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Greetings, and welcome to the Sunbelt Rentals Fiscal Third Quarter 2026 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. You may be placed in the question queue at any time by pressing star one on your telephone keypad. We ask you please limit yourselves to one question and one follow-up, then return to the queue. As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star zero. It's now my pleasure to turn the call over to Kevin Powers, Senior Vice President, Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Today, we're reviewing our third quarter results ended January 31st, 2026, with comments on operations and our financials, including our view of the industry and strategic outlook. The prepared remarks will be followed by an open Q&A. Let me remind you that today's call will include forward-looking statements. These statements are based on the environment as we see it today and are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the press release and our Form 10-K, as well as other filings with the SEC. Today, we're reporting financial results on a GAAP basis. In addition, we'll be reviewing or we'll be discussing non-GAAP financial information that we believe is useful in evaluating the company's operating performance.

Reconciliations to these non-GAAP measures to the closest GAAP equivalent can be found in the earnings release and the conference call materials. This morning, I'm joined by Brendan Horgan, our CEO, and Alex Pease, our CFO. I'll now turn the call over to Brendan.

Thanks, Kevin, and good morning, everyone. This is a landmark set of results for the company in the sense that this is the first under the name Sunbelt Rentals and our first since we've successfully moved our primary listing to the New York Stock Exchange on March 2nd. This milestone was achieved with a monumental amount of work, and as such, I'd like to use this as an opportunity to thank our leadership and team members across our finance, tax, legal, IR, and HR functions for their diligent, thorough, and quality work. It's an exciting time for the business, so let's get into it, beginning as usual with safety on slide five. Safety of our people, our customers, and the members of the communities we serve. Safety is a core operating priority for Sunbelt and a key indicator of execution discipline.

As you can see, both our Total Recordable Incident Rate and Lost Time Incident Rate continue to trend lower, even as we support higher activity levels and a larger footprint. That progress reflects consistent focus on training, standardized processes, leadership priorities, and accountability across this organization. Importantly, these improvements are structural. They are not one-off. Our industry-leading safety performance supports higher productivity, better customer outcomes, a more engaged workforce, and is foundational to our success. To the team, thank you for your ongoing dedication to the perpetual improvement to our Engage for Life culture. Turning now to slide six, and to cover the key messages you will hear from Alex and me today.

First, this is a solid set of results in line with our expectations, with group rental revenue growth at 2.6% for the quarter, despite the ongoing impact of a quieter hurricane season compared to an active period in the second and third quarters of last year. On an underlying basis, growth in the third quarter was 4%, a sequential improvement from the first two quarters. Second, the strength of free cash flow after CapEx investment in fleet and business expansion demonstrates the through the cycle free cash flow power of this business at our present scale and margin. Generated record free cash flow of $1.4 billion year to date, which is an 83% improvement on last year.

Third, while our key construction end markets remain mixed, we continue to be reassured that the local non-residential market is now in equilibrium in terms of completions no longer outpacing starts. Additionally, we continue to see positive momentum in many of our internal and external leading indicators. Megaproject activity continues to be strong across data centers, healthcare, infrastructure, energy, and manufacturing, and we are winning share across our regional and national strategic customers. Fourth, our strong free cash flow generation has enabled us to return nearly $1.4 billion to shareholders year to date through dividend payments and share buybacks. We commenced our new share buyback program of up to $1.5 billion at the beginning of March to coincide with the relisting on the New York Stock Exchange.

Finally, based on recent performance and trends, we've narrowed and increased the midpoint of our full-year rental revenue growth guidance. Moving on to the financial highlights of the first half on slide seven. Notably, these Q3 results are the first to be presented under U.S. GAAP. This impacts some of the key income statement lines, particularly EBITDA, which is lower principally due to differences in the accounting for leases under U.S. GAAP, with most of the costs going into operating expenses and compensating reductions to non-rental depreciation and interest further down the income statement. Alex will cover this in more detail shortly. Total rents revenues were up 2.6% in the quarter, strengthening sequentially and consistent with the full year guidance we gave in December.

Leading indicators, both internal and external that we track, have continued to trend positively, and therefore we remain cautiously optimistic that these trends in our business will continue and are early but positive signs for the local non-residential construction portion of our end markets. As when they do recover, we expect our growth momentum to further accelerate and our results to strengthen. In the third quarter, total company Adjusted EBITDA, reflecting the impact of U.S. GAAP accounting, was $1.1 billion at a 41% margin. Noteworthy, our North American year-to-date Adjusted EBITDA margins were 45%. I'll further note, this includes all central costs across the group. As we explained in the results for the first two quarters, these margins reflect disproportionately higher Specialty growth rates at lower EBITDA margin, but higher return on investment.

They also reflect the mixed effect of higher ancillary revenues, the proactive reposition of our fleet to drive utilization and unlock pockets of growth and increased repair costs as a larger portion of the fleet comes out of warranty coverage. From a capital allocation standpoint and in line with our Sunbelt 4.0 priorities, we've invested $1.8 billion in CapEx year to date, focused on a mix of replacement and growth. Free cash flows we've said year to date was $1.4 billion, which is a record demonstrating the resilience of our business while we continue to deliver and invest in growth. This strong cash flow generation is supporting our share buyback activity. We completed the previous $1.5 billion program at the end of February before commencing the new $1.5 billion program last week.

Slide eight shows fleet on rent for North America over the last four years. You can clearly see that our efforts to drive growth with existing fleets has resulted in improved time utilization. This supports a more constructive rate environment and contributes to strengthening ROI. It also demonstrates our disciplined and flexible capital allocation approach. Turning to slide nine. Rental revenue on a billings per day basis for General Tool grew 2% in the quarter, reflecting positive volume momentum and resilient rates in the end markets, which continue to be mixed. As expected, we continued to experience a moderated local non-res construction market, offset in part by the ongoing strength of the mega project landscape and the broader non-construction markets.

Specialty delivered growth of 5% in the quarter, and this strength continues to be broad-based across multiple lines like flooring, temporary fencing, structures and walls, trench safety, and of course, power and HVAC. On a constant currency basis, U.K. rents revenue was down 2% in the quarter, reflecting the ongoing challenges in the U.K. markets. We are making good progress, however, with the restructuring actions that we announced in December. On slide 10, we've set out the main leading indicators for the construction sector, namely Dodge Starts, Dodge Momentum Index, the Architecture Billings Index and Federal Funds Rate. The outlook for construction growth continues to be underpinned by mega projects and infrastructure work, which remains strong and in many cases, gaining further momentum.

We've made great progress in mega project wins year to date with a growing funnel of future projects and advancing market share with our strategic customers, both regionally and nationally. The breadth and depth of our product offering across Specialty and General Tool lines, our ability to deploy integrated solutions at scale, and our leading fleet quality place Sunbelt at a significant advantage to our competitors. Very few in the industry can even compete in this rapidly evolving space. Combine this with a technology suite that is second to none, and it creates a platform that can deliver world-class customer experience, efficiencies, and value across a wide range of complex applications. As it relates to our local non-res end market, we remain in moderate environment.

However, as I flagged with the Q2 results, both our internal leading indicators, such as quotations, reservations, and continuing contract count activity and key external indicators are encouraging. The Dodge Momentum Index, in particular, remains near record highs. Just to remind you, this index represents non-residential projects, excluding manufacturing that are below 500 million and entering the planning phase for the first time, and is therefore representative of the future velocity in what we refer to as that local non-residential construction market. This clearly indicates ongoing strong planning activity across our non-residential construction end markets, which will lead to an increase in starts likely within a period of 12-24 months. While clearly a positive leading indicator, it may take some time for this planning to translate into project starts, and when it does, we are poised to benefit.

Before I hand it over to Alex, I'll just touch on our Sunbelt 4.0 strategic plan on slide 11. We're gonna give you an updated, a detailed progress report on Sunbelt 4.0 at the Investor Day, so I won't go into any further detail now. As I previously mentioned, our team has been laser-focused on advancing each of the five actionable components, which you know as customer, growth, performance, sustainability, and investment. Our clarity and mission throughout the organization is certain and our momentum is building. I look forward with the team to highlighting the number of exciting developments while we're together in New York. With that, I will hand it over to Alex.

Great. Thank you, Brendan, and good morning to everyone on the call. Our third quarter results for the total company under U.S. GAAP are set out on slide 13. Total revenue and rental revenue both increased 3% in the quarter, reflecting a sequential improvement despite the ongoing impact of the quieter hurricane season. Adjusting for the impact of this rental revenue growth in the quarter was around 4%. The adjusted EBITDA margin and adjusted operating margin continued to be strong at 41% and 20% respectively in the quarter. In line with first half performance, the margin performance primarily reflects the fact that top line growth is being driven disproportionately in the Specialty business with lower margin but higher ROI, as Brendan mentioned. Additionally, we're incurring higher internal repair costs and also higher delivery costs due to the planned repositioning of fleet to drive growth and utilization.

Depreciation at $543 million was flat, reflecting the tight fleet discipline we have maintained this year as we have delivered improved time utilization. After an interest expense of $98 million, reflecting lower average debt levels, adjusted pretax profit was $441 million. Adjusted earnings per share were $0.78, reflecting lower adjusted net income, but was partially offset by the benefits of the ongoing share buyback program. ROI on a trailing twelve-month basis remains strong at 14%. Turning to slide 14. Our year-to-date results are set out on this slide. Notably, rental revenue increased 2%. Adjusted EBITDA margins were a strong 43%, and Adjusted EPS of $2.97 was consistent with prior year. Notably, as Brendan mentioned earlier, North America Adjusted EBITDA margin was a healthy 45% inclusive of total company central costs.

On slide 15, we're highlighting how Adjusted EBITDA, profit before tax, earnings per share, and free cash flow would have looked under IFRS. The difference for Adjusted EBITDA is primarily driven by the accounting for leases as an operating expense under U.S. GAAP compared with IFRS. This results in a higher SG&A expense with offsetting benefits in the form of lower depreciation and interest charges. The difference in adjusted profit before tax is primarily from stock-based compensation charges being excluded from adjusted measures under GAAP. Adjusted EPS is impacted by the aforementioned adjustments, but is offset by the tax effect of these adjustments and resulting in a higher adjusted net earnings. Free cash flow is a non-GAAP measure, but is also primarily affected by the classification of the operating lease payment impacting operating cash flow.

Under our updated reporting under U.S. GAAP, we've also removed the exclusion of non-recurring costs to better reflect the cash generative nature of the business. Slide 16 shows the performance for North American General Tool in the quarter. Rental revenue grew by 2% to $1.4 billion, driven by improved volume, time utilization, and stable rates. As I explained previously, margins were impacted in the quarter, primarily by growth being driven by higher activity levels. Adjusted EBITDA was $767 million at a margin of 50.3%, and adjusted operating profit was $414 million at a margin of 27%. Turning now to North America Specialty on slide 17.

Rental revenue was 4% higher than the third quarter last year at $851 million as the non-construction market continues to be strong across multiple business lines, as Brendan mentioned earlier. On an underlying basis, adjusting for hurricanes, rental revenues were up around 7% in the quarter. Adjusted EBITDA was $407 million at a margin of 45.4%, and adjusted operating profit was $271 million at a margin of 30%. Turning now to the U.K. on slide 18. U.K. rental revenue was 2% higher than a year ago at $182 million, benefiting from favorable FX movements. The U.K. business delivered Adjusted EBITDA of $49 million at a margin of 23% and operating profit of $7 million at a margin of 3%.

As mentioned with the second quarter results, we're restructuring the U.K. business to better position it for the future and aiming to deliver improved margins and returns at a sustainable level while positively impacting our customers' experience. This involves aligning the network of locations to current business needs, rightsizing the staff, and disposing of non-core fleet and business lines. Slide 19 again illustrates the flexibility, resilience, and agility of our capital allocation model. When markets are experiencing the transitory headwinds we have experienced over the last few quarters, we remain extremely disciplined in our deployment of capital to support strong utilization and rate discipline. When markets are growing more rapidly, we accelerate capital spending to capture opportunities in 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.

We have started the year strongly with over $1.4 billion generated year-to-date. This is a record and significantly ahead of the comparable period last year. We're on track to deliver record free cash flow generation in the full year. Slide 20 updates our debt and leverage position at the end of January. This again clearly demonstrates the strong cash generative nature of the business as we have lowered net borrowings by over $200 million in the last year to $7.6 billion. This is despite the fact that year-to-date, we've returned approximately $1.4 billion to shareholders through the share buybacks and dividends. We've invested $1.7 billion in cash CapEx, and we've invested $162 million on 10 bolt-on acquisitions.

In addition to that, we've opened 30 greenfields in North America, of which 14 were General Tool and 16 were Specialty. As a result, leverage was 1.6x net debt-to-EBITDA, well within our stated range of between 1 to 2x net debt-to-EBITDA. On the M&A front, 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 21 and our updated guidance for revenue, capital expenditures, and free cash flow for fiscal year 2026. Based on our performance year-to-date and strengthening trends, we have narrowed and increased the midpoint of our range for rental revenue growth to 2%-3%.

With growing confidence in our end markets for fiscal year 2027, we're modestly increasing gross CapEx guidance to $2.2 billion-$2.3 billion. This is driven by funding ongoing Specialty segment growth and recent major project wins. Further, replacement timing between Q4 and Q1 of next year. Updated CapEx guidance for fiscal 2027 will follow in our June full-year results. Lastly, because of these planned investments, we're now expecting free cash flow of approximately $2 billion. Importantly, this free cash flow outlook is now provided in accordance with U.S. GAAP rather than IFRS. With that, I'll hand the call back to Brendan.

Great. Thanks, Alex. Turning to slide 22, Alex and I have covered all of these capital allocation elements as part of our remarks this morning, so I won't cover them again. However, the slide serves as a consolidated reference and all consistent with our long-held policy, which we will continue to allocate capital on this basis throughout Sunbelt 4.0. To conclude, let's turn to slide 23. In summary, I'll leave you with a few takeaways one should gather from our update today. One, the performance year-to-date resulted in exactly what we expected in revenue growth, improving time utilization, free cash flow, and advancing our 4.0 plan.

Two, we're continuing to see positive leading indicators in our business activity levels and in our pipeline, coupled with an encouraging indication of market demand statistics and building momentum, all of which is reflected in our updated full-year guidance for our revenue growth and the CapEx that Alex has just referred to. Three, when you piece this all together, you should clearly see the continued secular progression in our business and indeed industry. This demonstrates ever so clearly that even during this modest growth environment, we continue to maintain discipline in pricing, investment, and strategic focus, all while delivering record free cash flow, which we have used across all of our allocation priorities. This business and balance sheet is stronger than ever and puts us in an incredibly powerful position, giving us great flexibility and optionality as opportunities unfold.

Finally, we're looking forward to seeing many of you in person in just a couple of weeks at our March 26th Investor Day in New York City, where we'll give you an update on our 4.0 progress and showcase our growing capabilities. With that, we'll be happy to take questions. Operator, over to you.

