Sunbelt Rentals Holdings, Inc. · NYSE:SUNB

Sunbelt Rentals — Ashtead Group — H1 2019/20 Earnings Presentation

37 slides from Sunbelt Rentals's earnings presentation, Dec 10, 2019

  1. Slide 1: Powering the platform

    Powering the platform 10 December 2019

  2. 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

  3. Slide 3: Highlights

    HIGHLIGHTS  Strong growth in revenue and profitability  North American markets continue to demonstrate strength  Good progress in our market development through greenfields and key bolt-on acquisitions  Invested £1bn in capital expenditure and £231m on bolt-ons  Completed £250m in share buyback

  4. Slide 4: Michael Pratt

    Michael Pratt 4 Half-year results ¦ 31 October 2019

  5. Slide 5: Group

    GROUP 2019 2018 Change1 (£m) As reported IFRS 16 impact Pre IFRS 16 Revenue 2,681 - 2,681 2,250 14% - of which rental 2,447 - 2,447 2,074 13% Operating costs (1,354) (50) (1,404) (1,151) 17% EBITDA 1,327 (50) 1,277 1,099 11% Depreciation (526) 44 (482) (397) 17% Operating profit 801 (6) 795 702 8% N

  6. Slide 6: Sunbelt US

    SUNBELT US Half year 2019 2018 Change1 ($m) As reported Pre IFRS 16 Revenue 2,887 2,887 2,500 15% - of which rental 2,667 2,667 2,329 15% Operating costs (1,385) (1,438) (1,222) 18% EBITDA 1,502 1,449 1,278 13% Depreciation (555) (509) (431) 18% Operating profit 947 940 847 11% Margins - EBITDA 52%

  7. Slide 7: Sunbelt Canada

    SUNBELT CANADA Half year 2019 2018 Change1 (C$m) As reported Pre IFRS 16 Revenue 200 200 167 20% - of which rental 167 167 140 19% Operating costs (115) (120) (100) 19% EBITDA 85 80 67 20% Depreciation (45) (40) (31) 32% Operating profit 40 40 36 10% Margins - EBITDA 42% 40% 40% - Operating profit 2

  8. Slide 8: A-Plant

    A-PLANT Half year 2019 2018 Change1 (£m) As reported Pre IFRS 16 Revenue 256 256 251 2% - of which rental 218 218 221 -2% Operating costs (170) (175) (156) 12% EBITDA 86 81 95 -14% Depreciation (56) (51) (51) 2% Operating profit 30 30 44 -33% Margins - EBITDA 34% 32% 38% - Operating profit 12% 12% 1

  9. Slide 9: Cash Flow

    CASH FLOW (£m) 2019 2018 Change3 EBITDA before exceptional items 1,327 1,099 11% Cash conversion ratio1 93% 88% Cash inflow from operations2 1,228 967 16% Replacement and non-rental capital expenditure (412) (348) Rental equipment and other disposal proceeds received 110 97 Interest and tax paid (17

  10. Slide 10: Net Debt and Leverage

    NET DEBT AND LEVERAGE (£m) 2019 2018 Leverage (excluding impact of IFRS 16) Net debt at 30 April 3,745 2,712 Impact of transition to IFRS 16 883 - 3.5 Opening debt including IFRS 16 4,628 2,712 3.0 2.8 Translation impact 30 200 2.5 Opening debt at closing exchange rates 4,658 2,912 2.5 2.1 Change fr

  11. Slide 11: Robust and Flexible Debt Structure

    ROBUST AND FLEXIBLE DEBT STRUCTURE £4,000m Debt maturity prior to refinancing activities £3,000m  In November, refinanced $500m 5.625% notes due 2024 £2,000m – $600m 4.0% notes due 2028 – $600m 4.25% notes due 2029 £1,000m Undrawn Drawn £m  Subsequent to refinancing, facilities committed for avera

  12. Slide 12: Brendan Horgan

    Brendan Horgan 12 Half-year results ¦ 31 October 2019

  13. Slide 13: Strong Revenue Growth Continues

    STRONG REVENUE GROWTH CONTINUES 2019/20 Q1 Q2 H1 plan Organic growth 9 – 12% 12% 8% 10% Bolt-ons 2 – 3% 6% 4% 5% 11 – 15% 18% 12% 15% Sunbelt US rental only revenue presented on a billing day basis  We continue to gain share with growth three times the pace of the market  Project 2021 progress con

