Sunbelt Rentals Holdings, Inc. · NYSE:SUNB
Sunbelt Rentals — H1 FY2023 Earnings Presentation
41 slides from Sunbelt Rentals's earnings presentation, Dec 6, 2022
Slide 1: Ambition with Purpose: Half Year Results
AMBITION WITH PURPOSE HALF YEAR RESULTS 6 December 2022
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 ▪ Strong first half performance with ongoing momentum in robust end markets ▪ Group rental revenue 26% ahead of last year; US rental revenue up 28% ▪ Profit before tax 1 up 28% to $1,243m (2021: $979m) and EPS 1 up 32% to 212.2ȼ (2021: 162.4ȼ) ▪ $1.7bn invested in capital expenditure ▪ 72
Slide 4: 2022/23 Outlook
2022/23 OUTLOOK Previous guidance Current guidance Rental revenue1 - US 17% to 20% 20 to 23% - Canada 19% to 22% 22 to 25% - UK2 -4% to 0% Flat - Group 15% to 17% 18 to 21% Capital expenditure (gross)3 $3.3 – 3.6bn $3.3 – 3.6bn - of which, rental fleet is: $2.7 – 3.0bn $2.7 – 3.0bn Free cash flow3 c
Slide 5: Financial Review
FINANCIAL REVIEW MICHAEL PRATT 5 Half year results ¦ 31 October 2022
Slide 6: Group
GROUP $m 2022 2021 Change1 Revenue 4,796 3,884 26% ‐ of which rental 4,383 3,545 26% Operating costs (2,550) (2,052) 28% EBITDA 2,246 1,832 24% Depreciation (849) (737) 18% Operating profit 1,397 1,095 29% Net interest (154) (116) 33% Profit before amortisation, exceptional items and tax 1,243 979 2
Slide 7: US
US $m 2022 2021 Change Revenue 4,069 3,124 30% ‐ of which rental 3,774 2,942 28% Operating costs (2,071) (1,557) 33% EBITDA 1,998 1,567 28% Depreciation (715) (598) 20% Operating profit 1,283 969 32% Margins ‐ EBITDA 49.1% 50.2% ‐ Operating profit 31.5% 31.0% Return on investment 26.5% 23.1% The res
Slide 8: Canada
CANADA C$m 2022 2021 Change Revenue 389 310 25% ‐ of which rental 341 280 22% Operating costs (220) (162) 35% EBITDA 169 148 15% Depreciation (77) (67) 17% Operating profit 92 81 13% Margins ‐ EBITDA 43.5% 47.6% ‐ Operating profit 23.6% 26.2% Return on investment 19.3% 22.9% The results in the table
Slide 9: UK
UK £m 2022 2021 Change Revenue 361 368 -2% ‐ of which rental 293 272 7% Operating costs (251) (253) -1% EBITDA 110 115 -5% Depreciation (62) (61) 1% Operating profit 48 54 -11% Margins ‐ EBITDA 30.4% 31.3% ‐ Operating profit 13.2% 14.6% Return on investment 11.8% 15.5% The results in the table above
Slide 10: Cash Flow
CASH FLOW Half year LTM October $m 2022 2021 2022 EBITDA before exceptional items 2,246 1,832 4,023 Cash conversion ratio1 79% 84% 91% Cash inflow from operations2 1,778 1,542 3,642 Replacement and non-rental capital expenditure (807) (549) (1,486) Rental equipment and other disposal proceeds receiv
Slide 11: Net Debt
NET DEBT Leverage (excluding impact of IFRS 16) $m 2022 2021 3.0 Opening net debt 7,160 5,801 2.5 2.5 Change from cash flows 1,019 431 2.1 2.0 Translation impact (76) (7) 1.9 1.9 2.0 1.8 1.8 1.8 Debt acquired 89 38 1.7 1.6 1.5 New lease liabilities 220 151 1.5 Deferred debt raising cost amortisation
Slide 12: Robust and Flexible Debt Structure
ROBUST AND FLEXIBLE DEBT STRUCTURE $5,000m Debt Maturity ▪ In August, issued $750m 5.50% notes due 2032 Undrawn Drawn $4,000m Notes ▪ Subsequent to notes issue, borrowing facilities committed for $3,000m average of six years at a weighted average cost of 4% $2,000m ▪ No financial monitoring covenant
Slide 13: Operational Review
OPERATIONAL REVIEW BRENDAN HORGAN 13 Half year results ¦ 31 October 2022
Slide 14: US Trading
US TRADING Rental revenue1 FY22 FY23 ▪ Strong growth present across all General Tool geographies and Specialty rental segments Q1 Q2 Q3 Q4 FY Q1 Q2 YTD General tool +15% +14% +20% +24% +18% +23% +21% +22% ▪ Ongoing strength in performance evidence of robust end Specialty +22% +23% +34% +34% +28% +39
Slide 15: Specialty Trading
SPECIALTY TRADING Rental revenue1 FY22 FY23 ▪ Unique portfolio of Specialty businesses takes advantage of ongoing growth opportunities in Q1 Q2 Q3 Q4 FY Q1 Q2 YTD lowly penetrated products Power and HVAC +24% +22% +30% +35% +27% +34% +26% +31% Climate Control and Air Quality +25% +31% +17% +6% +20%
Slide 16: 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 ▪ $340bn facility maintenance market; 100bn sq. ft.
