Earnings call transcript: Ashtead Group Q1 2025 sees modest revenue growth

Ashtead Group PLC reported a modest 2% increase in total revenue for the first quarter of 2025, while rental revenue rose by 2.4%. The company’s adjusted pretax profit stood at $552 million, reflecting a 4% decrease from the previous year. Despite these mixed results, the stock price showed resilience, with a 0.48% increase, closing at 5,376, moving closer to its 52-week high of 6,448. According to InvestingPro analysis, the company appears undervalued based on its Fair Value calculations, with an EV/EBITDA ratio of 15.27x. InvestingPro data reveals the company has maintained dividend payments for 20 consecutive years, demonstrating consistent shareholder returns.

Key Takeaways

• Ashtead Group’s total revenue increased by 2% in Q1 2025.
• Adjusted pretax profit decreased by 4% from the previous year.
• The stock price rose by 0.48%, showing positive investor sentiment.
• The company opened 10 new greenfield locations and invested $20 million in acquisitions.
• Guidance for rental revenue growth remains between 0% and 4%.

Company Performance

Ashtead Group’s performance in Q1 2025 reflected a steady yet cautious growth trajectory. The company’s revenue growth was modest at 2%, with rental revenue showing a slightly better increase of 2.4%. Despite a decline in adjusted pretax profit, the company continues to focus on strategic expansion, opening new locations and investing in acquisitions. The broader market trends in nonresidential construction appear favorable, supporting future growth prospects.

Financial Highlights

• Revenue: Increased by 2% year-over-year.
• Rental Revenue: Grew by 2.4%.
• EBITDA Margin: 46%.
• EBITA Margin: 24%.
• Adjusted Pretax Profit: $552 million, down 4% from last year.
• Adjusted Earnings Per Share: $0.53.
• Return on Investment: 14%.

Outlook & Guidance

Ashtead Group maintained its rental revenue growth guidance at 0% to 4%. The company plans significant capital expenditure ranging from $1.8 billion to $2.2 billion and expects free cash flow between $2.2 billion and $2.5 billion, an increase of $200 million. With a positive outlook on the nonresidential construction market, the company is preparing for a primary listing on the New York Stock Exchange in March 2026.

Executive Commentary

CEO Brendan Horgan noted, "We’re experiencing positive leading indicators in our internal business activity levels and pipeline." CFO Alex Pease highlighted the company’s transition, stating, "This is a demonstration of the progression of the business over time from more of an industrial commodity to a true service business."

Risks and Challenges

• Margin pressures from fleet repositioning and repair costs.
• Potential inflationary pressures impacting cost structures.
• Market volatility and economic uncertainties affecting construction activity.
• Competition in the rental market, particularly in mega projects.
• Dependence on the nonresidential construction sector for growth.

Q&A

During the earnings call, analysts queried the company about margin pressures and fleet repositioning costs. Executives expressed confidence in their ability to manage costs and pass on inflationary pressures to customers. The company also emphasized its strategic focus on rate progression and its recent contract win for the Los Angeles 2028 Olympic Games equipment solutions, signaling strong future opportunities.

Full transcript - Ashtead Group PLC (AHT) Q1 2026:

Conference Operator: Good morning, ladies and gentlemen. We’re awaiting the arrival of additional participants and the call will be starting shortly. We thank you for your patience and please continue to hold. Thank you. Hello, and welcome to the Ashtech Group PLC Q1 Results Analyst Call.

I’ll shortly be handing you over to Brendan Horgan and Alex who will take you through today’s presentation. For now, over to Brendan Horgan and Alex Pease of Ashtead Group PLC. Please go ahead.

Brendan Horgan, CEO/Executive, Ashtead Group PLC: Great. Thank you, operator. Good morning. Thank you for joining, and welcome to the Ashland Group Q1 results presentation. I’m speaking to you this morning from our support office in Fort Mill, South Carolina, where I’m joined by Alex Pease and Kevin Powers with Will Shaw on the line from London.

Given that the first quarter, we’ll keep this relatively brief. You’ll see we’ve updated the presentation format a bit as we do from time to time. But as usual, I’ll start with safety on Slide four. To begin, I’d like to address our Sunbelt team members listening in, specifically recognizing their leadership and the health and safety of our people, our customers and the members of the communities we serve. In particular, I’d like to acknowledge our professional drivers who are on the road every day and lead from the front in our obsession with Engage for Life and our obsession with customers.

They drive over 1,000,000 miles while performing over 30,000 deliveries and pickups every single day. We know that the more we drive, our exposure increases. And I’d like to recognize this team for not only delivering on our promise to our customers, but also doing it safely. Just as we invest in our fleet, we also invest in the safety of our people and our communities. And illustrated herein, you can see the significant improvement in rear ending events.

Our efforts are delivering results, not only in the performance of the business, which we will discuss, but more importantly in the safety of our people. So to our drivers, thank you. Thank you for all your efforts and your ongoing engage commitment to Engage for Life. Turning now to Slide five. Key messages you’ll hear from Alex and me today are the following.

First, this is a solid set of results with our expectations with group rental revenue growth of 2.4%. Second, the strength of free cash flow after CapEx investment in fleet and business expansion demonstrates that through the cycle free cash flow power of the business at our scale and margin. Third, while our key construction end markets remain mixed, we are seeing clear signs of positive momentum in many of our internal and external leading indicators such as quotes, reservations and planning momentum. More on these later. Mega project activity continues to be strong, and we’re winning share across our regional and national strategic customers.

Fourth, we continue to deliver against the five actionable components of our Sunbelt four point zero strategy with growing momentum every day. Fifth, we’re confident in reaffirming full year guidance for rental revenue growth and CapEx while increasing it for free cash flow. And finally, the work to move the primary listing to the New York Stock Exchange in March 2026 is on track. And as part of this process, we’re planning an Investor Day in New York shortly following our listing and hope to see you there in person. We’ll of course be sending out a save the date shortly.

Moving on to the financial highlights of the first quarter on slide six. Group rental revenues were up 2.4% consistent with the 0% to 4% guidance we gave in June. I mentioned some leading indicators a moment ago. So let me expand. We actively track leading indicators such as quotes, reservations, daily new contract activity and continuing contracts as a way to measure the health of our pipeline.

