Plant and equipment hire firm Sunbelt Rentals (SUNB), formerly known as Ashtead, posted an 11% drop in Q3 earnings. These are the first results since the company moved its listing to the US, and were published as a 10-Q form.
Nothing to write home about
Revenue for the quarter to the end of January was $2.64 billion, up 2.7% on the previous year. Cost of sales rose 4.8% to $1.65 billion, however, meaning gross profit was marginally down year-on-year.
Selling, general and admin costs rose by over 9% to $379 million, so operating income dropped 7.5% to $492 million. At the bottom line, net profit of $290 million was down around 11%.
The 10-Q form allows no room for a general discussion of business conditions so there was little explanation for the results. The company did say profit sharing and higher stock-based compensation was largely to blame for higher costs.
In addition, there were $10 million of legal and professional fees associated with the relisting. There was also a $10 million increase in ‘investment in infrastructure to support further business growth’.
The 10-Q is not the most user-friendly of documents for analysts or investors. It is mostly a sea of data with very little context or guidance from management.
However, what it does tell us is equipment rental volumes were up while prices were down. Also, total rental revenue increased by 2.6%, but OEC (original equipment cost) rose by 3% so margins are slipping.
The firm made less money from selling used rental equipment that it did a year earlier. It put this down to lower volumes, but it also made fewer gains on those sales.
Meanwhile, costs in general have been rising. Some of the increase due is to the relisting process, but not all of it, viz the rise in board compensation.
Overall, it’s hard to get excited about these results. In our view, moving the listing to the US hasn’t improved visibility, it’s just bumped up costs.
Read the press release here: https://ir.sunbeltrentals.com/filings/sec-filings
You might also like these stories:
