Sunbelt Rentals Holdings, Inc. · NYSE:SUNB
Sunbelt Rentals — Ashtead Group — Q2 2016/17 Earnings Presentation
54 slides from Sunbelt Rentals's earnings presentation, Dec 6, 2016
Slide 1: Growth and diversification
Growth and diversification 6 DECEMBER 2016
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 Uncert
Slide 3: Summary
SUMMARY Once again a strong quarter with market leading growth in revenue and profitability Clear progress on our growth and capital allocation priorities: – £683m invested in capital expenditure – £142m spent on bolt-ons – 56 new locations opened – Interim dividend raised to 4.75p per share – £
Slide 4: Suzanne Wood
Suzanne Wood 4 Second quarter results ¦ 31 October 2016
Slide 5: Q2 Group Revenue and Profit
Q2 GROUP REVENUE AND PROFIT Q2 (£m) 2016 2015 Change1 Revenue 845 649 12% - of which rental 784 589 14% Operating costs (428) (340) 9% EBITDA 417 309 15% Depreciation (149) (107) 20% Operating profit 268 202 13% Net interest (26) (20) 8% Profit before amortisation and tax 242 182 14% Earnings per sh
Slide 6: H1 Group Revenue and Profit
H1 GROUP REVENUE AND PROFIT H1 (£m) 2016 2015 Change1 Revenue 1,552 1,267 8% - of which rental 1,445 1,129 13% Operating costs (795) (675) 4% EBITDA 757 592 13% Depreciation (283) (210) 20% Operating profit 474 382 9% Net interest (48) (39) 7% Profit before amortisation and tax 426 343 9% Earnings p
Slide 7: Lower replacement capex reduces revenue and gains from sale of used equipment
LOWER REPLACEMENT CAPEX REDUCES REVENUE AND GAINS FROM SALE OF USED EQUIPMENT H1 (£m) 2016 2015 Change1 Revenue 1,552 1,267 8% Sale of used equipment (49) (93) (54)% Revenue excluding sale of used equipment 1,503 1,174 13% Underlying profit before taxation as reported 426 343 9% Gains on sale of use
Slide 8: H1 Sunbelt Revenue and Profit
H1 SUNBELT REVENUE AND PROFIT H1 ($m) 2016 2015 Change Revenue 1,814 1,685 8% - of which rental 1,694 1,504 13% Operating costs (890) (866) 3% EBITDA 924 819 13% Depreciation (328) (272) 21% Operating profit 596 547 9% Margins - EBITDA 51% 49% - Operating profit 33% 32% 8 Second quarter results ¦ 31
Slide 9: H1 A-Plant Revenue and Profit
H1 A-PLANT REVENUE AND PROFIT H1 (£m) 2016 2015 Change Revenue 199 178 12% - of which rental 182 157 16% Operating costs (123) (109) 12% EBITDA 76 69 11% Depreciation (38) (34) 13% Operating profit 38 35 9% Margins - EBITDA 38% 39% - Operating profit 19% 20% 9 Second quarter results ¦ 31 October 201
Slide 10: Cash Flow
CASH FLOW H1 (£m) 2016 2015 Change EBITDA before exceptional items 757 592 28% Cash conversion ratio1 92.9% 85.1% Cash inflow from operations2 703 504 40% Payments for capital expenditure (718) (733) Rental equipment and other disposal proceeds received 77 81 (641) (652) Interest and tax paid (82) (
Slide 11: Net Debt and Leverage
NET DEBT AND LEVERAGE NET DEBT TO EBITDA CONTINUES TO REDUCE AS WE INVEST IN THE FLEET October October Leverage (£m) 2016 2015 3.5 3.3 Net debt at 30 April 2,002 1,687 3.1 3.0 2.8 Translation impact 377 (9) 2.4 2.5 2.5 Opening debt at closing exchange rates 2,379 1,678 2.1 2.0 1.9 Target range 2.0 C
Slide 12: Geoff Drabble
Geoff Drabble 12 Second quarter results ¦ 31 October 2016
