I think you'll want to check out of this new cohort in Appendix 543. Thirdly, operational excellence, which is built to leverage our scale and leading technology platforms across our network of locations and cluster markets. Along the areas of opportunity are logistics and repair and maintenance activities, which is worthy of a little bit more detail on slide nine. The logistics associated with delivering rental assets to our customers and executing field service and repair is a part of our operations, a large part of our operations, and therefore a large cost base in which we currently spend roughly $1 billion a year. Operationally, we've been moving to a market-based logistics model, or internally we refer to the MLO, where our drivers, trucks, and dispatchers serve all locations in the cluster rather than being allocated to individual locations, as was historically the case. By the end of the year, we had embedded envelope operations in 16 of our clustered markets and have seen immediate improvement in metrics in these clusters. For example, in the four envelopes that were in place for the full year, Our days to pick up, which is the time it takes for us to pick up equipment after, of course, a customer is called off, was reduced by over 25%, and the spend on third-party haulers was reduced by 40%. We continue to advance our MLO expansion with a playbook to reach in excess of 30 of our top 50 markets by the end of this year, 26. This transition to MLOs has been supported by our full launch of DDoS 4.0, our proprietary Vehicle Dispatch Optimization System, which has been reimagined and repowered to improve availability, utilization, efficiency, and user and customer experience resulted in improved order capture through a clear path to say yes to our customers. Every single branch and MLO are now using this new system and beginning to realize its early benefits. Finally, touch on sustainability and investment on slide 10. On the environmental front, we're on track to meet our 2034 target to reduce our scope 1 and scope 2 carbon intensity by 50%, with a number of ongoing initiatives around our transportation fleet and how we source electricity for our locations. And on investment, we allocated capital dynamically throughout the year to maintain our fleet, fuel growth categories, and greenfield openings, and bolt-on acquisitions, and have executed returns to shareholders through increased dividends and share buybacks. So in summary, Ford Auto is off to a strong start with further exciting progress expected in this new fiscal year. So with that, I'll hand over to Alex to cover the financials in more detail, but also give our guidance for the year. Alex? Thanks, Brendan, and good morning, Edwin.

So before I get into the numbers, I thought it would be helpful to give you a brief update on the relisting process. with over 96% voting in favor of the resolutions. We're making good progress on the U.S. gas conversion and on Sarbanes-Oxley compliance, which means we're still on track to implement the move of the primary listing to the New York Stock Exchange in Q1 of calendar year 2026. We're also beginning to make plans for an investor event in New York shortly thereafter, which we'll be providing more details on as we progress through this year. turning now to the full year results themselves on slide 13. Firstly, as you may have noticed this morning, we've reassessed the basis of our segmental disclosures. The group operates under two primary geographic regions, reflecting its North American activities and assets and its U.K. activities and assets. The North American business is farther split operationally as general school and specialty, reflecting the nature of its products and services and the management structure of the group. As such, the group has identified its reportable operating segments as North America General Tools, North America Specialty, and the UK, which we believe reflects better the basis on which we review the performance of the business internally and aligns with the basis of our strategic growth plan, Sunbelt 4.0. Prior year comparative information has been restated to reflect these updated segments. To help you navigate your way through this change, we've included the full year results under the old segmentation on slide 31 in the appendix. Group rental revenue increased 4%. Total revenue was down 1%, reflecting the planned lower level of used equipment sales. Our growth was delivered with strong margins, an adjusted EBITDA margin of 47%, and an operating profit margin of 25%. As expected, After an interest expense of $559 million, adjusted pre-tax profit was 5% lower than last year at $2.1 billion. The higher interest expense reflects principally higher average debt levels. As explained at Q3 and in the press release, we are adjusting out non-recurring costs associated with the move of the group's primary listing to the U.S. These amounted to $15.4 million in the year. We will continue to track these as we move through the new fiscal year. Adjusted earnings per share were 370 cents. On slide 14, we've shown the group performance adjusting out the impact of the sales of used equipment, which were significantly lower in fiscal year 25 versus fiscal year 24. As you can see, Now turning to the businesses, slide 15 shows the performance for North American General Tool. Rental revenue for the year grew by 1% to $5.9 billion. This has been driven by a combination of volume and rate improvement, demonstrating the power of