Sunbelt Rentals Holdings, Inc. · NYSE:SUNB
Sunbelt Rentals — Ashtead Group — H1 2024 Earnings Presentation
40 slides from Sunbelt Rentals's earnings presentation, Dec 5, 2023
Slide 1: Half Year Results
AMBITION WITH PURPOSE HALF YEAR RESULTS 5 December 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 first half revenue and profit in robust end markets ▪ Group revenue 16% ahead of last year (rental revenue: 13%); US revenue up 18% (rental revenue up 14%) ▪ 15% increase in EBITDA to $2,583m, profit before tax¹ up 5% at $1,312m (2022: $1,243m) and EPS¹ up 6% to 225.8ȼ (2022: 212
Slide 4: 2023/24 Outlook
2023/24 OUTLOOK Q1 guidance Current guidance Rental revenue1 - US 13 to 16% 11 to 13% - Canada2 15 to 20% 14 to 16% - UK 6 to 9% 6 to 9% - Group 13 to 16% 11 to 13% 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. $300m
Slide 5: Financial Review
FINANCIAL REVIEW MICHAEL PRATT 5 Half year results ¦ 31 October 2023
Slide 6: Group
GROUP $m 2023 2022 Change1 Revenue 5,573 4,796 16% ‐ of which rental 4,960 4,383 13% Operating costs (2,990) (2,550) 17% EBITDA 2,583 2,246 15% Depreciation (1,020) (849) 20% Operating profit 1,563 1,397 12% Net interest (251) (154) 64% Profit before amortisation and tax 1,312 1,243 5% Earnings per
Slide 7: US
US $m 2023 2022 Change Revenue 4,792 4,069 18% ‐ of which rental 4,299 3,774 14% Operating costs (2,461) (2,071) 19% EBITDA 2,331 1,998 17% Depreciation (850) (715) 19% Operating profit 1,481 1,283 15% Margins ‐ EBITDA 48.7% 49.1% ‐ Operating profit 30.9% 31.5% Return on investment 26.1% 26.5% The r
Slide 8: Canada
CANADA C$m 2023 2022 Change Revenue 446 389 15% ‐ of which rental 382 341 12% Operating costs (256) (220) 17% EBITDA 190 169 13% Depreciation (110) (77) 42% Operating profit 80 92 -12% Margins ‐ EBITDA 42.7% 43.5% ‐ Operating profit 18.0% 23.6% Return on investment 14.3% 19.3% The results in the tab
Slide 9: UK
UK £m 2023 2022 Change Revenue 359 361 -1% ‐ of which rental 301 293 3% Operating costs (257) (251) 2% EBITDA 102 110 -7% Depreciation (69) (62) 12% Operating profit 33 48 -32% Margins ‐ EBITDA 28.5% 30.4% ‐ Operating profit 9.1% 13.2% Return on investment 6.5% 11.8% The results in the table above a
Slide 10: Cash Flow
CASH FLOW Half year LTM October $m 2023 2022 2023 EBITDA before exceptional items 2,583 2,246 4,749 Cash conversion ratio1 86% 79% 95% Cash inflow from operations2 2,228 1,778 4,523 Replacement and non-rental capital expenditure (1,458) (807) (2,542) Rental equipment and other disposal proceeds rece
Slide 11: Net Debt
NET DEBT Leverage (excluding impact of IFRS 16) $m 2023 2022 3.0 Opening net debt 8,960 7,160 2.5 2.5 Change from cash flows 1,476 1,019 2.1 Translation impact (44) (76) 2.0 1.9 2.0 1.9 1.8 1.8 1.8 1.8 Debt acquired 97 89 1.7 1.6 1.5 New lease liabilities 152 220 1.5 Deferred debt raising cost amort
Slide 12: Operational Review
OPERATIONAL REVIEW BRENDAN HORGAN 12 Half year results ¦ 31 October 2023
Slide 13: US Trading
US TRADING Rental revenue1 FY23 FY24 ▪ Strong growth on top of Q2 +24% last year Q1 Q2 Q3 Q4 FY Q1 Q2 YTD ▪ Ongoing strength in performance evidence of General Tool +23% +21% +21% +19% +21% +14% +13% +13% robust end markets and demand characteristics Specialty +39% +31% +31% +17% +29% +17% +14% +15%
Slide 14: US Non-Construction
US NON-CONSTRUCTION ▪ Specialty business activity serves as a proxy for non-construction market strength MAINTENANCE, REPAIR AND OPERATIONS OF THE GEOGRAPHICAL MARKETS WE SERVE ▪ Continuous need for maintenance, repair and operations in our markets ▪ $340bn facility maintenance market; 100bn sq. ft.
