Half year highlights
· Group rental revenue up 6%2; revenue up 2%2; US rental revenue up 5%; revenue up 1%
· Operating profit of $1,484m (2023: $1,502m), with $77m lower gains on disposal
· Adjusted3 profit before taxation of $1,255m (2023: $1,312m)
· Adjusted3 earnings per share of 213.6¢ (2023: 225.8¢)
· $1.7bn of capital invested in the business (2023: $2.5bn)
· Free cash inflow1 of $420m (2023: outflow of $355m)
· Net debt to EBITDA leverage2 of 1.7 times (2023: 1.8 times)
· Interim dividend of 36¢ per share (2023: 15.75¢); rebalanced interim/final split
· Commencing a share buyback programme of up to $1.5bn over the next 18 months
· Proposed move to a US primary listing
· Full-year guidance revised to reflect latest expectations
· Our outlook is positive and we look to Sunbelt 4.0 and the future with confidence
Ashtead's chief executive, Brendan Horgan, commented:
We launched our Sunbelt 4.0 strategic growth plan in April and the business is focused on executing against our five actionable components: Customer, Growth, Performance, Sustainability and Investment. I want to thank all our team members for the hard work and professionalism they exhibit every day as we deliver on this strategy and our commitment to provide exceptional service to our customers, safely.
Group rental revenue increased 6% and revenue was up 2% in the half year. In North America, the strength of mega projects and hurricane response efforts have more than offset the lower activity levels in local commercial construction markets. These local construction markets have been affected by the prolonged higher interest rate environment. However, underlying demand continues to be strong and we expect this segment to recover as interest rates stabilise. As expected, lower used equipment sales and a higher increase in depreciation and interest costs, resulted in adjusted profit before taxation of $1,255m (2023: $1,312m).
The investments in and expansion of the business over Sunbelt 3.0 and into Sunbelt 4.0 are enabling us to take advantage of the diverse opportunities that we see while maintaining discipline and balance sheet strength that affords us considerable flexibility and optionality. In the period we invested $1.7bn in capital across existing locations and greenfields and $53m on two bolt-ons, adding a total of 47 new locations in North America. We now expect capital expenditure for the year to be $550m lower than our previous guidance at the mid-point, as we flex our plans to reflect market conditions. Illustrating the cash generative nature of our model, this lower level of capital expenditure means our guidance for free cash flow increases to c.$1.4bn. Accordingly, with this strong free cash flow and leverage towards the middle of our target range of 1.0 to 2.0 times net debt to EBITDA, we are commencing a share buyback programme of up to $1.5bn over the next 18 months.
Principally as a result of local commercial construction market dynamics in the US, we now guide to Group rental revenue growth for the full year in the range of 3-5% and hence, full year profit lower than our previous expectations. We remain in a position of strength, with the operational flexibility and financial capacity to capitalise on the ongoing structural growth opportunities we see for the business and enhance returns to shareholders as we follow our Sunbelt 4.0 plan and the Board looks to the future with confidence.