And all these indicators are trending positively and favorable to what we experienced a year ago this time. While it’s too soon for these leading indicators to form certainty, we’re cautiously optimistic these trends in our business will continue and our early signs of the local nonresidential portion of our end markets recover. As when they do, we’ll experience accelerated momentum and improved results. Group adjusted EBITDA was flat at $1,300,000,000 and EBITDA margins at 46% reflected the mix effect of higher ancillary revenue, primarily related to the Power and HVAC business as well as the proactive repositioning of our fleet to drive utilization and unlock pockets of growth. Increased repair costs also represent a headwind to margin as a larger portion of the fleet comes out of warranty coverage as we expected.

From a capital allocation standpoint and in line with our Sunbelt four point zero priorities, we invested $532,000,000 in CapEx, focused on a mix of replacement and growth. Free cash flow was $514,000,000 which apart from the COVID impacted fiscal year twenty twenty one is a record for the quarter and demonstrating the resilience of our business while we continue to invest in growth. This strong free cash flow generation is supporting the current $1,500,000,000 buyback program, which we are on track to complete in the current fiscal year, in addition to repaying $90,000,000 in long term borrowings in the quarter. Moving on to our segmental performance on Slide seven. Revenue growth for North America General Tool was 1% in the quarter, reflecting positive volume momentum and resilient rates in end markets, which continue to be mixed.

As expected, we continue to be in a moderated local nonresidential construction market through the first quarter, offset in part by the ongoing strength of the mega project landscape and the broader nonconstruction markets. During the quarter, we repositioned rental fleet as we focused on improving time utilization across General and Tool with good results. As expected, Specialty performed well with growth of 5% despite the drag from oil and gas and the Film and TV business in Canada, both of which were not previously reported in specialty and were down in the quarter. The specialty segment strength was led by the Power and HVAC business, which grew double digits as we continue to provide a wider scope of value added services to our customers. On a constant currency basis, U.

K. Rental revenue was down 2%, reflecting the ongoing challenges in The U. K. Markets. Slide eight shows fleet on rent for North America over the last four fiscal years, and you can clearly see that our efforts to drive growth with existing fleet has resulted in improved time utilization.

While this has come with temporarily higher transportation costs, it’s the right trade off to make for the business as it will support a more constructive rate environment and improve ROI over time. It also demonstrates our disciplined and flexible capital allocation approach. On the next couple of slides, we’ll cover the activities and outlook for the North American construction end market. On Slide nine, we’ve set out the main lead indicators for the construction sector: Dodge Stars Dodge Momentum Index the Architectural Billing Index and the Fed Funds Rate. The outlook for construction growth continues to be underpinned by mega projects and infrastructure work, which remains strong and in many cases are gaining further momentum.

We made great progress in mega project wins in the quarter with a growing funnel of future projects and advancing market share with our strategic customers, both regional and national. This clearly demonstrates the cross selling prowess across the specialty and general tool businesses as well as the advantage of Sunbelt’s significant breadth and depth of products, solutions and expertise, combined with a technology platform that is able to deliver efficiencies and value in a range of complex applications. As it relates to our local nonresidential end market, we remain in a moderated environment. However, in addition to the previously mentioned internal leading indicators, quotes, reservations and activity, where we are seeing positive trends, I’d like to call your attention to the Dodge Momentum Index in the bottom left of the slide. This index represents nonresidential projects, excluding manufacturing, that are below $500,000,000 and entering the planning phase for the first time.

This is therefore highly representative of future velocity in what we refer to as the local nonresidential construction market. This clearly indicates strong demand and development, and we are confident that the strengthening and planning activity across our nonresidential construction end markets will lead to an increase in starts likely within a period of twelve to twenty

Alex Pease, CFO, Ashtead Group PLC: four months.

Brendan Horgan, CEO/Executive, Ashtead Group PLC: So while clearly a positive leading indicator, it will take some time for this planning to translate into project starts. However, when it does, we are poised to benefit. On Slide 10, you can see how the starts forecast translate into the latest Dodge put in place figures. It’s worth flagging that Dodge have now increased their 2026 forecast for growth in construction, excluding residential, from 2% to 4% in their June report, reflecting some of the more positive lead indicators we’re now seeing. It’s also important to note that these numbers significantly influenced by the strength of mega projects, which affect our large strategic customers as opposed to the SME portion of our customer base.

Before I hand it over to Alex, I’ll just touch on our Sunbelt 4 strategic plan on Slide 11. We’re now five quarters into a 20 quarter plan. And as I detailed in June, our teams have been laser focused on advancing each of the five actionable components, which are customer, growth, performance, sustainability and investment. While I’m not going to give you a further detailed progress report today, I will say that our clarity and mission throughout the organization is certain and our momentum is building. We’ll share more details as we progress throughout the year and in particular during our upcoming Investor Day.

With that, I’ll hand it over to Alex to cover the financials in more detail.

Alex Pease, CFO, Ashtead Group PLC: Thanks, Brendan, and good morning, gentlemen. Starting with the first quarter results for the group on Slide 13. Group total revenue increased 2% and rental revenue increased 2.4%. The EBITDA margin and EBITA margin were forty six percent and twenty four percent respectively. The slight drop in margins reflects a number of factors, including the higher level of ancillary revenue, most notably E and D work in our Power business, which is typically at a lower level of margin an increased level of internal repair costs, which anticipated as we had roughly 13 percentage points less of our fleet on warranty coverage and an expected increased cost of repositioning the fleet to higher growth markets, driving improved time utilization and ongoing rate After an interest expense of $131,000,000 reflecting lower average debt levels, adjusted pretax profit was 4% lower than last year at $552,000,000 As explained previously, we’re adjusting for nonrecurring items associated with the move of the group’s primary listing to The U.

S. These costs amounted to $12,700,000 Adjusted earnings per share were $0.09 $53 and ROI on a trailing twelve month basis was 14%. Slide 14 illustrates group revenue and EBITDA progression over the last five years and in the first quarter, highlighting the significant track record of growth over a range of economic conditions. Turning now to the individual segments and starting with General Tools. Slide 15 shows the performance for our North American General Tools.

