Sunbelt Rentals Holdings, Inc. · NYSE:SUNB
Sunbelt Rentals — Ashtead Group — FY2024 Earnings Presentation
41 slides from Sunbelt Rentals's earnings presentation, Jun 18, 2024
Slide 1: Full Year Results
FULL YEAR RESULTS 18 June 2024
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 these prospective investors in the secondary markets about the Group forward-looking statements are discussed in the Principal Risks and does not constitute an offer of sec
Slide 3: Highlights
HIGHLIGHTS ▪ Group revenue 12% ahead of last year (rental revenue: 10%); US revenue up 13% (rental revenue up 11%) ▪ 11% increase in EBITDA to $4,893m, profit before tax¹ of $2,230m (2023: $2,273m) and EPS¹ of 386.5ȼ (2023: 388.5ȼ) ▪ $4.3bn of capital invested in the business (2023: $3.8bn) ▪ 113 lo
Slide 4: Sunbelt 3.0 Group Financial Performance
SUNBELT 3.0 GROUP FINANCIAL PERFORMANCE 2020/21 2023/24 RANGE1 2023/24 CAGR ACHIEVEMENT Rental revenue ($m) 5,902 7,700 – 7,900 9,630 18% Total revenue ($m) 6,639 8,500 – 8,800 10,859 18% EBITDA ($m) 3,037 4,000 – 4,200 4,893 17% Operating profit2 ($m) 1,579 2,200 – 2,500 2,775 21% US drop through 5
Slide 5: Realisation of Structural Progression
REALISATION OF STRUCTURAL PROGRESSION STRUCTURAL CHANGE OUTPUTS Shift from ownership to rental • Rental has become core rather than top up • Big getting bigger in a growing market Rental increasingly essential for • Larger and more diversified addressable market customer success • Pricing discipline
Slide 6: Sunbelt 4.0 Actionable Components
SUNBELT 4.0 5 ACTIONABLE COMPONENTS UNDERPINNED BY STRONG FOUNDATIONAL ELEMENTS Actionable Components: CUSTOMER GROWTH PERFORMANCE SUSTAINABILITY INVESTMENT 1 2 3 4 5 Elevate our Grow General Tool Operate with Advance our position Disciplined capital obsession with and Specialty through greater effi
Slide 7: Sunbelt 4.0 Direction of Travel for the Next Five Years
SUNBELT 4.0 DIRECTION OF TRAVEL FOR THE NEXT FIVE YEARS ASSUMPTIONS Based on five-year organic rental revenue CAGR assumptions ▪ North America rental revenue growth of ≥1.5 times rate of the rental market US 6 - 9% Canada 9 - 12% ▪ Anticipates US construction forecast to broadly reflect those herein
Slide 8: Financial Review
FINANCIAL REVIEW MICHAEL PRATT 8 Full year results | 30 April 2024
Slide 9: Group
GROUP $m 2024 2023 Change1 Revenue 10,859 9,667 12% ‐ of which rental 9,630 8,698 10% Operating costs (5,966) (5,255) 13% EBITDA 4,893 4,412 11% Depreciation (2,118) (1,772) 19% Operating profit 2,775 2,640 5% Net interest (545) (367) 49% Profit before amortisation and tax 2,230 2,273 -2% Earnings p
Slide 10: US
US $m 2024 2023 Change Revenue 9,307 8,222 13% ‐ of which rental 8,321 7,503 11% Operating costs (4,901) (4,267) 15% EBITDA 4,406 3,955 11% Depreciation (1,773) (1,490) 19% Operating profit 2,633 2,465 7% Margins ‐ EBITDA 47.3% 48.1% ‐ Operating profit 28.3% 30.0% Return on investment 23.0% 27.3% Th
Slide 11: Canada
