Sunbelt Rentals Holdings, Inc. · NYSE:SUNB
Sunbelt Rentals — Ashtead Group — Q2 2017/18 Earnings Presentation
45 slides from Sunbelt Rentals's earnings presentation, Dec 12, 2017
Slide 1: Making it happen
Making it happen 12 December 2017
Slide 2: Legal Notice
LEGAL NOTICE This presentation has been prepared to inform Some of the factors which may adversely impact investors and prospective investors in the secondary some of these forward looking statements are markets about the Group and does not constitute an discussed in the Principal Risks and Uncertai
Slide 3: Highlights
HIGHLIGHTS Another encouraging quarter with underlying growth in revenue and profitability Growth supplemented by initial hurricane clear up Strong margins and cash generation a key feature of our performance Announcing a share buyback of at least £500m and up to £1bn to be executed over the
Slide 4: Suzanne Wood
Suzanne Wood 4 Second quarter results ¦ 31 October 2017
Slide 5: Q2 Group Revenue and Profit
Q2 GROUP REVENUE AND PROFIT Q2 (£m) 2017 2016 Change1 Revenue 1,019 845 22% - of which rental 945 784 22% Operating costs (516) (428) 22% EBITDA 503 417 22% Depreciation (178) (149) 21% Operating profit 325 268 22% Net interest (27) (26) 5% Profit before amortisation, exceptional items and tax 298 2
Slide 6: H1 Group Revenue and Profit
H1 GROUP REVENUE AND PROFIT H1 (£m) 2017 2016 Change1 Revenue 1,899 1,552 19% - of which rental 1,774 1,445 20% Operating costs (965) (795) 19% EBITDA 934 757 20% Depreciation (343) (283) 18% Operating profit 591 474 21% Net interest (54) (48) 9% Profit before amortisation, exceptional items and tax
Slide 7: H1 Sunbelt US Revenue and Profit
H1 SUNBELT US REVENUE AND PROFIT H1 ($m) 2017 2016 Change Revenue 2,084 1,787 17% - of which rental 1,974 1,669 18% Operating costs (1,007) (875) 15% EBITDA 1,077 912 18% Depreciation (374) (320) 16% Operating profit 703 592 19% Margins - EBITDA 52% 51% - Operating profit 34% 33% Excludes Canada 7 S
Slide 8: H1 A-Plant Revenue and Profit
H1 A-PLANT REVENUE AND PROFIT H1 (£m) 2017 2016 Change Revenue 245 199 23% - of which rental 215 182 18% Operating costs (152) (123) 24% EBITDA 93 76 22% Depreciation (46) (38) 20% Operating profit 47 38 23% Margins - EBITDA 38% 38% - Operating profit 19% 19% 8 Second quarter results ¦ 31 October 20
Slide 9: Cash Flow
CASH FLOW (£m) LTM October LTM October Change3 2017 2016 EBITDA before exceptional items 1,681 1,343 16% Cash conversion ratio1 94% 95% Cash inflow from operations2 1,581 1,270 15% Replacement and non-rental capital expenditure (550) (523) Rental equipment and other disposal proceeds received 172 17
Slide 10: Net Debt and Leverage
NET DEBT AND LEVERAGE NET DEBT TO EBITDA IN THE MIDDLE OF OUR RANGE October Leverage (£m) 2017 2016 3.5 3.2 Net debt at 30 April 2,528 2,002 3.1 3.0 2.8 Translation impact (65) 377 2.5 Opening debt at closing exchange rates 2,463 2,379 2.5 2.1 2.0 1.9 2.0 1.8 Change from cash flows 347 292 1.8 Debt
Slide 11: US Tax Reform
US TAX REFORM RECONCILIATION OF HOUSE AND SENATE BILLS ONGOING While the bills need to be reconciled and then finalised, it appears that the likely impact for the Group will be: – an effective Group tax rate of 23-25% – reduction in cash tax rate to mid to high teens – reduced deferred tax liabili
Slide 12: Geoff Drabble
Geoff Drabble 12 Second quarter results ¦ 31 October 2017
Slide 13: Good Sunbelt US Revenue Growth