  14. Slide 14: Hurricane Impact

    HURRICANE IMPACT  Quieter 2019 hurricane season impacts reported figures: Q2 2019 Q2 2018 Underlying rental revenue 1,116 977 +14% – Underlying rental revenue growth stronger than reported Hurricane - 19 -100% Rental revenue 1,116 996 +12% – Impacts comparable period metrics in the short-term Renta

  15. Slide 15: Demand Remains Strong Throughout Our Business

    DEMAND REMAINS STRONG THROUGHOUT OUR BUSINESS General Tool utilisation Specialty utilisation 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 2018/19 2019/20 2016/17 2017/18 2018/19 2019/20  Strong utilisation of a fleet 18% lar

  16. Slide 16: Project 2021: Locations Added in Ten Quarters

    PROJECT 2021: 229 LOCATIONS ADDED IN TEN QUARTERS 2017/18 2018/19 H1 2019/20 Total FY18-FY20 cohort: Specialty - Greenfield 26 48 16 90  Highly profitable cold / warm starts - Bolt-ons 3 40 7 50  Good balance between specialty and general tool Total 29 88 23 140 General tool  Rental fleet at cost

  17. Slide 17: Market Share Growth and Diversification

    MARKET SHARE GROWTH AND DIVERSIFICATION Rental revenue growth Relative to market  Pace of growth demonstrates power of the Sunbelt General tool 12% 2x platform to build the business - Organic 9% - Bolt-on 3%  Specialty predominately non-construction focused Specialty 23% 4x - Organic 13% - Bolt-on

  18. Slide 18: US Construction Market Outlook

    US CONSTRUCTION MARKET OUTLOOK Dodge construction starts Construction spending put in place Indexed: 2000=100 220 200 180 History Forecast 160 140 2016 2017 2018 2019 2020 2021 2022 2023 120 Market ($bn) 1,211 1,266 1,307 1,314 1,325 1,269 1,286 1,349 100 80 Market growth +7% +4% +3% +1% +1% -4% +1%

  19. Slide 19: Our End Markets Go Far Beyond Construction

    OUR END MARKETS GO FAR BEYOND CONSTRUCTION Commercial square feet under roof Facility maintenance market 400 120 350 100 300  Total non-construction market is large and forecast for continued Market size ($bn) Square feet (bn sq ft) 80 250 growth 200 60 150 40 100 20  Significant portion of our sp

  20. Slide 20: Sunbelt Canada

    SUNBELT CANADA Physical utilisation  Organic rental revenue growth of 10% (5x market growth)  Continuing expansion with three greenfield locations opened and one acquisition in the half year  Advancing our clustering model in top markets; with an emphasis on specialty  Long runway for growth Apr

  21. Slide 21: Expanding Specialty Opportunities in Canada

    EXPANDING SPECIALTY OPPORTUNITIES IN CANADA William F. White International  Canada’s largest provider of film and television production equipment, services and studio facilities – 6 equipment rental locations from Vancouver to Halifax Vancouver Calgary – 7 studios in Vancouver and Toronto Winnipeg

  22. Slide 22: A-Plant

    A-PLANT UK industry forecasts 2018 2019 2020 2021 Rental market (£bn) 6.0 6.0 6.1 6.1 Construction industry +1% nil% +1% +1%  Project Unify underway: Source: European Rental Association / IHS Markit (2019); Construction Products Association (Autumn 2019) – Simplification of go-to-market message – L

  23. Slide 23: Group Fleet Plan for 2019/20

    GROUP FLEET PLAN FOR 2019/20 2019 2020 2020 Actual H1 Plan1 Sunbelt US ($m) - rental fleet - replacement 480 324 500 – 600 - growth 1,127 725 1,000 – 1,100 - non-rental fleet 168 135 175 1,775 1,184 1,675 – 1,875 Sunbelt Canada - rental fleet - replacement 56 43 40 – 50 (C$m) - growth 100 40 50 – 60

  24. Slide 24: Capital Allocation

    CAPITAL ALLOCATION 1. Organic growth  £1,010m invested in the business  31 greenfields opened 2. Bolt-on acquisitions  £231m spent on bolt-ons  19 locations added 3. Returns to shareholders  Interim dividend increased to 7.15p (2018: 6.5p)  £250m spent under the buyback programme  Minimum of

  25. Slide 25: Summary

    SUMMARY  North American markets continue to demonstrate strength  Good progress in our market development through greenfields and key bolt-on acquisitions  Long runway for growth taking advantage of structural change and continuing development of our diverse end markets  Strong cash generation a

