Ashtead unveils ‘Sunbelt 4.0’ plan

Ashtead Group unveiled its new Sunbelt 4.0 five year plan at an analysts meeting in Atlanta, USA this week. The plan details its financial and operational targets, including an ambition to become a US14 billion business in North America by the 2029 financial year.

The company foresees compound annual growth rates in revenue of 6 to 9% in the USA, 9-12% in Canada and 2-5% in the UK over the five year period.

Supporting that growth will be between 300 and 400 greenfield depot openings, comprising between 180 and 240 specialty locations and 120 to 160 general tool stores.

These new locations will generate up to 30% of the growth anticipated in the five year period.

Key to the plan is to further expand the density of locations, or clusters, within key rental markets in the US. It has already accomplished this for 21 of the top 25 market areas, and sees most opportunity to establish new clusters in the next seventy five largest markets, growing the number of clusters in these areas from 35 now to as many as 50.

Specialty rentals remains another key objective, with Ashtead forecasting that such business could represent US$5 billion by the end of the five year plan. Growth opportunities are seen especially in power and HVAC, climate control and flooring solutions.

Brendan Horgan, Chief Executive of Ashtead

The company also outlined its technology plans, with multiple developments this year, including technology to deliver connected assets and “actionable insights”, by August; a logistics platform including optimised routing, by September; and ‘Customer 360’, giving employees a complete picture of customers, by the end of the year.

The company expects capital expenditures of around $20 billion in the five year period, encompassing both fleet purchasing and acquisitions.

The business has made 203 acquisitions since 2011 at an average EBITDA multiple of 6.1 (6.7 for those exceeding $100 million in value). Ashtead said the US market remains fragmented, with more than 3000 companies operating with a single store and around 700 remaining with multiple locations.

The company also outlines a vision of a more consolidated US market in the future, with Sunbelt having a +20% market share and one or two others with around 30% - meaning two or three businesses representing more than half of the market. That compares to the current situation with the top 10 having a 38% share. It did not give a timescale for this ‘future’ situation.

The plan covers a wide range of Ashtead’s business and encompasses five key areas:

A Sunbelt battery energy storage system (BESS).

• Customer: “Elevate our obsession with customer service”
• Growth: “Grow General Tool and Specialty”
• Performance: “Operate with greater efficiency through scale, process and technology”
• Sustainability: “Advance our position as a thriving, growing enterprise to deliver long-term sustainable value”
• Investment: “Disciplined capital allocation driving profitable growth, strong cash generation and enhanced shareholder value.”

Brendan Horgan, CEO of Ashtead, said: “As we sunset the successful execution of Sunbelt 3.0 and look to the years ahead, we set out today another ambitious five-year plan to deliver strong growth, improving margins and returns and strong free cash flow generation, while embracing our sustainability agenda, for the benefit of all our stakeholders.”