MAKING IT HAPPEN - Ashtead Group

1 Ashtead Group PLC Annual Report & Accounts 2017 MAKING IT HAPPENA nnual Report & Accounts 2017At Ashtead we provide our customers with more than just equipment rental. We provide solutions. From multinational businesses to individual do-it-yourselfers our experts are dedicated to delivering the best service. From everyday things that matter, to mission-critical events where experience counts we are there to supply what is people are there to make it HOW WE VE RISEN TO OUR CUSTOMERS CHALLENGES IN THE PAST YEARW alter Dunston and the team at Sunbelt kept the capital moving for the inauguration of the 45th president PAGE 90 OUR FINANCIAL HIGHLIGHTS20172015 2014 2013 7652016 6174743572142017 2015 2014 2013 3,1872016 2,5462,0391,6351,36220172015 2014 2013 8982016 7285574092902017 2015 2014 2013 7932016 645490362245 REVENUE ( m)CONTENTSUNDERLYING OPERATING PROFIT ( m)UNDERLYING PROFIT BEFORE TAXATION ( m)PROFIT BEFORE TAXATION ( m)STRATEGIC REPORT 2 Our Group at a glance4 Chairman s statement5 Highlights of the year10 Strategic review12 Our markets18 Our business model24 Our strategy32 Key performance indicators34 Principal risks and uncertainties38 Financial review46 Responsible business reportDIRECTORS REPORT 58 Our Board of directors60 Corporate governance report65 Audit Committee report68 Nomination Committee report69 Remuneration report87 Other statutory disclosures89 Statement of directors responsibilitiesFINANCIAL STATEMENTS 92 Independent auditor s report to the members of Ashtead Group plc96 Consolidated income statement96 Consolidated statement of comprehensive income97 Consolidated balance sheet98 Consolidated statement of changes in equity99 Consolidated cash flow statement100 Notes to the consolidated financial statementsADDITIONAL INFORMATION130 Ten-year history131 Glossary of terms132 Additional informationForward looking statements This report contains forward looking statements.

2 These have been made by the directors in good faith using information available up to the date on which they approved this report. The directors can give no assurance that these expectations will prove to be correct. Due to the inherent uncertainties, including both business and economic risk factors underlying such forward looking statements, actual results may differ materially from those expressed or implied by these forward looking statements. Except as required by law or regulation, the directors undertake no obligation to update any forward looking statements whether as a result of new information, future events or objective is to deliver sustainable value and above-average performance across the economic cycle extending our industry-leading position and delivering superior total returns for shareholders. Deliver the very best levels of customer service throughout our networks to enable that growth every more in our strategic review on page the Annual Report we refer to a number of alternative performance measures.

3 These are defined in the Glossary on page Group plc Annual Report & Accounts 20171 STRATEGIC REPORTDIRECTORS REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONHAWAIIOUR Group AT A GLANCESUNBELTThe second largest equipment rental company in North America with 612 stores in 47 states in the US and 17 stores in is an international equipment rental company with national networks in the US and the UK, and a small presence in Canada. We rent a full range of construction and industrial equipment across a wide variety of applications to a diverse customer service storesRevenueSunbelt at Lowes storesProfitsEmployeesReturn on investment** Includes 17 stores in Canada.** Excluding goodwill and intangible *$3,584m23$1,088m10,73422% 87%Sunbelt represents 87% of Group revenue United Rentals 10% Sunbelt 7% Herc Rentals 3% Home Depot 1% BlueLine Rentals 1% Sunstate 1% Top 7 10 4% Top 11 100 Others Aerial work platforms 35% Forklifts 17% Earth moving 16% Pump and power 9% Scaffold 3% Other 20%Source: Management estimate based on IHS Markit market : Management MARKET SHAREUS FLEET COMPOSITION2 Ashtead Group plc Annual Report & Accounts 2017A-PLANTThe largest equipment rental company in the UK with 179 on investment*Revenue* Excluding goodwill and intangible 72m3,47313% 418m 13%A-Plant represents 13% of Group revenue A-Plant 7% HSS 6% Speedy 6% VP 4% GAP 3% Lavendon 2% Others 72% Aerial work platforms 11% Forklifts 9% Earth moving 17% Accommodation 15% Pump and power 4% Acrow 3% Traffic 2% Panels, fencing and barriers 13% Others 26%Source: Management estimate based on IHS Markit market.

