Ashtead Technology Holdings Plc ($AT)

Good morning, ladies and gentlemen, and welcome to the Ashtead Technology Holdings Plc Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question it received during the meeting itself, however company can review all questions received today and will publish their responses when it's appropriate to do so on the Investor Meet Company platform. Before we begin, we would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from Ashtead Technology Holdings, Allan. Good morning, sir.

Good morning. Thank you, Jake. Thank you all for joining us this morning. I'm Allan Pirie, I'm the CEO; and with me is Ingrid Stewart, our CFO. So the plan this morning is to run through a presentation. I'll start with the overview and some highlights. I'll then hand over to Ingrid, who will talk us through the financial review, and I'll follow that up with the market and operational section, and then we'll start to answer the questions. So if we start with highlights of 2025, 2025 was a year of financial, strategic and operational progress. We're delighted to present another strong set of financial results. Revenue increased by 21% to GBP 203 million, including organic growth of 3%. Adjusted EBITDA margin at 29.1% was towards the top of our medium-term target range, reflecting our focus on high-quality revenue. Adjusted EPS growth at 10% demonstrates the compounding nature of our resilient business model. These financial results demonstrate the strength of our differentiated global service model, our scale diversified footprint and the mission-critical solutions that we provide to our customers. We built on the strong strategic and operational momentum during the year. The '24 acquisitions of Seatronics and J2 were fully integrated across the four regions of our business, delivering synergies ahead of plan. We opened a new mechanical solutions facility in Houston to further localize our winch offering in that region. In Norway, we opened a new facility towards the end of the year, expanding our capabilities in that market. We deployed GBP 37 million in CapEx to further expand our technology capability, including new proprietary products that we took to market, and I'll touch on that a bit later. And then to support further growth, we also strengthened the senior team, in particular, appointing a new HR Director, QHC Director, CTO and Head of Mechanical Solutions during the year. In terms of outlook, the long-term offshore activity outlook is supported by rising energy demand and energy security considerations. Our addressable market is forecast by Rystad to grow by 6% CAGR through '29, and our growth strategy is supported by record levels of multiyear customer backlog. Our highly mobile service offering allows us to follow market demand unrestricted by geography, and we are closely monitoring the evolving situation in the Middle East. And our primary concern is the safety of 27 employees and their families that are in the region. Turning to the platform that we've got. We are building unrivaled capability and the benefits of our strategy are increasing. The platform we have creates a great opportunity to drive financial performance and further scale the business. We're a trusted partner. The service failure offshore carries significant consequences, leading customers to prioritize reliability, track record and trusted supplier relationships over marginal pricing differences. We support -- our technology supported all of our 10 top -- sorry, our top 10 customers for more than a decade. We're deepening our service moat, increasing our focus on integrated solutions, embeds Ashtead Technology into customer projects, derisking their execution at an earlier stage. We're accelerating in-house innovation. The majority of our mechanical solutions and asset integrity equipment is designed, engineered and assembled in-house, which can't be bought, and it can't be easily replicated by competitors. We've got -- I'll start again. We've got global reach. We support our customers globally with the world's largest independent subsea equipment solutions fleet. And finally, our offering is highly fungible. Our mission-critical flexible service supports offshore construction inspection, maintenance repair and decommissioning, giving the business exposure across the full life cycle of subsea energy infrastructure. We're increasing our TAM. We're delivering unique value through integrated project support and are well placed for growth. So turning to innovation. During 2025, we advanced our innovation efforts through the design and engineering of proprietary in-house equipment. We also collaborated closely with OEM partners to deliver innovative technology solutions to market. So on this slide, there's four examples. If we start at the top left-hand side and go clockwise around the page. Sockets inspection. This is a tool that was developed to image seabed boreholes on our wind farm construction project, totally bespoke for that project. On mattress recovery, we create the most technologically advanced tool in the market to remove mattresses over pipelines, which is now part of our decommissioning capability. On abrasive cutting, we use our proprietary airlift dredge and the new abrasive cutting tool to assist our customers decommission 5 platforms in India. And on eBOSS on the bottom left-hand side of the page, we've invested in this game-changing technology, which is 3D sub-bottom imaging sonar, used to locate and identify previously unseen subsurface targets such as cables, unexploded ordinances and boulders. So each of these technologies and delivery methods are difficult to replicate, but deliver significant value to our customers. So through these, not only are we delivering value to our customers, but are also creating competitive advantage in the market. I'll now turn it over to Ingrid, and she can talk through the financials.