Thank you. We'll now be conducting a question-and-answer session. If you'd like to be placed into question queue, please press star one on your telephone keypad. As a reminder, we ask that you please ask one question and one follow-up, then return to the queue. You may press star two if you'd like to remove yourself from the queue. One moment please while we pull for questions. Once again, that's star one, and please limit yourselves to one question and one follow-up. Our first question is coming from Annelies Vermeulen from Morgan Stanley. Your line is now live.

Hi. Good morning, Brendan. Morning, Alex. I have two questions, please. Firstly, on the upgrade to the CapEx guidance, you've talked about a bit of a pull forward of spend, in effect, taking some of the full year 2027 CapEx budget into 2026 ahead of those landings. Could you talk a bit, little bit about the split of that versus how much of it is indicative of perhaps an improving demand outlook? You also mentioned some recent mega project wins. Just wondering how we think about that and especially heading into full year 2027. Secondly, I just wanted to ask about rates. I think one of the last times we spoke, you mentioned a dynamic pricing pilot. Are you seeing some good traction there?

Is there a plan to roll that out more broadly? Are you confident in positive rate growth as we move through calendar 2026? Thank you.

Great. Thanks, Annelies, and good morning. First of all, on CapEx, I would answer it this way. It's 50/50. As we've talked about in Q1 and Q2, half of that modest increase will continue to fuel a growth CapEx in certain of our Specialty segments, which as you'll see in the quarter-by-quarter, we see ongoing momentum there, and we're seeing that as recent as February. The other half of that is really. It's literally replacement timing between April and May. It's something that we do, we call internally advanced replacement. I'll give you a for instance. Pick any town, North America, Atlanta, Georgia, because it comes to mind.

If there were 10 telehandlers to be replaced in Atlanta in the first half, or let's just say first quarter, we will land between April and May-June timeframe, 10 telehandlers. We may dispose of nine, and therefore, in that market, we now have 11. As we test the waters and compare it to what our time utilization and pricing expectations are, if that sticks, we may order another for the 11th and therefore contribute to growth. At this moment, just so we're clear, that's not growth CapEx. That is indeed replacement CapEx. We took advantage of some OEMs having some green gear available to ship. We see this moving activity. Fifty percent fueling growth in Specialty and mega project, recent big project wins, and 50% of that at that advanced replacement.

I'm sure we'll talk about that in June and full year in terms of how that's working. You asked a question about rate and specifically about a pilot that we've shared to some extent, which we call intelligent customer pricing. That pilot's progressing really well. We have that going in three test markets, and we have three control markets that correspond with that. I wouldn't be answering so fully simply right now if I didn't anticipate the team talking about that two weeks from today at our Investor Day. I would answer at least by saying that's very positive early signs. We're testing and making sure that not only do we deliver our targeted rate improvement, but it also doesn't have a degrading effect on our time utilization.

Thus far, we can report positive results from that and very importantly, great buy-ins. We have a really high efficacy rate of taking precisely that prescribed rate. This is nothing new when it comes to dynamic pricing overall. It's a new layer of our dynamic pricing system.

That's great. Thank you very much.

Thank you. Next question is coming from David Raso from Evercore ISI. Your line is now live.

Hi. Thank you for the time. You mentioned rates were roughly flat. Curious if you can give us a little color, local market rates versus large projects and some of the at least hints of optimism maybe around local. At what level of confidence are you in the sense of when do you start to think about that when it comes to your CapEx budget or changes in rates in local markets? Just curious. I'm just trying to gauge you a little bit on that level of optimism and also how the rates are trending between those two at the moment, rather distinct markets.

Yeah, David, great question. You're right in terms of, you say flat, we say resilience. I think your question around how is pricing and the integrity of pricing and the discipline of pricing in the markets in that local non-res. The short answer is it's very strong. That's very strong especially when we know that we've had a significant decline in that local non-res construction market, which speaks to this output of this structural progression, that we've talked to and documented so many times. Just for clarification, our testing of the next level of our dynamic pricing system is tuned really just to that.

Sure, it impacts in some way, shape, or form some of our national and regional strategic customers, but largely that is tuned right into that local non-res. I think we sit here today with optimism that our ability to balance both fleet investment and pricing is positive. I think, frankly, when we are 12 months, 18 months removed from this last 18 or 24 month period that we're in, this is gonna be a real case in point as to how significantly the industry and all of our systems and our discipline have progressed to deliver that sort of result. I would in summary answer, we are cautiously optimistic and positive about our ability to progress pricing as we move forward.

I appreciate it. Thank you.

Thanks, David.

Thank you. Next question is coming from Lush Mahendrarajah from J.P. Morgan. Your line is now live.

Hi, guys. Thanks for taking my questions. I've got two, please. The first is just on margins in Q3. I sort of appreciate all the headwinds you've walked us through, sort of similar through the year. I think the year-on-year step-down in Q3 was a bit higher than the first half of the year. Is there anything particular in the quarter that sort of drove that? I guess how should we think about that through the year? The second question is just on local. I think it's two or three quarters now where I guess you've been talking about leading indicators improving.

What do you think the timeline is on when you start to see that coming through in your numbers, please?

I'll hit the margin point, then I'll let Brendan talk about the local market. I will point out we've talked about the strength in the DMI for quite some time, and that is about a 12-24 month lag because that's projects entering planning. That planning cycle is about 12-24 months. Brendan will talk at length about the internal leading indicators which we track, all of which are trending quite positively relative to where we were a year ago. Back on your margin point, you know, really the headline message here is mix. It's mix from a couple things. I mentioned in my prepared remarks the mix of specialty growth outpacing General Tool growth.

It's important to remember Specialty has lower EBITDA margin, but higher ROIC because it has higher cap factors and it's less capital intensive. That's actually a good thing. The other area that grew significantly year-over-year was ancillaries. An example of this, we just completed the Super Bowl, and there is a huge amount of installation of cable to power that entire event. Another example would be every time we support a data center, we have to have step up and step down transformers, which we re-rent from third parties. By the way, those re-rentals eventually will become additional CapEx and additional specialty service lines, but we haven't gotten there yet. That re-rent is up about 42% year-over-year.

If I look at the cost items on the income statement, the things that I mentioned in my prepared remarks around internal rental repairs driven by the equipment coming off of warranty, the outside hauler expense as equipment is moved around to unlock utilization and capture these pockets of growth. Really, those are actually internal repairs are down sequentially, so we're making progress on the internal repair line item of the P&L. On outside hauler, that's sort of flattish as we continue to run the business, and we continue to unlock these pockets of growth with existing fleet. As you think through, you know, expectations for the balance of the year, again, it's largely going to come down to mix.

I would expect it to look and feel pretty similar to what we've seen for the balance of the year. I guess that gives you a lot of color on margin, and I'll turn it over to Brendan to talk more about our leading indicators on the local market.

I think, Lush, Alex answered half of it already. I would say it, and I'm trying not to be tongue in cheek here, it's three months closer than it was when we last talked. The important thing is the DMI continues to be positive. If you look at February's print, which just came out on Thursday, 23 more projects entered at $100 million or more. There was a nice range in those. We had convention center, we had some schools, some dormitories, and a handful of the smaller, as we call them, data centers, 'cause they're in that $200, $300, $400 million range. Also, I would refer to something else that's given us this.

Some of the questions, as for instance, that David would ask about pricing in that local non-res arena. Look at GT, how GT trends. I appreciate it's slight with the 2% print that we saw in the quarter on volume. Those are positive signs. Of course, General Tool, light Specialty participates in megas. But we're just seeing some of that activity pick up, which gives you the sense that for sure now, starts are not being outpaced by completions. You might be making that turn just a bit. I would refer to slide eight, I believe it is, in today's deck, which just shows the fleet on rent year-over-year.

If you look at that momentum and that delta as that's progressed through the year, you'll see the notable impact of the hurricane piece. Look, it continues to be a positive in terms of what we're hearing from customers. You know, our sales force is quite enthusiastic as they enter the spring. As I've said before, we're gonna be balancing all this in terms of our level of investment and our conviction around being able to progress price at the same time.

Cool. Thank you, guys. Appreciate it.

Thank you.

Next question today is coming from Paddy Bogart from Melius Research. Your line is now live.

Hi, thanks for taking my question. It's been great to see the strength in the mega projects. I'm just curious, can you talk about the full lifecycle profitability for you on mega projects versus other projects?

I think you said, full lifecycle utilization. Was that the question?

Profitability, sorry.

Oh, profitability, I'm sorry. In short, when we look at the full lifecycle of a mega project compared to that of the rest of the business, there's parity. You'll have some projects that'll be a touch higher, you'll have some projects that'll be a touch lower. The important thing to understand, and as part of what Alex has spoken to in terms of those fleet loadings for those mega projects, you have to picture it about, you know, with a relatively slow buildup. A very long crest, and then also a relatively slow build down. On both ends of that, you're gonna have a bit lower than you would normally because you load in, let's just say, $30 million worth of fleet and eight people.

Early on, you know, it may take you six, eight months to get to time utilization levels that we would expect there, which would be higher than the rest of the business. You've got all of your costs from the beginning in that in terms of a skilled trade. Then when you get to that crest, which oftentimes lasts two-plus years, two, even three years, you still have the same number of people that you began with. Your fleet grows over time, and your time utilization gets far higher. During that crest, it's actually accretive to overall margins. Then when you're coming down, it's about the same. All in all, we consider it a wash, but that's just the life cycle of that mega project.

That's helpful. Thank you.

Thank you.

Thank you. Our next question today is coming from Katie Fleischer from KeyBanc Capital Markets. Your line is now live.

Hey, good morning, guys. Alex, I appreciated all the color you gave around, you know, the ancillary dynamics, and it's I think it's pretty clear what's going on there. I'm just curious how you're thinking about that going forward. You know, it seems like it's becoming a bigger part of the business, both for you and some of your peers as well. How do you think about maybe offsetting some of those margin impacts and continuing to drive stronger EBITDA margins when we do see some more volume improvement?

Yeah. This is actually kind of a great news part of the story because as you know, as we grow Specialty, we're basically displacing re-rent. Some of these re-rental categories, we're actually getting to understand that market. We're understanding how it interacts with the rest of the portfolio. It builds relationships with the suppliers that we're working with. And ultimately, I think you'll see, some of the re-rental equipment turn green, over time. That's kind of the longer term. I think the other thing to think about, re-rent as, again, a positive part of the story is it really points to the solution selling capability of that Specialty business and the interaction between Specialty and General Tool.

As we develop more and more fulsome solutions, think about a complex data center project where you've got a General Tool doing a lot of the construction work. You've got the power and HVAC segment. You've got, as I mentioned in my remarks, the step-down transformers. You think about the complexity of that solution, it really speaks well to the, you know, underlying growth algorithm for the overall solutions that we're providing to the market. You didn't ask the question, but I'll answer it around some of the cost items in the P&L and how we're addressing that. I don't wanna front run what we're gonna talk about in the Investor Day, but you will hear, if you come to the Investor Day, you'll hear about the progress we're making in the market logistics operation centers.

You'll hear about how they're taking out significant usage of outside haulers. They're optimizing the use of the fleet, so really limiting our transportation costs. You'll hear about the Market Service Operations, where we're improving the productivity of our internal labor and our internal repair labor. So a lot of the work when we talk about the performance kind of vertical of Sunbelt 4.0 is well in flight, and you'll hear a lot about it when you come to the Investor Day on the 26th. You know, the other thing that I'd point out is let's not lose sight of the fact that the North America market, which is our core market, continues to have extremely strong margins at 45%. That's inclusive of all of the central company costs.

You know, I think that's just an important thing to underscore as we think about the underlying profitability of the business.

Okay. That's helpful. I know U.K. is small, but just wanted to ask about margins within that business. It feels like they've been challenged for a while now. There's been a few different rounds of actions there to improve those. What gives you confidence that these new restructuring activities should help drive stronger margins in that business over the long term?

Yeah, Katie, we are running the playbook that we covered at the half. That team has gone through this restructuring with areas like reducing G&A expense, consolidating to a degree the footprint, disposing of non-core assets, all in a way to deliver a leaner overall operation that is more in tune with what we're experiencing in the markets there. That business is remarkably well-positioned even in the current infrastructure and construction and maintenance environment that it has. So, you know, we have a strong confidence that you will see that progress. That doesn't happen overnight. That happens over time. That's what we're doing. We're running the playbook.

Okay, thanks.

Thank you. Next question today is coming from Neil Tyler from Rothschild & Co Redburn. Your line is now live.

Yeah, good morning. Thank you. Two questions, please. Firstly, your release mentions market share gains with strategic accounts, which I presumably, you know, you've mentioned deliberately. I wonder if you can share any insight into either way you think this share is accruing, whether it's General Tool, Specialty construction versus non-construction or any particular region versus another. You know, if there's anything specific you want to put that down to at this point. Actually a follow-up to Annelies's question on CapEx. Just want to make sure that the increase, which I'm pretty sure it is all volume rather than value, and whether there's anything in your mind pulling forward that CapEx, sort of looking forward to OEM inflation for next year. Thank you.

Thanks, Neil. I'll take the market share piece, and but I will do it in a manner not to steal the thunder that you will hear from Janelle two weeks from today. I will remind you of the decile slide that we cover, where we break out the customers that make up our top 10%, next 10%, et cetera. You will see in black and white the significant growth in those tranches of customers to the tune of 50% in deciles in some cases, when you look at average or median spend compared to the last time you've seen that print. With every certainty, we are gaining share with those national and regional strategic customers. Importantly, it is in the construction and the non-construction space, 'cause you'll also see how diverse that is.

I wouldn't chalk it up to any one geography in particular. Certainly when we see, you know, some of the mega projects and infrastructure, they are quite broad, not only in makeup, but also in geography. It is, quite frankly, across the board. When you see also, I will mention, you know, we just got the update from Dodge for construction put in place, the slide that you're so used to seeing in the deck, and you'll see it today. It points now more clearly than ever in terms of that local non-residential degradation that we have experienced over the last two years. Again, you'll see that in black and white, how much that was.

Therefore, you'll see there is no other answer that as we've continued to grow through that period of weakness, it's coming from market share gains.

Yeah, I'll try to hit the CapEx question. You know, just to draw you back to Brendan's comments on the prior question regarding CapEx. About 50% of the incremental increase is driven by growth. That growth is coming from mega projects. It's coming from some of the Specialty segments, particularly in load banks, coming from some of the earthmoving equipment that's again used in the mega project space. All of that is really you know, oriented toward capturing the growth and really contributing to the increased revenue guidance that we provided. Then the other 50% is literally simply a question of when it landed, the time of year it landed. You might ask, "Well, why didn't we just wait?" The reason is because we're pretty optimistic as we look forward to next year.

As the market begins to recover and all these leading indicators begin to materialize into activity, we wanna make sure we have the fleet on the ground to take advantage of that as we get into the spring season. As it relates to your specific question, you know, volume versus value. Look, we are kind of coming off the period of really significant inflationary effects. Inflation has mitigated largely. It's really mostly volume related, not inflation related. You know, that being said, don't forget that when you roll off equipment that's seven years old and you put in brand-new equipment, you do typically have around 20% lifecycle inflation. That's what we would've said consistently over the years.