4 Management MARKET SHAREUK FLEET COMPOSITIONA shtead Group plc Annual Report & Accounts 20173 STRATEGIC REPORTDIRECTORS REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONA shtead had another outstanding year with good growth again delivered in North America and the UK. I am delighted to report that both Sunbelt and A-Plant achieved excellent results in terms of revenue, margins and profit. Our markets remain strong and we are constantly developing new ways to serve our customers through expansion of our locations, increased specialty businesses and an ever increasing range of equipment available to rent. We launched our new five-year plan, Project 2021, to optimise our growth strategy in the medium term and you can read about this on page 24. Full-year revenue was 3,187m compared to 2,546m the previous year. Underlying pre-tax profit rose 7% year-on-year at constant exchange rates to 793m and our EBITDA margin rose to 47% (2016: 46%). Top-line growth continues to be the main driver of our profitability and total rental revenue increased by 13% at constant exchange rates.

5 Total rental revenue at Sunbelt grew 12% and 16% at continue to invest responsibly in our fleet, new greenfield sites and bolt-on acquisitions. We made 15 acquisitions last year, the largest and most recent being Pride in New York which significantly increased our presence in that important market. Group RoI for the year was 17% and despite continued significant investment in the fleet and acquisitions, our leverage at times EBITDA was well within our to 2 times target leverage range. We took advantage of favourable financial market conditions in the third quarter to increase the size of our senior debt facility from $ to $ This means we now have access to additional low cost capital to invest in growing the business while maintaining leverage within our target we said in last year s report, we began a process of share buybacks this year as part of our declared capital allocation programme. We spent almost 50m on share buybacks as part of our commitment to enhance shareholder value.

6 We will continue to review our best options and the interests of our shareholders in this regard on a regular basis. We prioritise the maintaining of a balanced and diverse Board that reflects and supports the breadth of our business and provides strong governance. In July we welcomed Tanya Fratto to the Board as a non-executive director and I look forward to her contribution to the Group s continued growth and development. We conducted an external evaluation review of Board performance and processes last year and I am pleased to report that the results of that were employees are very much the engine behind our success and the Board is enormously grateful for their efforts. Our reputation for customer service is such that new greenfield stores quickly become profitable and our employees strive daily to make the customer s rental experience an exceptional one. Their enthusiasm and dedication to MAKING it HAPPEN (the theme of this year s report) continue to underpin our excellent progressive dividend policy aims to always make dividends sustainable whatever stage we are at in our business cycle.

7 In line with that objective and our excellent performance, the Board is recommending a final dividend of per share MAKING for the year compared to in 2016, an increase of 22%. Assuming the final dividend is approved at the Annual General Meeting, it will be paid on 15 September 2017 to shareholders on the register on 18 August work hard to ensure our growth is sustainable. Our capital allocation priorities remain unchanged and we will continue to grow responsibly. The past five years have seen 23% compound annual revenue growth and we expect continued strong growth. Therefore, the Board looks forward to the medium term with confidence. CHRIS COLEC hairman 12 June 2017 CHAIRMAN S STATEMENTSTRONG RESPONSIBLE GROWTHCHRIS COLECHAIRMAN 4 Ashtead Group plc Annual Report & Accounts 2017 READ MORE ABOUT HOW WE PERFORMED IN OUR FINANCIAL REVIEW PAGE 38 HIGHLIGHTS OF THE YEARR evenue 3,187mUnderlying operating profit 898mUnderlying profit before taxation 793mProfit before taxation 765m1 At constant exchange profit and earnings per share are stated before exceptional items and amortisation of intangibles.

