Sunbelt Rentals Holdings, Inc. · NYSE:SUNB
Sunbelt Rentals — Ashtead Group — Q1 2024 Earnings Presentation
38 slides from Sunbelt Rentals's earnings presentation, Sep 5, 2023
Slide 1: Ambition with Purpose: First Quarter Results
AMBITION WITH PURPOSE FIRST QUARTER RESULTS 5 September 2023
Slide 2: Legal Notice
LEGAL NOTICE This presentation has been prepared to inform investors and Some of the factors which may adversely impact some of prospective investors in the secondary markets about the these forward-looking statements are discussed in the Group and does not constitute an offer of securities or Princ
Slide 3: Highlights
HIGHLIGHTS ▪ Record Q1 revenue and profit in robust end markets ▪ Group revenue 19% ahead of last year (rental revenue: +14%); US revenue up 22% (rental revenue up 16%) ▪ Profit before tax¹ up 11% and EPS¹ up 14% to 107.5ȼ (2022: 94.4ȼ) ▪ $1,132m of capital invested in the business (2022: $699m) ▪ 4
Slide 4: 2023/24 Outlook
2023/24 OUTLOOK Previous guidance Current guidance Rental revenue1 - US 13 to 16% 13 to 16% - Canada2 15 to 20% 15 to 20% - UK 10 to 13% 6 to 9% - Group 13 to 16% 13 to 16% Capital expenditure (gross)3 $3.9 – 4.3bn $3.9 – 4.3bn - of which, rental fleet is: $3.3 – 3.6bn $3.3 – 3.6bn Free cash flow3 c
Slide 5: Financial Review
FINANCIAL REVIEW MICHAEL PRATT 5 First quarter results ¦ 31 July 2023
Slide 6: Group
GROUP $m 2023 2022 Change1 Revenue 2,696 2,259 19% ‐ of which rental 2,376 2,075 14% Operating costs (1,467) (1,220) 20% EBITDA 1,229 1,039 18% Depreciation (496) (417) 19% Operating profit 733 622 18% Net interest (118) (67) 77% Profit before amortisation and tax 615 555 11% Earnings per share 107.
Slide 7: US
US $m 2023 2022 Change Revenue 2,311 1,899 22% ‐ of which rental 2,048 1,768 16% Operating costs (1,206) (983) 23% EBITDA 1,105 916 21% Depreciation (413) (349) 18% Operating profit 692 567 22% Margins ‐ EBITDA 47.8% 48.2% ‐ Operating profit 29.9% 29.9% Return on investment 27.1% 25.6% The results i
Slide 8: Canada
CANADA C$m 2023 2022 Change Revenue 213 176 21% ‐ of which rental 183 159 15% Operating costs (120) (100) 19% EBITDA 93 76 23% Depreciation (53) (38) 41% Operating profit 40 38 5% Margins ‐ EBITDA 43.8% 43.1% ‐ Operating profit 18.9% 21.8% Return on investment 16.9% 19.6% The results in the table ab
Slide 9: UK
UK £m 2023 2022 Change Revenue 178 182 -2% ‐ of which rental 150 149 1% Operating costs (128) (125) 2% EBITDA 50 57 -12% Depreciation (34) (31) 9% Operating profit 16 26 -39% Margins ‐ EBITDA 28.1% 31.4% ‐ Operating profit 8.9% 14.2% Return on investment 7.4% 12.4% The results in the table above are
Slide 10: Net Debt
NET DEBT Leverage (excluding impact of IFRS 16) $m 2023 2022 2.5 2.4 Opening net debt 8,960 7,160 2.1 Change from cash flows 506 424 2.0 1.9 1.9 1.8 1.8 Translation impact 37 (12) 1.7 1.7 1.6 1.6 1.6 Debt acquired 78 44 1.5 1.3 New lease liabilities 99 98 Deferred debt raising cost amortisation (1)
Slide 11: Robust and Flexible Debt Structure
ROBUST AND FLEXIBLE DEBT STRUCTURE Debt Maturity $6,000m Undrawn $5,000m Drawn Notes ▪ In July, issued $750m 5.950% notes due October 2033 $4,000m $3,000m ▪ Subsequent to notes issue, borrowing facilities committed $2,000m for average of six years at a weighted average cost of 5% $1,000m $m FY24 FY2
Slide 12: Operational Review
OPERATIONAL REVIEW BRENDAN HORGAN 12 First quarter results ¦ 31 July 2023
Slide 13: US Trading
US TRADING Rental revenue1 FY23 FY24 ▪ Strong growth on top of Q1 +27% last year Q1 Q2 Q3 Q4 FY Q1 ▪ Ongoing strength in performance evidence of General Tool +23% +21% +21% +19% +21% +14% robust end markets and demand characteristics Specialty +39% +31% +31% +17% +29% +17% Total +27% +24% +23% +18%
Slide 14: US Construction Outlook
US CONSTRUCTION OUTLOOK Dodge construction starts 2020 2021 2022 2023 2024 2025 2026 2027 350 Indexed: 2000=100 Construction put in place ($bn) 300 Non-residential 556 522 580 760 767 772 815 847 250 Non-building 300 301 309 375 423 443 460 466 200 Construction (excl. resi) 856 823 889 1,135 1,190 1