Yeah, just to add that on that last point, so we're clear. Yes, there's still the life cycle. We are expecting zero virtually sequential inflation for our assets.

Perfect. That's very clear. Thanks very much.

Thanks, Neil.

Thank you. Next question today is coming from Rory Mckenzie from UBS. Your line is now live.

Oh, good morning, everyone. It's Rory here. I just wanted to follow up on the point around profitability pressure in Q3. Your group return on investment was down 1 percentage point, I guess despite the fact you're flagging higher specialty mix, which as you explained, is lower margin, but a higher return. Also, I guess despite the fact you had a relatively low quarter for fleet CapEx, so utilization has been up. Looking at the ROI lens, can you talk about the pressures on the business today? Is this the mix of projects you were speaking about? Is it just those cost pressures that you're past? And then also related to that, how do you think about, you know, allocating CapEx and investments when you've been seeing that ROI come down for a longer period? Thank you.

Yeah. It's a great question, and I guess I'd start by pointing out the depreciation number on the income statement, where depreciation for rental fleet was actually flat year-over-year versus a growth of rental of, call it 2.6%, 2.5%. You know, that points to the fact that the fleet is getting more highly utilized, which we've spoken about. It speaks to the capital discipline. If you were to look several quarters previously, you'd actually see depreciation outpacing rental revenue growth. I think that should give you some confidence that, you know, utilization of our capital is actually getting optimized. As it relates to the compression in ROI, it's really just math. As you live through this life cycle cost inflation, your asset base increases.

In a world where EBITDA is slightly softer or EBIT, which is what we use for the ROI calculation, is slightly softer. Sequentially, you would expect a bit of compression. As we begin to see the impact of the market logistics operation centers, the market repair centers, a lot of the intelligent customer pricing and rate improve. Not uncommon to see in periods where the market is a bit frothier. You'll get ROI in the range of 18%-19%.

In periods like this, you'll see, you know, ROI in the 14%-15% range, just a function of the activity level and where we are in the cycle. By the way, that's still significantly above our cost of capital and generating significant economic profit for our shareholders.

All right. Thank you.

Thanks, Rory.

Thank you. Our next question is coming from Karl Green from RBC. Your line is now live.

Yes. Thank you very much. Good morning. Just a couple of questions. Firstly, just going back to the point about the importance of ancillary revenues. Can you indicate how rental-only revenues trended in General Tool throughout the year to date? That would be super helpful and any kind of sense as to how that's tracking on a sort of like-for-like same store basis. Then the second question, completely unrelated, could probably work it out as I dig into some of the notes, but how has the gains on sale of used equipment impacted the margins in this quarter, please? Thank you.

Yeah. I'll take the gain on sale. I would say we are in a period where, you know, the used asset pricing, you know, has been softer than what we would have seen coming out of COVID. It's been, you know, at a pretty low point relative to where it's been historically. That being said, unlike prior quarters, this quarter we did see an actual gain on sale of around $2 million. It was small and not what we would have seen in some prior years, but it did turn positive. In terms of pure rental revenue growth for GT, it was about 150 basis points.

For Specialty, it was around 3.5 basis points, which is consistent with the remarks. Sorry, 350 basis points, so 3.5 percentage points. It's consistent with the remarks that we've kind of been saying of Specialty growth kind of outpacing GT. By the way, entirely consistent with the remarks we've made on non-residential, the local non-res construction, which is predominantly impacting the GT business and the non-construction portion of the business, predominantly impacting the specialty piece of the business. Hopefully that helps.

Just to add an exclamation point to that, the sort of specialty in that sort of three pure rental, double that in total rental. Ancillaries are growing at two times the pace of pure rental revenue and hence that mix. As a reminder, that is profitable revenue.

The margin impact on the quarter at 250 basis points versus the year at 140 basis points is purely revenue geography and the cost associated with that revenue. It's no longer the underlying that we've documented so much around the internal rental repairs and the repositioning fleet, et cetera. That's steady as it goes. Frankly, it's tailing off a bit more positively now as some of the operational imperatives that Alex spoke to are gaining even further traction, which you'll see much more clearly two weeks from today in New York City.

That, that's great. Just to clarify on General Tool rental only, 'cause I guess greenfields haven't been that pronounced. You're still in positive territory on a like-for-like basis for rental only. Is that-

It would be, yes.

Yeah.

Yes.

Great. Thanks, guys. Appreciate that.

Thanks, Karl.

Thank you. Next question is coming from Allen Wells from Jefferies. Your line is now live.

Hey, good morning, gentlemen. Apologies, my line dropped earlier. But I just wanna double-check. Clearly some optimism on the mega project theme still there, but could you talk a little bit about the competitive dynamics in that mega project market and to what extent maybe these have been unhelpful in the margin pressure story, particularly when I think about 3Q versus 2Q? I know some of your peers have talked about some of the challenges there. And secondly, just following up, I think a little bit on Karl's question. You historically have disclosed the kind of M&A contribution in the quarter versus the organic growth split. Definitely, I think in general in 2Q. Is it possible you can provide the organic versus M&A split for 3Q as well?

I can answer the second one very easily. It's almost all organic. You can see the total investment in M&A throughout the whole year was a sum total of $162 million in purchase price. That's gonna have no effect. This is all organic growth that we're delivering today. I'll emphasize what Alex said. His prepared remarks. Make no mistake, there is a robust, very active pipeline from an M&A standpoint, which we are quite excited about. I didn't fully understand your question around M&A's. Were you speaking competitive landscape around M&A's or something different?

No, sorry. Only just to be clear. The impression that it comes across from some of your peers and then more broadly in the market is that, you know, there's just a lot more competition, a lot more of your peers are trying to be more active in those mega project market that's driving potentially some pressure on the pricing and margins that you can deliver against those projects or the industry can. I just wondered if that's something that you're seeing and particularly if you've seen anything sequentially step up in Q3 versus Q2 that may also explain some of that margin pressure.

The margin pressure would not be attributed to other than what Alex covered in detail of some of the ancillaries that go along with a mega project, which is construction. Let's also think about, you know, large scale events like he would have referenced in the Super Bowl, and there are many others of those. Nothing has changed between Q1, Q2, and Q3 when it comes to the competitive set. What is a.

What is a newer and increasing feature are our customers, in particular, the larger they get and the more complex the challenge or the problem is, they're looking for solutions providers with greater breadth, greater expertise. They're looking for one throat to choke, in a very inelegant manner to answer that question. We're seeing that trend more and more. Of course, any rental company who's out there would love to participate on a mega project and deliver 100 telehandlers. The problem is the customer wants 100 telehandlers, plus they want load bank solutions, fencing solutions, ground protection solutions, power plants, and all the transformers that you heard Alex talk about. That's the direction of travel. It's not just the big getting bigger structurally. It's the big getting bigger and big growing breadth.

There's a very big difference when you really dissect the larger rental solutions providers in this industry and those that are really gen rents companies with a bit of scale.

Thank you.

Thanks, Allen.

Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over for any further closing comments.

Great. Thank you, operator, and thank you all for joining. It's a bit different that we will be seeing you in person for an Investor Day in literally two weeks time. Speaking on behalf of the team who you will see there, they are extraordinarily excited about sharing with you a comprehensive update on Sunbelt 4.0 and actually taking you through a real-life experience of our Connect 360 at every touch point with our customers and every touch point with our team members. We look forward to seeing you in New York City. Until then, have a great day.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Hello, and welcome to the Ashtead Group plc Q2 Results Analyst Call. I will shortly be handing you over to Brendan Horgan and Alex Pease, who will take you through today's presentation. [Operator Instructions] For now, over to Brendan Horgan at Ashtead Group plc.

Thank you, operator, and good morning. Thank you for joining, everyone, and welcome to the Ashtead Group Half 1 and Q2 Results Presentation. I'm joined this morning by Alex Pease and Kevin Powers, with Will Shaw on the line from London. Let's get into it, beginning as usual with safety on Slide 4. I'll begin by addressing our Sunbelt team members to specifically recognize their leadership in the health and safety of our people, our customers and the members of the communities we serve. Our total recordable incident rate and lost time rates that you see here continue to be best-in-class. However, despite these results and momentum behind our Engage for Life program, there are incidents that remind us there is never a finish line in safety, rather improvement milestones, nor is there room for complacency. With this said, I'll share with our team members that in 2026, we'll be taking on a significant effort to conduct Engage for Life culture and compliance assessments at every one of our branches. These third-party reviews will address local health and safety compliance, leadership engagement, along with a deep dive into the systems and programs our locations have in place to manage tasks that could potentially lead to a serious event, if not controlled properly. The safety of our team will always be the top priority at Sunbelt, and this will be one of the most important initiatives that we have in calendar year '26. So thank you for your dedication and engagement thus far and, in advance, for welcoming these assessments in the months to come as we continue to pursue perpetual improvement in our safety culture. Turning now to Slide 5. The key messages you'll hear from Alex and me today are the following: First, this is a solid set of results, in line with our expectations with group rental revenue growth at 2% for the first half and 1% in the second quarter despite a nonexistent hurricane season compared to an active period in the second quarter last year. On an underlying basis, growth in the second quarter was 3%, a sequential improvement from the first quarter. Second, the strength of free cash flow after CapEx investment in fleet and business expansion demonstrates the through-the-cycle free cash flow power of this business at our scale and margin, generating $1.1 billion of free cash flow, which is a 164% growth on last year. Third, while our key construction end markets remain mixed, we're seeing signs that the local nonresidential market is now an equilibrium in terms of completions and starts as well as continued positive momentum in many of our internal and external leading indicators. Mega project activity continues to be strong, and we're winning share across our regional and national strategic customers. Fourth, our strong free cash flow generation has enabled us to return over $1 billion to shareholders in the half through dividend payments and share buybacks. And we've announced today a new share buyback program of up to $1.5 billion that we intend to commence on March 2, which will follow on from the completion of the existing program and will coincide with our expected relisting date on the New York Stock Exchange. And finally, we are confident in reaffirming full year guidance for rental revenue growth, CapEx and free cash flow. Moving on to the financial highlights of the first half on Slide 6. Despite the quiet hurricane season, group rental revenues were up 2% in the first half, consistent with the 0% to 4% guidance we gave in September. The leading indicators, both internal and external that we track, have continued to trend positively. And therefore, we remain cautiously optimistic that these trends in our business will continue and are early signs of the local nonresidential portion of our end markets recovering. As when they do, we will experience accelerated momentum and improved results. Group adjusted EBITDA was $2.7 billion at a 46% margin. As we explained in the Q1 results, these margins reflect the mix effect of higher ancillary revenue, the proactive repositioning of our fleet to drive utilization, and unlock pockets of growth and increased repair costs as a larger portion of the fleet comes out of warranty coverage. From a capital allocation standpoint and in line with our Sunbelt 4.0 priorities, we invested $1.3 billion in CapEx focused on a mix of replacement and growth. Free cash flow in the 6 months was just over $1.1 billion, which is a record, demonstrating the resilience of our business while we continue to invest in growth. The strong free cash flow is supporting the current $1.5 billion buyback program, which we are on track to complete by the end of February '26, before commencing the new $1.5 billion program that I've just referred to. Moving on to our segmental performance on Slide 7. As I've already mentioned, performance in the second quarter was impacted by a very quiet hurricane season compared to Q2 last year, when we reported that hurricanes had contributed $55 million to $60 million in incremental revenue. Rental revenue on a billings per day basis for General Tool grew 2% in the second quarter and 1% in the first half, 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 nonres construction market through the first half, offset in part by the ongoing strength of the mega project landscape and the broader nonconstruction markets. Specialty growth is more impacted by lower hurricane activity with growth in the quarter flat. Adjusting for the hurricane impact, underlying growth in Specialty was 5%. The strength in Specialty segments was broad-based, led by Power & HVAC, Temporary Fencing, Structures & Walls, and Trench Safety, all delivering strong growth in the half. On a constant currency basis, U.K. rental revenue was down 2% in the quarter, reflecting the ongoing challenges in the U.K. end markets. As a response to this and consistent with our 4.0 strategy, we're undertaking a series of onetime restructuring actions, including location consolidation, people transitions, exiting noncore lines, and G&A reductions. These actions will enable better service to our customers, unlock value, deliver sustainable double-digit return on investment, and produce consistent free cash flow, while continuing to lead as the premier rental platform in the U.K. Alex will cover the financial implications of these actions shortly. Slide 8 shows fleet on rent for North America over the last 4 years. You can clearly see that our efforts to drive growth with existing fleet has resulted in improved time utilization. This supports a more constructive rate environment and contributes to our strong ROI. It also demonstrates our disciplined and flexible capital allocation approach. Over the next couple of slides, we'll cover the activities and outlook for the North American construction end market. On Slide 9, we set out the main leading indicators for the construction sector, namely Dodge Starts, Dodge Momentum Index, the Architectural Billings Index and 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, gaining further momentum. We made great progress in mega project wins in the first half with a growing funnel of future projects and advancing market share with our strategic customers, both regionally and nationally. Exercising the cross-selling power across the Specialty and General Tool businesses as well as the advantage of Sunbelt's significant breadth and depth of products, solutions and expertise is a strategic differentiator. Combine this with a technology suite that is second to none, creates a platform that can deliver world-class customer experience, efficiencies and value across a wide range of complex applications. As it relates to our local nonresidential end market, we remain in a moderated environment. However, as I flagged with the Q1 results, both our internal leading indicators such as quotations, reservations and continuing contract activity and key external indicators are encouraging. The Dodge Momentum Index, in particular, remains near record highs. Just to remind you, this index represents nonresidential projects, excluding manufacturing, that are below $500 million and entering the planning phase for the first time and is therefore representative of future velocity in what we refer to as the local nonresidential construction market. This clearly indicates ongoing strong planning activity across our nonres construction markets will lead to an increase in starts, likely within a period of 12 to 24 months. So while clearly positive leading indicators, it may take some time for this planning to translate into project starts. When it does, as we've said, we are poised to benefit. On Slide 10, you can see how these starts forecasts translate into the latest Dodge put in place forecast and the S&P forecast for the North American rental market. As we expected, Dodge's September report lowered their forecast for construction, excluding residential, by 2% for '25 and 3% for '26. Although we've not updated the mega project slide, which you can find in today's slides, Appendix #37, I can confirm that the outlook for ongoing growth in the mega project space is strong as new project plans are entering the funnel often. Further, the makeup of projects is broad in sector and geography. And finally, the team has done a great job year-to-date, winning more than our fair share and are very active in current RFPs. More details to come in this mega project landscape in March. Before I hand it over to Alex, I'll just touch on our Sunbelt 4.0 strategic plan on Slide 11. We're now 6 quarters into a 20-quarter plan. As I previously mentioned, our team has been laser-focused on advancing each of the 5 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 through the year and, in particular, during our upcoming Investor Day this coming March. With that, I'll hand it over to Alex to cover the financials in more detail. Alex?