Rental revenue for the quarter grew by 1% to $1,500,000,000 driven by improved volume, time utilization and stable rates. As I explained previously, margins were impacted in the period primarily by investments in repositioning the fleet for growth as well as higher internal repair costs largely related to warranty recoveries. EBITDA was $871,000,000 at a strong 53% margin. Operating margins were 32% and ROI was 20%. Turning now to North American Specialty on slide 16.

Rental revenue was 5% higher than the first quarter last year at $854,000,000 as the non construction market continues to be strong, particularly in Power and HVAC and Climate Control. This strong rental revenue growth in the quarter was primarily impacted by the inclusion of both film and TV and oil and gas, which were not included in the results prior to our resegmentation. Margins in Specialty were flat with EBITDA margin of 48% and an operating margin of 33% as mix related to high ancillary revenue impacted margin as well as the higher internal repair costs. These headwinds were offset by continued strength in rate and will pay dividends in the back half of the year. ROI was 31%, again clearly demonstrating the higher returns achievable in the specialty business.

Turning now to The U. K. On slide 17, and please note that all of these numbers are in U. S. Dollars.

U. K. Rental revenue was 4% higher than a year ago at $212,000,000 The UK business delivered an EBITDA margin of 25% and generated an operating profit of $16,000,000 at a 7% margin and ROI was 6%. In line with the four point zero strategy, we continue to focus on improving the business’ operational efficiency and long term sustainable returns through a broad range of efforts including footprint realignment, targeted asset sales and G and A discipline. Across our North American segments, we’ve shown the resilience of our business and return to growth and significant cash flow generation, while continuing to invest for the future.

While our U. K. Business continues to be challenged, our disciplined operating model, robust transformation plans and strong execution gives us a high level of confidence for the future. Combined, our results clearly demonstrate the full power of Sunbelt and the strength of our Sunbelt Portado strategy. Slide 18 illustrates the flexibility and agility of our capital allocation framework.

When markets are experiencing the transitory headwinds we have experienced recently, we manage our capital budget to support strong utilization and rate discipline. When markets are more robust, we accelerate capital spending to capture growth and market share. In all cases, we generate significant free cash flow in excess of our investments, which we return to shareholders in the form of dividends, debt repayment and share buybacks. You see this clearly in fiscal years 2021 and 2025 when we generated around $1,800,000,000 of free cash flow in both years. And as you can see, we have started the year strongly with over $500,000,000 generated in the first quarter, over three times the level generated in the first quarter of last year.

And we’re well on track to deliver record free cash flow generation this year. Slide 19 updates our debt and leverage position at the July. We reduced external borrowings by $91,000,000 in the quarter in addition to the $523,000,000 reduction in borrowings last year. We also returned $332,000,000 through share buybacks at an average price of just over £45 per share, while continuing to invest over $500,000,000 in CapEx. As a result, excluding lease liabilities, leverage was 1.6 times net debt to EBITDA, well within our stated range between one to two times net debt to EBITDA.

We expect to be in the 1.5 to 1.6 range at the April, the impact from the share buyback program, but not including any potential impact of M and A activity. While I’m speaking with M and A, we have a robust pipeline, which we continue to develop and pursue opportunistically as long as it is accretive to growth and generates margins and returns in line with our capital allocation expectations. Turning now to slide 20 and our latest guidance for revenue, capital expenditure and free cash flow for fiscal year twenty twenty six. Our guidance for group rental revenue growth is unchanged at between flat and plus 4% reflecting the ongoing dynamics in some of our end markets. The plan for gross capital expenditure is unchanged in the range of 1,800,000,000.0 to $2,200,000,000 Finally, we expect free cash flow to be between 2,200,000,000.0 and $2,500,000,000 which is an increase of $200,000,000 over June’s guidance and reflects the expected cash tax benefit from the reintroduction of 100% bonus depreciation based on our current CapEx plans.

And so with that, I’ll hand it back to Brendan to close this out.

Brendan Horgan, CEO/Executive, Ashtead Group PLC: Great. Thanks, Alex. Before we sum it up, I’ll just touch on capital allocation. During the quarter, we made good progress on our Sunbelt four point zero execution. As part of this, we’ve continued to invest in the business.

So during the quarter, we invested $530,000,000 in CapEx. We opened 10 greenfields in North America, of which six were general tool and four specialty with a clear line of sight to achieve 60 greenfields in the full year. We invested $20,000,000 on two bolt on acquisitions. The M and A pipeline as Alex just referred to remains robust and we expect to acquire additional businesses as we progress through the year. We’ll pay the final dividend of $0.72 per share on September 10, following its approval at yesterday’s AGM.

This amounts to $3.00 $6,000,000 Finally, we returned a further $330,000,000 through share buybacks and expect to complete our $1,500,000,000 program by the end of this fiscal year. All this is consistent with our long held policy, and we’ll continue to allocate capital on this basis throughout Ward Auto. Turning to slide 22. In summary, there are two primary takeaways one should gather from our update today. One, the quarter resulted in exactly what we expected in revenue growth, improving utilization, free cash flow and advancing our four point zero plan, leading us to reiterate our revenue and CapEx guidance while increasing it for free cash flow.

And two, we’re experiencing positive leading indicators in our internal business activity levels and pipeline coupled with an encouraging indication of market demand statistics. And with that, we will open the call for Q and A. So back to you operator.

Conference Operator: Thank you very much Mr. Horgan. Our very first question today is coming from Elyse Vermeeran of Morgan Stanley. Please go ahead.

Elyse Vermeeran, Analyst, Morgan Stanley: Hi, good morning Brendan. Good morning Alex. I got two questions please. So just on your margin expectations for the rest of the year. I think your margins improved in Q4, thanks to some of those cost controls you spoke about previously.

But clearly, we’re a little bit under pressure this quarter due to the factors you mentioned on ancillaries, fleet repositioning, repairs, etcetera. So should that continue through the remaining quarters? Or was Q1 a bit of a one off in that regard? And do you have further planned offsetting cost control factors for the remaining three quarters? And then secondly, on your free cash guide upgrade, just wondering if you had any plans at this stage for that cash, either in terms of deleveraging, more buyback.

You mentioned you plan to acquire additional businesses through the year. So within that, could could you perhaps comment on the M and A environment in terms of valuations, willingness to sell, etcetera? Thank you.

Alex Pease, CFO, Ashtead Group PLC: Sure, Annalie. Thanks so much for the question. And I’ll sort of kick us off and then hand it over to Brendan, particularly on the M and A point. So first, I would not characterize our margins as being under pressure. I think they were extremely strong in a fairly moderate growth environment.

And so as I mentioned in the prepared remarks, they were impacted by a number of things that were very deliberate in terms of how we run the business. And the first was that higher internal repair cost that I mentioned. And this is driven, if you look back two and three years ago, you’ll see that we spent in the order of $4,000,000,000 of CapEx in those years. And in the last year, we did about $2,500,000,000 This year, we’ll do about $2,000,000,000 And so as you see those big slugs of capital age, you’ll see the warranty just as expected roll off because warranties typically cover for about two years. So we knew that was going to happen and that’s just a function of the timing of our capital investment.

The second issue that impacted margins was this higher repositioning of fleet. And again, that’s very, very deliberate. We are repositioning fleet to really increase time utilization that has a positive impact on rate that allows us to capture growth without investing more in CapEx. And so again, that was a very deliberate and positive move that will pay dividends as we get into the back half of the year. And then the last issue was really around mix.

And so we pointed to higher ancillary revenue, particularly in our power and HVAC business, where there’s high E and D expense at positive margin, but lower margin than sort of the core True Rental business. And then again, this repositioning of fleet in the general tool business. So all of the margin headwinds were sort of within our control and deliberate and positioning us for strength as we get into the back half of the year. We’re obviously always extremely focused on cost control. There’s no difference.

That’s the actionable component of Sunbelt three point zero, the third tier. But I just want to make sure nobody misinterprets the slight margin compression as being a loss of that focus on cost control as opposed to really focusing on positioning ourselves for growth and margin expansion as the market recovers. As it relates to free cash flow guide, we upgraded it by about $200,000,000 This is directly related to the big beautiful bill and the reimplementation of the accelerated depreciation as well as continued strong EBITDA growth. In terms of our plans for that free cash flow, as I would have mentioned, we are always maintaining a robust pipeline for M and A activity. We have a very flexible capital allocation framework.

So we’re online to complete our $1,500,000,000 share buyback program before the end of the fiscal year. We are supporting a robust dividend. And as the market recovers, we’ll again increase our capital our CapEx expectations to capture those pockets of growth. And with that, I’ll probably turn it over to Brendan to comment a little bit more on the M and A activity because I know that’s an area that

Brendan Horgan, CEO/Executive, Ashtead Group PLC: Great. Good morning, Annalise. The business development team has been busy. As we mentioned several times, there’s a strong pipeline, and that remains the case. We have a few businesses under LOI that we’ll complete in the quarter for a little bit over $100,000,000 And I expect that to actually gain as we progress through the year.

To your point or question on what from a multiple standpoint in terms of what expectations are, I’d say that that pressure, if you will, is abating. There are actually a lot of buyers out there at the moment for I think all the reasons everyone understands. So we’re positioned quite well. But really in the end, this is not a race for M and A rather finding businesses that just fit. They fit our strategic rationale.

They fit in our Sunbelt Ford auto plans between specialty and general tool, but certainly that pipeline is strong.

Elyse Vermeeran, Analyst, Morgan Stanley: Thank you. Thanks very much. Just to double check on the margins. Do those fleet repositioning costs and so on, is that something that will continue in Q2? Or have you done the bulk of that kind of in Q1?

Alex Pease, CFO, Ashtead Group PLC: Look, we always are repositioning our fleet. And as mega project activity increases, we’ll be positioning fleet to take advantage of those opportunities. As projects ramp down, we obviously take the fleet off of those projects and reposition. So this is just part of our business and one of the things that makes our business such an interesting environment to operate in and we can take advantage of our scale because we do have nationwide footprint. So we’ll always be repositioning our fleet.

What’s a little bit anomalous about this quarter is that we are really focused on that time utilization and making sure we’re unlocking these pockets of growth in the markets where it exists. So look as the market recovers will that subside somewhat? Of course, yes, will. Will we ever stop repositioning our fleet proactively? Probably not.

Brendan Horgan, CEO/Executive, Ashtead Group PLC: If I could just reinforce, Alex mentioned the performance actionable component. That our expectations of progressing margins over the course of four point zero very much remain intact. We have the playbook in order to do it. At the full year, we would have highlighted some of those actions around MLOs as we call them market logistics operations and market service operations and we continue to progress that throughout the quarter. I’ll just remind really everyone, it’s not linear in terms of that progress from the starting point to the ending point.

We made good progress in margin progression over the course of last fiscal year, and we will certainly return to that as we progress through four point zero.

Elyse Vermeeran, Analyst, Morgan Stanley: Very clear. Thank you guys very much.

Conference Operator: Thank you for your questions, ma’am. We’ll now move to Suhasini Varanasi of Goldman Sachs. Please go ahead. Your line is open.

Suhasini Varanasi, Analyst, Goldman Sachs: Hi, good morning. Thank you for taking my questions. Just a couple for me please. Your commentary on leading indicators and business momentum seem to suggest that maybe the August trading environment was a better than last year. Would you say that was true?

And is it possible to give some color on how August trading was? And then second one, just to go back to the point on the margins that Annalise asked, sorry about that. Is it possible to quantify the impact of the repair cost, the ancillary revenues, the repositioning of fleet? Just so that we can understand if there was any lumpiness in that particular quarter, should we think about any of them unwinding in Q2? Thank you.

Brendan Horgan, CEO/Executive, Ashtead Group PLC: Sure. August trading is in line with what we expected, very similar to what we would have seen in Q1. And just on your point there, I think it’s worth turning to Slide nine for those of you that have the deck in front of you. And this references, of course, the external indicators. We talked about the internal leading indicators of our business, which is really activity, activity in quoting, activity in reservation, daily contract of transactional activity, which we’re seeing this strength in that pipeline or indicators.

And then when you look at that Dodge Momentum Index in the bottom left, just to reiterate what that actually interprets. So these are projects that Dodge accounts for that are entering the planning phase, but these are projects under $500,000,000 in total starts value and excluding manufacturing. So this really is a good barometer of that local non res construction market that we’ve been talking to for a period of time now. So these are positive signs not to be confused with. We’re still in a moderated non res construction environment.

That shifts if you will from what was moderating to be in position where we are. The positivity in all that is these good signs, but also when you look back to say 2022, 2023, those years where we saw far more robust starts activity and this funnel is shaping up to demonstrate the beginnings of that. But again, reminder, that’s twelve twenty four months on average before you actually see these planned projects progress to starts. Yes.

Alex Pease, CFO, Ashtead Group PLC: And so I’ll take the margin question just because I seem to be on a roll. So on the IRR cost, it was year over year, it was about $30,000,000 higher. And if you think about the warranty coverage of that big slug of fleet that I mentioned, if you were to look last year, about 39% of the fleet was under warranty coverage. If you were to look same quarter this year, about 26% of the fleet was on warranty coverage. So that’s the 13 percentage points that I mentioned.

And again, if you look on Slide 30 of the results presentation in the appendix, you’ll see quite clearly in years 2023 and 2024, those are the two big slugs of capital years that we’re referring to. And it will make sense to you when you understand that these warranties typically last around two years. And generally speaking, about 1% of our fleet, 1% of our total OEC is comes back to us in terms of the warranty coverage. That’s the total number if you want to put a quantum around it is about $30,000,000 year over year. That change in warranty expense is about $18,000,000 of the $30,000,000 So it explains about half or just over half of the higher IRR.

If you look at the fleet repositioning costs that’s higher year over year by about $5,000,000 or so. And again, that will mitigate as the overall non residential construction market begins to improve. But again, that’s positioning ourselves for improved margin in the future. And then the last point that I think should be obvious, but as you all work through your expectations for the balance of the year and into next year, it’s normal in any business to give merit improvements around this time of year. So you did see salary and wages increase by about 3%, which I think is in line with again anyone else in any other industry.

And obviously, a growth environment where you’re growing by about 2.4% and your salaries and wages are increasing by about 3%, that’s going to have an impact on margin. As we continue to progress rate and unlock these pockets of growth that will mitigate. And then the last point that Brendan mentioned, which I don’t want anybody to lose sight of is the progression of that third actionable component of Sunbelt four point zero. We mentioned last year at the year end that we had four sites that had been active in the MLOs, these market logistics centers for a full year. We’re generating significant double digit improvements in outside hauler expense.

That number at year end was around $60,000,000 that have been implemented. That continues to progress. And this year, we’re on track to deliver or implement more than 30 of those locations. So we’re gaining scale in terms of that body of work. And then in a really exciting development this week or I’m sorry, just last week, we went live with our market service operations.

And so this is really optimizing our repair and maintenance spending, again, leveraging that clustered economic strategy in the markets where we really have scale. And so that’s just gone live and that will deliver huge benefits in terms of our overall repair and maintenance costs. So really appreciate all the questions.

Suhasini Varanasi, Analyst, Goldman Sachs: Thank you for the color. And Brendan, just a quick follow-up please. Was there any comment that you would like to make on current trading in August, please?

Brendan Horgan, CEO/Executive, Ashtead Group PLC: The comment I made was it is it’s very similar to Q1.

Suhasini Varanasi, Analyst, Goldman Sachs: Thank you.

Elyse Vermeeran, Analyst, Morgan Stanley: Thank you very

Conference Operator: much. Thank you for your questions, ma’am. Next question will be coming from Will Krakenis of Bernstein. Please go ahead.

Alex Pease, CFO, Ashtead Group PLC: Thanks very much.

Rory McKenzie, Analyst, UBS: So first question just on utilization.

Alan Wells, Analyst, Jefferies: I wondered if you could give us some help on how much headroom you have there before you might need to start looking at when to switch on the CapEx a bit more. And then linked to that, I suppose, rates. Should we think of rental rates as flat here or maybe a touch higher? Thank you.

Brendan Horgan, CEO/Executive, Ashtead Group PLC: Well, on utilization, it’s very much by category. There’s a bit of headroom in certain product categories, But we’re also quite toppy, if you will, in some others as we’re constantly working to maximize the fleet that we have invested in and the fleet positioning, not only the repositioning, which Alex has talked about in so much detail of existing fleet, but also just managing the landings that were planned throughout the year. So what was planned to go into a certain metro area is very agile, so to speak, and can go to the next metro area that is experiencing ever more demand. So we’ve got a bit of headroom there compared to our almost, if you will, anomalous levels of high time utilization when we had such significant supply constraint. In terms of when we will increase the dial as it relates to increasing CapEx, well that just comes down to what demand is.

So when we look we’re doing it as we go through the year, whether it’s a mega project win or it is a market that is exceeding our thresholds for time utilization, which allows for ongoing order capture. We move that and we’ll see what things look like at the half year as it relates to CapEx, and we’ll give you an update at that point in time. I think your assessment of rates is a good one. They are strong, the strength in terms of resilience. We continue to see discipline across the industry, particularly when it comes to CapEx levels and fleet landings as well as dispositions.

And that’s all remarkably healthy. We progressed sort of steady as it goes in the specialty business. And in the general tool business, I would describe that as you have, which is flat but also very resilient. And as we continue to sort of inch up time utilization, I think we will see that return and be a real characteristic of growth of ours akin to what we would have put out there with Sunbelt four point zero in terms of our strategy on pricing. Hope that answers your questions, Will.

Alan Wells, Analyst, Jefferies: Yes. Very clear. Thanks.

Conference Operator: Thank you so much, sir. Next question is coming from Rob Wertheimer of Medias Research. Please go ahead.