Slide 15: Drivers of Unprecedented Levels of Construction Starts
DRIVERS OF UNPRECEDENTED LEVELS OF CONSTRUCTION STARTS ADVANCING TECHNOLOGY AND ONSHORING / RESHORING LEGISLATIVE ACTS MANUFACTURING MODERNISATION ▪ Establishing or reestablishing US based ▪ Ongoing growth in technology related ▪ Infrastructure, Chips and Science, and manufacturing and production. P
Slide 16: Mega Project Landscape: Both Private and Federal Funding
MEGA PROJECT LANDSCAPE: BOTH PRIVATE AND FEDERAL FUNDING Started and planned projects from May 2021 through April 2024 Sunbelt poised for success in this landscape: ▪ Increased rental penetration across broad product range required to complete sophisticated projects of this scale ▪ Health, safety an
Slide 17: Canada Trading
CANADA TRADING Fleet on rent (excluding Film & TV) ▪ Sunbelt 3.0 plan progressing well with 5 of the top 10 markets clustered (13 in total) and increasing business maturity delivering strong margins and returns ▪ Amplification of Specialty business progressing well. Acquisition of Loue Froid, enhanc
Slide 18: UK Trading
UK TRADING ▪ Strong performance with rental only revenue up 15%, driven by LARGE PROJECT LANDSCAPE market share gains Current live large projects: Future projected large projects ▪ HS2 Phase 1 (£44bn) (FY24 and beyond): ▪ Market conditions softening but support from infrastructure, ▪ Transmission se
Slide 19: Sunbelt 3.0: Ahead of Plan
SUNBELT 3.0: AHEAD OF PLAN 1 Actionable GROW GENERAL TOOL Progress component & ADVANCE OUR CLUSTERS ▪ $1.1bn of capital invested in the business, of which $1.0bn invested in rental assets 2 SPECIALTY AMPLIFY ▪ Opened 24 greenfield locations in North America, of which 20 were Specialty 3 TE
Slide 20: Summary
SUMMARY ▪ Clear momentum, with strong positions in supportive end markets ▪ Onshoring, advancing technology and manufacturing modernisation are drivers of unprecedented levels of construction ▪ Legislative Acts add to the mega project landscape and enhance already strong activity levels ▪ Market dyn
Slide 21: Appendices
APPENDICES 21 First quarter results ¦ 31 July 2023
Slide 22: Divisional Performance: First Quarter Results
DIVISIONAL PERFORMANCE FIRST QUARTER RESULTS Revenue EBITDA Profit 2023 2022 Change1 2023 2022 Change1 2023 2022 Change1 Canada (C$m) 213 176 21% 93 76 23% 40 38 5% UK (£m) 178 182 -2% 50 57 -12% 16 26 -39% US 2,311 1,899 22% 1,105 916 21% 692 567 22% Canada ($m) 160 137 16% 70 59 18% 30 30 1% UK ($
Slide 23: Divisional Performance: Last Twelve Months
DIVISIONAL PERFORMANCE LAST TWELVE MONTHS Revenue EBITDA Profit 2023 2022 Change1 2023 2022 Change1 2023 2022 Change1 Canada (C$m) 864 654 32% 354 291 22% 169 147 15% UK (£m) 681 717 -5% 185 210 -12% 55 81 -32% US 8,634 6,911 25% 4,144 3,312 25% 2,589 1,987 30% Canada ($m) 645 515 25% 264 229 15% 12
Slide 24: Group Fleet Plan
GROUP FLEET PLAN 2022 2023 2024 2024 Actual Actual Guidance1 Q1 Actual US ($m) - rental fleet 1,625 2,878 2,900 – 3,200 863 - non-rental fleet 321 436 500 111 1,946 3,314 3,400 – 3,700 974 Canada (C$m) - rental fleet 201 254 290 – 320 72 - non-rental fleet 39 56 100 12 240 310 390 – 420 84 UK (£m) -
Slide 25: Capital Allocation
CAPITAL ALLOCATION CONSISTENTLY APPLIED POLICY CONTINUES CLEAR PRIORITIES APPLICATION Organic fleet growth ▪ Same-store ▪ $1.1bn invested in the business ▪ Greenfields ▪ 24 greenfields opened in North America Bolt-on acquisitions ▪ $361m spent on bolt-ons, with 16 locations added in North America ▪
Slide 26: Our Business and Industry Has Changed Fundamentally
OUR BUSINESS AND INDUSTRY HAS CHANGED FUNDAMENTALLY STRUCTURAL CHANGE HAS PROGRESSED 30.0% 20.0% 10.0% 0.0% Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21 Apr-22 Apr-23 -10.0% GFC: 30% rental -20.0% Ten years of growth revenue decline CAGR: 18% peak
Slide 27: US Construction Outlook: Residential Building Starts