Thank you, Allan. Our financial highlights demonstrate our continued strong margin and excellent returns performance despite the geopolitical headwinds we experienced through the year. Our revenue of GBP 203.2 million equates to growth of 21% on prior year. Having adjusted for the planned removal of certain lower-margin revenues acquired as part of the Seatronics and J2 Subsea acquisitions, the growth is split 19% inorganic, 3% organic, and then we had a small headwind of minus 1% from FX. Having experienced some market headwinds through Q2 and Q3 last year, momentum built through the remainder of the year and our second half revenues performance increased by 5% on the first half. Our full year adjusted EBITDA of GBP 59.1 million represents a margin of 29.1%. And as Allan said earlier, that remains at the top end of our medium-term target. This falls to adjusted EPS of 49.4p, an increase of 10% on the prior year. Our return on capital remains strong at 22.7%, remaining well ahead of our cost of capital. And then finally, through a continuation of our strong cash flow, we have reduced our leverage to 1.3x, further strengthening our balance sheet. If we move on to the P&L in a bit more detail. This slide just shows the P&L in more detail, but I've covered most of the salient points in the previous slide. The additional information included here is a split of revenues between oil and gas and renewables. With particular headwinds felt in the U.S. due to the changes in policy in offshore renewables, our renewables revenues grew only 4% in the year, compared to a stronger oil and gas performance at 28%. Oil and gas remains our largest contributor. And within this, circa 10% of our revenues came from decommissioning with the majority of this work being undertaken through our European operations. The split of oil and gas versus renewables revenue was 76% in 2024. It's also worth noting that we continue to grow our business across all of our geographic segments as we continue to expand our operations globally, increasing the robustness of our operating model. As noted previously, our EBITDA margin was at the top end of our medium-term guidance, and this was also true for our EBITDA margin. We saw an increase in our finance costs as a result of funding the Seatronics and J2 Subsea acquisitions through our RCF, but expect this to reduce through 2026 and as a result of lowering leverage. Adjusted profit after tax of GBP 39.8 million, also an adjusted EPS of 49.4. Through our compounding growth model, we have delivered a 2.6x increase to EPS over the past four years. We've continued to strengthen our balance sheet through 2025. We continue to invest in both our own in-house designed and built proprietary technology as well as maintaining close relationships with OEM partners to ensure our fleet is well positioned to support our customers globally. We continue to ensure that our CapEx investments are fungible across asset life cycles, geographies and markets to allow us to pivot to market demand. Our net debt-to-EBITDA leverage is 1.3x at the year-end, and our working capital represents 16% of revenues, close to our 15% target. Through 2025, we invested in both shelling spares and cable molding stock as we sought to expand these services acquired through the Seatronics and J2 Subsea acquisitions. Our balance sheet strength gives us flexibility and optionality to keep investing in our growth as we seek to maintain our strengths of scale, global mobility and provide mission-critical support to our customers. Our opening net debt was GBP 128.4 million, representing a pro forma leverage of 1.6x. Utilized our free cash flow to continue our discretionary organic growth investments, spending GBP 37.2 million in CapEx in the year. Our free cash flow, being the cash generated from operating activities less our net CapEx was GBP 40.4 million, representing an EBITDA to free cash flow ratio of 49%. Our strong cash generation model has resulted in a leverage reducing to 1.3x at the year-end, well within our 1x to 2x medium-term target. This next slide, we put in to demonstrate the growth journey we've been on through both organic and inorganic investment over the past 4 years since we originally IPO-ed and the outstanding returns that our business can deliver. Through utilizing our strong operating cash flow of GBP 206 million plus available RCF, we drew off -- a net draw of GBP 82 million. We've spent GBP 100 million in CapEx and GBP 143 million in acquisitions. Through those acquisitions, we added GBP 31 million of EBITDA and that averages to a multiple of 4.6x. The growth we have achieved during this time period equates to 41% CAGR in revenues, 44% CAGR in adjusted EBITDA -- EBITA, sorry, and 37% CAGR on adjusted EPS, a growth, as I said earlier, of 2.6x during a 4-year period. And that brings us nicely on to the next slide, which is around our capital allocation policy. We have sustainable and growing operating cash flows driven by our high-margin business, which allows us to continuously invest in growth through active deployment in technologies to broaden our offering and meet our customers' needs. We've had great success through our acquisition strategy, and we'll continue to utilize our free cash flow and balance sheet to fund complementary bolt-on M&A. We remain committed to a progressive dividend strategy and are recommending a 1.3p per share final dividend, which will put to shareholder vote on our AGM on the 21st of May. Our net debt target remains at 1 to 2x, and we'll continue to utilize our balance sheet to target industry leading ROIC through our growth plans. There may be opportunity for additional shareholder returns, but with significant growth opportunities ahead of us, we see this as a lower priority at this current time. I'll now pass you back to Allan to cover an update on the market.