Rob Wertheimer, Analyst, Medias Research: Hi. I have two if I could. The first is just I wonder if you could talk about your ongoing experience in mega projects with the color around market share, capture rates and then profitability on those projects. And then second, I’ll just ask it now. I think Alex mentioned kind of market service areas.

I wonder if you could kind of just expand on what that is, what kept you from doing it before and how much potential it holds? Thank you.

Brendan Horgan, CEO/Executive, Ashtead Group PLC: Yes. Thanks, Rob. Good morning. I’m going to start with your second. Around the question is why didn’t we do that earlier?

You’ll remember, of course, the sort of chronology of strategic growth plans we have.

Alex Pease, CFO, Ashtead Group PLC: We had Project twenty twenty one.

Brendan Horgan, CEO/Executive, Ashtead Group PLC: We had Project three point zero, all very much pointed to increasing our density and creating what we define as these clustered markets. And it’s really at that point when you have the ability to not only form the scale, but also form that level of density in the marketplace where it makes sense. But long, long ago, we would have done market field service that we would have put in place in all of these areas. And now a combination of that density but also the technology that’s in place, if you take, for instance, our VDOS system, which is sort of VDOS three point zero, which was a total remake over that period of time, which builds automatically the manifest for all the dispatch, etcetera, and allows us to do it at the market level. Alex also touched on this market service operations, which is the next step from a market field service overall, whereas we are allocating, if you will, repairs based on shop and technician availability, aligning larger repairs with technicians level three, etcetera.

So that’s making great progress. All of you would know and would have seen over the years Brad Walpresents. So Brad and the OpEx team are leading that charge. And as we’ve stated very clearly, we’ll have over 30 of those in full play by year end. So not only are we working on there the overall efficiency in the business, but we’re also bringing better service to our customers overall.

As it relates to mega projects, we can quite comfortably characterize our ongoing momentum from last year. So in the quarter as a for instance, we would have been awarded nine mega projects. And our batting rate on that so to speak is really high. It’s the typical task of larger, more sophisticated, more capable with good resumes so to speak and having completed and participated in projects at scale and complexity. So we continue to feel remarkably good about our overall share there.

We’ve stated that it’s at least two times our overall market share and that comfortably remains the case. So not only a good quarter in wins, but also a continuing good environment in terms of adds to the overall pipeline. And I’d also add a lot of diversity in these mega projects. Lots of headlines around data centers and sure there are lots of data centers that are entering planning or entering that funnel or even beginning new. But there’s a lot else out there whether it be fabs, it be LNG or be sporting arenas or stadiums.

It is a flush market of mega projects. Rob, maybe a couple of additive points I’d just make. First on the whole MSA, MLO, I just think as Brendan described, this is a demonstration of the progression of the business over time to from more of a sort of industrial commodity, if

Alex Pease, CFO, Ashtead Group PLC: you will, to a true service business. And it demonstrates the scale of Sunbelt that just can’t be replicated. And it’s on the back of the technology investments, on the back of the Sunbelt three point zero strategy, and it’s really implementing everything that we described back in POWERHOUSE. So I really just think it’s the continued transformation of the company to this business service orientation, which is delivering distinctive and differentiated value to our customers. Second, on the mega projects, just to sort of dimensionalize it, because I think a lot of times in these sessions, people tend to think of mega projects as data centers.

And so I’m just looking at our funnel here. Of the eight thirty two projects that we’re involved in, 64 are data centers. So it’s a very broad and diverse pipeline. Around 400 of those are listed in the other category. Around 200 of those are in the infrastructure domain.

So it’s just a very, very diverse funnel. As we sit here today, that total project count is around eight thirty. If I look out into 2026 and 2028 that project count grows from eight thirty to ten fifty three representing around $1,400,000,000,000 in potential project value. So this really is a dynamic growing and diverse landscape of projects, which are a huge tailwind for growth as we look forward.

Rob Wertheimer, Analyst, Medias Research: Thank you.

Conference Operator: Thank you so much, sir. Next question coming from James Rose of Barclays. Please go ahead, sir.

Alan Wells, Analyst, Jefferies: Thank you and good morning. I’ve got two, please. Firstly, can you update us on how tariffs are impacting the business? And then secondly, I see you’ve won the contract for the Olympics. Any color you can provide on that bid would be much appreciated and congratulations.

Brendan Horgan, CEO/Executive, Ashtead Group PLC: Yes. Thanks, James. First, the tariff piece and Alex will add some color here as well. The key point for where we are today, our agreements with our OEMs are intact and the current year spending, therefore, from a CapEx standpoint is protected. I think if you set aside tariffs, our starting point for our negotiations for next year for those that are multiyear agreements would actually be flat to down.

And we will deal with tariffs as they come. These are obviously a moving target it seems from week to week. But overall there are some other puts and takes around tariffs.

Alex Pease, CFO, Ashtead Group PLC: Yes. Look, I’ll just and obviously Brendan will talk about the Olympics, is hugely exciting and again another demonstration of the power of Sunbelt and something that only we can provide to this market. But back on tariffs, look, this year as Brendan mentioned, it won’t have any impact. All of our agreements are in place. And so it’s not a headwind for this year at all.

As we look forward, we’ll work with our OEM suppliers to mitigate the impact. We’re an importer of record on only about 20% of our fleet. So relative to others, we are much more highly domestically oriented, which mitigates this impact right out of the gate. So you have opportunities to work with suppliers to help manage their cost structure, but it doesn’t have a direct impact on us. If I were to dimensionalize it, we put it in the range of, call it, between 50,000,000 and $250,000,000 of potential headwind at the low end to 200,000,000 at the high end.

Obviously, as Brendan mentioned, that changes almost daily, certainly weekly. Last point I’ll mention is we do have about $17,000,000,000 of OEC here domestically in this market. We have massive flexibility in terms of what we can do with that, whether it becomes looking to remanufacturing as options for how we mitigate the impact of tariffs extending the life of that fleet to get through current trends or any sort of transitory headwinds. So we have huge amounts of flexibility. And as tariffs impact the market, that pushes more people towards rental because they can’t have the advantages of scale with suppliers the way that we do.