Slide 13: Sunbelt – US Revenue Drivers
SUNBELT – US REVENUE DRIVERS H1 General Tool Specialty1 Total % of business 79% 21% 100% Rental revenue growth +15% +7% +14% Fleet on rent +17% +7% +16% Yield -2% - -2% Year-on-year physical utilisation -1% +5% - Presented on a billing day basis, excluding Canada 1 Including Oil & Gas ● Specialty re
Slide 14: Sunbelt – US Revenue Drivers: Physical utilisation
SUNBELT – US REVENUE DRIVERS Physical utilisation General Tool Specialty (inc. Oil & Gas) 80% 80% 70% 70% 60% 60% 50% 2014-15 50% 2015-16 2016-17 40% 40% May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr 14 Second quarter results ¦ 31 October 2016
Slide 15: Strong Margin Progression
STRONG MARGIN PROGRESSION H1 Same-stores1 Greenfields2 Bolt-ons2 Oil & Gas Total Proportion of revenue 92% 5% 2% 1% 100% Fleet on rent - % change +11% nm nm -23% +16% Net yield -2% nm nm -17% -2% Physical utilisation – actual 74% 66% 66% 66% 73% Dollar utilisation 55% 45% 63% 47% 55% Drop through 68
Slide 16: US Construction Market
US CONSTRUCTION MARKET 2015 RAMP UP OF VERY LARGE PROJECTS HAS CREATED VOLATILITY IN DATA AND MIX The first half of 2015 featured 13 large projects valued at $1bn or more, including a $9bn liquified natural gas export terminal in Texas, and $8.5bn petrochemical plant in Louisiana In contrast, th
Slide 17: US Construction Market Outlook
US CONSTRUCTION MARKET OUTLOOK Large energy projects caused a spike – back on moderate medium-term growth trajectory Construction activity by cycle (T=100 based on constant dollars) 200 Cyclical 180 troughs: 160 1975 140 1982 120 1991 2011 100 80 60 T T+1 T+2 T+3 T+4 T+5 T+6 T+7 T+8 T+9 T+10 T+11
Slide 18: US Construction Market Indicators
US CONSTRUCTION MARKET INDICATORS MACRO POSITION SOLID – UNDERSTANDING BY SECTOR IS IMPORTANT Both construction starts and construction spending show that the expansion is continuing, although the pattern of construction starts has recently been volatile Dodge construction starts 2015 2016 Constru
Slide 19: US Construction Market Sector (Starts)
US CONSTRUCTION MARKET SECTOR (STARTS) THE PATTERN HAS VARIED BY MAJOR SECTOR 2015 2016 2015 2016 Residential buildings ($bn) Commercial buildings ($bn) +16% +7% +6% +12% 450 140 400 120 350 300 100 250 80 200 60 150 100 40 50 20 90 92 94 96 98 00 02 04 06 08 10 12 14 16 90 92 94 96 98 00 02 04 06 0
Slide 20: US Manufacturing Buildings
US MANUFACTURING BUILDINGS DISCONNECT BETWEEN VALUE AND VOLUME OF ENERGY PROJECTS Manufacturing buildings (msf) Manufacturing buildings ($bn) 250 60 200 50 40 150 30 100 20 50 10 0 0 90 92 94 96 98 00 02 04 06 08 10 12 14 16 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Manufacturing buildings Manufactu
Slide 21: US Construction Market Outlook Adjusting for One Small Sector
US CONSTRUCTION MARKET OUTLOOK ADJUSTING FOR ONE SMALL SECTOR GIVES A DIFFERENT PICTURE OF CURRENT ACTIVITY LEVELS ($bn) 2011 2012 2013 2014 2015 2016 2017 2018 Total construction (starts) 441.5 492.9 547.3 601.0 667.7 676.4 712.9 769.9 +1% +12% +11% +10% +11% +1% +5% +8% Total construction 400.0 43
Slide 22: 2017 US Construction Market Outlook
