Sunbelt Rentals posted $5,417.5 million in revenue in the United States for its full year fiscal 2021 ended April 30, compared to $5,489.9 million in fiscal 2020, a 1.3-percent decline. Its revenue increased in Canada, from CDN $420.7 million in fiscal 2020 to $500.9 million in fiscal 2021, a 19.1-percent hike.
In the United Kingdom, Sunbelt U.K. posted £635.1 million compared to £469.2 million a year ago, a 35.4-percent increase.
All three countries combined totaled £5,031.1 million (about U.S. $7,099.3 million) compared to £5,053.6 million a year ago, essentially flat, with a decline of less than half a percent.
In the fourth quarter, the three countries combined totaled £1.271 billion (about U.S. $1,793 billion) compared to £1.125 billion in the fourth quarter of fiscal 2020, a 13-percent increase. Rental revenue increased from £1.039 billion to £1.098 billion, a 5.7-percent hike.
“We returned to growth in the fourth quarter with rental revenue up 15 percent over last year and up 14 percent when compared with the fourth quarter of 2018/19, both at constant exchange rates,” said Ashtead chief executive Brendan Horgan. “This completes a year of market outperformance across the business with full year rental revenue up 1 percent at constant exchange rates.
“Our performance this year illustrates the benefits of our long-term strategy to broaden and diversify our end markets and strengthen our balance sheet. This has enabled us to capitalize on our increasing scale while, at the same time, maintaining the business’ agility. The last year has proven the strength in our business model during a difficult period in the economic cycle, through responding in the manner we did to the challenges arising as a result of the pandemic. Our performance during this period resulted in record free cash flow for the 12 months of £1,382 million (2020: £792 million) contributing to reduced leverage of 1.4 times compared to 1.9 times a year ago and adjusted pre-tax profit of £998 million, only 2 percent lower than a year ago on a constant currency basis.
“We have shown that our business can perform in both good times and more challenging ones. We enter the new financial year with clear momentum, strong positions in all our markets, supported by high quality fleet, a strong financial position and our exciting new Sunbelt 3.0 strategic plan, positioning us well to respond to market conditions and capitalize on opportunities. We will invest to drive long-term sustainable growth and returns and strengthen the business. The benefit we derive from the diversity of our products, services and end markets, our investment in technology and ongoing structural change, enhanced by the environmental and social aspects of ESG, enables the board to look to the future with confidence.”
Sunbelt’s general tool business was 4 percent lower than last year (fourth quarter 7 percent higher than prior year), while the specialty businesses demonstrated the benefit of a broader range of products and end markets with rental only revenue 13 percent higher than last year. This contributed to group rental revenue for the year 1 percent higher than the prior year at constant exchange rates.
Group revenue of £5,031 million was 3 percent higher than the prior year at constant exchange rates (2020: £5,054 million). Ashtead said its performance relative to the prior year improved as it progressed through the year, with all its geographies delivering year-over-year growth in the fourth quarter. The lower activity levels, particularly in the first half of the year, had a significant impact on profit in the year as a large proportion of its costs are fixed in the short term. This profit impact reflects, in part, the company’s decision to not make team members redundant as a result of COVID-19 and ensure it had a committed workforce ready to take advantage of improving market conditions, when the recovery came. As a result, adjusted profit before tax for the year was £998 million (2020: £1,061 million).
Although COVID-19 impacted Ashtead’s performance adversely, it highlighted the benefits of its strategy to broaden and diversify its end markets, which has contributed to this resilient performance. This has provided the foundation for the launch of the next phase of the company’s strategy, Sunbelt 3.0, again underpinned with long-term growth being driven by organic investment (same-store and greenfield) supplemented by bolt-on acquisitions.
In the U.S., rental only revenue of $3,976 million was only 2 percent lower than the prior year (2020: $4,065 million), representing a strong market outperformance and demonstrating the benefits of Sunbelt’s strategy of growing its specialty businesses and broadening its end markets. In the year, specialty businesses grew 13 percent while the general tool business declined 4 percent. U.S. total revenue, including new and used equipment, merchandize and consumable sales, decreased 1 percent to $5,418 million (2020: $5,490 million).
The U.K. business generated rental only revenue of £362 million, an increase of 10 percent on a comparable basis (2020: £349 million). This was a strong performance as the breadth of its product offering enabled it to provide essential support to the Department of Health in its COVID-19 response efforts. Total revenue increased 35 percent to £635 million (2020: £469 million) reflecting the higher level of ancillary and sales revenue associated with the work for the Department of Health, which accounted for approximately 29 percent of U.K. revenue in the year.
Canada’s rental only revenue increased 27 percent on a reported basis. Excluding the contribution from William F. White, rental only revenue of the legacy business declined only 2 percent and returned to growth in the fourth quarter (18 percent).
In all its markets, Ashtead took action to reduce operating costs and eliminate discretionary expenditure. Its broad customer base ensures there continues to be good opportunities to grow the business and the company focused on disciplined investment as the group returned to growth towards the end of the year.
“We took early decisions not to make any team members redundant as a result of COVID-19 or seek assistance from any government support programs but to continue investment in the business, including our technology platform and our rental fleet,” the company said. “As a result, in the U.S., 50 percent of the rental revenue decline dropped through to EBITDA. This contributed to a reported EBITDA margin of 49 percent (2020: 50 percent) and a 7 percent decrease in operating profit to $1,445 million (2020: $1,560 million) at a margin of 27 percent (2020: 28 percent).”
Last financial year Ashtead launched Project Unify in the U.K. with the objective of improving operational efficiency and returns in the business. This has resulted in significant investment in the operational infrastructure of the business which, when combined with the impact of COVID-19, contributed to an EBITDA margin of 30 percent (2020: 32 percent). Operating profit of £61 million (2020: £36 million) at a margin of 10 percent (2020: 8 percent) reflected these factors.
Canada is in a growth phase as Sunbelt invests to expand its network and develop the business. In December 2019, it acquired William F. White, which serves the film and TV production industries. While WFW contributed virtually no revenue in the first quarter, it bounced back strongly from September onwards generating record levels of revenue for the business and an operating profit of C$29 million at a 23-percent margin.
The legacy Canadian business, excluding WFW, increased its EBITDA margin to 43 percent (2020: 38 percent) and generated an operating profit of CDN $69 million (2020: CDN $56 million) at an 18-percent margin (2020: 15 percent). This performance reflects a strong focus on operational efficiency and the cost base.
Sunbelt Rentals, No.2 on the RER 100, is based in Fort Mill, S.C. Ashtead plc is headquartered in London.