Slide 17: US Construction Outlook
US CONSTRUCTION OUTLOOK Dodge construction starts 2019 2020 2021 2022 2023 2024 2025 2026 300 Indexed: 2000=100 Construction put in place ($bn) 250 Non-residential 546 556 523 603 666 689 727 787 200 Non-building 291 300 301 300 329 361 385 401 150 Construction (excl. resi) 837 856 824 903 995 1,050
Slide 18: Mega Project Landscape
MEGA PROJECT LANDSCAPE ▪ Projects over $400m represent an ever increasing proportion of total non-residential construction starts (30% today compared with 13% in 2000-2009) Increase in ▪ c. 200 projects with a value of over $400m currently ongoing/under construction, with an average value $1.2bn meg
Slide 19: Legislative Acts Supporting End Market Demand
LEGISLATIVE ACTS SUPPORTING END MARKET DEMAND INFRASTRUCTURE INVESTMENT THE CHIPS AND SCIENCE ACT2 INFLATION REDUCTION ACT2 AND JOBS ACT1 ▪ $1.2tn in federal spending, with net ▪ $250bn act boosting American ▪ Investment focused on energy, climate additional funding of $550bn semiconductor research,
Slide 20: Canada Trading
CANADA TRADING Fleet on rent (excluding Lighting, Grip and Lens) ▪ Sunbelt 3.0 plan progressing well, with cluster development and increasing business maturity delivering strong margins and returns ▪ Amplification of Specialty business progressing well ▪ Healthy demand and market dynamics contributi
Slide 21: UK Trading
UK TRADING Fleet on rent ▪ Strong underlying performance with rental only revenue, excluding the DoH work, up 21% ▪ DoH testing site demobilisation completed in the first quarter ▪ End market resilience in infrastructure and industrial, as shut- down work resumes ▪ Unique range of general and specia
Slide 22: Sunbelt 3.0: Half-Way Through and Ahead of Plan
SUNBELT 3.0: HALF-WAY THROUGH AND AHEAD OF PLAN 1 Actionable GROW GENERAL TOOL Progress at mid-point component & ADVANCE OUR CLUSTERS ▪ $4.1bn of capital invested in the business, of which $3.5bn invested in rental assets 2 SPECIALTY AMPLIFY ▪ ▪ Opened 122 greenfield locations in North America, o
Slide 23: Market Dynamics Enhance Structural Opportunity
MARKET DYNAMICS ENHANCE STRUCTURAL OPPORTUNITY Dynamic Anticipated duration Our advantage ▪ Partnership and trust with OEMs SUPPLY CHAIN ▪ Long range fleet planning where supply THESE DYNAMICS ARE ALL CONSTRAINTS 12 – 18 months constraints mitigate industry over-fleeting TAILWINDS TO RENTAL ▪ Financ
Slide 24: Group Fleet Plan
GROUP FLEET PLAN 2021 2022 2023 2022 Actual Actual Current guidance1 Half year actual US ($m) - rental fleet 576 1,625 2,400 – 2,600 1,249 - non-rental fleet 102 321 500 209 678 1,946 2,900 – 3,100 1,458 Canada (C$m) - rental fleet 79 201 200 – 230 123 - non-rental fleet 17 39 80 30 96 240 280 – 310
Slide 25: Summary
SUMMARY ▪ Clear momentum, with strong positions in robust end markets ▪ The recent CHIPS Act and Inflation Reduction Act enhance and add clarity to an already strong construction market, flush with mega projects ▪ Supply constraints, inflation and skilled trade scarcity are agents of structural chan
Slide 26: Appendices
APPENDICES 26 Half year results ¦ 31 October 2022
Slide 27: Divisional Performance: Second Quarter Results
DIVISIONAL PERFORMANCE SECOND QUARTER RESULTS Revenue EBITDA Profit 2022 2021 Change1 2022 2021 Change1 2022 2021 Change1 UK (£m) 180 178 +1% 53 53 -% 22 22 -1% Canada (C$m) 212 161 +32% 93 81 +16% 53 46 +14% US 2,170 1,659 +31% 1,082 842 +29% 716 537 +33% UK ($m) 207 245 -15% 61 73 -16% 25 31 -17%
Slide 28: Divisional Performance: Last Twelve Months