2017 US CONSTRUCTION MARKET OUTLOOK 2017 GROWTH SUPPORTED BY A LARGE AMOUNT OF MID-SIZED PROJECTS Dodge currently tracking 2,378 projects that are forecast to start in 2017 with an estimated project value of $10m or greater 1,868 (79%) projects have greater than a 70% probability of starting T
Slide 23: US Construction – Dodge Momentum Index (DMI)
US CONSTRUCTION – DODGE MOMENTUM INDEX (DMI) THE DMI, A MEASURE OF PROJECTS IN PLANNING, OFFERS INSIGHT ON WHAT LIES AHEAD Dodge Momentum Index The Dodge Momentum Index (DMI) tracks the first (or 200 initial) reports for non-residential building projects at the 175 planning stage. 150 125 The DMI
Slide 24: Dodge Data Supported by Other Forecasters We Follow
DODGE DATA SUPPORTED BY OTHER FORECASTERS WE FOLLOW IHS Markit: Maximus: Rental market (excl. party and event) ($bn) Put in place construction 60 Annual change 50 2016 2017 2018 40 30 Total construction +4.2% +6.5% +6.9% 20 Total building +5.9% +7.4% +6.8% 10 Total infrastructure -0.7% +3.8% +7.0% -
Slide 25: Structural Change: The Key Drivers
STRUCTURAL CHANGE THE KEY DRIVERS CAGR FY11 – FY16 Same-store Bolt-ons & Total rental only growth Greenfields revenue growth +16% + +6% = +22% End market Structural share growth gains +8% +8% 25 Second quarter results ¦ 31 October 2016
Slide 26: Structural Change: Customers confident we have what they want
STRUCTURAL CHANGE OUR CUSTOMERS ARE CONFIDENT THAT WE HAVE WHAT THEY WANT Product stats Fleet size $6 billion $600k Fleet range $340k 8,500 classes $190k $38k $9k $1k $250 $45 2 meg 400 ton 135’ Track 19’ Electric Rotary 2” Submersible Steel for Generator Chiller Boom Skidsteer Scissor Hammer Pump A
Slide 27: Structural Change: Infrastructure to support their needs
STRUCTURAL CHANGE THEY ARE CONFIDENT THAT WE HAVE THE INFRASTRUCTURE TO SUPPORT THEIR NEEDS 10,100 EMPLOYEES 193K SERVICE CALLS JUST SAY 689 FIELD TECHNICIANS YES! 1,724 We solve customers DRIVERS problems AND make it easy! 2,440 DELIVERY & SERVICE 1,442 TECHNICIANS FLEET 98M MILES DRIVEN LAST YEAR
Slide 28: Structural Change: Local partner support
STRUCTURAL CHANGE THEY ARE CONFIDENT THAT WE CAN SUPPORT THEM AS A LOCAL PARTNER NATIONAL FOOTPRINT LOCAL CLUSTERS 28 Second quarter results ¦ 31 October 2016
Slide 29: Structural Change: Technology makes rental easier
STRUCTURAL CHANGE OUR TECHNOLOGY MAKES THE RENTAL PROCESS FAR EASIER Average of 3,255 users per month added to “command centre” over the last 18 months 29 Second quarter results ¦ 31 October 2016
Slide 30: Good Start to Our 2021 Plan
GOOD START TO OUR 2021 PLAN Market Consideration Broad General Tool Power and climate control Acquisition I&L Rentals $67m LoadBanks $6m Portable Rental Solutions $11m CanSource Direct C$9m Tower Tech $13m Post Falls $4m Rick’s Action Rental $0.4m New Mexico / El Paso branches of Blue-
Slide 31: A-Plant Revenue Drivers
A-PLANT REVENUE DRIVERS GROWTH CONTINUES BACKED BY FLEET INVESTMENT Average fleet on rent 80% Physical utilisation +17% +15% 70% 60% 50% 2014-15 40% 2015-16 2016-17 30% May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Q1 Q2 Year over year change in yield Fleet size and growth +17% +10% +25% +21% +4%
Slide 32: Strategic Shift: Growth and diversification through low risk bolt-ons