Thanks, Brendan, and good morning to everybody. Starting with the second quarter results for the group on Slide 13. Group total revenue and rental revenue both increased 1% in the quarter, reflecting the impact of the quiet hurricane season that Brendan has already mentioned. Adjusting for the impact of the hurricane, underlying rental revenue growth in the quarter was around 3%. The EBITDA margin and EBITA margin continued to be strong at 47% and 27%, respectively. In line with the Q1 performance, the slight drop in margins primarily reflects the fact that top line growth is being driven by higher activity levels in both the mega project space and large strategic accounts as opposed to the more transactional business as well as a planned repositioning of fleet to drive both growth and utilization. Margins have also been impacted by a higher level of ancillary revenue associated with the growth in the nonconstruction markets, an increased level of internal repair costs with a greater portion of our fleet out of warranty coverage just as we expected, and lower gains on disposals of used equipment. Adjusted for depreciation at $592 million was up 1%, matching rental revenue growth as the challenges associated with the slight over-fleeting of the industry has abated. After interest expense of $133 million, reflecting lower average debt levels, adjusted pretax profit was 4% lower than last year at $656 million. As explained previously, we are adjusting for nonrecurring items associated with the move of the group's primary listing to the U.S. These costs amounted to $19 million in the quarter and $32 million in the first half. In addition, we've taken a onetime exceptional charge of $37 million in the quarter relating to the restructuring of the U.K. business that Brendan has already mentioned. The bulk of this charge is noncash in nature and the full scope of the actions taken in the year are expected to be cash accretive. Adjusted earnings per share were up at $1.168, reflecting the benefits of the ongoing share buyback program, and ROI on a trailing 12-month basis was a strong 14%. Slide 14 shows the first half results in a similar format. Rental revenue growth in the half was up 2%, and up 3% on an underlying basis, adjusting for the lack of hurricanes. The EBITDA margin and EBITA margin remained strong at 46% and 26%, respectively. Adjusted PBT was down 4% and adjusted EPS down 1% for the half. Slide 15 illustrates group revenue and EBITDA progression over the last 5 years and in the first half, highlighting significant track record of growth and margin strength over a range of economic conditions. Turning now to the individual segments. Slide 16 shows the performance for North American General Tool. Rental revenue for the first half grew by 1% to $3.2 billion, driven by improved volume, time utilization and stable rates. Excluding the hurricane-related impacts, rental revenue increased about 3% in the first half. As I explained previously, margins were impacted in the half, primarily by growth being driven by higher activity levels. EBITDA was $1.8 billion at a strong 54% margin. Operating margins were 33% and ROI was 20%. Turning now to North American Specialty on Slide 17. Rental revenue was 2% higher than the first half of last year at $1.8 billion as the nonconstruction market continues to be strong, particularly in Power & HVAC, Climate Control and Flooring Solutions. On an underlying basis, adjusting for hurricanes, rental revenues were up around 5% in the half. Margins in Specialty were broadly flat with EBITDA margin of 48% and an operating margin of 33%. ROI was 31%, again, clearly illustrating the higher returns achievable in the Specialty businesses. Turning now to the U.K. on Slide 18, and please note, all of these numbers are in U.S. dollars. U.K. rental revenue was 3% higher than a year ago at $422 million, benefiting from favorable FX movements. The U.K. business delivered an EBITDA margin of 26% and generated an operating profit of $35 million at a 7% margin. ROI was 5%. As Brendan has already mentioned, during the quarter, we commenced a restructuring of the U.K. business, better positioning it for the future and aimed at delivering improved margins and returns at a sustainable level, while positively impacting the customer experience. This involves aligning the network of locations to current business needs, rightsizing the staff and disposing of noncore fleet and business lines, including the sale of the U.K. hoist business in October for $16 million. Slide 19 illustrates the flexibility, resilience and agility of our capital allocation model. When markets are experiencing transitory headwinds we have experienced over the last few quarters, we remain disciplined in our deployment of capital to support strong utilization and rate discipline. When markets are growing more rapidly, we accelerate capital spending to capture opportunities 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 the fiscal years 2021 and 2025, and we have started this year strongly with $1.1 billion generated in the first half, a record and significantly ahead of the comparable period of last year. We are well on track to deliver record free cash flow generation for the full year. Slide 20 updates our debt and leverage position at the end of October. This again clearly demonstrates the strong cash-generative characteristic of the business as we have lowered net borrowings by over $500 million in the last year to $7.6 million (sic) [ billion ]. This is despite the fact that we returned over $1 billion to shareholders in the half through share buybacks and dividends, invested $1.3 billion in CapEx, and invested $143 million on 7 bolt-on acquisitions. In addition to that, we opened 22 greenfields in North America, of which 12 were in General Tool and 10 were in Specialty, with a clear line of sight to achieving around 60 greenfields in the full year. As a result, excluding lease liabilities, leverage was 1.6x net debt-to-EBITDA, well within our stated range of between 1x to 2x net debt-to-EBITDA. We expect to be in the 1.5x to 1.6x range at the end of April, including the impact from the share buyback activity, but not including any potential impact of additional M&A activity. On the M&A front, 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 21 and our latest guidance for revenue, capital expenditure and free cash flow for fiscal year 2026. We're pleased to reaffirm the guidance that we gave in September. Our guidance for group rental revenue growth is between flat and plus 4%. The plan for growth capital expenditure is in the range of $1.8 billion to $2.2 billion. And finally, we expect free cash flow to be between $2.2 billion and $2.5 billion. And with that, I'll turn it back to Brendan to close this out.

Thanks, Alex. Turning to Slide 22. I think you'll agree, Alex and I have covered all of these capital allocation elements as part of the presentation this morning. All of this is consistent with our long-held policy, and we will continue to allocate capital on this basis throughout 4.0. To conclude, let's turn to Slide 23. In summary, I'll leave you with a few takeaways one should gather from our update today. One, recognizing the impact of hurricanes, the half resulted in exactly what we expected in revenue growth, improving utilization, free cash flow and advancing our 4.0 strategic plan, leading us to reiterate our guidance for revenue, CapEx and free cash flow. Two, we're continuing to see positive leading indicators in our business activity levels and in our pipeline, coupled with an encouraging indication of market demand statistics. And three, when you piece this all together, you should clearly see the secular progression in our business and in our industry. This demonstrates ever so clearly, in particular, during this modest growth environment, we continue to maintain discipline in pricing, investment and strategic focus, all while delivering record free cash flows, which we've used across all our allocation priorities. This business and balance sheet is stronger than ever and puts us in an incredibly powerful position, giving us great flexibility and optionality as opportunities unfold. And finally, just a comment, you should have received a save the date for our March 26 Investor Day in New York City, where we'll update you not only on our 4.0 progress, but showcases our ever-growing capabilities, and we certainly hope to see all of you there. And with that, operator, we will turn the call over to Q&A.

[Operator Instructions] Our first question is from Lush Mahendrarajah from JPMorgan.

I've got 2. The first is just on rental rates and how we think about the combination of that and margins as we go through the second half. Clearly, some of those things are mix related, et cetera, and repositioning related. I mean, is that something that you want to start to offset and push rental rates a bit more? Or are you sort of happy with the status quo and sort of those things will sort of iron themselves out over time? So that's the first question. And the second is just on local and you've indicated, I think, there on the document sort of the 12- to 24-month lead time, but also interesting to hear, I think you said quotations and reservations for yourselves is trending upwards. I mean is it typical to see a lead time of 12, 24 months for those as well? I'd imagine those are short, just to get an idea of exactly what you're seeing there and what that actually means labeling into revenue?

Sure. Thanks, Lush. Rental rates, as we've said, so much so, in particular during this moderated level of growth that we've talked about, the resilience of. Our rates are strong, make no mistake. Your question specifically talks about what is our anticipation of where rates go in the second half. I can probably obviously always say to you that we prefer rates to be a bit higher as we move. I feel good about. We feel good about the momentum that we have. We have a number of initiatives underway to further progress the mechanized progress, if you will, of pricing. So we'll certainly be talking about that a bit in the Investor Day. I think the key thing is this when it comes to pricing. We believe at this stage that we've reached a good fleet balance in the industry. It's well known that for a period of time, the industry was a bit over-fleeted. We think that, that has largely corrected itself. And therefore, that leads to even more momentum and really expectation around pricing. But there are also a number of moving parts between some of that local nonres we've talked about and also our national and strategic customers that we're growing so significantly. But overall, our expectations on rates are positive, and we do expect rate progression to be a feature of our growth for the years to come. Second question around the momentum that we're seeing, particularly in the internal indicators and, of course, in areas like that Dodge Momentum Index. Yes, internally, what we're seeing really now as compared to what we would have seen a year ago, we're seeing more normal rhythms in the business. And by that, I mean rhythms as it relates to seasonality where we had actually seen a decoupling of that at prior points. And in that, that's supportive of what we would have said in our prepared remarks. We feel as though both in terms of the actual data and then just a feel on the ground that when you look at completions versus starts, we've reached equilibrium. And if you think about that local nonres market, really for about 2 years' time, completions, in essence, were outpacing starts. We feel as though we've reached neutrality in that, and that gives us even more confidence in what we're seeing in some of these forecasts. That being said, and you sort of answered it in your question, Lush, that lead time from planning to actually progressing to start is 12 to 24 months, depending on what it may be. Some of your smaller retail might be 12 months, offices and lodging might be 18 months, larger projects beneath that $500 million may be more like the 24 months. So when that comes? Time will tell. We're seeing positive signs for that. And as we've said so many times, we are positioned well to take advantage of that when not if that returns.

The next question is from Annelies Vermeulen from Morgan Stanley.

Two questions, please. So just on the U.K. restructuring charges. So you've mentioned closing branches and some headcount. So do you expect that, that business will be materially smaller going forward? And if you could talk a little bit about what has prompted that? And as part of that, you mentioned double-digit returns on those investments. So over what kind of time frame could we see that come through? And then secondly, just coming back to some of those green shoots on leading indicators. Is there anything incrementally different relative to the last time we spoke in September with regards to the type of customers or projects that you're seeing that across, or any particular drivers you're hearing in your conversations with customers such as rates, et cetera? Any color there?

Great. Thanks for question, Annelies. I'll take the first part, and then I'll turn it over to Brendan to talk a little bit more about the green shoots that you mentioned. So the U.K. structuring, this is activity that we're undertaking to really sort of improve the performance of that business. We mentioned $37 million of nonrecurring charges. That's a onetime charge, mostly noncash in the quarter. Important to say that all of that will be cash accretive in the year. We pointed to the sale of the Hoist business for about $16 million. There's a little bit of severance in there, but it will all be cash accretive for the year. And largely, those actions are already behind us. So there's really not a whole lot more to be done. In terms of your question, will that be a materially smaller business? No. This is really about sort of optimizing the footprint, divesting some of the businesses where we weren't really competitively advantaged, closing locations where we didn't have scale. So it's really, I would say, just basic hygiene about how we drive improved performance in that business. In terms of what's our trajectory to more sustainable returns, obviously, it's a bit of a tricky question to answer, because it depends on how top line performance evolves as the market recovers. But we would expect all of these actions, like I say, to be accretive in the year and to be delivering positive returns as we look out into the next fiscal year. And so with that, I'll turn it over to Brendan to talk more about the green shoots that we're seeing in the marketplace.

Great. Thanks, Alex. And Annelies, your question really was, is there anything different really from Q1 when we first talked about what we're seeing internally and some of the forecast externally. And I think the biggest is, we've had 3 prints now of DMI that have maintained really high levels. And the key to that is, it is indicating the demand in the marketplace. And as we see that maintain that quite wholesome level, we have increased confidence that we will see those progress to starts. And that actually, that question, brings up a good point I think I'll make to perhaps reiterate our conviction there. When you study over time, the correlation between DMI and starts, it is a remarkably strong correlation, about as strong as you can get, which one would expect. You have someone who has literally entered the planning phase and the correlation from entering planning to, therefore, actually becoming a start is remarkably high. So that gives us extra confidence. And again, what we're seeing there is it's just the demand. And that demand, just to emphasize, remember, that is specifically DMI pointed to projects that are below $500 million, nonmanufacturing. So it really gets to the core of that local nonres.

Our next question is from Neil Tyler from Rothschild & Co Redburn.

Two for me, please. You've increased the amount of M&A slightly. You mentioned a robust pipeline. Does this reflect a more attractive M&A landscape more broadly? Is that maybe tying into your comments about some of the industry being a little bit over-fleeted? Are there assets available that have got increased headroom to improve sort of utilization compared to, say, a year or 2 back? That's the first question. And then a similar topic, but on your own fleet utilization, how are you thinking about utilization rates as you shape up for the 2026 season? How much growth headroom in terms of utilization rates do you think exists in your current fleet before CapEx will need to kind of raise to move the fleet in sort of lockstep with demand growth? Does that make sense?

Yes. Sure, Neil. The first in terms of M&A, well, look, we did 2 in Q1, we did 5 in Q2, nice little bolt-ons mix between Specialty and General Tool. So really, it's a combination of density and a bit of expansion into some markets where we didn't have quite the presence that we would have wanted, all part and parcel of our 4.0 expansion plan. Nice little specialty businesses in the first half that we added, one around perimeters that really supports our events business, everyday events, and then, of course, magnify with events like LA28. From a pipeline standpoint, it's remarkably strong, and it's remarkably strong, particularly in the specialty space. So there are a handful of opportunities that are out there that both complement existing lines that we offer today, but also some nice adjacent lines. Your question about do we see this ability to extract, in essence, higher utilization because of the industry's fleet levels? I think, frankly, it's not so much that. We get that in almost every circumstance. So we buy a business in any town, North America, for instance, and they may be running at a utilization level of 60, let's just say, for conversation's sake. And as we fold that into our overall system, our overall apparatus, we can comfortably run that business at a higher level of time utilization, if for no other reason, then we have a deeper offering of whatever products we tend to bring in. So certainly, that's one of our overall hallmarks of this bolt-on M&A strategy that we have. And we take those customers that we acquire by way of the acquisition, and we offer them a far broader set of solutions. So it's really no different than what it has been. As we've said in all of our updates, the pipeline has remained robust. We're just in a really good position right now. And frankly, we would expect the momentum in terms of our allocating capital investment in this regard to strengthen over the course of the quarters to come. In terms of our own time utilization, to your second question, and what sort of headroom, I mentioned that similar to the end market from a local nonres standpoint, I think we're kind of at equilibrium now. When you look at our business today, as you've seen and you would have heard from Alex's remarks, Specialty is becoming a larger part of our overall business. So time utilization isn't quite what it was before. Take, for instance, as we grow our climate business or we grow our load banks business to the degree in which we are, you have different seasonality as it relates to time utilization. So really, the answer to your question is the devil is in the details. We have certain product categories that we do have a bit of headroom, but we also have, and I would put it this way, equally have product categories that are at quite high levels of time utilization and, therefore, that's where you'll see our growth CapEx invested not only in the second half, but as we complete our planning from a CapEx standpoint for next year, which we're right in the middle or right in the throes of our growth plans for next fiscal year. I hope that answers your questions, Neil.