Great. Thanks, Ingrid. So if we turn our attention to the market, the market continues to provide a strong growth runway for us. Over the next four years, Ashtead Technologies total addressable market is expected to grow by 25% to GBP 3.4 billion by 2029. So if we look at the graphs on the page, if we start on the left-hand side, despite recent headwinds in offshore wind, the market is forecast to grow at 12% CAGR through 2029. The successful completion of the U.K.'s auction Round 7, which was the largest to date, last year awarded 8.4 gigawatts of power, which really firmed up the 2030 pipeline. And AR8, the next auction round, has been brought forward to July this year. Looking at oil and gas, inspection, maintenance, repair and construction support growth is forecast at 3%. Oil and gas is an important part of the future energy mix and forecast demand is forecast for decades to come. Turning to the right-hand graph. This shows the regional addressable markets for Ashtead Technology, which are global, excluding China. We support our customers' operations across all the key offshore regions, and we are well placed to benefit from this forecast uplift in activity. It's worth remembering that not only is our equipment highly fungible, our customers' vessels -- sorry, highly mobile, our customers' vessels are also highly mobile, which allows us to support our customers' operations globally regardless of where our operations are. So with the platform that we've built, our team's domain knowledge and expertise and through the deep value we deliver to our customers, we are very well placed to benefit from the long-term growth that we see in our end markets. If we move from some macro data to what are our customers saying, this graphic shows the backlog buildup of three key customers, Technip, Subsea 7 and Saipem. You'll see from the page that the backlog of these three customers has more than doubled in the last four years to 55 billion at the back -- at the end of 2025. So not only has the backlog increased significantly, it's also extended in duration. And you can see that in the level of backlog that is in place for 2027 and 2028, 1 and 2 years out from now compared to what it was in the past. So what does this mean for Ashtead Technology? Our customers depend on us for our advanced technologies and our specialized expertise required to execute the projects. So from this multiyear customer backlog, we expect a strong pipeline of revenue opportunities that will support our continued growth plans. Touching on M&A. Strategic M&A is a cornerstone of our strategy to expand the business and position Ashtead Technology as an integrated solutions provider. So to illustrate this point, we'll talk you through three Is of the ACE Winches acquisition that we completed in 2023. So internationalization, innovation and integrated services. So firstly, internationalization. In 2023, when we acquired ACE Winches, circa 80% of its revenue came from outside the U.K. from one operating site in the U.K. Last year, 91% of its revenue came from outside of the U.K., and we operated across 38 countries delivering 291 projects. With new facilities in the U.S. and Norway and with equipment positioned in other Ashtead locations, we are well placed to continue this diversification of our geographic revenue mix. Secondly, innovation. The capabilities we acquired with ACE have been essential to launching new products during 2025, including the Mattress Recovery Tool and the eBOSS deployment solutions that we touched on earlier. And then finally, integrated services. Lifting pooling and deployment, which happens through ACE Winches is generally considered at an earlier stage of offshore project planning. The acquisition has allowed us to accelerate our project engagement with customers, helping us to secure and deliver wider Ashtead Technology integrated packages. So supported by a proven M&A track record of successful integration and value creation, we're well placed to continue on the M&A path. And then to wrap up the presentation, we've got a clear growth strategy, and we're executing on that plan. Our unique service offering is highly differentiated, adding real value to our customers. The markets we operate in have strong fundamentals, presenting attractive multiyear growth opportunities. Record multiyear customer backlog creates a strong, sustainable revenue runway for us and our highly flexible business model is creating multiple geographic and end market growth opportunities. So with increased balance sheet strength, our continued focus on strong cash generation and disciplined capital allocation that Ingrid talked through, we are well placed to further our growth strategy, both organically and inorganically. And as I said at the start of the presentation, we are closely monitoring the evolving situation in the Middle East. And absent extended or wider disruption, the Board remains confident in delivering further progress in 2026. And with that, I'll hand back to Jake.