And so I wouldn’t say we’re happy about the tariff environment, but we’re certainly a net beneficiary relative to others in the market. So Brendan, why don’t

Brendan Horgan, CEO/Executive, Ashtead Group PLC: you comment on the election? So James, for the rest of the audience listening, James is picking up clearly on a press release that

Rob Wertheimer, Analyst, Medias Research: we would put out yesterday about one P. M.

Brendan Horgan, CEO/Executive, Ashtead Group PLC: Eastern Time in conjunction with the LA twenty eight committee. But yes, Los Angeles twenty twenty eight Olympic Summer Games. It’s a great win for the team. They’ve been working on this for two years or longer. We didn’t speak to it in our prepared remarks as we’re still nearly three years out, but we’ll get to scale, revenue, capital, execution, etcetera in due course.

The big picture really is, since this was asked, our selection or win here represents the breadth, depth, scale of solutions and the supporting technology in terms of what the team presented to the body that was making this decision. Just to be clear, we are the official rental equipment solutions partner. And that’s actually across our general tool equipment, power and HVAC, ground protection, fencing, scaffold. I’m sure I’m missing something there. But to be awarded something as significant as this, you have to have a clear track record.

Thinking back to a previous question around mega project success and so much of it comes down to your resume and our ability to demonstrate our delivery of solutions on complex and large scale events and projects while doing it safely is really what led to this overall result. And it was a pleasure working with that LA twenty twenty eight committee who is laser focused on delivering a great, great, great game. So yes, we’re pleased to have that win. And I’m sure that we’ll cover a bit more of that when it comes to our Investor Day in March. Great.

Alan Wells, Analyst, Jefferies: Thanks very much.

Conference Operator: Thank you, James. We’ll now move to Katie Fleisher of KeyBanc Capital Markets. Please go ahead, ma’am.

Katie Fleisher, Analyst, KeyBanc Capital Markets: Hey, good morning. Sorry to beat the dead horse here on the margins, but just any detail that you can give on progression within specialty and general tool through the remainder of the year and if we should expect any significant changes from this quarter’s levels? And then, turning to the local accounts, when you think about the green shoots that you’ve seen there so far, do you think that’s mainly driven by better clarity on tariffs, interest rates? Any color there on what you think is making those customers a bit more confident and what you think

Alex Pease, CFO, Ashtead Group PLC: they need to see in

Katie Fleisher, Analyst, KeyBanc Capital Markets: the future to really start that recovery?

Alex Pease, CFO, Ashtead Group PLC: Yes. So I’ll hit the margin point, and then Brendan will obviously talk about market conditions. So on margin, I think the real driver of margin progression over the balance of the year is will likely be the progression of freight as well as utilization. And so we mentioned a lot, we’re really driving improved time utilization And that will support rate progression over time. I think as you think about modeling out the balance of the year, we would not want to take our PBT of $550,000,000 and multiply it by four.

Wouldn’t be appropriate. For a number of reasons, obviously, there’s seasonality in there. But don’t forget, we did have $100,000,000 of hurricane related revenue last year. And so far, we’ve not seen a single hurricane this year. So if you think about how that unfolded Q2 versus Q3, that was about $60,000,000 in Q2 and about $40,000,000 in Q3.

So as we look out at the balance of the year, I think it’s reasonable to expect that margins will continue to look similar to how they looked this quarter. And as market conditions recover, obviously, we’ll see the benefits of that scale and leverage on the fixed cost. So Brendan, why don’t you hit on the market mix?

Brendan Horgan, CEO/Executive, Ashtead Group PLC: Katy, I think in many ways you answered your question. The key really is and this is this has not been a demand issue as it relates to local non res. It really has been uncertainty. And the way we view it is it’s there’s three legs to it. First, there was the interest rate environment or the cost of borrowing.

And we’ve gone from where we were to clearly being in a period of easing, what the velocity of that will be. I’m sure we’ll be in tune September 17 when we hear from the Fed. However, I think it’s clear out there that we’re in this easy environment, and we’ll see how that progresses. The second, which was quite important, was actually the tax legislation or the so called big beautiful bill. Now we have clarity with tax rates extended both business and personal and very importantly the bonus depreciation element.

And then the third leg I think to it all is the tariff environment. And up until this point, certainly, I think most would say the damage, so to speak is not as bad as it would have been feared. So as we see those easing and I think you see that translate into that Dodge Momentum Index, It’s quite different between where it is today and where it was at the end of last calendar year. So from December 2024 to where we are today, it is 36% more in terms of what’s in that momentum index. And if you exclude the small fractions of data centers that are in that below $500,000,000 range, you’re still plus 26%.

So that just underpins the level of demand that’s out there. And we look forward to seeing those projects and planning progress to starts.

Katie Fleisher, Analyst, KeyBanc Capital Markets: All right. Great. Thank you.

Conference Operator: Thank you, Katie. Next question will be coming from Rory McKenzie of UBS. Please go ahead.

Rory McKenzie, Analyst, UBS: Hi, everyone. It’s Rory here. Two questions on margins. No, I’m kidding. They’re about rental rates, the other topic.

Within the group average rates being stable, are there any regions or products that you saw achieve good increases or any that came under pressure? And then secondly, within Sunbelt four point zero, I know you are budgeting for kind of annual rate increases over the planned cycle.

Conference Operator: Can you talk about

Rory McKenzie, Analyst, UBS: if you think that’s still feasible? Especially, Brent, I think you could just commented you were looking to OEMs for fleet costs to be flat to down. So maybe can you talk about how we think about pricing power into any recovery, your customers’ affordability of cost increases and maybe some of those points to discuss, please.

Brendan Horgan, CEO/Executive, Ashtead Group PLC: Yes. Well, first on rates, there’s look, as I said, specialty is steady as it goes. So in our specialty business, where it is so clear we’re providing overall solutions. And as we see this business continue to reflect more and more the hallmarks of a business services company, we’ll do the same. General tool, there are no particular geographies speak to or even product categories.

It’s just been a bit more benign. In no way shape or form are we suggesting that. We won’t regain momentum as it relates to rates. And again, let me just make the point. The rate environment is strong.