Yes, that you did. That's very helpful.

Our next question is from Arnaud Lehmann from Bank of America.

Two questions from my side. Firstly, on margin trends, you highlighted, again, a little bit of margin erosion year-on-year, highlighting the repairs and repositioning of the rental fleet. Do you expect that to continue into the second half of the fiscal year, or the repositioning is largely done? Maybe something remains on the repair side. My second question is just a few follow-ups on the U.S. relisting. When are you expecting to transition to U.S. GAAP? Are you going to move to a December year-end for reporting? And what sort of incremental U.S. relisting costs should we expect into Q3 and Q4, please?

Okay. So I'll take both of these. On the margin point, a couple of points that I think are really important to understand. First of all, this is largely driven by mix. And the mix is coming from a couple of things. First, we have a disproportionate growth in Specialty relative to General Tool. And remember, Specialty is a little bit narrower margin, although it's higher return, because it's less capital intense. So that should be somewhat intuitive from the numbers. Secondly, the growth, as Brendan would have mentioned in his results, the growth broadly is coming from mega projects and the large strategic accounts as opposed to that local nonres more transactional business. And so again, I think it should be intuitive that, that type of business mix would carry with it a bit more of a lower margin profile. And then lastly, we're really optimizing the fleet positioning to unlock these pockets of growth. And that higher level of activity, comes with it higher cost. So as Brendan says frequently, we're really just running the business as you would want. There's nothing sort of structurally changing in the underlying economics. In terms of as it looks towards the second half, I think we would continue to expect Specialty to have relatively stronger growth than General Tool. I think the other issue that we pointed to was the higher internal repair costs as a portion of the fleet comes off warranty. You would expect that to continue through the balance of the year. So I think largely, you should expect the second half to look and feel similar to what the first half looked like. As it relates to the U.S. relisting, we're on track for that to be delivered March 2. We've submitted the first round of comments to the SEC -- or first round of response to the SEC's comments. We expect to get a second round back here in the course of the next week or so. And so everything is going exactly as we would have hoped despite the government closure throwing a bit of a speed bump in it. In terms of your question as it relates to the December year-end, we will likely make that decision at some point in the future. That is not something that we would undertake sort of imminently as we need to get through this process first, but we would likely take that decision at some point in the future. And we will continue to see some incremental cost as we get through the balance. I think we're kind of targeting a total budget of around $90 million or so by the time this is all said and done, the majority of which will happen as we get into sort of the second half of the year, but there will be some residual cost as we get into next year, which will all be adjusted out of the adjusted GAAP numbers. And then obviously, once we start reporting on the SEC regime, we'll be reporting U.S. GAAP numbers, and we'll bridge that very clearly for you in the Investor Day.

Our next question is from Rob Wertheimer from Melius.

A question on just profitability and ROIC on the mega projects versus the rest. We've seen the fleet positioning cost. I wonder -- I'm not sure if I understood the last answer to indicate that the repositioning is a kind of phase or, I don't know, whether it continues with each mega project as they sort of bounce around the country, whether that's just a new cost of doing business. But does the profitability kind of curve up to average? Or is it lower given competition? And -- well, anyway, I'll stop there for now.

Rob, thanks for that. You heard Alex allude to that margin impact. And I just want to clarify that, and I think this will answer your question. That's in the early phases of those wins and of those build-ups. So as we've said many times in the past, not only does history tell us, but our expectations are, as you reach that sort of crest, which is quite long on these mega projects, we would say, at a minimum, those are parity to the margins for the overall business. And the same thing goes really with our national strategics. I mean when you think about these not just mega projects, but these national contractors, and you put all that together, these are more experienced operators. The conditions on these sites are better governed. The products themselves, in so many instances, move in many ways a bit less than they do on other projects, and the repair and maintenance, when it comes to upkeeping with those, you have this great opportunity to have field service technicians deployed that are on site and they spend most every single day on those projects, maintaining this equipment. So over time, we would expect for that to be at a minimum parity to the rest of the business.

Perfect. That does answer. And then just out of curiosity, I guess, just as you slowed expansion appropriately with the industry, then the repair cost comes up as more of the fleets off warranty, I get that. Is that a 1-year effect and you kind of rebase, or if you didn't expand faster again, would that continue to be a margin headwind over the next year? I'll stop there.

Yes. I mean, it's really -- if you look at the fleet profile slide that we have in the appendix, you'll see 2 extraordinary years of growth where we extracted significant share gains and expanded our business. So it's really those 2 rather large tranches. So unless we were to go to those levels of CapEx, say, next year, I think we have another year of that sort of headwind and then we balance out as we ordinarily would. And then, of course, look, there'll be these periods where you have significantly low replacement CapEx for tranches 7, 8 years ago that were lower. But I would expect that same sort of headwind for another 6 quarters or so.

Our next question is from Suhasini Varanasi from Goldman Sachs.

Just one final follow-up from me, please. The U.K. restructuring program of $37 million, you mentioned it was cash positive, but can you maybe give us some color on what's the benefit on annualized SG&A costs for that region and, therefore, the benefit to margins on an annualized basis?

Sure. So the bulk -- as I would have mentioned, the bulk of the restructuring would have been in sort of fixed assets, sale of underperforming businesses, consolidation of locations and those sorts of actions. So really where it hit -- and it's noncash, by the way, so where it typically would hit is more on the ROIC and the depreciation line than the sort of SG&A side. I don't have the exact number in front of me. I think it would be reasonable to expect 150 to 200 basis points of SG&A improvement on leverage. But again, the bulk of it is really focused on the asset footprint, if that helps.

We'll now take our next question from Allen Wells from Jefferies.

A couple for me, please. Firstly, just on the margins. Sequentially, slightly worse, I think, down 140 bps versus 120 bps in Q1. The incremental decline there, is that all related to hurricane activity? Or were any of the other headwinds stronger in the quarter? And then maybe linked to that, I think kind of follows on from Rob's question on the repair costs. We should expect that obviously to be a continued headwind over the next few quarters. But when you look at that CapEx profile, the step-up between '22 and 2024, should we be thinking that the headwind from higher repair costs actually steps up over the next few quarters as well? So that's just those on the margin? And then secondly, just on the rate environment following on from a question earlier. Beyond the broader market conditions being slightly muted, are there any other factors that you would call out that are impacting rates? I'm particularly thinking about are there any particular smaller or midsized competitors being a bit more aggressive than you would typically expect on pricing or anything like that? Or is it just a broader market issue?

Yes, I'll let Brendan take the rate question, but I'll hit the margin question quickly. So you sort of answered your own question. Yes, the hurricane activity -- the lack of hurricane activity, I should say, did have a dilutive impact on margins. You're also lapping a very strong period of margin expansion. So you sort of have a tougher comp that you're comparing against. So those are really the issues. As it relates to the higher repair costs, I think Brendan answered that. We do expect that to continue for the next, call it, 6 quarters as we're lapping those really 2 high CapEx years. So I think that would be more of a sustained headwind. And I'll let Brendan comment on the rate environment.

Yes. Allen, from a pricing standpoint, look, there will always be some competitor in some market somewhere who leads with price. That has been the realities of the business forever. The key to understanding pricing is, pricing in any business is dynamic. And the big takeaway would be, think about the structural change, the structural progression of this business and the secular outputs of that, and we're seeing those so clearly today. Secular outputs, particularly highlighted during this end market that we are working through today, that create larger TAMs, that create more resilience overall in the business, that deliver discipline when it comes to pricing. And largely speaking, that's exactly where we are. It's not different than most anywhere else. Pricing does have a momentum element. And at this particular juncture, it has proven to be remarkably resilient, and as we've said, pricing is still very much strong, and we look to take further advantage, if you will, of this structural output to progress pricing, as I've said, that we expect to be a feature of our growth for years to come.

And sorry, just a quick clarification, Alex. I appreciate you kind of confirmed that there'd be a sustained headwind in the higher repair cost. But I guess my question was, when I look at the CapEx profile, '23 was more CapEx than '22, '24 was more than '23. So is there any reason why that headwind shouldn't actually increase given that CapEx profile?

Yes. I guess when we return to fueling larger growth capital investments, you would see that impact mitigate, because you'd be putting more capital on the balance sheet that's under warranty cost and the age of your fleet would come down slightly. So really, the higher warranty cost is entirely connected with the aging profile of the fleet. And Brendan is pulling up the slide in the appendix, which really shows the nature of how we've invested in the last couple of years. So you would expect that trend to continue as we lap those 2 years of $3 billion to $4 billion of investment. As those levels of CapEx get retired, you would expect it to come down to something a little bit more normal.

Yes. I think, Allen, to just add, let us not over-index on. I appreciate we may have put ourselves in that position because we call out the impact of higher repair costs as assets come out of warranty. Think about Sunbelt 4.0 and the actionable component of performance. Make no mistake, we have opportunities which are being actioned to drive margin improvement in this business just as we set out to do with 4.0. So whether it be the over '25 market logistics operations that we have employed year-over-year, growing from last year's 10 or 12 to today's over 25, which is more than 500 of our locations. We'll have more than 30 of these rolled out by April of our top 50 markets. Part and parcel of that MLO is a consolidated market field service approach. Furthermore, as you will see in full color on March 26 during our Investor Day is the new service platform that we've implemented throughout the business. So all of these improvements not only deliver exceptional customer experience, but they also will deliver, over time, improved operational processes and therefore, improved margins. So this is just a moment in time when we're going through those 2 years of extraordinary growth investment, which we all look forward to returning to. But make no mistake, the business is actioning significantly an improvement in the way that we operate, and that will translate into margins. I'll just talk to MLOs a bit more. We have reduced days to pick up for our assets. That creates opportunity for higher time utilization of an existing fleet. We have circa 15% better truck utilization in these markets. We reduced outside hauler spend in many cases, by 50% or more. And this whole measure we've looked at for so long, delivery cost recovery improves by 4% or 5%. So it's not all about just the warranty of the fleet, it's about how we continue to get better at our operations, and you've met the Brad Laws and [ Chais ] of our business. And that's what they're focused on every single day, and we have great momentum behind that.

Our next question is from Karl Green from RBC.

Just 2 questions. The first one, Brendan, given that we're seeing double-digit auction inventory builds in major equipment categories, I just wondered what gives you the confidence in the statement that the over-fleeting in the industry is being largely corrected? And then the second question, Alex, perhaps for you, just on depreciation. It looks like sequentially, adjusted depreciation went down between Q1 and Q2. So I just wanted to understand the moving parts of that. Was that partly due to accelerated write-offs in the U.K.? Or is there anything else going on there in terms of fleet mix that we should be aware of? And then just a final follow-up on that would be what would your expectation be for full year depreciation, please?

Sure, Karl. On the first, look, I think when you look at 2 things really, your question is about how we feel comfortable that we're reaching this sort of balance from a fleet versus demand standpoint in the industry? You're right, we do see some, and I want to say that very clearly, some product categories that are creating a bit of a backlog in that auction environment. As you know, there's some activities going on in the industry where some are taking the decision to rebalance fleet in some way, shape or form, more so when it comes to composition than when it comes to absolute levels. And you'll see that from time to time. I think you'll see that work through quite quickly. And you can see that also when it comes to secondhand values, which it's important to understand when you think about this business over the years rather than just quarter-by-quarter, you'll see oscillation when it comes to secondhand values. If we sort of collar what we get assets at least through the auction channel, you'll see peaks in the 42% to 45% of original equipment cost range down to extraordinary times like '08, '09, where you saw 25% or so relative to OEC. And today, we're in the kind of 32%, 33% range. So that also indicates a relative level of health in that space. But I think when we look at -- look, many of our OEMs are publicly traded, and you can understand what their volumes look like year-on-year or really over the last 18 months. So all of those line up to and indeed, our own time utilization, giving us this confidence that we are in a pretty good position overall from a fleet makeup in the industry.

Yes. So a couple of points on depreciation. It would be the case that the majority of the decline would be tied to the U.K. Remember, that $37 million charge that I mentioned is largely accelerated depreciation. So that would be the case. If I look at rental depreciation in the quarter, it was for the first quarter that we had really in the last probably 6, rental depreciation was a good guide. So we've got back to a world where rental growth and depreciation are more in balance. You do have some other effects of depreciation going on with things like lease amortization, some of the greenfield investments before they come to scale, obviously, those would be headwinds to depreciation. But I think the headline number is the fact that this rental depreciation was more in line with rental growth, which is a good thing in the quarter. Does that help?

That's helpful. Thank you.

Our next question is from Neil Tyler from Rothschild.

Just wanted to follow up actually on the answer to the previous question about the used equipment recovery rates. You said for some time that you have been trying to optimize the channels that you use. Can you give us any sort of update on that, thoughts on the current split and how far through that sort of optimization process you are?

Yes, Neil, I'm glad you asked that question because shame on me for not addressing that when I had the opportunity. Yes, I mean, we have, as you know, over the years of such significant growth and such organic investment in the business, we've relied primarily on 2 channels, one being trades to OEM, because when you're buying 3, 4 and even 5 to every 1 you're selling, it's a pretty optimal path. An asset lives a perfect life after its last day of rental. Once we deem it to be an asset to be replaced, it's sold nearly immediately, not taking any time away from the business or distraction to the business. And then secondarily was the path through auction. We have been working on standing up a strong retail and wholesale platform, which I would call 3 quarters through its build. And you will see in significance, beginning next year, more and more of our secondhand sales going into that retail and wholesale market. And of course, we think that overall will lead to better proceeds for our sales of used equipment.

It appears there are currently no further questions at this time. With this, I'd like to hand the call back over to Brendan for closing remarks. Thank you.

Great. Thank you, operator, and indeed, everyone, for joining this morning. I think we have gotten across -- or hope certainly clearly that over the half and indeed year-over-year, we have invested in growth in this business. We have been working vigilantly to improve our craft, to improve the service throughout our actionable components of 4.0. We have generated significant free cash flow, which we have returned in record levels to our shareholders. We paid down debt, and we've done all of this within our leverage range presently at 1.6x. And I'll just reiterate what I would have said in my prepared remarks, which is this business is in a remarkably strong position, and we are poised to benefit as we see things recover and this great industry continues to grow. So with that, we look forward to seeing all of you on the 26th of March.

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.

Hello, and welcome to the Ashtead Group plc Q1 Results Analyst Call. I'll shortly be handing you over to Brendan Horgan and Alex Pease, who will take you through today's presentation. [Operator Instructions] For now, over to Brendan Horgan and Alex Pease of Ashtead Group plc. Please go ahead.