STRATEGIC SHIFT GROWTH AND DIVERSIFICATION THROUGH LOW RISK BOLT-ONS Market Consideration (including Broad Power and climate Industrial Entertainment acquired debt) General Tool control Acquisition Mather & Stuart £14m Tool and Engineering Services £1m Lion Trackhire £38m Opti-cal Survey £14m
Slide 33: A-Plant continues to grow profitably with more upside
A-PLANT CONTINUES TO GROW PROFITABLY WITH MUCH MORE UPSIDE AS NEWLY ACQUIRED ASSETS ARE INTEGRATED EBITDA Operating profit RoI £m % £m % 18% 175 40 100 20 38% 37% 18% 18% 34% 15% 150 144 15% 14% 137 14% 13% 29% 28% 30 75 70 15 125 26% 67 12% 109 100 9% 20 50 9% 10 9% 79 46 75 57 6% 6% 49 5% 50 10 25
Slide 34: Strong fleet growth planned for the Group in 2016/17
STRONG FLEET GROWTH PLANNED FOR THE GROUP IN 2016/17 CAPITAL EXPENDITURE AT THE UPPER END OF OUR EXPECTATIONS Initial Revised Anticipated volume H1 2017 guidance1 forecast1 growth (%) Sunbelt ($m) - rental fleet - replacement 175 – 250 220 – 300 130 Low to - growth 600 – 900 730 – 950 540 mid teens
Slide 35: Summary
SUMMARY Strong growth with ongoing structural opportunity and good end markets Further margin improvements as we improve technology, leverage our scale and stores mature Capital expenditure upgraded to reflect our outlook for 2017/18 and beyond Good progress on our growth strategy with a ran
Slide 36: Appendices
Appendices 36 Second quarter results ¦ 31 October 2016
Slide 37: Divisional Performance – Q2
DIVISIONAL PERFORMANCE – Q2 Revenue EBITDA Profit 2016 2015 Change1 2016 2015 Change1 2016 2015 Change1 Sunbelt ($m) 961 864 11% 495 429 15% 327 289 13% Sunbelt (£m) 742 561 32% 381 278 37% 252 188 34% A-Plant 103 88 17% 40 35 15% 20 18 14% Group central costs - - - (4) (4) 12% (4) (4) 13% 845 649 3
Slide 38: Divisional Performance – LTM
DIVISIONAL PERFORMANCE – LTM Revenue EBITDA Profit 2016 2015 Change1 2016 2015 Change1 2016 2015 Change1 Sunbelt ($m) 3,406 3,059 11% 1,688 1,446 17% 1,062 931 14% Sunbelt (£m) 2,444 1,983 23% 1,213 939 29% 765 604 26% A-Plant 386 336 15% 144 118 22% 70 52 36% Group central costs - - - (14) (12) 18%
Slide 39: 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 (£m) Oct 16 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 EBITDA before exceptional items 1,343 1,178 908 685 519 381 284 255 359 380 310 225 170 147 EBITD
Slide 40: Robust and Flexible Debt Structure
ROBUST AND FLEXIBLE DEBT STRUCTURE £2,250m £2,000m £1,750m Debt facilities committed for average of 5 years £1,500m £1,250m No amortisation £1,000m £750m No financial monitoring covenants whilst availability £500m exceeds $260m (October 2016: $768m) £250m £m 2016 2017 2018 2019 October 2021 Ju
Slide 41: $768m of Availability at 31 October 2016
$768M OF AVAILABILITY AT 31 OCTOBER 2016 Book value Borrowing base Senior debt £5,266m (April 16 : £4,086m) Calculation: £608m Inventory – 50% of book value £3,846m (April 16 : £3,089m) Receivables – 85% of net eligible receivables £415m Fleet and vehicles – 85% of net appraised market value of elig
Slide 42: Debt and Covenants
DEBT AND COVENANTS Facility Interest rate Maturity $2.6bn first lien revolver LIBOR + 125-175 bps July 2020 Debt $900m second lien notes 6.5% July 2022 $500m second lien notes 5.625% October 2024 Capital leases ~7% Various S&P Moody’s Ratings Corporate family BB Ba1 Second lien BB Ba2 Availability