US CONSTRUCTION OUTLOOK US RESIDENTIAL BUILDING STARTS 2,500 ▪ Single family housing starts forecasted to slow to c. 2017 levels driven by mortgage rate increase and supply chain constraints ▪ This despite the US demographic trends putting housing in an undersupply position 2,000 1,500 1,626 1,035 9
Slide 28: Market Dynamics Enhance Structural Opportunity
MARKET DYNAMICS ENHANCE STRUCTURAL OPPORTUNITY Dynamic Anticipated duration Current environment ▪ Supply chains improved from most constrained SUPPLY CHAIN period THESE DYNAMICS ARE CONSTRAINTS New normal ▪ Long range fleet planning critical to ensure supply meets needs ALL TAILWINDS TO Longer lead
Slide 29: US Fleet Profile
US FLEET PROFILE ▪ Smooth fleet profile ▪ Benefits of prolonged cycle and our growth strategy ▪ Strong position providing optionality through the cycle ▪ Flexibility to turn replacement into growth and vice versa ▪ Strengthens partnership with suppliers through predictability 29 First quarter result
Slide 30: Cash Flow Funds All Fleet Investment
CASH FLOW FUNDS ALL FLEET INVESTMENT LTM ($m) 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 Jul-23 EBITDA before exceptionals 4,602 4,412 3,609 3,037 3,008 2,748 2,319 1,947 1,769 1,452 1,098 817 607 444 409 597 730 593 399 316 EBITDA margin 46% 46% 4
Slide 31: $2,740m of Availability at 31 July 2023
$2,740M OF AVAILABILITY AT 31 JULY 2023 Book value Borrowing base Senior debt $13,480m (April 23: $12,611m) $1,588m $10,356m Calculation: (April 23: $9,693m) Inventory – 50% of book $1,306m value Receivables – 85% of net eligible receivables $11,042m Fleet and vehicles – lower of 85% of net appraise
Slide 32: Debt and Covenants
DEBT AND COVENANTS Facility Interest rate Maturity $4.5bn first lien revolver SOFR / SONIA + 125-150 bps August 2026 $550m senior notes 1.500% August 2026 $600m senior notes 4.375% August 2027 $600m senior notes 4.000% May 2028 Debt $600m senior notes 4.250% November 2029 $750m senior notes 2.450% A
Slide 33: Location Growth During 3.0
LOCATION GROWTH DURING 3.0 CLEARLY DEFINED April 2021* 936 Sunbelt 3.0 +298 April 2024 1,234 April 2021 Sunbelt 3.0 – May 2021 – April 2024 * Excludes two Sunbelt 3.0 locations opened in April 2021 33 First quarter results ¦ 31 July 2023
Slide 34: Benefits of Clustered Markets Are Demonstrable
BENEFITS OF CLUSTERED MARKETS ARE DEMONSTRABLE THE STRATEGY REVENUE COMPOSITION CLUSTER VS. NON-CLUSTER Comparison to similar sized Metric / KPI non-clustered markets1 30% Active customer count 2.2x customers 70% Revenue 15% more revenue per customer Broaden customer base Clustered DMAs Time utiliza
Slide 35: Specialty Market Sizing, Rental Penetration & Share
SPECIALTY MARKET SIZING, RENTAL PENETRATION & SHARE REVENUE WILL GROW BY $1BN IN 3.0 WITH AMPLE OPPORTUNITY BEYOND CURRENT, PROJECTED AND ILLUSTRATIVE RENTAL BY BUSINESS LINE, $M LTM January 2021 total rental 10% RENTAL MARKET Incremental projected FY24 total rental via existing locations and greenf
Slide 36: Environmental Roadmap
ENVIRONMENTAL ROADMAP INITIATIVES ON THE PATH TO 35X30 NEAR TERM: 3.0 PERIOD MEDIUM LONG TERM TARGET: 15% BY 2024 TERM GOAL: 35% BY 2030 Retrofit of heating and hot Migration to alternative 1 water infrastructure energy for HGVs/tractors 2 Step change in 3 service/sales vehicle All new vehicles use
Slide 37: US Market Share
US MARKET SHARE 2010 2023 Future 5% 4% 3% 17% 20%+ 3% 6% 37% 13% All others 13% 4% One or two 66% others 8% 21% United Rentals Sunbelt RSC Herc Rentals Top 4-10 Top 11-100 Other Two or three have 50%+ of the market 37 First quarter results ¦ 31 July 2023
Slide 38: Important to Not Lose Sight of Through the Cycle Key Metrics
IMPORTANT TO NOT LOSE SIGHT OF THROUGH THE CYCLE KEY METRICS Group RoI Group EBITDA margin Group adjusted EPS % % ȼ 19 19 20 19 50 46 47 47 47 47 46 450 19 18 45 45 46 18 17 18 18 45 42 388 16 400 15 15 38 38 16 15 40 14 35 35 350 33 34 307 14 13 35 12 30 30 300 12 30 250 227222 10 10 25 219 200 171