Great. Thank you, operator. Good morning. Thank you for joining, and welcome to the Ashtead Group Q1 Results Presentation. I'm speaking to you this morning from our support office in Fortville, South Carolina, where I'm joined by Alex Pease and Kevin Powers, with Will Shaw on the line from London. Given this is 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 4. To begin, I'd like to address our Sunbelt team members listening in, specifically recognizing their leadership and help 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 million miles while performing over 30,000 deliveries and pickups every single day. We know that the more we drive our exposure increases. 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 following the performance of the business, which we will discuss, but more importantly, on 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 5. Key messages you'll hear from Alex and me today are the following: First, this is a solid set of results with our expectation with group rental revenue growth of 2.4%. Second, the strength of free cash flow after CapEx investment in fleet and business expansion, demonstrating 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 5 actionable components of our Sunbelt 4.0 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. 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 to save the date shortly. Moving on to the financial highlights of the first quarter on Slide 6. 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. Whilst too soon for these leading indicators to form certainty, we're cautiously optimistic that these trends in our business will continue and are early signs of the local nonresidential portion of our end markets recovering. As when they do, we'll experience accelerated momentum and improved results. Group adjusted EBITDA was flat at $1.3 billion and EBITDA margins of 46% reflected the mix effect of higher ancillary revenue primarily related to the Power & 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 4.0 priorities, we invested $532 million in CapEx, focused on a mix of replacement and growth. Free cash flow was $514 million, which apart from the COVID impacted fiscal year 2021 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 $1.5 billion buyback program, which we are on track to complete in the current fiscal year, in addition to repaying $90 million in long-term borrowings in the quarter. Moving on to our segmental performance on Slide 7. Rental 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 project landscape and the broader nonconstruction markets. During the quarter, we repositioned rental fleet as we focused on improving time utilization across General Tool with good results. As expected, specialty performed well with a growth of 5% despite the drag from oil and gas and the Film & TV business in Canada, both of which were not previously reported in specialty and were down in the quarter. The Specialty segment's strength was led by the Power & 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 8 shows the fleet on rent for North America over the last 4 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 cost, 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 9, we've set out the main lead indicators for the construction sector, Dodge Starts, Dodge Momentum Index, the Architectural Billing Index and the Fed Fund rate. The outlook for Construction growth continues to be underpinned by mega projects and infrastructure work, which remains strong. 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 the 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 of 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 million 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 12 to 24 months. So while clearly 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 start forecasts 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 are 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 4.0 strategic plan on Slide 11. We're now 5 quarters into a 20-quarter plan, and as I detailed in June, our teams have been laser-focused on advancing each of the 5 actionable points, 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.

Thanks, Brendan, and good morning to everyone. 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 46% and 24%, respectively. The slight drop in margins reflects a number of factors, including the higher level of ancillary revenue, most notably EMV work in our power business, which is typically at a lower level margin. An increased level of internal repair costs, which we 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 rates. After an interest expense of $131 million, reflecting lower average debt levels, adjusted pretax profit was 4% lower than last year at $552 million. 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 $12.7 million in the quarter. Adjusted earnings per share were $0.953 and ROI on a trailing 12-month basis was 14%. Slide 14 illustrates group revenue and EBITDA progression over the last 5 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 Tool. Slide 15 shows the performance for our North American General Tool. Rental revenue for the quarter grew by 1% to $1.5 billion, 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 million 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 million as the nonconstruction market continues to be strong, particularly in power & HVAC and Climate Control. This strong rental revenue growth in the quarter was primarily impacted by the inclusion of both Film & 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 margins as well as the higher internal repair costs. These headwinds were offset by continued strength in rates 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 million. The U.K. business delivered an EBITDA margin of 25% and generated an operating profit of $16 million at a 7% margin and ROI was 6%. In line with the 4.0 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&A discipline. Across our North American segments, we've shown the resilience of our business and returned to growth and significant cash flow generation while continuing to invest for the future. While a U.K. business continues to be challenged, our disciplined operating model, robust transformation plan and strong execution gives us a high level of confidence in the future. Combined, our results clearly demonstrate the full power of Sunbelt and the strength of our Sunbelt 4.0 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 generated significant free cash flow in excess of our investments, which we returned 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 $1.8 billion of free cash flow in both years. And as you can see, we have started the year strongly with over $500 million generated in the first quarter, over 3x 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 end of July. We reduced external borrowings by $91 million in the quarter in addition to the $523 million reduction in borrowings last year. We also returned $332 million through share buybacks at an average price of just over GBP 45 per share while continuing to invest over $500 million in CapEx. As a result, excluding lease liabilities leverage was 1.6x net debt to EBITDA, well within our stated range of between 1 to 2x net debt to EBITDA. We expect to be in the 1.5 to 1.6 range at the end of April, including the impact from the share buyback program, but not including any potential impact of M&A activity. While I'm speaking of M&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 2026. 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 $1.8 billion to $2.2 billion. Finally, we expect free cash flow to be between $2.2 billion and $2.5 billion, which is an increase of $200 million over June's guidance and reflects the expected cash tax benefit from the reintroduction of 100% bonus depreciation based on our current CapEx plan. And so with that, I'll hand it back to Brendan to close this out.

Great. Thanks, Alex. Before summing up, I'll just touch on capital allocation. During the quarter, we made good progress on our Sunbelt 4.0 execution. As part of this, we've continued to invest in the business. So during the quarter, we invested $530 million in CapEx. We opened 10 greenfields in North America, of which 6 were General Tool and 4 Specialty with a clear line of sight to achieve 60 greenfields in the full year. We invested $20 million on 2 bolt-on acquisitions. The M&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 $306 million. Finally, we returned a further $330 million through share buybacks and expect to complete our $1.5 billion 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 4.0. Turning to Slide 22. And in summary, there are 2 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 4.0 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&A. So back to you, operator.

[Operator Instructions] Our first question today is coming from Annelies Vermeulen of Morgan Stanley.

I get 2 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, et cetera. 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 plans offsetting cost control factors for the remaining 3 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 that you plan to acquire additional businesses through the year. So within that, could you perhaps comment on the M&A environment in terms of valuations, willingness to sell, et cetera?

Sure, Annelies, 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&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 we're 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 2 and 3 years ago, you'll see that we spent in the order of $4 billion of CapEx in those years. And in the last -- last year, we did about $2.5 billion. This year, we'll do about $2 billion. And so as you see those big slugs of capital aged, you'll see the warranty just as expected roll off because warranties typically cover for about 2 years. We knew that was going to happen and that's just function on 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 increased 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 & HVAC business, where there's high E&D expense at positive margin, but lower margin than sort of the core true rental business. And then, again, that's 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 3.0, the third tier. But I just want to make sure nobody misinterpret 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 million. 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&A activity. We have a very flexible capital allocation framework. So we're online to complete our $1.5 billion 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&A activity because I know that's an area of his.

Great. Yes, 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 will complete in the quarter for a little bit over $100 million, 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&A rather buying businesses that just fit. They fit our strategic rationale. They fit in our Sunbelt 4.0 plans between Specialty and General Tool. But certainly, that pipeline is strong.

Just to double check on the margins, 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?

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 repositions. So this is just part of our business. And one of the things that makes our business such as -- such an interesting environment to operate in, and we can take advantage of our scale because we do have that nationwide footprint. So we'll always be repositioning our fleet with a little bit anomalous about this quarter is that we are really focused on the 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, it will. Will we ever stop repositioning our fleet proactively? Probably not.

Annelies, if I could just reinforce Alex mentioned the performance actionable component. That -- our expectations of progressing margins over the course of 4.0 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 4.0.

We'll now move to Suhasini Varanasi of Goldman Sachs.

Just a couple for me, please. Your commentary on leading indicators and business momentum seems to suggest that maybe the August trading environment was a bit 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 Annelies asked, sorry about that. Is it possible to quantify the impact of the repair cost, the ancillary revenues, the repositioning of fleet, just so we can understand if there was any lumpiness in that particular quarter, should we think about any of them unwinding in Q2?

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 9 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 and reservation, daily contract 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 interpret. So these are projects that Dodge accounts for that are entering the planning phase but these are projects under $500 million 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 moderated non-res construction environment. That shifts, if you will, for what was moderating to be in a 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, a reminder, as 12 to 24 months on average before you actually see these planned projects progress to starts.

Yes. 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 million 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 2 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 2 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. So that's at the total number, if you want to put the quantum around it, is about $30 million year-over-year. That change in warranty expense is about $18 million of the $30 million. So it explains about half or just over half of the higher IRR. If you look at the fleet repositioning cost that's higher year-over-year by about $5 million or so. And again, that will mitigate as the overall nonresidential construction market begins to improve. But again, that's positioning ourselves for improved margins 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, in 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 4.0. We mentioned last year at the year-end that we had 4 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 million 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. 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.

And Brendan, just 2 quick follow-up, please. Was there any comment that you would like to make on current trade in August, please?

The comment I made was -- it's very similar to Q1.

Next question will be coming from Will Kirkness of Bernstein.

So first question, just on utilization. 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?

Yes. Will, on utilization, it's very much by category. There's a bit of headroom in certain product categories. But we're also quite happy, if you will, and 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, 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. That's all remarkably healthy. We progressed sort of steady as it goes in the Specialty business. And in the General Tool business, I'll describe that as you have, which is flat, but also very resilient. 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 4.0 in terms of our strategy on pricing. I hope that answers your questions, Will?

Yes.

Next question is coming from Rob Wertheimer of Melius Research.

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?

Thanks, Rob. 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. We had Project 2021, we had Project 3.0, 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 for 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 3.0, which was a total remake over that period of time, which builds automatically the manifest for dispatch, et cetera, 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 allocated, if you will, repairs based on shop and technician availability, aligning of larger repairs with technicians, Level 3, et cetera. So that's making great progress. All of you would know and would have seen over the years, Brad Ball present, 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 last year. So in the quarter, as a -- for instance, we would have been awarded 9 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 the 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 2x our overall market share, and that is -- 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, if be LNG or it be in 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 the demonstration of the progression of the business over time to -- from more of a sort of industrial commodity, if 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 3.0 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 and data centers. And so I'm just looking at our funnel here. Of the 832 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 counts around 830. If I look out into 2026 and 2028, that project count grows from 830 to 1,053 representing a $1.4 trillion in potential project value. So it just really is a dynamic growing and diverse landscape of projects, which are a huge tailwind for growth as we look forward.

Next question come from James Rose of Barclays.

I've got 2, 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.

Yes. Thanks, James. First, on 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 aren't 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.

Yes. Look, I'll just -- and obviously, Brendan will talk about the Olympics, which 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 million and $58 million of potential headwind at the low end to $200 million 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 billion 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 market, that pushes more people towards rental because they can't have the advantages of scale with suppliers the way 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 you comment on the Olympics?

So James, for the rest of the audience listening, James is picking up clearly on a press release that we would have put out yesterday about 4 p.m. Eastern time in conjunction with the LA '28 Committee, but yes. Los Angeles 2028 Olympic summer games. It's a great win for the team. They've been working on this for 2 years or longer. We didn't speak to it in our prepared remarks as we're still nearly 3 years out. But we'll get to scale, revenue, capital, execution, et cetera, 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 & HVAC, ground protection, fencing, and 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 of 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 2028 Committee who is laser-focused on delivering a great, great, great game. So yes, we're pleased to have had that win. And I'm sure that we'll cover a bit more of that when it comes to our Investor Day in March.

We'll now move to Katie Fleischer of KeyBanc Capital Markets.

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 the clarity on tariffs, interest rates? Just any color there on what you think is making those customers a bit more confident and what you think they need to see in the future to really start that recovery?

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 will likely be the progression of rate 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 million and multiply it by 4. That wouldn't be appropriate. For a number of reasons, obviously, there's seasonality in there. But don't forget, we did have $100 million 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 $60 million in Q2 and about $40 million 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 look this quarter. And as the 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 conditions?

Katie, 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 there's 3 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. What we hear from the Fed. However, I think it's clear out there that we're in this ease 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 what has 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 of 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 million 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 the planning progress to starts.

Next question will be coming from Rory McKenzie of UBS.

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 achieved good increases or any that came under pressure? And then secondly, within Sunbelt 4.0, I know you were budgeting for kind of annual rate increases over the planned cycle. Can you talk about if you think that's still feasible? Especially, Brendan, I think you just commented, you were looking to OEMs for fleet cost 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.

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 to 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 contract how rates have performed in the business over the last 18 or 24 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.

We'll now move to Allen Wells of Jefferies.

Just a couple for me. One, just a clarifying comment just about rates and repair costs and how these trend, so my understanding is that because of the repositioning you saw a bit of an improvement in time utilization this quarter sequentially. But obviously, if I look at the General Tool rate environment, it's stable now versus improving, which you said in quarter 3, 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 stepped up again in '24 versus '23. So obviously, there's a need for [indiscernible] to offset that. So that's just to understand those dynamics is the first question. And then secondly, just on Specialty, is it possible 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, Power & 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, film that are dragging that specialty growth, from double...

There's no areas of real weakness -- yes, there's no areas of real weakness in Specialty. There are -- when you look across it, you have double-digit growth as I think in the prepared remarks, we would have talked about Power & HVAC. We also have strength in fencing, temporary structure, ground protection. There's a significant drag effect when it comes to Film & TV and oil and gas. And the upstream oil and gas, but also industrial heating, which 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. Look, 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 movements 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.

And Allen, I'll hit the maintenance cost point. So your observation is correct that we do have those 2 big years of around $4 billion of CapEx that we'll continue to have this trend. But let's come back to again that third actionable component of Sunbelt 4.0 and the implementation of the MSOs, which we talked about in leveraging our clustered economics. So that will mitigate the impact of this phenomenon 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 3 technicians more effectively. So there's just a lot of goodness that comes out of the overall 4.0 strategy, that third actionable component and then the scale that we have relative to others as we leverage those clustered economics. So you should see that mitigate over time. But you're right, the phenomena of having less fleet on warranty will continue as we age those big slug years.

Ladies and gentlemen, we have time for one last question. And the last question today will be coming from Carl Raynsford of Berenberg.

Two from me, please, if I may. The first, going back to 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? This is the first one. . And the 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?

So the 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 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 3 years of 8% and 6% rate improvement that we would have 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 and rate. Look, 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 there's 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.

As we have no further questions, I'd like to turn the call back over to your hosts for any additional or closing remarks. Thank you.

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.

Ladies and gentlemen, that will conclude today's conference. Thank you for your attendance. You may now disconnect.

Hello, and welcome to the Ashtead Group plc Full Year and Q4 Results Analyst Call. I will shortly be handing you over to Brendan Horgan and Alex Pease, who will take you through today's presentation. There will be an opportunity for Q&A later in the call. For now, over to Brendan Horgan and Alex Pease at Ashtead Group plc.