CANADA C$m 2024 2023 Change Revenue 897 827 8% ‐ of which rental 765 696 10% Operating costs (534) (490) 9% EBITDA 363 337 8% Depreciation (225) (170) 33% Operating profit 138 167 -18% Margins ‐ EBITDA 40.5% 40.7% ‐ Operating profit 15.4% 20.2% Return on investment 10.9% 18.1% The results in the tab
Slide 12: UK
UK £m 2024 2023 Change Revenue 706 685 3% ‐ of which rental 590 559 6% Operating costs (507) (493) 3% EBITDA 199 192 3% Depreciation (141) (127) 11% Operating profit 58 65 -11% Margins ‐ EBITDA 28.2% 28.1% ‐ Operating profit 8.2% 9.5% Return on investment 7.2% 8.9% The results in the table above are
Slide 13: Cashflow
CASHFLOW $m 2024 2023 EBITDA before exceptional items 4,893 4,412 Cash conversion ratio1 93% 92% Cash inflow from operations2 4,541 4,074 Replacement and non-rental capital expenditure (2,807) (1,891) Rental equipment and other disposal proceeds received 879 615 Interest and tax paid (759) (628) Cas
Slide 14: Net Debt
NET DEBT Leverage (excluding impact of IFRS 16) $m 2024 2023 2.5 2.4 Opening net debt 8,960 7,160 Change from cash flows 1,217 1,229 2.0 2.0 1.9 1.8 1.8 1.8 Translation impact (10) (38) 1.7 1.7 1.7 1.6 1.6 Debt acquired 154 228 1.5 1.4 1.5 New lease liabilities 325 374 Deferred debt raising cost amo
Slide 15: 2024/25 Outlook
2024/25 OUTLOOK Guidance Rental revenue1 - US 4 to 7% - Canada 15 to 19% - UK 3 to 6% - Group 5 to 8% Capital expenditure (gross)2 $3.0 to 3.3bn - of which, rental fleet is: $2.3 to 2.6bn Free cash flow2 c. $1.2bn 1 Represents year-over-year rental revenue growth at constant currency 2 Current guida
Slide 16: Operational Review
OPERATIONAL REVIEW BRENDAN HORGAN 16 Full year results | 30 April 2024
Slide 17: US Trading
US TRADING Rental revenue1 ▪ Strong growth of +12% on top of +23% last FY23 FY24 year Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY ▪ General Tool growth of +11% on top of +21% General tool +23% +21% +21% +19% +21% +14% +13% +8% +7% +11% last year; recent quarters growth in line with Specialty +39% +31% +31% +17% +
Slide 18: US Construction Outlook
US CONSTRUCTION OUTLOOK 2021 2022 2023 2024 2025 2026 2027 2028 Construction put in place ($bn) Dodge construction starts 350 Indexed: 2000=100 Non-residential 542 608 744 783 810 839 876 908 300 Non-building 275 314 363 423 469 487 498 501 250 Construction (excl. resi) 817 922 1,107 1,206 1,279 1,3
Slide 19: Mega Projects Endure
MEGA PROJECTS ENDURE A KEY FEATURE OF THE CONSTRUCTION LANDSCAPE ONGOING AND PLANNED PROJECTS FROM MAY 2022 THROUGH APRIL 20271 PLANNED MEGA PROJECT VALUE $565bn $759bn 442 projects 501 projects FY22-24 FY25-27 • Mega projects typically take ~3 years to complete • FY25-27 value will likely increase
Slide 20: Major Non-Construction End Markets
MAJOR NON-CONSTRUCTION END MARKETS INCREASINGLY LARGE AND RESILIENT WITH VAST OPPORTUNITY FOR GROWTH MAINTENANCE, ENTERTAINMENT EMERGENCY STATE & LOCAL AGRICULTURE REPAIR & SPECIAL EVENTS RESPONSE GOVERNMENT Annual operating budget for crop and & OPERATIONS & RESTORATION livestock production Highly
Slide 21: Canada Trading