8 The definition of exceptional items is set out in Note 2 to the financial statements.+13% Group rental revenue up 13%147% Group EBITDA margins up to 47% (2016: 46%) 793m Group underlying pre-tax profit of 793m, up 7%1 437mspent on bolt-on acquisitions and 61 greenfield locations final dividend of , MAKING for the full year, up 22% (2016: ) in the business (2016: ) 319mfree cash flow generation(2016: 68m outflow) debt to EBITDA leverage1 of times(2016: times) Ashtead Group plc Annual Report & Accounts 20175 STRATEGIC REPORTDIRECTORS REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 600,000 CUSTOMERS 600,000+RENTAL ASSETS2,000+EVENTS SUPPORTED 7,000,000+kW OF POWERMAKING IT HAPPEN IN 2016/17 Our equipment can be used to lift, power, generate, light, move, dig, compact, drill, support, access, scrub, pump, direct, heat and ventilate whatever is Group plc Annual Report & Accounts 2017950,000 SMALL TOOLS RENTED 1,000,000+METRES OF BARRIERS ASSEMBLED 2,600,000 RENTAL CONTRACTS WRITTEN136 MILLION+ MILES TRAVELLED FOR DELIVERY AND SERVICE1,000+ APPLICATIONS FOR APPRENTICESHIPS17 BILLION+ BTU/hr IN THE HEATING FLEETA shtead Group plc Annual Report & Accounts 20177 STRATEGIC REPORTDIRECTORS REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONP reparing Chicago for a possible Cubs win celebration with less than 12 hours notice2 November 2016 marked Game 7 of the World Series between the Chicago Cubs and the Cleveland Indians.

9 This game was viewed by over 40m people, MAKING it the most watched baseball game in 25 years. At 7pm, we received a call asking us to prepare 50 pieces of equipment, for delivery to Grant Park (possibly) by 7am the following morning!THE CHALLENGE8 Ashtead Group plc Annual Report & Accounts 2017 OUR SOLUTION Able to deliver massive celebration solutions at the drop of a hat!With no certainty of who would win, it wasn t until 12:05am we knew we needed to mobilise! We had to organise, load and deliver equipment by the 7am deadline and we began sourcing equipment from various specialty locations. A team effort across the entire district was needed. Around two million people (two-thirds of Chicago s residents) attended the event at Grant Park to celebrate the 2016 World Series event took being prepared to a whole new level! Luckily we had the team, resources and commitment ready, so when it came to organising this fantastic celebration, we knocked it out of the park! Marissa Lotito Chicago District Manager Strategic review10 Strategic review12 Our markets18 Our business model24 Our strategy32 Key performance indicators34 Principal risks and uncertainties38 Financial review46 Responsible business reportAshtead Group plc Annual Report & Accounts 20179 AshAteadGstrosAuastdAos pGstrosAlachcdah1G AhAt8tcA huuaAaoch1 Gaclos8hAaocSTRATEGIC REVIEW MAKING IT HAPPEN CONSISTENTLY AND OVER THE LONG TERMWe are delighted to report that this financial year was another record-breaking one for Ashtead .

10 The combination of our strategy and strong end markets means we continue to grow our business and our profitability. The economic environment continues to help us but the underlying strength of our business makes that an added bonus rather than something we depend on to grow. As such, our strategy remains predominantly the same, with some enhancements to enable us to capitalise further on our markets increasing level of comfort with renting rather than owning strategy is focused on same-store growth, supplemented by greenfield openings and bolt-on acquisitions, whilst delivering the highest levels of customer service. This year we developed and rolled out in the US, our next five-year plan, Project 2021. This plan develops our existing growth strategy and you can read more about it in our section on strategy on page majority of our growth still comes from the US and two-thirds of that continues to come from what we call structural growth. Our customers increasingly rely on the flexibility of rental and are more open to renting new types of equipment for different applications.