Thank you, operator, and good morning, all, and welcome to the Ashtead Group full year results presentation. I'm joined as usual this morning by Alex Pease and Will Shaw. But in addition, we have Kevin Powers with us, who joined in May to lead our Investor Relations for Sunbelt Rentals when the primary listing moves to the U.S. early next year. Kevin now, as you would expect, is working very closely with Will and the team, and most of all, we're happy to have him on board. Turning to Slide 3. I'll begin this morning as I always do, by addressing our Sunbelt team members listening in or perhaps more significantly on the recorded call later in the morning U.S. time. Referencing Slide 3 to specifically recognize their leadership and the health and safety of our people, our customers and the members of the communities that we serve. Your commitment and efforts resulted in a fiscal year with a total recordable incident rate of 0.65 and a lost time rate of 0.1. Both of these metrics represent record performance in frequency and severity. This is all achieved through the team's collective and ongoing progress of our Engage for Life program, which is central to the Sunbelt culture. Part of this progression and importantly, keeping our guards up against complacency, was the holding of our 13th annual safety week, throughout which every single branch, every day, the week of May 12, held engaging sessions with all of our team members introducing and reinforcing practices and habits of a world-class safety organization. So to the team, thank you. Thank you for your efforts to date and your ongoing commitment to Engage for Life. Turning now to the highlights for the year on Slide 4. We delivered strong performance in the year with group and North America rental revenues up 4%, which was consistent with the guidance that we gave in December. These rental revenues and strong fall- through delivered group EBITDA growth of 3% to $5 billion, PBT of $2.1 billion and earnings per share of $3.70. These are record rental revenues and EBITDA for the year with group EBITDA also progressing from a margin standpoint to 47%. From a capital allocation standpoint, and in accordance with our Sunbelt 4.0 priorities, we invested $2.4 billion in CapEx. This fueled existing location fleet needs and greenfield openings. Despite this level of investment, we delivered near record free cash flow of $1.8 billion. This fueled for us record returns to shareholders of $886 million or in dividends paid in the year of $544 million and share buybacks of $342 million. Our current $1.5 billion buyback program which, as you know, was initiated just in December, we fully intend to complete the balance in the current year. This year's results were achieved as we executed our plans, to gain from the clear and ongoing structural momentum in our business and our industry and our ever strong positioning within it, such as gaining share among large strategic customers across many construction and nonconstruction market segments, including the exciting mega projects arena, which continues to expand in this era of deglobalization, technology-related construction and infrastructure. This also came from the rapid growth of our newly opened 3.0 locations, and the everyday winning of new customers, gaining market share through new customers who seek solutions through a broad range of general and specialist products and services. I'll give some added color on these points in just a moment. This was a year of execution and investment. In the ongoing improvement in our business, while capturing the available growth from the current market conditions and positioning us for even more growth and success in the future. This leads me nicely into an update on our 4.0 progress in the year, and we'll begin that on Slide 6. We launched Sunbelt 4.0 at our Powerhouse event in April '24. And since then, our team has been laser-focused on advancing each of the 5 actionable components, which you know as customer, growth, performance, sustainability and investment. Over the next few slides, I'll highlight some of the successes we have delivered in the first year and the plans to progress to deliver even more, starting with customer and growth on Slide 7. Our customer obsession journey is well underway. During the year, we introduced enhanced training programs touching every one of our team members and recently launched a new customer obsession metric, to provide real-time customer feedback to our team members. Illustrating our customer obsession and growth are the 42,000 new customers added in the year, on top of the 118,000 new customers added during 3.0. In total, these market share gains, these customers generated $1.9 billion of rental revenue growth in the year. Contributing to these market share gains and ongoing growth is our ability to leverage our expanded network of locations and density to further advance the cross-selling prowess between our general tool and specialty businesses. We successfully added 61 locations throughout North America in the year with a nice mix of general tool and specialty businesses. These are helping to drive growth and advance our clustered market strategy by delivering added convenience, depth and breadth of product and solutions. Importantly, growth in the year continued to be supported by rate progression as we are able to demonstrate to our customers the value of our extensive range of products, services and value-add solutions. Moving to performance on Slide 8. Our performance action component is designed to leverage our platform, optimize our processes and energize our technology, all with the output of improved customer experience and operational efficiencies, contributing to margin improvement over the course of Sunbelt 4.0. There were 3 main areas of focus you'll remember that were embedded in this action actionable component. First, leveraging our SG&A through extracting the value from the investments we made during 3.0. In the year, we delivered efficiencies allowing us to reduce G&A costs while still delivering expansion and growth. Second is the growth and maturation of the 401 locations. These locations, which were opened or added during the 3 years of Sunbelt 3.0. These locations have grown to over $1.9 billion in revenue, which is 19% higher than last year and $900 million in EBITDA, while also progressing margin by 280 basis points in the year. These locations are on average only 33 months young. So I think we can agree there's ample runway for growth incumbent in these 401 new locations. There's a detailed scorecard I'll think you want to check out of this new cohort in appendix Slide 43. Thirdly, operational excellence, which is built to leverage our scale and leading technology platforms across our network of locations and clustered markets among the areas of opportunity are logistics and repair and maintenance activities, which is worthy of a little bit more detail on Slide 9. The logistics associated with delivering rental assets to our customers and executing field service and repair as a part of our operations, a large part of our operations and, therefore, a large cost base in which we currently spend roughly $1 billion a year. Operationally, we've been moving to a market-based logistics model or internally we refer to them MLOs, where our drivers, trucks and dispatchers serve all locations in the cluster rather than being allocated to individual locations as was historically the case. By the end of the year, we had embedded MLO operations in 16 of our clustered markets and have seen immediate improvement in metrics in these clusters. For example, in the 4 MLOs that were in place for the full year, our days to pick up, which is the time it takes for us to pick up equipment after, of course, the customers call [indiscernible], was reduced by over 25% and the spend on third-party haulers was reduced by 40%. We continue to advance our MLO expansion with a playbook to reach in excess of 30 of our top 50 markets by the end of fiscal year '26. This transition to MLOs has been supported by our full launch of VDOS 4.0, our proprietary Vehicle Dispatch Optimization System, which has been reimagined and repowered to improve availability, utilization, efficiency and user and customer experience resulted in improved order capture through a clear path to say yes to our customers. Every single branch and MLO are now using this new system and beginning to realize its sturdy benefits. Finally, touching on sustainability and investment on Slide 10. On the environmental front, we're on track to meet our 2034 target to reduce our Scope 1 and Scope 2 carbon intensity by 50% with a number of ongoing initiatives around our transportation fleet and how we source electricity for our locations. And on investment, we allocated capital dynamically throughout the year to maintain our fleet, fuel growth categories and greenfield openings and bolt-on acquisitions and have executed returns to shareholders through increased dividends and share buybacks. So in summary, 4.0 is off to a strong start with further exciting progress expected in this new fiscal year. So with that, I'll hand it over to Alex to cover the financials in more detail, but also give our guidance for the new year. Alex?

Thanks, Brendan, and good morning, everyone. So before I get into the numbers, I thought it would be helpful to give you a brief update on the relisting project. As you know, we received strong support from our shareholders at last week's EGM with over 96% voting in favor of the resolutions. We're making good progress on the U.S. GAAP conversion and our Sarbanes Oxley compliance, which means we're still on track to implement the move of the primary listing to the New York Stock Exchange in Q1 of calendar year 2026. We're also beginning to make plans for an investor event in New York shortly thereafter, which we'll be providing more details on as we progress through this year. Turning now to the full year results themselves on Slide 13. Firstly, as you may have noticed this morning, we've reassessed the basis of our segmental closures. The group operates under 2 primary geographic regions, reflecting its North American activities and assets and its U.K. activities and assets. The North American business is further split operationally as general tool and specialty reflecting the nature of its products and services and the management structure of the group. As such, the group has identified as reportable operating segments as the North America general tools, North America Specialty and the U.K. which we believe reflects better the basis on which we review the performance of the business internally and aligns with the basis of our strategic growth plan, Sunbelt 4.0. Prior year comparative information has been restated to reflect these updated segments. To help you navigate your way through this change, we've included the full year results under the old segmentation on Slide 31 in the appendix. Group rental revenue increased 4%. Total revenue was down 1%, reflecting the planned lower level of used equipment sales. Our growth was delivered with strong margins, an adjusted EBITDA margin of 47% and an operating profit margin of 25%. As expected, the lower level of used equipment sales resulted in lower gains on sale of $81 million compared with $223 million a year ago, which affects the absolute level of EBITDA and operating profit. After an interest expense of $559 million, adjusted pretax profit was 5% lower than last year at $2.1 billion. The higher interest expense reflects principally higher average debt levels. As explained at Q3 and in the press release, we are adjusting out nonrecurring costs associated with the move of the group's primary list into the U.S. These amounted to $15.4 million for the year. We will continue to track these as we move through the new fiscal year. Adjusted earnings per share were $3.70. On Slide 14, we've shown the group performance adjusting out the impact of the sales of used equipment, which were significantly lower in fiscal year '25 versus fiscal year '24. As you can see, that total revenue, including -- excluding this impact, would have been 3% higher and operating profit would have been up 2%. Now turning to the businesses. Slide 15 shows the performance for North American general tools. Rental revenue for the year grew by 1% to $5.9 billion. This has been driven by a combination of volume and rate of improvements, demonstrating the power of our diversified business model as well as our disciplined execution. As Brendan will discuss later, strength in mega projects have mitigated ongoing moderating conditions in the local commercial construction market. The 5% fall-through in total revenue reflects the lower level of used equipment sales than last year, which I referred to earlier. As Brendan has already explained, we have been laser-focused on the performance action component of Sunbelt 4.0, and the team is making strong progress, driving value from our significant investments in logistics, telematics, maintenance execution, and we're already seeing the results. The team is also demonstrating strong cost control discipline with operating costs around 5% below prior year. These actions resulted in an EBITDA margin of 54%. After the impact of lower gains on disposals and the higher depreciation charge, operating profit was $2.1 billion compared to $2.4 billion last year. Operating margins were 33% and ROI was 20%. Now turning to North American Specialty on Slide 16. Rental revenue was 8% higher than a year ago at $3.3 billion. As with GT, this has been driven by a combination of volume and rate improvement. Rental revenue growth in the fourth quarter was impacted by the inclusion of both film and TV and oil and gas, which were both down significantly in the quarter. We took similar actions taken to control costs in specialty, and this has contributed to an EBITDA margin of 48% compared to 44% last year. After the impact of the higher depreciation charge on a larger fleet, operating profit was approximately $1.1 billion at a 33% margin and ROI was 30%, clearly illustrating the higher returns achievable in the specialty business. As specialty becomes a larger part of the overall business portfolio, it should help to drive up overall group returns in the future. Turning now to the U.K. on Slide 17, and please note that all of these numbers are now in U.S. dollars. U.K. rental revenue was 5% higher than a year ago at $778 million. In line with the 4.0 strategy, the focus in the U.K. remains on delivering operational efficiency and long-term sustainable returns in the business. While we continue to make progress on rental rates, these need to progress further. As a result, the U.K. business delivered an EBITDA margin of 26% and generated an operating profit of $69 million at an 8% margin and ROI was 7%. Across all 3 segments, our results have shown the resilience of our business model and our disciplined execution despite challenging market conditions. Slide 18 sets out the group's cash flows for the year. This emphasizes the strong cash generation capability of the business across a wide range of market conditions. We maintain a strong focus on working capital management, which has resulted in cash flow from operations of $5 billion in the 12 months, which is a 99% conversion of EBITDA. As many are aware, two of the key attributes of our business model is both the resilience across a range of market conditions, which I mentioned previously, and the agility with which we can control capital spending, reallocating capital dynamically to maximize value. In this environment where certain segments of our markets are more moderate, and we have some latent capacity, we spent $2.7 billion compared with the $4.4 billion last year. We adjusted our priorities to principally fund fleet replacement and some pockets of growth. This strategy generated near record free cash flow for the year of $1.8 billion despite some of the transitory softness we've discussed. This ended up significantly higher than our guidance of around $1.4 billion, principally because of the timing of fleet landing at the end of the year where payment will be made in fiscal year 2026. While we've reduced our capital expenditure, this has not been at the expense of the future. We've executed on our fleet disposal plan as intended. We have isolated areas of the business with lower demand and dynamically reallocated our spending to growth markets, such as power and HVAC and specialty businesses more broadly as well as the mega projects arena where demand is higher. We're also using our improved logistics and telematics systems to proactively reposition our existing fleet to higher growth markets. One example of this is utilizing latent capacity in our network to fund more than 60% of the OEC required in our greenfield locations. This is how we can continue to grow even when our absolute spending in capital dollars is lower. Turning now to Slide 19 and our guidance for revenue, capital expenditure and free cash flow for fiscal year 2026. We expect group rental revenue growth to be between flat and plus 4%, reflecting the ongoing dynamics in some of our end markets. Gross capital expenditure is planned to be in the range of $1.8 billion to $2.2 billion, and I will give a little bit more detail on this in just a moment. Finally, based on this guidance, we expect free cash flow to be between $2.0 billion and $2.3 billion, which again reflects the timing and payment of fleet landings around fiscal year-end. On Slide 20, I've broken down that CapEx guidance. You'll see that we're planning rental fleet CapEx as follows: for North America between $1.3 billion and $1.6 billion and for the U.K. between $110 million and $130 million. For North American general tool in the U.K., these are largely replacement requirements, while in North America specialty, we're still funding pockets of growth. In all cases, there is a focus on improving time utilization and taking advantage of the latent capacity in the fleet that we already own. It's also worth noting that lead times with our key suppliers are relatively short at the moment. So there's considerable flexibility in these plans as market conditions improve. And so with that, I'll hand the call back over to Brendan.