  26. Slide 26: Appendices

    Appendices 26 Half-year results ¦ 31 October 2019

  27. Slide 27: Divisional Performance – Q2

    DIVISIONAL PERFORMANCE – Q2 Revenue EBITDA Profit 2019 2018 Change1 2019 2018 Change1 2019 2018 Change1 Sunbelt US ($m) 1,507 1,333 13% 786 688 14% 500 461 8% Sunbelt Canada (C$m) 106 90 17% 47 38 24% 24 22 11% Sunbelt US (£m) 1,214 1,025 19% 633 529 20% 402 355 14% A-Plant 125 125 0% 42 48 -11% 15

  28. Slide 28: Divisional Performance – LTM

    DIVISIONAL PERFORMANCE – LTM Revenue EBITDA Profit 2019 2018 Change1 2019 2018 Change1 2019 2018 Change1 Sunbelt US ($m) 5,376 4,569 18% 2,677 2,264 18% 1,645 1,438 14% Sunbelt Canada (C$m) 377 300 26% 142 98 46% 59 44 35% Sunbelt US (£m) 4,227 3,406 24% 2,108 1,688 25% 1,296 1,071 21% A-Plant 480 4

  29. Slide 29: Cash Flow Funds All Fleet Investment

    CASH FLOW FUNDS ALL FLEET INVESTMENT LTM (£m) Oct-19 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 EBITDA before exceptional items 2,335 2,107 1,733 1,504 1,178 908 685 519 381 284 255 356 364 310 225 170 EBITDA margin 47% 47% 47% 47% 46% 45% 42% 38% 34% 30% 30% 30% 33%

  30. Slide 30: $1,001m of Availability at October 2019

    $1,001M OF AVAILABILITY AT 31 OCTOBER 2019 Book value Borrowing base Senior debt £7,468m (April 19 : £6,770m) Calculation: £827m Inventory – 50% of book value £5,545m Receivables – 85% of (April 19 : £5,132m) net eligible receivables £632m Fleet and vehicles – 85% of net appraised market value of el

  31. Slide 31: Debt and Covenants

    DEBT AND COVENANTS Facility Interest rate Maturity $4.1bn first lien revolver LIBOR + 125-175 bps December 2023 $600m second lien notes 4.150% August 2025 Debt $600m second lien notes 5.250% August 2026 $600m second lien notes 4.375% August 2027 $600m second lien notes 4.000% May 2028 $600m second l

  32. Slide 32: US Fleet Profile

    US FLEET PROFILE Sunbelt US itemised rental fleet 2020 ($m) Capex Plan Sunbelt US - rental fleet - replacement 500 – 600 - growth 1,000 – 1,100 - non-rental fleet 175 1,675 – 1,875  Smooth fleet profile  Benefits of prolonged cycle and our growth strategy  Strong position providing optionality th

  33. Slide 33: US Construction Market

    US CONSTRUCTION MARKET Dodge non-residential construction starts US office building starts Constant dollars, excluding manufacturing Billions of dollars 180 60 160 50 140 40 120 30 100 20 80 10 60 40 0 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 2019 2023 2008 2009 2010 2011 2012 2013 201

  34. Slide 34: US Market Share

    US MARKET SHARE 2010 2019 5% 4% 14% 3% 3% 6% 9% 50% 3% 13% 6% 66% 18%  Expect the large to get larger with the top 100 sharing 60-70% of the market 34 Half-year results ¦ 31 October 2019

  35. Slide 35: Increased Footprint and Market Share

    INCREASED FOOTPRINT AND MARKET SHARE April 2012 April 2019 stores – April 2012 store growth – May 2012 to April 2019 35 Half-year results ¦ 31 October 2019

  36. Slide 36: Continuing Opportunity to Build Out Further Clusters

    CONTINUING OPPORTUNITY TO BUILD OUT FURTHER CLUSTERS USA Canada Rental markets Top 25 26-50 51-100 100-210 Top 10 11-25 26-76 Rental market % 57% 19% 15% 9% 64% 22% 14% Cluster definition >15 >10 >4 >1 >10 >4 >1 Clusters 9 markets 7 markets 9 markets 16 markets 2 markets 0 2 markets  Only 25 of the

  37. Slide 37: 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 19 19 20 19 50 46 47 47 47 200 18 18 45 18 17 45 42 180 174 16 15 38 38 16 40 160 14 35 35 33 34 14 13 35 140 128 12 30 30 12 30 120 104 10 10 25 100 85 8 7 20 80 63 6 5 15 60 47 4 1

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