Sunbelt Rentals posted $1,287.3 million in revenue in its fiscal third quarter ended Jan. 31, compared to $1,392.4 million in the same period last year, a 7.5-percent decline. Sunbelt Canada posted Cdn. $136.4 million compared to $120.5 $120.5 million a year ago, a 13.1-percent increase, helped along by the additional revenue from the acquired William F. White Co. The company’s U.K. division, A-Plant, posted £171.5 million in the fiscal third compared to £109.2 million, a 57-percent increase. Overall, the whole company posted £1,206 million compared to £1,247 million a year ago, a 3.3-percent decline.
For the first nine months of fiscal 2021, Sunbelt U.S. reported $4,034.2 million, compared to $4,279.9 million in the same period a year ago, a 5.7-percent decline. Sunbelt Canada increased 11.2 percent from CDN $320.8 million to $356.6 million. U.K. revenue was £444.1 million compared to £365.1 million, a 21.6-percent jump.
“We have delivered another strong quarter of market outperformance across the business contributing to rental revenue down only 3 percent in the nine months at constant exchange rates,” said Brendan Horgan, Ashtead plc chief executive. “This performance illustrates the successful execution of our long-term strategy, which we embarked upon after the last recession, 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. This has been demonstrated over the last year as the group has responded to the challenges arising as a result of the pandemic. The actions we took to optimize cash flow during this period resulted in record free cash flow for the nine months of £1,059 million (2020: £363 million) contributing to reduced leverage of 1.6 times compared to 1.9 times at year end, towards the lower end of our target range.
“We expect capital expenditure for the full year to be at the upper end of our previous guidance (approximately £700 million). Looking forward to 2021/22, we expect to return to growth and anticipate gross capital expenditure of £1.3 billion to 1.5 billion, which should enable mid-single digit revenue growth in the U.S. The strength of our business model and balance sheet positions the group well in markets that are likely to remain uncertain. With our businesses performing well, we now expect full year results ahead of our previous expectations. The benefit we derive from the diversity of our products, services and end markets, coupled with ongoing structural change, enables the board to look to the future with confidence.”
“While trading volumes were lower than last year as a result of the pandemic, this has been mitigated, in part, by emergency response efforts throughout our business but particularly within our specialty businesses,” said the company in a statement. “The degree of impact on volume varied significantly across our geographical markets and correlated to the severity of infection rates and associated market level restrictions. Activity levels have increased consistently through the period such that fleet on rent is now broadly in line with prior year in the US, slightly behind in Canada due to the recent lockdown in Ontario and higher in the U.K.
“As a result of these market dynamics, nine-month rental only revenue in the U.S. was only 5 percent lower than last year. Within this overall performance, our general tool business was 7-percent lower than last year (third quarter 4-percent lower than prior year), while the specialty businesses demonstrated the benefit of a broader range of products and end markets with rental only revenue 10 percent higher than last year. This contributed to group rental revenue in the nine months 3 percent lower than the prior year at constant exchange rates.”
The company provided more explanation of its performance.
“Although COVID-19 has influenced the group’s short-term planning and actions, our strategy remains unchanged with long-term growth being driven by organic investment (same-store and greenfield) supplemented by bolt-on acquisitions. In the U.S., we experienced a 5 percent rental only revenue decline, while in the UK and Canada, rental only revenue increased by 3 percent and 19 percent respectively, reflecting the benefit of the work for the Department of Health in the U.K. and the acquisition of William F. White in Canada.
“In the U.S., a moderate rental only revenue decline represents a strong market outperformance, demonstrating the benefit of our strategy of growing our specialty business and broadening our end markets. In the nine months, our specialty business grew 10 percent while the general tool business declined 7 percent. In the second quarter, our revenue was affected by our hurricane response efforts which we estimate contributed $35 million to $40 million of revenue, with little carry-over into the third quarter. U.S. total revenue, including new and used equipment, merchandise and consumable sales, decreased 6 percent to $4,034 million.
“The U.K. business generated rental only revenue of £265 million, an increase of 3 percent on the prior year on a comparable basis (2020: £256m). This was a strong performance as the breadth of our product offering and commitment of our team members enabled us to provide essential support to the Department of Health in its COVID-19 response efforts. Total revenue increased 22 percent to £444 million (2020: £365m) reflecting the higher level of ancillary and sales revenue associated with the work for the Department of Health, which accounted for [about] 25 percent of U.K. revenue.
Canada’s rental only revenue increased 19 percent on a reported basis. Excluding the impact of the acquisition of William F. White, rental only revenue of the legacy business decreased 8 percent. Total Canadian revenue was CDN $357 million (2020: C$321m).
“In all our markets we took action to reduce operating costs and eliminate discretionary expenditure. However, we believe there continue to be good opportunities to grow the business and we are focused on disciplined investment to position the group for the next phase of growth. 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 the condition of our rental fleet. As a result, in the U.S., 74 percent of the rental revenue decline dropped through to EBITDA. This contributed to a reported EBITDA margin of 49 percent (2020: 51 percent) and a 17 percent decrease in operating profit to $1,105 million (2020: $1,339 million) at a margin of 27 percent (2020: 31 percent). Excluding the impact of used equipment sales, the EBITDA margin would have been only 1 percent lower than last year.
“Canada is in a growth phase as we invest to expand its network and develop the business. The most recent acquisition was WFW, which serves the film and TV production industries. This was a drag on Canadian performance in the period as production activity in Canada ceased in March and only restarted in September. However, while WFW contributed virtually no revenue in the first quarter, we retained all the team members and infrastructure of the business, and it bounced back strongly from September onwards such that November saw record revenue for the business. The legacy Canadian business, excluding WFW, increased its EBITDA margin to 44 percent (2020: 41 percent) and generated an operating profit of C$52 million (2020: C$57m) at a 19 percent margin (2020: 19 percent). This performance reflects a strong focus on operational efficiency.”
After the close of the reporting period, Sunbelt U.S. acquired the business and assets of DC Rentals LLC, a general equipment business in Connecticut. Craft Partners, managed by Dan Conway, represented DC Rentals in the transaction.
Based in Fort Mill, S.C., Sunbelt Rentals is No. 2 on the RER 100.