[Operator Instructions] The first question that we have here reads as follows. You previously talked about how double-digit growth is -- you previously talked about how low double-digit growth. Is this still your target?

So we set that target back in 2021 when we IPO-ed, at which point the market growth data that we had from Rystad has shown 11% market growth. Just I guess, maybe to set the scene a little in terms of how we build up our forecast. In terms of the budgets and the forecast that we do for the current year, those are incredibly granular. So they're by region, by business line, by customer, by project. So there's a huge amount of data kind of built up within our models to do that. But when we're kind of looking further out, we're kind of looking to macro data. So the Rystad data, we're looking at customer data and various other sources. So as I said, that's a low double-digit growth, and rate was set back in 2021. When we're looking at '21 to '25 period at that point with 11% growth, that sort of low double-digit growth kind of stayed through kind of through to the back end of 2023 and into '24. And '24, it sort of fell back a little bit. So the Rystad data at that point, which went out to '28 was 9%. And as Allan presented earlier, that same growth chart today is currently at 6%. So I think -- and just to reassure people, that whether the growth rate has come back from a market perspective, the good news is that, that's extended out. So we're now looking at data through to 2029. And if you think about everything that's going on in the world currently, the focus on energy security, there's going to be a need for the services that Ashtead provide for a long time to come. So we feel very confident about the kind of medium- and long-term prospects of the business.

Just turning to this question here. Your renewables revenue was down to 24% of your business. Does this change your long-term target of 50% of revenue from offshore wind?

Yes. So again, that was a target we set and as part of -- during the IPO process about -- linked back to the Rystad data at that point. The growth in offshore wind was 19% at that point. It's now pulled down to 12%. I think what we've seen over the last sort of 4, 5 years, given the events and the sort of geopolitical events in the world, we've seen more of a shift towards -- back towards oil and gas. That's not to say that the transition isn't happening. We feel very strongly in the transition. And naturally, our business will get there. We just think it's going to take a little bit longer than we originally said. We are very much a transition business. So 85% of our equipment and our services are fungible across both markets, and we can pivot depending on market demand, which is one of the beauties of this business.

I think it's fair to say that, that target that we set years ago is no longer in place. Our focus is to support our customers across both oil and gas and offshore renewables, and we will focus on both without setting ourselves a target.

We have a few questions that have come in on CapEx. So perhaps if we just take these sequentially. What percentage of equipment has in-house design adjustments versus purchase from OEMs?

So in terms of the business split, our revenues -- I know this is linking to revenues rather than CapEx, but our revenues are broadly split 60% in Survey & Robotics, 34% Mechanical Solutions and 6% in Asset Integrity. And if you look at the sort of fleet that supports those parts of the business, the Survey & Robotics fleet is all OEM acquired assets, whereas the Mechanical and Asset Integrity is more weighted towards sort of in-house built proprietary technologies. So -- and that part of the business has been growing really well over the last few years.