Slide 15: US Construction Outlook
US CONSTRUCTION OUTLOOK Dodge construction starts 2021 2022 2023 2024 2025 2026 2027 2028 350 Indexed: 2000=100 Construction put in place ($bn) 300 Non-residential 522 580 694 717 718 749 784 810 250 Non-building 301 309 384 444 462 481 488 488 200 Construction (excl. resi) 823 889 1,078 1,161 1,180
Slide 16: Drivers of Recent and Forecast Starts
DRIVERS OF RECENT AND FORECAST 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. Private constructi
Slide 17: 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 positioned for ongoing success in this landscape: ▪ Increased rental penetration across broad product range required to complete sophisticated projects of this scale ▪ Hea
Slide 18: 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 19: UK Trading
UK TRADING ▪ Rental only revenue up 11%, driven by market share gains LARGE PROJECT LANDSCAPE Current live large projects: Future projected large projects ▪ Market conditions softening but support from infrastructure, (FY24 and beyond): ▪ HS2 Phase 1 (£44bn) industrial and large projects ▪ Transmiss
Slide 20: Sunbelt 3.0: Ahead of Plan
SUNBELT 3.0: AHEAD OF PLAN 1 Actionable GROW GENERAL TOOL Progress component & ADVANCE OUR CLUSTERS ▪ $2.5bn of capital invested in the business, of which $2.2bn invested in rental assets 2 SPECIALTY AMPLIFY ▪ Opened 45 greenfield locations in North America, of which 35 were Specialty 3 TE
Slide 21: Summary
SUMMARY ▪ Record first half and good momentum, with strong positions in supportive end markets ▪ Onshoring, advancing technology and manufacturing modernisation are drivers of unprecedented levels of construction ▪ Legislative Acts add to the mega project landscape and enhance already strong activit
Slide 22: Appendices
APPENDICES 22 Half year results ¦ 31 October 2023
Slide 23: Divisional Performance: Second Quarter Results
DIVISIONAL PERFORMANCE SECOND QUARTER RESULTS Revenue EBITDA Profit 2023 2022 Change1 2023 2022 Change1 2023 2022 Change1 Canada (C$m) 233 212 10% 97 93 4% 40 53 -24% UK (£m) 181 180 1% 52 53 -1% 17 22 -24% US 2,480 2,170 14% 1,227 1,082 13% 789 716 10% Canada ($m) 172 160 7% 71 70 2% 29 40 -26% UK
Slide 24: Divisional Performance: Last Twelve Months
DIVISIONAL PERFORMANCE LAST TWELVE MONTHS Revenue EBITDA Profit 2023 2022 Change1 2023 2022 Change1 2023 2022 Change1 Canada (C$m) 885 705 26% 358 303 18% 156 154 1% UK (£m) 682 719 -5% 184 209 -12% 50 81 -38% US 8,945 7,422 21% 4,288 3,552 21% 2,663 2,166 23% Canada ($m) 656 547 20% 266 235 13% 116
Slide 25: Group Fleet Plan
GROUP FLEET PLAN 2022 2023 2024 2024 Actual Actual Guidance1 Q2 actual (YTD) US ($m) - rental fleet 1,625 2,878 2,900 – 3,200 1,918 - non-rental fleet 321 436 500 304 1,946 3,314 3,400 – 3,700 2,222 Canada (C$m) - rental fleet 201 254 290 – 320 164 - non-rental fleet 39 56 100 18 240 310 390 – 420 1
Slide 26: Capital Allocation
CAPITAL ALLOCATION CONSISTENTLY APPLIED POLICY CONTINUES CLEAR PRIORITIES APPLICATION Organic fleet growth ▪ Same-store ▪ $2.5bn invested in the business ▪ Greenfields ▪ 45 greenfields opened in North America Bolt-on acquisitions ▪ $705m spent on bolt-ons, with 29 locations added in North America ▪
Slide 27: 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 ▪ Borrowing facilities committed for average of six years at a $2,000m weighted average cost of 5% $1,000m $m FY24 FY25 FY26 Aug Aug May Nov FY31
Slide 28: Our Business and Industry Has Changed Fundamentally
OUR BUSINESS AND INDUSTRY HAS CHANGED FUNDAMENTALLY STRUCTURAL CHANGE HAS PROGRESSED 30.0% 20.0% 10.0% 0.0% Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21 Apr-22 Apr-23 -10.0% -20.0% GFC: 30% rental Ten years of growth revenue decline CAGR: 18% peak
Slide 29: US Construction Outlook
US CONSTRUCTION OUTLOOK US RESIDENTIAL BUILDING STARTS 2,500 ▪ Single family housing starts forecasted to slow to c. 2017 levels driven by mortgage rate increase and supply chain constraints ▪ This despite the US demographic trends putting housing in an 2,000 undersupply position 1,500 1,035 1,626 9
Slide 30: Market Dynamics Enhance Structural Opportunity
MARKET DYNAMICS ENHANCE STRUCTURAL OPPORTUNITY Dynamic Anticipated duration Current environment ▪ Supply chains improved from most SUPPLY CHAIN constrained period THESE DYNAMICS ARE CONSTRAINTS New normal ▪ Long range fleet planning critical to ensure supply meets needs ALL TAILWINDS TO Longer lead
Slide 31: US Fleet Profile
US FLEET PROFILE ▪ Smooth fleet profile ▪ Benefits of prolonged cycle and our growth strategy ▪ Strong position providing optionality through the cycle ▪ Flexibility to turn replacement into growth and vice versa ▪ Strengthens partnership with suppliers through predictability 31 Half year results ¦
Slide 32: Cash Flow Funds All Fleet Investment
CASH FLOW FUNDS ALL FLEET INVESTMENT LTM ($m) 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 Oct-23 EBITDA before exceptionals 4,749 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% 4
Slide 33: $1,803m of Availability at 31 October 2023
$1,803M OF AVAILABILITY AT 31 OCTOBER 2023 Book value Borrowing base Senior debt $14,419m (April 23: $12,611m) $1,682m $11,103m Calculation: (April 23: $9,693m) Inventory – 50% of book $1,376m value Receivables – 85% of net eligible receivables $11,823m Fleet and vehicles – lower of 85% of net appra
Slide 34: 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 35: 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 35 Half year results ¦ 31 October 2023
Slide 36: 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 37: 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 38: 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 39: 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 39 Half year results ¦ 31 October 2023
Slide 40: 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