Slide 43: Composition of Growth Locations
COMPOSITION OF GROWTH LOCATIONS Total 329 General Tool Specialty LOCATION TYPE 185 144 Current Partial New MARKET TYPE Clusters Clusters Markets 92 170 67 $15m plus $10m - $15m $5m - $10m Under $5m LOCATION SIZE 55 93 77 104 43 Second quarter results ¦ 31 October 2016
Slide 44: General Tool Greenfield v. Bolt-on
GENERAL TOOL GREENFIELD V. BOLT-ON Large Greenfields Target Bolt-ons Target Bolt-ons Greenfields Market Size Greenfields Greenfields Target Bolt-ons Small High Sunbelt Market Share Low 44 Second quarter results ¦ 31 October 2016
Slide 45: Working Cluster
WORKING CLUSTER Baltimore/Washington DC Fleet Size $299 million GT Locations 21 Specialty Locations 10 Market Share 12% EBITA 44% General Tool Pump & Power ROI 31% Climate Control Flooring Industrial Scaffold 45 Second quarter results ¦ 31 October 2016
Slide 46: 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% 46 Second quarter results ¦ 31 October 2016
Slide 47: 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% 47 Second quarter results ¦ 31 October 2016
Slide 48: Different Size General Tool Locations Satisfy Multiple Needs
DIFFERENT SIZE GENERAL TOOL LOCATIONS SATISFY MULTIPLE NEEDS Day Week Month Rough Terrain Laurel, MD Parkville, MD Suggested $419 $990 $2,695 Forklifts Book $415 $990 $2,695 High $445 $1,065 $2,860 Quantity 99 units 12 units Average $420 $1,015 $2,590 Utilization 85% 72% Floor $400 $970 $2,390 Examp
Slide 49: Pump & Power Location
PUMP & POWER LOCATION Pump & Power location Maryland Pump & Power Fleet Size $16 million Rental $10 million Employees 23 Avg. Open 155 Contracts ROI% 42% EBITA 44% 49 Second quarter results ¦ 31 October 2016
Slide 50: Climate Control Location
CLIMATE CONTROL LOCATION Climate Control location DC Climate Control Fleet Size $4 million Rental $4 million Employees 8 Avg. Open 103 Contracts ROI% 69% EBITA 49% 50 Second quarter results ¦ 31 October 2016
Slide 51: Clusters – A Proven Track Record of Enhanced Performance
CLUSTERS – A PROVEN TRACK RECORD OF ENHANCED PERFORMANCE SEGMENTAL ANALYSIS Same Store Rental Revenue CAGR (FY11-FY16) EBITA margin ROI Market share 17% 17% 38% 38% 27% 27% 10% 10% 36% 36% 14% 14% 23% 23% 5% 5% Cluster Non-Clustered Cluster Non-Clustered Cluster Non-Clustered Cluster Non-Clustered 5
Slide 52: Significant Opportunity to Build Out Further Clusters
SIGNIFICANT OPPORTUNITY TO BUILD OUT FURTHER CLUSTERS Rental Markets Top 25 26-50 51-100 100-210 Rental Market % 56% 19% 16% 9% Cluster Definition >10 >7 >4 >1 9 markets 8 markets 2 markets 13 markets Clustered 132 stores 70 stores 13 stores 32 stores 16 markets 17 markets 44 markets 34 markets Non-
Slide 53: Our Financial Road Map to 2021
OUR FINANCIAL ROAD MAP TO 2021 Revenue ($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 54: What About the Trump Infrastructure Plan?
WHAT ABOUT THE TRUMP INFRASTRUCTURE PLAN? Public investment cratered from 1965-80 and has slowly declined since then, while US construction as a % of GDP, 1990-2015 private investment has fluctuated historically but grew during the recovery Source: Redburn, US Census Bureau Gross investment as a por