GOOD SUNBELT US REVENUE GROWTH AHEAD OF ORIGINAL PLAN 6 months to 2017/18 plan Q1 Q2 October 2017 Same-store1 organic growth2 4 – 6% 7% 10% 8% Greenfields2 3 – 4% 3% 4% 4% Organic growth 7 – 10% 10% 14% 12% Bolt-ons 2 – 3% 5% 5% 5% 2017/18 growth outlook 9 – 13% 15% 19% 17% Rental only revenue prese
Slide 14: Underlying Growth Continues Ahead of Original Plan
UNDERLYING GROWTH CONTINUES AHEAD OF ORIGINAL PLAN INCREMENTAL REVENUE OF $40-45M FROM HURRICANES YoY rental revenue 30% 25% YoY total rental revenue growth 20% Q2 revenue impact: $40 – 45 million 15% Original growth plan 10% 5% 0% May June July August September October November Actual Trend Origina
Slide 15: Scale and Technology Allowed Us to Be a Major Responder
SCALE AND TECHNOLOGY ALLOWED US TO BE A MAJOR RESPONDER Puerto Rico and Virgin Islands 15 Second quarter results ¦ 31 October 2017
Slide 16: Strong Revenue Growth and Improving Margins
STRONG REVENUE GROWTH AND IMPROVING MARGINS ENCOURAGING TRENDS ON RATE, PHYSICAL UTILISATION AND MARGINS Improving rate trend Mix still a factor year on year 1.100 Q2 2017 Q2 2016 H1 2017 H1 2016 1.050 Day 9% 10% 9% 10% Rate index 1.000 Week 21% 22% 21% 22% 0.950 0.900 Month 70% 68% 70% 68% Nov-16 N
Slide 17: Good Organic Growth Supplemented by Bolt-ons
GOOD ORGANIC GROWTH SUPPLEMENTED BY BOLT-ONS SAME-STORE PERFORMANCE REMAINS STRONG AND THE KEY DRIVER HALF YEAR Organic1,2 Bolt-ons3 Total2 Proportion of revenue 96% 4% 100% Fleet on rent – % change +13% nm +19% Net yield nil% nm -1% Physical utilisation – actual 75% 74% 74% Dollar utilisation 54% 4
Slide 18: Market Outlook – Encouraging Medium-Term Forecasts
MARKET OUTLOOK – ENCOURAGING MEDIUM-TERM FORECASTS DODGE MOMENTUM INDEX VOLATILE AS ALWAYS BUT 7% HIGHER THAN LAST YEAR Dodge Starts vs. Census Spending Put in Place Indexed: 2000=100 US rental revenue forecasts 220 200 180 2017 2018 2019 2020 2021 160 Industry rental 140 +4% +4% +5% +5% +4% revenue
Slide 19: Sunbelt Canada
SUNBELT CANADA Sunbelt Canada (C$m) H1 2017 H1 2016 % growth Rental revenue 75 33 129% EBITDA 37 15 151% EBITA 21 5 304% Rental revenue growth in western Canada of 22% Existing western Canada locations Rental revenue growth in eastern Canada of 21% New locations acquired with CRS Canadian rental
Slide 20: A-Plant Revenue Drivers
A-PLANT REVENUE DRIVERS GROWTH CONTINUES BACKED BY FLEET INVESTMENT Average fleet on rent Physical utilisation 80% +24% +25% 70% 60% 50% 40% 2016-17 2017-18 30% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Q1 Q2 Year over year change in yield Margins remain constant H1 2017 H1 2016 EBITDA 38%
Slide 21: Continued Focus on Fleet Investment in 2017/18
CONTINUED FOCUS ON FLEET INVESTMENT IN 2017/18 H1 2017 H1 2016 Initial guidance1 Revised forecast1 Sunbelt2 ($m) - rental fleet - replacement 134 130 300 – 350 300 – 325 - growth 595 540 600 – 850 925 – 1,000 - non-rental fleet 75 57 100 125 804 727 1,000 – 1,300 1,350 – 1,450 A-Plant (£m) - rental
Slide 22: Capital Allocation Policy
CAPITAL ALLOCATION POLICY STRONG CASH GENERATION AND ENCOURAGING OUTLOOK Clear priorities Consistently applied Organic fleet growth £708m on capital expenditure – Same-store – Greenfields £298m on bolt-ons Bolt-on acquisitions Interim dividend increased 16% to 5.5p Returns to shareholder
Slide 23: Summary