our diversified business model as well as our disciplined execution. As Brendan will discuss later, strengthened megaprojects have mitigated ongoing moderating conditions in the local commercial construction market. sales than last year, which I referred to earlier. As Brendan has already explained, we have been laser focused on the performance actual component of Sunbelt 4.0, and the team is making strong progress, driving value from our significant investments in logistics, telematics, maintenance execution, and we're already seeing the results. The team is also demonstrating strong cost control discipline with operating costs around 5% below prior year. These actions resulted in an EBITDA margin of 54%. After the impact of lower gains on disposals and the higher depreciation charge, operating profit was $2.1 billion compared to $2.4 billion last year. Operating margins were 33% and ROI was 20%. Now turning to North American specialty on slide 16. Rental revenue was 8% higher than a year ago at $3.3 billion. As with GT, This has been driven by a combination of volume and rate improvement. Rental revenue growth in the fourth quarter was impacted by the inclusion of both film and TV and oil and gas, which were both down significantly in the quarter. We took similar actions taken to control cost and specialty, and this has contributed to an even down margin of 48% compared to 44% last year. After the impact of the higher depreciation charge on the larger fleet, Operating profit was approximately $1.1 billion at a 33% margin, and ROI was 30%, clearly illustrating the higher returns achievable in the specialty business. As specialty becomes a larger part of the overall business portfolio, it should help drive up overall group returns in the future. Turning now to the UK on slide 17, and please note that all of these numbers are now in U.S. dollars. UK rent In line with the 4.0 strategy, the focus in the U.K. remains on delivering operational efficiency and long-term sustainable returns in the business. While we continue to make progress on rental rates, these need to progress farther. As a result, the U.K. business delivered an EBITDA margin of 26% and generated an operating profit of $69 million at an 8% margin, an ROI of 7%. Across all three segments, our results have shown the resilience of our business model and our disciplined execution despite challenging market conditions. Slide 18 sets out the group's cash flows for the year. This emphasizes the strong cash generation capability of the business across a wide range of market conditions. We maintain a strong focus on working capital management, which has resulted in cash flow from operations of $5 billion in the 12 months, which is a 99% conversion from EBITDA. As many are aware, two of the key attributes of our business model is both the resilience across a range of market conditions, which I mentioned previously, and the agility with which we can control capital spending, reallocating capital dynamically to maximize value. some pockets of growth. This strategy generated near-record free cash flow for the year of $1.8 billion, despite some of the transitory softness we've discussed. This ended up significantly higher than our guidance of around $1.4 billion, principally because of the timing of fleet landings at the end of the year where payment will be made in fiscal year 2026. While we've reduced our capital expenditure, this has not been at the expense of the future. We've executed on our fleet disposal plan as intended. We've isolated areas of the business with lower demand and dynamically reallocated our spending to growth markets, such as power and HVAC, and specialty businesses more broadly, as well as the megaprojects arena where demand is higher. We're also using our improved logistics and telematics system to proactively reposition our existing fleet to higher growth markets. One example of this is utilizing Lake Pass Center Network to fund more than 60% of the OECD required in our greenfield locations. This is how we can continue to grow even when our absolute spending in capital dollars is lower. Turning now to slide 19 and our guidance for revenue, capital expenditure, and free cash flow for fiscal year 2026. We expect group rental revenue growth to be between flat and plus 4% reflected of our end markets. Growth capital expenditure is planned to be in the range of $1.8 to $2.2 billion, and I will give a little bit more detail on this in just a moment. Finally, based on this guidance, we expect free cash flow to be between $2.0 and $2.3 billion, which again reflects the timing and payment of fleet landings around fiscal year end. On slide 20, I've broken down that CapEx guidance. you'll see that we're planning rental fleet capex as follows. For North America, between $1.3 and $1.6 billion, and for the U.K., between $110 and $130 million. For North America's general tool in the U.K., these are largely replacement requirements. While in North America's specialty, we're still funding pockets of growth. In all cases, there is a focus on improving time utilization and taking advantage of the latent capacity in the fleet that we already own. It's also worth noting that lead times with our key suppliers are relatively short at the moment, so there's considerable flexibility in these plans as market conditions improve. And so with that, I'll hand the call back over to Brendan. Thanks, Alex. I'll now move on to some operational details, beginning with North America on slide 22.