CANADA TRADING Fleet on rent (excluding Film & TV) ▪ Sunbelt 3.0 has created a strong foundation for Sunbelt 4.0 with 5 of the top 10 markets clustered (13 in total) and increasing business maturity delivering strong margins and returns ▪ Added 17 locations through greenfields and bolt-ons ▪ Acquisi
Slide 22: UK Trading
UK TRADING ▪ Rental only revenue up 9%, driven by market share gains Sunbelt 4.0 ▪ Market conditions softening but support from infrastructure, industrial and larger projects ▪ Diversify the customer base ▪ Unique range of general and specialty products in the UK ▪ Broaden the total addressable mark
Slide 23: Group Fleet Plan
GROUP FLEET PLAN 2023 2024 2025 Actual Actual Guidance1 US ($m) - rental fleet 2,878 3,170 2,000 – 2,300 - non-rental fleet 436 577 550 3,314 3,747 2,550 – 2,850 Canada (C$m) - rental fleet 254 318 230 – 250 - non-rental fleet 56 87 100 310 405 330 – 350 UK (£m) - rental fleet 161 174 100 – 120 - no
Slide 24: Capital Allocation
CAPITAL ALLOCATION CONSISTENTLY APPLIED POLICY CONTINUES CLEAR PRIORITIES APPLICATION Organic fleet growth ▪ Same-store ▪ $4.3bn invested in the business ▪ Greenfields ▪ 66 greenfields opened in North America Bolt-on acquisitions ▪ $0.9bn spent on bolt-ons, with 47 locations added in North America ▪
Slide 25: In Conclusion
IN CONCLUSION ▪ We are positioned to execute and realise the benefits of ongoing structural change present in this industry ▪ Our strategic growth plan is designed to deliver a period of strong performance through growth in volume, pricing, margin, and return on investment ▪ An ever-strengthening fi
Slide 26: Appendicies
APPENDICIES 26 Full year results | 30 April 2024
Slide 27: Divisional Performance: Fourth Quarter Results
DIVISIONAL PERFORMANCE FOURTH QUARTER RESULTS Revenue EBITDA Profit 2024 2023 Change1 2024 2023 Change1 2024 2023 Change1 Canada (C$m) 221 218 1% 91 82 10% 32 36 -11% UK (£m) 182 163 12% 53 42 25% 17 10 72% US 2,235 2,083 7% 1,014 968 5% 552 575 -4% Canada ($m) 163 161 1% 67 61 10% 24 26 -11% UK ($m
Slide 28: Divisional Performance: Last Twelve Months
DIVISIONAL PERFORMANCE LAST TWELVE MONTHS Revenue EBITDA Profit 2024 2023 Change1 2024 2023 Change1 2024 2023 Change1 Canada (C$m) 897 827 8% 363 337 8% 138 167 -18% UK (£m) 706 685 3% 199 192 3% 58 65 -11% US 9,307 8,222 13% 4,406 3,955 11% 2,633 2,465 7% Canada ($m) 664 622 7% 269 254 6% 102 126 -
Slide 29: A Broad and Diverse Customer Base
A BROAD AND DIVERSE CUSTOMER BASE POSITIONED TO INCREASE SHARE FROM THE LARGEST TO THE SMALLEST CUSTOMERS US CREDIT MEDIAN CUSTOMER $63 AVG. LINES Dollars spent with REVENUE 79% DECILE CUSTOMER OF BUSINESS CUSTOMER PERSONA Speciality, Revenue for comes every COUNT ($’ 000) USED $100 spent with from
Slide 30: Clear Opportunity to Increase Density in Our Markets
CLEAR OPPORTUNITY TO INCREASE DENSITY IN OUR MARKETS FLEET DENSITY 1 FLORIDA OEC PER CAPITA • 3rd largest US rental market $ OEC per capita $69 • 99 locations 0–10 • Our fleet density continues 10–20 to grow 20–30 30–40 40–50 2 2 ONTARIO 50–60 OEC PER CAPITA • Largest Canadian rental $39 >60 market