SUMMARY We have built on the momentum established in Q1 with improving volumes, rates and margins Encouraging markets and good execution allow us to look to our 2021 plans with confidence Buyback of at least £500m and up to £1bn announced Interim dividend increased to 5.5p All divisions ar
Slide 24: Appendices
Appendices 24 Second quarter results ¦ 31 October 2017
Slide 25: Divisional Performance – Q2
DIVISIONAL PERFORMANCE – Q2 Revenue EBITDA Profit 2017 2016 Change1 2017 2016 Change1 2017 2016 Change1 Sunbelt US ($m) 1,117 946 18% 580 488 19% 386 324 19% Sunbelt US (£m) 850 730 16% 442 376 17% 294 250 18% A-Plant 126 103 23% 48 40 21% 24 20 20% Sunbelt Canada 43 12 260% 17 5 237% 10 2 415% Grou
Slide 26: Divisional Performance – LTM
DIVISIONAL PERFORMANCE – LTM Revenue EBITDA Profit 2017 2016 Change1 2017 2016 Change1 2017 2016 Change1 Sunbelt US ($m) 3,823 3,357 14% 1,910 1,669 14% 1,192 1,056 13% Sunbelt US (£m) 2,991 2,409 24% 1,495 1,199 25% 934 760 23% A-Plant 464 386 20% 169 144 17% 80 70 15% Sunbelt Canada 79 35 124% 32
Slide 27: Sunbelt US – Revenue Drivers
SUNBELT US – REVENUE DRIVERS HALF YEAR General Tool Specialty Total % of business 79% 21% 100% Rental revenue growth +17% +20% +17% Fleet on rent +19% +17% +19% Yield -2% +3% -1% Year-on-year physical utilisation +1% +9% +1% Presented on a billing day basis, excluding Canada 27 Second quarter result
Slide 28: Sunbelt Physical Utilisation
SUNBELT PHYSICAL UTILISATION General Tool Specialty 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr 2016/17 2017/18 2016/17 2017/18 28 Second quarter results ¦ 31 October 2017
Slide 29: Fleet Continues to Grow
FLEET CONTINUES TO GROW THROUGH GROWTH CAPITAL EXPENDITURE AND BOLT-ON M&A RENTAL FLEET AT ORIGINAL COST Growth in rental fleet 31 October 2016 30 April 2017 31 October 2017 LTM1 Current year1 Sunbelt US in $m 6,135 6,439 7,135 16% 11% Sunbelt US in £m 5,023 4,977 5,373 7% 8% A-Plant 721 774 858 19%
Slide 30: Good Progress on 2021 Plan
GOOD PROGRESS ON 2021 PLAN ACQUISITIONS AND GREENFIELDS Consideration Q4-2016/17 Arsenal $39m Pride $277m Van’s Equipment $25m Q1-2017/18 Noble $34m RGR $58m MSP $23m Green Acres $5m Q2-2017/18 CRS C$287m Lift $9m RentalCo $1m Q3-2017/18 Maverick $22m 30 greenfield locations added in addition to t
Slide 31: Robust and Flexible Debt Structure
ROBUST AND FLEXIBLE DEBT STRUCTURE £2,500m £2,000m Debt facilities committed for average of 6 years £1,500m No amortisation £1,000m £500m No financial monitoring covenants whilst availability Undrawn exceeds $310m (October 2017: $1,067m) Drawn £m 2017 2018 2019 2020 2021 Jul 2023 Oct Aug 2026
Slide 32: Cash Flow Funds Organic Fleet Growth
CASH FLOW FUNDS ORGANIC FLEET GROWTH HEALTHY EBITDA MARGINS ENSURE SIGNIFICANT TOP LINE CASH GENERATION THROUGH THE CYCLE LTM Oct (£m) 2017 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 EBITDA before exceptional items 1,681 1,504 1,178 908 685 519 381 284 255 356 364 310 225 170 E
Slide 33: Cyclical Cash Generation
CYCLICAL CASH GENERATION CASH POSITIVE AS GROWTH MODERATES – HIGHLY GENERATIVE DURING DOWNTURN High growth Moderate to flat growth Declining market 2011 2012 2013 2014 2015 2016 2017 Moderate growth Cyclical downturn Cash flow from 280 365 501 646 841 1,071 1,444 Growing Decreasing but remains posit
Slide 34: $1,067m of Availability at October 2017