DIVISIONAL PERFORMANCE LAST TWELVE MONTHS Revenue EBITDA Profit 2022 2021 Change1 2022 2021 Change1 2022 2021 Change1 UK (£m) 719 731 -2% 209 222 -6% 81 95 -15% Canada (C$m) 705 591 +19% 303 274 +11% 154 146 +6% +28% US 7,422 5,795 +28% 3,552 2,828 +26% 2,166 1,632 +33% UK ($m) 905 1,000 -9% 263 304
Slide 29: Our Business and Industry Has Changed Fundamentally
OUR BUSINESS AND INDUSTRY HAS CHANGED FUNDAMENTALLY STRUCTURAL CHANGE HAS PROGRESSED 30.0% 20.0% 10.0% 0.0% Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21 Apr-22 -10.0% GFC: 30% rental Ten years of growth -20.0% revenue decline CAGR: 18% peak to tro
Slide 30: US Construction Outlook: Residential Building Starts
US CONSTRUCTION OUTLOOK US RESIDENTIAL BUILDING STARTS 2,500 ▪ Single family housing starts forecasted to slow to c. 2018/19 levels driven by mortgage rate increase and supply chain constraints ▪ This despite the US demographic trends putting housing in an 2,000 undersupply position 1,500 1,626 1,03
Slide 31: US Fleet Profile
US FLEET PROFILE ▪ Smooth fleet profile ▪ Benefits of prolonged cycle and our growth strategy ▪ Strong position providing optionality through the cycle ▪ Flexibility to turn replacement into growth and vice versa ▪ Strengthens partnership with suppliers through predictability 31 Half year results ¦
Slide 32: Cash Flow Funds All Fleet Investment
CASH FLOW FUNDS ALL FLEET INVESTMENT LTM- ($m) 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 Oct 22 EBITDA before exceptionals 4,023 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% 45% 46% 47% 47%
Slide 33: $2,217m of Availability at October 2022
$2,217M OF AVAILABILITY AT 31 OCTOBER 2022 Book value Borrowing base Senior debt $11,493m (April 22: $10,238m) $1,558m $8,894m Calculation: (April 22: $7,755m) Inventory – 50% of book $1,274m value Receivables – 85% of net eligible receivables $9,164m Fleet and vehicles – lower of 85% of net apprais
Slide 34: Debt and Covenants
DEBT AND COVENANTS Facility Interest rate Maturity $4.5bn first lien revolver LIBOR + 125-150 bps August 2026 $550m senior notes 1.500% August 2026 $600m senior notes 4.375% August 2027 Debt $600m senior notes 4.000% May 2028 $600m senior notes 4.250% November 2029 $750m senior notes 2.450% August 2
Slide 35: Capital Allocation
CAPITAL ALLOCATION CONSISTENTLY APPLIED POLICY CONTINUES CLEAR PRIORITIES APPLICATION Organic fleet growth ▪ Same-store ▪ $1,685m invested in the business ▪ Greenfields ▪ 34 greenfields opened in North America ▪ $609m spent on bolt-ons, with 38 locations added in North America Bolt-on acquisitions ▪
Slide 36: 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 36 Half year results ¦ 31 October 2022
Slide 37: 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 38: 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 FY22 total rental 10% RENTAL MARKET Incremental projected FY24 total rental via existing locations and greenfields PENETR
Slide 39: 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 40: US Market Share
US MARKET SHARE 2010 2022 Future 5% 4% 3% 16% 20%+ 3% 6% 44% 12% All others 13% 4% One or two 66% others 7% 17% United Rentals Sunbelt RSC Herc Rentals Top 4-10 Top 11-100 Other Two or three have 50%+ of the market 40 Half year results ¦ 31 October 2022
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 % % ȼ 19 19 20 19 50 46 47 47 47 47 46 350 18 45 45 18 17 18 18 45 42 307 16 300 15 15 38 38 16 15 40 14 35 35 33 34 14 13 35 250 227 222 219 12 30 30 12 30 200 171 10 10 25 8 7 20 150 128 1
Sunbelt Rentals Holdings — H1 FY2023 Earnings Presentation on 6ix