Slide 31: A Benefit of Structural Progression
A BENEFIT OF STRUCTURAL PROGRESSION RENTAL RATE DISCIPLINE AND PROGRESSION Major events 2008–09 2014–16 2020–21 2022–23 GREAT FINANCIAL OIL & GAS CRISIS COVID-19 PANDEMIC LAST 6 QUARTERS CRISIS Structural progression • Top 3 rental companies • Industry consolidation and big getting bigger • Top 3 re
Slide 32: Rate Methodology
RATE METHODOLOGY Inflationary Costs WAGES (W) ASSET LIFECYCLE (AL) GENERAL INFLATION (G) Dynamic We expect skilled trade Lifecycle inflation drives Affects costs such as wages to outpace general increasing average fleet vehicle running, facility, inflation for the foreseeable cost, resulting in part
Slide 33: Specialty Market Sizing, Rental Penetration & Share
SPECIALTY MARKET SIZING, RENTAL PENETRATION & SHARE REVENUE IS EXPECTED TO GROW BY ~$2 BILLION IN 4.0 WITH AMPLE OPPORTUNITY BEYOND CURRENT, PROJECTED AND ILLUSTRATIVE RENTAL REVENUE BY BUSINESS LINE ($M) LTM 31 January 2024 Line of business 4.0 growth Incremental illustrative Sunbelt potential tota
Slide 34: Our Pathway to Net Zero
OUR PATHWAY TO NET ZERO SCOPE 1 AND 2 50 2050 2024 Increasing use of HVO across 2030> West Coast Only EV purchased MEDIUM & HEAVY DUTY LIGHT DUTY NEARLY ALL ON-ROAD 2022 2026–2027 2035 FLEET IS EMISSION FREE EV trials – ~10% 2nd Near 100% EV 1st gen gen in fleet in fleet LIGHT DUTY LIGHT DUTY LIGHT
Slide 35: 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 35 Full year results |
Slide 36: Cash Flow Funds All Fleet Investment
CASH FLOW FUNDS ALL FLEET INVESTMENT ($m) 2024 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 EBITDA before exceptionals 4,893 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 45% 46% 45% 46%
Slide 37: Robust and Flexible Debt Structure
ROBUST AND FLEXIBLE DEBT STRUCTURE Debt Maturity $6,000m Undrawn ▪ In July, issued $750m 5.950% notes due October 2033 Drawn $5,000m Notes $4,000m ▪ In January, issued $850m 5.800% notes due April 2034 $3,000m $2,000m ▪ Borrowing facilities committed for average of six years at a weighted average co
Slide 38: $2,771m of Availability at 30 April 2024
$2,771M OF AVAILABILITY AT 30 APRIL 2024 Book value Borrowing base Senior debt $14,974m (April 23: $12,611m) $1,528m $11,466m Calculation: (April 23: $9,693m) Inventory – 50% of book $1,206m value Receivables – 85% of net eligible receivables $12,290m Fleet and vehicles – lower of 85% of net apprais
Slide 39: 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 $750m senior notes 2.450% A
Slide 40: The Rental Industry Landscape
THE RENTAL INDUSTRY LANDSCAPE THE BIG GETTING BIGGER IN A GROWING MARKET NA RENTAL MARKET SIZE1 ($BN) MARKET SHARE BREAKDOWN1,2 94 2023 Future 93.5 11% 77 20%+ 77.0 15% 56.5 42% Two or 57 All three have others 50%+ of the 4% market 4% One 8% or two 8% others 21% 20% 2018 2023 2027 Sunbelt URI Herc T
Slide 41: Important Not to 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 19 19 20 19 50 46 47 47 47 47 46 450 19 18 45 45 46 45 18 17 18 18 45 42 388 387 16 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