$1,067M OF AVAILABILITY AT 31 OCTOBER 2017 Book value Borrowing base Senior debt £5,528m (April 17 : £5,133m) Calculation: £693m Inventory – 50% of book value £4,051m (April 17 : £3,726m) Receivables – 85% of net eligible receivables £467m Fleet and vehicles – 85% of net appraised market value of el
Slide 35: Debt and Covenants
DEBT AND COVENANTS Facility Interest rate Maturity $3.1bn first lien revolver LIBOR + 125-175 bps July 2022 $500m second lien notes 5.625% October 2024 Debt $600m second lien notes 4.125% August 2025 $600m second lien notes 4.375% August 2027 Capital leases ~7% Various S&P Moody’s Ratings Corporate
Slide 36: The Big Are Getting Bigger
THE BIG ARE GETTING BIGGER WHICH PROVIDES FURTHER OPPORTUNITY US MARKET SHARE 2010 2017 2020s 5% 4% 10% 3% 3% 7% Others United Rentals Sunbelt 6% 3% - mid RSC Herc Rentals Top Top 4-10 Top 11-100 7% 30s 100 13% Others 66% - mid 57% 16% 60s Note: Restated to reflect latest IHS Global insight market s
Slide 37: Increased Footprint and Gained Significant Market Share
WE HAVE INCREASED OUR FOOTPRINT AND GAINED SIGNIFICANT MARKET SHARE April 2012 April 2017 stores – April 2012 store growth – May 2012 to April 2017 37 Second quarter results ¦ 31 October 2017
Slide 38: Working Cluster
WORKING CLUSTER Baltimore/Washington DC Fleet Size $299 million GT Locations 21 Specialty Locations 10 EBITA 44% ROI 31% General Tool Pump & Power Climate Control Flooring Industrial Scaffold 38 Full year results ¦ 30 April 2017
Slide 39: Large General Tool Location
LARGE GENERAL TOOL LOCATION General Tool location Laurel, MD Fleet Size $40 million Rental $21 million Employees 46 Avg. Open 866 Contracts ROI% 29% EBITA 44% 39 Full year results ¦ 30 April 2017
Slide 40: Midsize General Tool Location
MIDSIZE GENERAL TOOL LOCATION General Tool location Parkville, MD Fleet Size $6 million Rental $4 million Employees 8 Avg. Open 150 Contracts ROI% 32% EBITA 44% 40 Full year results ¦ 30 April 2017
Slide 41: Climate Control Location
CLIMATE CONTROL LOCATION Climate Control location DC Climate Control Fleet Size $4 million Rental $4 million Employees 8 Avg. Open 103 Contracts ROI% 69% EBITA 49% 41 Full year results ¦ 30 April 2017
Slide 42: Clusters – A Proven Track Record of Enhanced Performance
CLUSTERS – A PROVEN TRACK RECORD OF ENHANCED PERFORMANCE SEGMENTAL ANALYSIS Same Store Rental Revenue CAGR (FY11-FY16) EBITA margin ROI Market share 17% 17% 38% 38% 27% 27% 10% 10% 36% 36% 14% 14% 23% 23% 5% 5% Cluster Non-Clustered Cluster Non-Clustered Cluster Non-Clustered Cluster Non-Clustered T
Slide 43: Significant Opportunity to Build Out Further Clusters
SIGNIFICANT OPPORTUNITY TO BUILD OUT FURTHER CLUSTERS Rental Markets Top 25 26-50 51-100 100-210 Rental Market % 56% 19% 16% 9% Cluster Definition >10 >7 >4 >1 11 markets 10 markets 3 markets 14 markets Clustered 176 stores 101 stores 20 stores 33 stores 14 markets 15 markets 44 markets 38 markets N
Slide 44: Our Financial Road Map to 2021
OUR FINANCIAL ROAD MAP TO 2021 Revenue ($bn) 2016 EBITA Store vintage Locations 2016 2021 Evolution margin %1 - Continue to build at circa 1.5x Mature stores market growth 310 2.5 3.3 – 3.5 39 (up to FY11) - EBITA improvement through scale and efficiency - Growth at rate of mature stores as we broad
Slide 45: 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 underlying EPS % % p 20 19 19 19 50 46 47 120 45 17 42 105 18 45 16 38 38 100 16 15 40 14 35 35 85 33 34 14 13 35 12 30 30 80 12 30 63 10 10 25 60 47 8 7 20 5 40 32 6 15 4 10 15 12 17 20 11 10 2 5 4 0 20