Sunbelt reports 15 percent decline in rental revenues but doesn’t have to lay off or use government assistance
By Ashtead GroupNews Rental store reports ashtead financial fiscal investors share stock sunbelt
Sunbelt’s fiscal year-end report to shareholders reveals severe but survivable impacts from the pandemic to the international rental giant. Here’s the overview section:
In simple terms, the year can be characterised as pre-COVID-19 and post COVID-19. We were on track for another record year when the COVID-19 pandemic changed the world for everyone. We are proud to report that, despite an unprecedented ‘black swan’ event, with US fleet on rent falling 15% in 5 weeks, we are still able to report strong results for the year. There has, of course, been an impact on our fourth quarter results, but the underlying strength of the business and our performance in the first three quarters of 2019/20 mean we have continued to perform well overall. Our business is robust and we remain open for our customers in all our geographies. Throughout this period our focus has been on our people, our customers, our communities and our investors, in particular:
- ensuring the health and safety of our team members and customers;
- continuing to serve the needs of our customers and communities, including supporting government and private sector responses to the pandemic; and
- taking steps to optimise cash flow, reduce operating costs and strengthen further our liquidity position during a period of suppressed activity.
While trading volumes were lower in the second half of March and April as a result of the
pandemic, this has been mitigated, in part, by emergency response efforts throughout our business units but particularly within our specialty businesses. Sunbelt Rentals is designated as an essential business in the US, UK and Canada, supporting government and private sector responses to the pandemic. This includes providing vital equipment and services to first responders, hospitals, alternative care facilities, testing sites, food services and telecommunications and utility companies, while continuing to service ongoing construction sites and increased facility maintenance and cleaning.
As a result of these market dynamics, rental revenue for Sunbelt US in March was 3% higher (2% on a billings per day basis) than prior year and in April was 12% lower than prior year. This is due principally to the general tool business being 15% lower than prior year in April, while the specialty businesses (excluding oil and gas) were 9% higher than last year, with the reduction in the general tool business being driven by declines in volume rather than rental rates. This contributed to Group rental revenue in the fourth quarter 1% lower than the prior year at constant exchange rates. The degree of impact on volume has varied significantly across different markets and is correlated to the severity of infection rates and associated market level restrictions. Since 10 April, we have seen US fleet on rent stabilise and then increase as our markets adjust to new working practices and restrictions eased gradually. The trend has been similar in the UK and Canada. As a result, US May rental revenue was 14% (8% on a billings per day basis) lower than last year.
In early March we took steps to optimise cash flow, reduce operating costs and strengthen further our liquidity position including, but not limited to reducing planned capital expenditure for the year ending April 2021, suspending all current and prospective M&A activity, pausing our share buyback programme, implementing a group wide freeze on new hires and reducing discretionary staff costs, use of third party freight haulers and other operating expenditures consistent with reduced activity levels. We now expect capital expenditure of c. £500m in 2020/21. In addition, on 24 April 2020, we accessed an additional $500m of liquidity through the Group’s senior secured credit facility, increasing the facility size to $4.6bn for the next twelve months.
A skilled workforce is instrumental to the Group’s long-term success and we have made every effort to preserve our committed workforce for the impending recovery. Therefore, we have not made any team members redundant as a result of the impact of COVID-19 and have not sought assistance from government support programmes such as the UK’s Coronavirus Job Retention Scheme or similar schemes in Canada.
Looking forward, we believe that the impact of the COVID-19 pandemic will continue to give rise to market uncertainties over the coming months. However, with strong market positions in all our markets, supported by good quality fleets and a strong financial position, we believe that we are well positioned to respond to this market uncertainty and continue to support our customers and team members.
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