Sunbelt Rentals U.S. posted $4,988.9 million in revenue in full year fiscal 2019 compared to $4,153.1 million in full year fiscal 2018, a 20.1-percent year-over-year increase. Sunbelt Canada recorded CDN $333 million compared to $223.4 million a year ago, a 54-percent increase.

Ashtead’s chief executive, Brendan Horgan, commented: “The Group delivered a strong quarter with good performance across the business. As a result, Group rental revenue increased 18% for the year and underlying pre-tax profit increased 17% to £1,110m, both at constant exchange rates.

We continue to experience strong end markets in North America and are executing well on our strategy of organic growth supplemented by targeted bolt-on acquisitions. We invested £1.6bn in capital and a further £622m on bolt-on acquisitions in the period, which has added 146 locations across the Group. This investment reflects the structural growth opportunity that we continue to see in the business as we broaden our product offering, geographic reach and end markets, thus increasing market share and diversifying our business.

We remain focused on responsible growth. Our increasing scale and strong margins are delivering good earnings growth and significant free cash flow generation. This provides significant operational and financial flexibility, enabling us to invest in the long-term structural growth opportunity and enhance returns to shareholders, while maintaining leverage within our target range of 1.5 to 2.0 times net debt to EBITDA. We have spent £675m under our share buyback programme announced in December 2017, which has now concluded, and expect to spend a minimum of £500m on share buybacks in 2019/20.

Our business continues to perform well in supportive end markets. Looking forward, we anticipate a similar level of capital expenditure in 2019/20, consistent with our strategic plan. So, with our business performing well and a strong balance sheet to support our plans, the Board continues to look to the medium term with confidence.”

Sunbelt US’s revenue growth demonstrates the successful execution of our long-term structural growth strategy. We continue to capitalise on the opportunity presented by our markets through a combination of organic growth (same-store growth and greenfields) and bolt-ons as we expand our geographic footprint and our specialty businesses. We added 123 new stores in the US in the year, the majority of which were specialty locations.

Rental only revenue growth was 20% in strong end markets. This growth was driven by increased fleet on rent year-over-year with yield flat. While revenue was impacted by our involvement in the clean-up efforts following hurricanes Florence and Michael, it was much less than last year with estimated incremental rental revenue of $30-35m (2018: c. $100m). Average physical utilisation for the year was 71% (2018: 72%). Sunbelt US’s total revenue, including new and used equipment, merchandise and consumable sales, increased 20% to $4,989m (2018: $4,153m).

A-Plant generated rental only revenue of £357m, up 4% on the prior year (2018: £344m). This was driven by increased fleet on rent with a 1% improvement in yield, mainly due to product mix. The rate environment in the UK market remains competitive. A-Plant’s total revenue increased 1% to £475m (2018: £472m).

In Canada, the acquisitions of CRS and Voisin’s are distortive to year-over-year comparisons as they have tripled the size of the Sunbelt Canada business. On a pro forma basis, Canadian rental only revenue increased 18%. Sunbelt Canada’s total revenue was C$344m (2018: C$223m).

We continue to focus on operational efficiency as we look to maintain or improve margins. In Sunbelt US, 49% of revenue growth dropped through to EBITDA. The strength of our mature stores’ incremental margin is reflected in the fact that this was achieved despite the drag effect of 185 greenfield openings and acquired stores in the last two years. This resulted in an EBITDA margin of 49% (2018: 50%) and contributed to a 19% increase in operating profit to $1,545m (2018: $1,293m) at a margin of 31% (2018: 31%).

The UK market remains competitive and after a period of sustained growth for the business, the focus is now on operational efficiency and improving returns. Drop-through of 52% contributed to an EBITDA margin of 35% (2018: 35%) while operating profit of £62m (2018: £70m) at a margin of 13% (2018: 15%) reflected the higher depreciation charge of a larger average fleet.

Sunbelt Canada is in a growth phase as it invests to expand its network and develop the business. Significant growth has been achieved while delivering a 36% EBITDA margin and generating an operating profit of C$55m (2018: C$28m) at a margin of 16% (2018: 13%). We continue to expect the Canadian business to generate EBITDA and operating profit margins of around 40% and 20% respectively in the near term.

Reflecting the strong performance of the divisions, Group underlying operating profit increased to £1,264m (2018: £1,037m), up 19% at constant exchange rates. Net financing costs increased to £153m (2018: £110m) reflecting a higher average interest rate and higher average debt levels.

As a result, Group profit before amortisation of intangibles, exceptional items and taxation was £1,110m (2018: £927m). After a tax charge of 25% (2018: 32%) of the underlying pre-tax profit, underlying earnings per share increased 33% at constant currency to 174.2p (2018: 127.5p).

The reduction in the Group’s underlying tax charge from 32% to 25% reflects the reduction in the US federal rate of tax from 35% to 21% with effect from 1 January 2018, following the enactment of the Tax Cuts and Jobs Act of 2017. The underlying cash tax charge was 5%. We anticipate the cash tax charge to increase to c.10% in 2019/20. Statutory profit before tax was £1,059m (2018: £862m). This is after amortisation of £51m (2018: £43m) and, in the prior year, an exceptional charge of £22m. The exceptional tax credit of £12m (2018: £401m) relates to a tax credit of £12m (2018: £13m) in relation to the amortisation of intangibles. In addition, the prior year includes a £7m tax credit in relation to exceptional net financing costs and a £381m credit as a result of the change in the US federal tax rate. As a result, basic earnings per share were 166.1p (2018: 195.3p).

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