And if you can track how rates have performed in the business over the last eighteen or twenty four months When there was lower time utilization in the overall industry, it is in stark contrast to what we would have experienced in other cycles. So nothing to call out as it relates to product specifically or regions and very much what we would have laid out as our internal working plan as it relates to our ability to pass on inflationary pressures after we actually drive the efficiencies as best we can through the organization to our customers ultimately with some small margin is very much a focus and we have all the confidence that we will achieve that.

Conference Operator: Okay. Thank you. Thank you, sir. We’ll now move to Alan Wells of Jefferies. Please go ahead, sir.

Alan Wells, Analyst, Jefferies: Hey, good morning, gentlemen. Just a couple for me. One, just a clarifying comment just about rates and repair costs and how these trends. So my understanding is that because of the repositioning, you saw a bit of an improvement in time utilization this quarter sequentially. But obviously, I look at the general tool rate environment, it’s stable now versus improving, which you said in coffee.

So it looks like a deterioration. So rates haven’t followed utilization up at least this quarter. Can you just confirm that? And then on the repair costs, this looks like it should be a multiyear event, multiyear headwind, right, because your CapEx steps up again in twenty twenty four versus 2023. So obviously, there’s a need for some kind of set that.

So that’s the just to understand those dynamics is the first question. And then secondly, just on specialty, is it possible that you can provide the specialty growth if you adjust out the oil and gas and the film business? And as I look at the kind of the direct comparison there, the power and HVAC and climate saw double digit growth. I mean, my understanding that makes up the biggest portion of your specialty business. So what are the areas of real weakness outside oil and gas and film that are dragging that specialty growth

Alex Pease, CFO, Ashtead Group PLC: from double

Brendan Horgan, CEO/Executive, Ashtead Group PLC: Yes. Digit down to no areas of real weakness in specialty. There are when you look across it, you have double digit growth as

Conference Operator: I think in

Brendan Horgan, CEO/Executive, Ashtead Group PLC: the prepared remarks, we would have talked about power and HVAC. We also have strength in fencing, temporary structure, ground protection. There’s a significant drag effect when it comes to film and TV in oil and gas and the upstream oil and gas, but also industrial heating, is very much tied to that piece of the market. So that’s really all that it is from a headwind standpoint. We don’t have the statistics exactly on us in terms of what that would be absent the previously mentioned aspects.

On the rate piece that you talked about, your characterization is fine. The rates are not digressing in the general tool business. As you progress time utilization as we have done throughout the quarter, we’ve just we’ve hit that point. Part of that will come down to mix, whereas we have a larger portion of our revenue today coming from these mega projects and larger strategic customers. Not to be confused with those rates themselves not progressing, because those rates indeed will progress year on year.

They just make up a larger piece of it. So it is a quarter that we’ve gone through while maintaining rates and also seeing some sequential movement later in the quarter in general tool, which is positive. So again, we just reiterate our confidence in our ability to progress rates over time.

Alex Pease, CFO, Ashtead Group PLC: And Alan, I’ll hit the maintenance cost point. So your observation is correct that we do have those two big years of around $4,000,000,000 of CapEx that we’ll continue to have this trend. But let’s come back to again that third actionable component of Sunbelt four point zero and the implementation of the MSOs, which we talked about in leveraging our cluster economics. So that will mitigate the impact of this phenomena of increased IRR. And I think Brendan talked at length about that in answering the prior question.

That also leverages the scarcity of skilled labor as we can leverage those Tier three technicians more effectively. So there’s just a lot of goodness that comes out of the overall four point zero strategy, that third actionable component and then the scale that we have relative to others as we leverage those cluster economics. So you should see that mitigate over time, but you’re right. The phenomena of having less weight on warranty will continue as we age those big slug years. Okay.

Thank you.

Conference Operator: Thank you, Alan. Ladies and gentlemen, we have time for only one more question. And the last question today will be coming from Karl Rainsford of Berenberg. Please go ahead, sir.

Karl Rainsford, Analyst, Berenberg: Hi. Yes. Good morning to you both. Thanks very much for the color and your answer has been very useful. Two from me, please, if I may.

The first, going back to rail, both on rates really. Would you be able to quantify the sort of general time lag roughly between time utilization improvements and the pricing improvement, if that has sort of happened in the past, a similar dynamic is the first one. And second one, just on mega projects. Could you briefly explain the contract dynamics when those projects are multiyear? So for instance, do you get a fixed rate step up year on year?

Or is it more sort of dynamic than that? Thank you.

Brendan Horgan, CEO/Executive, Ashtead Group PLC: Sure. First, really what we have experienced, as you would have heard over the last couple of years, is a decoupling in many ways between time utilization and rental rates. It was well covered throughout the industry of industry level time utilization down over the last couple of years, and we’ve seen a resurgence in that more recently. And over that couple of years, we progressed rates well over that period of time. I’ll remind you of the three years of 886% rate improvement that we would spoken to and then 2% and a bit or 3% last year.

So during the time of that abatement really just demonstrates that decoupling between time utilization rate. Although time utilization, generally speaking, does help, but it’s really more just the solutions that we’re bringing to customers. From a mega project or a large strategic customer, the short answer is it varies. From time to time, we’ll have a multiyear agreement and we’ll have pricing that will be based on certain cost indexes. And from a mega project standpoint, similarly, most often there’s an annual allowance for a price increase over the course of a project.

So generally speaking, those have that, which is why I made the point earlier. There is this mix impact overall from a pricing standpoint, not to be confused that those individual customers don’t have or we don’t have the allowance within those agreements to increase rates as we go year in and year out.

Karl Rainsford, Analyst, Berenberg: Okay. Thanks very much Brendan. Thank you.

Conference Operator: Thank you, Karl. Thanks, Karl. As we have no further questions, I’d to turn the call back over to your hosts for any additional or closing remarks. Thank you.

Brendan Horgan, CEO/Executive, Ashtead Group PLC: Great. Well, again, thank you all for joining this morning and we look forward to speaking again at the half year. Have a great day.

Conference Operator: Thank you. Ladies and gentlemen, will conclude today’s conference. Thank you for your attendance. You may now disconnect.

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