Just to follow up on that. I think this is one of the things that is not necessarily known about Ashtead Technology. We are creating real differentiation through designing, engineering and assembling our own equipment. As I said during the presentation, you can't buy that equipment in the open market, and it's super difficult for competitors to replicate what we've got.

Perfect. What is your estimate of maintenance CapEx? And what level of CapEx do you expect going forward?

So the maintenance CapEx question is actually quite a tricky one to answer because the reality is we don't go through a program of kind of replenishment every so many years. We run all our assets through to end of life, and we don't look to sell on any residual value or anything. So -- but actually putting some science to it, we've kind of done a bit of analysis. We estimate our maintenance CapEx currently is around sort of low double digits, maybe around sort of GBP 12 million to GBP 13 million.

And I guess just finally, what is the total original cost of your fleet? And how much do you estimate the replacement cost to be?

So in our statutory accounts, our gross book value of our fleet is around about GBP 200 million. When you buy businesses, there's a sort of accounting formula that you need to go through, where you basically bring the assets you acquired in at net book value or value, I guess, market value at that point. So that GBP 200 million is actually truly GBP 270 million in terms of what the original cost to the business and/or the business that we've acquired and paid. And -- so some of that kit, because it's manufactured or built in-house, we're not having to pay a premium or pay any kind of margin to a third party to buy those assets. So if you kind of think about the fact that you have to pay a premium if you want to buy that kit externally. And also given inflation, we would estimate that the replacement cost is somewhere in the region of GBP 350 million.

We've had quite a few questions on M&A. So perhaps if we go to these. Acquisition have played a key role in AT's development. Can you talk about the type of opportunities you would consider ideal?

Sure. So the M&A strategy is one that we set out in 2015. So it's been in existence for quite some time. There's three angles to it. One is to consolidate a fragmented market. Secondly is to expand our range of products and services to better support our customers. And the third one is to expand geographically to better support our customers. And linked to that, we've got a strong pipeline of opportunities that we've been cultivating for quite some time. There's some opportunities in there that we've been talking to owners for 10 years. We don't like processes. We like to buy businesses off market. We feel that, that derisks M&A. And the way we go about that is initiate conversations with owners at an early stage, understand what the catalyst is for them to sell the business, get an understanding of them, get an understanding of the business, do full due diligence. And then when we acquire businesses, we fully integrate them into Ashtead Technology, and we feel that, that is the way to maximize value.

If an acquisition opportunity presented itself, what level of leverage would you be comfortable with? And would you consider using shares to fund an acquisition?

Yes, good question. So leverage at the year-end was 1.3x. We have stated that we're very comfortable within a leverage range of 1 to 2x, as Ingrid again pointed out in the capital allocation slide. We would not rule out using paper to fund acquisitions, but we're also conscious of the multiple that we are currently trading on, and we've got no desire to use paper at current multiples.

And perhaps one final question. Have you realized all synergies from your latest acquisitions? And is there still some value to come through in 2026 and beyond?

So I think there's probably two parts to that. One is that with the latest acquisition of Seatronics and J2 Subsea, we fully integrated that during 2025. We'll get the full year benefit of synergies during 2026. But it's a continuing theme in that as we acquire businesses, as we fully integrate them, we're always looking for other opportunities. So there is a full year impact in '26 to come, and there is further work to do as we tighten up in the sort of final stage of integration.

And that actually concludes all the questions for this morning. So thank you very much indeed for addressing those. And of course, if any further questions do come through, we'll make these available to you immediately after the presentation has ended just for you to review to then add any additional responses, of course, where it's appropriate to do so, and we'll publish those responses out on the platform. But Allan, perhaps before really now just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments just to wrap up with, that would be great.

Great. And thank you, Jake. All I would like to say is thank you very much for your time this morning. Thanks for being part of our results update. If there is any further questions, please pass them through. It does influence what we cover on these presentations. And hopefully, we'll have the opportunity to present to you again soon. Thank you very much.

And thank you once again for updating investors this morning. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback. On behalf of the team of Ashtead Technology Holdings plc, we would like to thank you for attending today's presentation. That now concludes today's session. So good morning to you all.