Thanks, Alex. I'll now move on to some operational detail, beginning with North America on Slide 22. The North American business delivered good rental-only revenue growth in the year of 4%. Specialty performed strongly with growth of 11% with general tool up 1%. As Alex mentioned, the fourth quarter growth figure for specialty reflects the fact that the North American Specialty segment for reporting purposes now includes oil and gas and film and TV, which were previously reported in the U.S. general tool and is part of Canada, respectively. So I'll say that again, oil and gas would have been part of the GT reporting previously, and film and TV, of course, would have just been captured in Canada as that was reported. Excluding this, North American Specialty grew 8% in Q4 and 12% for the full year. As expected, we continue to realize moderating local nonres construction market activity through the fourth quarter, and this is offset in part by the ongoing strength of the mega project landscape and the broader nonconstruction markets, both of which I'll further detail shortly. Importantly, run rates continue to progress year-on-year as utilization levels are improving across the industry, we anticipate continued discipline in our business as we deliver added value to our customers. This is ongoing evidence of the progressing structural change in the business and leveraging our internal pricing tools and disciplined rate approach. Moving on to Slide 23. We'll cover the activities and outlook for the construction end market. Consistent with our usual reporting of construction activity and forecast, the slide lays out the latest Dodge figures starts momentum and put in place. Outlook for construction group continues to be underpinned by mega projects and infrastructure work, which remains strong and in some cases, are gaining even further momentum. This is a portion of the market where we enjoy outsized share and continue to be positioned extraordinarily well as more of these very large projects begin and enter planning. Our cross-functional sellers and solutions experts are highly engaged with these contractors, our customers, and in many cases, the owner or developer themselves, bringing our broad range of solutions and capabilities to bear on these not only large but highly complex projects. At the same time, as I already mentioned, local commercial construction space continues to moderate compared to what were really high recent years as this prolonged environment of uncertainty has weighed on local and regional developers. This predominantly impacts some of the small, mid and regional size contractors. Nonetheless, the SME contractor landscape is a powerful and important part of our customer base. Although we're seeing some positive trends in local planning, it will take some time for this segment to see a meaningful uptick. However, it will rebound. And as I've said before, when it does, I think it will quite strong. When this inevitability happens, we're in a position of strength to benefits, benefit with our customer relationships, cross-selling opportunities, coverage of products, services and markets and capacity. All part of our long-held clustered market strategy. Let's move on and talk a bit more about mega projects on Slide 24. This is, of course, a slide you should now be pretty familiar with. It delineates mega project starts in counts and value, looking at the last 3 years have gone by as well as the next 3 years. This is broken down in our fiscal years for context. What should you draw from this update, particularly when compared to equivalent [indiscernible] from our prior updates is, one, some have been pushed a bit right. It should come as no surprise, showing projects of this scale and sophistication, takes some time to get started. However, this should not be confused with projects being canceled. And two, the funnel keeps growing as the mega project landscape continues to expand and strengthen. This mega project era, is being driven by deglobalization, technology advancement and the related construction that comes from that manufacturing and production modernization and infrastructure. For these reasons and ongoing momentum, we believe this is a feature of our end markets, which will be present at a significant scale for years to come. We continue to experience a very strong win rate in this arena and are highly engaged in project planning and solutions with associated customers and project owners. Turning now to Slide 25, which, of course, puts in scale our nonconstruction end market. Over half of our business is outside of commercial construction. As we have detailed over the years and probably best showcased most clearly during our Anytown Exhibit as part of last year's event in Atlanta, these markets are both large and expansive. So many of our product categories have remarkably universal applications, which presents a vast opportunity to advance rental penetration ever more broadly across our end markets, whether it's the planned or the unplanned, there are abundant activities throughout these nonconstruction markets where our products and services deliver the requisite solutions. We made great progress across these segments over the years, and we'll continue to do so throughout 4.0. So these are big end markets with big opportunities to continue the expansion of our TAM. Moving to capital allocation on Slide 26. Alex or I have covered most of these capital allocation elements throughout this morning's presentation. However, I'll highlight again our launching of our buyback program in December of up to $1.5 million over 18 months. This program takes into account our latest CapEx plans and demonstrates the optionality and confidence, which comes from the fundamental strength and our cash-generative growth model. As I said in the highlights, we expect to complete this buyback in full in the current year while maintaining leverage within our target range of 1x to 2x. There's also a robust bolt-on M&A landscape, which we've so often exercised. Our business development team continues to work on our pipeline to find opportunities that align with our strategy, which will surely result in future additions. All this is consistent with our long-held policy, and we will continue to allocate capital on this basis throughout 4.0. Turning to the summary slide on 27. And to conclude, we've had a year of strong performance, delivering record rental revenues and EBITDA through capturing the available growth in these market conditions. The results again demonstrate that through-the- cycle cash generation, which is so powerful at our current scale, and current margin, with which we deploy through our capital allocation priorities to maximize our benefits in the structural growth business. We have dynamic flexibility and optionality to invest in segments, organic expansion, M&A, market opportunities and, of course, returns to shareholders as we've covered through today's update. Our business is growing and our business is improving, positioning us for even more success over the years to come. We look forward to a strong fiscal '26 as we continue to grow and advance our business to benefit all of our stakeholders. And with that, operator, we'd be happy to open the line for Q&A.

[Operator Instructions] First, we have a question from Lush Mahendrarajah from JPMorgan.

I've got 3, I think, if that's okay. The first is just on sort of exit rates and current trading. I mean it would be good to get some color on May trading and what you're seeing there. I mean, looking at that chart on Slide 22, sort of shows fleet and rent pulling away from the sort of '23, '24 lines. Just be good to get an update on sort of what you're seeing there? So that's the first question. The second is just on the rental revenue guidance. I guess, how are you thinking about the building blocks of that in terms of local, mega projects, rates, et cetera, and sort of time utilization, I guess, as well? And how do you see the sort of phasing of that recovery through the year? And I guess, what gets you to the upper end? And then the last is just on your comments around at the start of the presentation on market share and sort of some of the accounts you've been winning in the last year or the last 4 years. I mean when you look at those account wins, I mean, I presume they're mostly in sort of local, but it would be good to get some color there. I mean, how is that working? I mean the backdrop is tough. You're pushing rates and sort of still taking market share. I mean, can you just talk about some of the dynamics there and how you think you've been so successful in sort of continuing to drive market share?

Sure. Thanks, Lush. I'm going to do 1 and 3, and Alex will take 2. So simply put in terms of entry rate, May was plus 2% in North America on a billings per day basis. And you mentioned that graph on Slide 22, which you're right, shows that separation in terms of fleet on rent. We're certainly not here calling some change to that low gold nonres market. But nonetheless, we're pleased with that progress. And we'd like to post a couple more quarters of that as we move forward. But anyway, 2% on a billings per day basis. I'm glad you asked this question about market share. And I'm actually going to refer to a few slides here. And I think the first one would be beneficial to take a look at, which is Slide 7. In Slide 7, we just demonstrate the real progress that we made -- we continue to make in terms of adding new customers. And let's just be clear. These are B2B accounts. These are businesses that before having an account with some rentals, they did 1 of 2 things. Mostly, they rented from someone else. And secondly, perhaps they would have owned equipment rather than rent equipment. But nonetheless, we added 42,000 new customers that generated over $400 million in revenue in the current fiscal year. And there's 118,000 customers that we added over the course of just 3 years, in 3 years, those added $1.4 billion, so for a combined $1.9 billion. When you start to think about the context to lean into your question there a bit when it comes to you suspect these are mostly local. Yes, of course, they are local. What happens is -- I mean, let's face it, we went through a period as a business and as an industry when you had not a whole heck of a lot of supply and a pretty really surprisingly strong end market and the sales force at large was -- they were shuffling to say yes and finding availability. When things do get a bit tighter, albeit good, you know what you do, you turn more stones and that's exactly what this illustrates in terms of the sales force, finding more customers, and these are wins and these are winning market share. And of course, when you talk about Slide 8 there, which I'll refer to now, is really these new locations. And when you think about gaining market, these are 401 locations in the center of that slide that are only 33 months old on average. There's that appendix slide, which is Slide 43, that will be worth you taking a look at. But these businesses grew 19% in total revenue with 24% in rental revenue in the year. There's only one answer as to where that revenue is coming from, and that's coming from ongoing gains. And then finally, and I'll get off of my market share talk here. If you refer to Slide 4 we have chronicled really well. Jenelle actually led this during our Capital Markets event in April of '24 of our deciles in the business. Of course, this is a straight pull from that slide. Our statement is this, we are winning market share with a big, we're winning market share with the middle and we're winning market share with the little. Unapologetically, we are proportionately higher SME to some of our competitors, but it is a core part of the market that we really like. But if you take, for instance, that slide, I'll just reference a couple of lines, illustrating the winning and growing at the top. So what were 22 customers that made up 10% of our revenue, last year were 20 of our customers. And instead of $20 million on -- as a median, it's $28 million today. The second decile was 99 customers. Well, today, it's 75. Don't mistake that for losing customers, the point is those customers are getting larger, significantly so. Those customers went from doing $7 million a year to doing $10 million a year. So this really demonstrates our ongoing growth and market share on these mega projects, but also through leaning in, turning a few more stores. That's 1 and 3, Lush, and as I said, Alex will do two.

Yes. Let me just give you a little bit of color on the rental revenue guidance. So obviously, in the prepared remarks, we referenced sort of flat to 4%, so midpoint of 2%. So again, a fairly modest amount of growth driven really predominantly by the specialty business. So if you want to weigh specialty business versus the general tool, you'd find specialty probably in the mid-single-digit range. And then GT still positive, probably in the lower end of the single-digit range. And then the U.K. probably looks a little bit more flattish year- over-year. If you think about bridging that to your total revenue, remember, we're in this world where we'll probably have lower sales of used equipment. So that's probably about a $40 million headwind year-over-year. So that obviously gives you a pretty good estimate on what total revenue looks like. Probably one last point to make, and then I'll go into what would bring you to the lower end or the higher end of that range. So if you think about seasonality on that total revenue. Remember, in the first half of last year, we had about $100 million of hurricane revenue. So I think it's reasonable to expect the year to be more back half weighted than front half as you think about the timing. And obviously, as Brendan would have mentioned in his prepared remarks, we're yet to sort of call the sequential strengthening of the nonresidential local construction market, which would also sort of lead you to a more back half-weighted year. So in terms of the underlying assumptions and what might lead you to the lower versus the higher end of that range. Obviously, at the higher end of the range, we would anticipate an accelerated strengthening of that nonresidential construction and an increased utilization of our existing fleet. So just to dimensionalize that, 2% increase in utilization represents about $350 million of incremental revenue. So to the extent we're utilizing that latent capacity to drive growth, that would be positive and obviously continued rate progression, which is what we're seeing. So to the extent you don't see either one of those 2 things materialize, that would probably lead you more towards the lower end of that range. So hopefully, that helps give you some additional color.

And next, we have a question from Katie Fleischer from KeyBanc Capital Markets.

You mentioned some of the cost controls that were put in place this quarter that you executed well on that we're able to drive some of that margin improvement. Can you just talk about the opportunity to maybe build upon those and how we should think about the opportunities to strengthen margins going forward?

Sure. So I'll hit the first part of the question, and then Brendan will actually talk at more length around margin progression. So yes, we took some action last year around just getting our cost structure more in line. And so as you know, during Sunbelt 3.0, there were significant investments, particularly on the technology stack that required us to really add resource to do the coding and the development of that technology architecture. As we got through the back end of Sunbelt 3.0, we really looked hard at evaluating whether that -- those investments needed to continue or whether we could actually take some of the fixed cost structure out of the business, and we did, in fact, remove some of the fixed cost structure out of the business. That being said, a lot of the margin progression is really leveraging those investments that we made during 3.0 through things like the MLO, the optimization of our repair and maintenance activity. And that's where you really see the leverage come through and I'll let Brendan talk in more detail about that.

Well, I think really -- thanks for the question, Katie, and I think Alex has really hit it. I'll just kind of double down on the fact that this was, of course, part of the plan. As we enter Sunbelt 4.0, we clearly outlined what those 3 steps were. Some of the G&A activity Alex mentioned is just what you would expect to go through a build period and then you prepare yourself for a run period. The overarching theme is this though -- from an SG&A standpoint. We have, in place, the SG&A level to build on top of that what our expectations and ambitions are around Sunbelt 4.0, as we continue to grow the business. We doubled the size of specialty over 3.0, and you put in place some infrastructure order to do that. And now that's in place and you move that forward. And then really these efficiencies, I would have mentioned in the prepared remarks, this delivery cost recovery and in those markets, reducing outside hauler by 40% in those 4. I appreciate that's a small segment of the total. But as an organization, when I mentioned $1 billion in North America, just to touch you over $1 billion in the denominator there, $250 million of that or so is wages for our skilled drivers we have that deliver great customer service. It's almost matched that in outside haulers. And we know that we have the embedded efficiencies, but you have to marry the technology with that to actually be able to extract it, and that's what we're seeing. So this is not an overnight thing. I want to emphasize, this is margin progression over the course of 4.0, a really good start as you'd expect year 1 in these sort of moderated growth arena that Alex would have outlined in terms of that range. It's a bit harder to come by. But nonetheless, we are confident about that progression as we move forward throughout 4.0.

And the other -- just the final point that I'd make, as Brendan again touched on in his prepared remarks, the progression of the locations that we added. So remember, we added 401 locations over the course of 3.0. For context, year 1 of those locations, EBITDA margin is around 32%. When we exited 2025, that margin rate was closer to 49%. So as we scale those locations and mature those new businesses, we will actually get the margin more in line with what our broader group margins are, and there's still probably 200 or 300 basis points more upside as we scale those and we'll continue to invest to the tune of north of 60 locations in this year. So I think the continued progression of the greenfield businesses is another area where we drive significant margin potential.

Okay. Great. That's helpful. Just another quick follow-up on that. I think here, I heard you mention that a specialty becomes a larger part of the business. We can expect that to drive some stronger performance. How do you think about that long-term split between gen rent and specialty? And is your M&A strategy going forward going to reflect that greater emphasis on the specialty business?

Yes. I mean it's likely. If you look at the 401 that Alex just referenced that we had talked about before on what you'll see highlighted there in Slide 43. That was, of course, bias to our specialty business over the course of that time. From an M&A standpoint, as you can imagine, we scour that and it's quite robust in the specialty landscape as well. Over the course of the last 4 years, if you think about it, we've more than doubled the specialty business while growing general tool nicely when you had a really strong end market. But as Alex will again guide you today, it's a bit more than 30% of total business, and we would expect that to continue to migrate. A lot of it really just depends on what the end market unfolds. As you see a return to that local nonres whenever that may be the case. Your GT business will grow a bit more in line with or maybe not lagging to the extent in which it does from the specialty business. So our thing is this, and it's important, even as Alex would have mentioned kind of the -- a range there between GT and specialty. Our specialty business by design captures and has an ongoing opportunity for a very broad TAM. And as a result of that, you'll see some undulation in certain segments. But overall, we like that. So you would expect that to progress over time, one would see it growing closer to 50% mark over quite some time, but much of that again has to do with what the end market deals does from a nonresi endpoint.

And from Morgan Stanley, we now have Annelies Vermeulen with our next question.

Brendan, Alex, I have 3 as well, please. So just coming back to market share gains, could you elaborate -- you've talked a lot about the 42,000 new customers you've added in the year. Do you think you also took share with existing customers in terms of share of wallet relative to other rental players? And as part of that, do you think you benefited in that regard from some of the disruption at some of your competitors in recent months. And therefore, do you think that, that market share progression can continue at the same pace looking ahead? And then secondly, on the locations, I think you mentioned, Alex, you'd expect to do north of 60 locations this year. How do you think about the mix there in terms of greenfields versus bolt-ons? I think you mentioned previously valuations starting to normalize. So could we see more bolt-on activity this year, particularly in the context of that fairly buoyant free cash flow you expected to generate. And then lastly, just on the bigger beautiful bill, I think I gained from Will this morning that if the bonus depreciation rules were enacted, then that would benefit your free cash flow, I think, could you -- is there anything else we should consider if that bill does go ahead in terms of what it can mean for your numbers?

Annelies, short answer your first question is, yes, when it comes to market share, as I would have demonstrated looking at that cohort slide. Those -- we are this remarkably national or North American reaching company today, and we bring these capabilities to bear with these national strategics, which are growing significantly. But we're also gaining share across those deciles of which we're very confident. I'm not going to comment on disruption or otherwise, I think that consolidation as we have demonstrated for years and years is very positive for the industry. And I'm sure that, that will all go just fine throughout that whole thing. The 60, just for reference that Alex mentioned, the 60 that were opened over the course of last year. We have plans for similar location adds this year. Those are just our green fields, not to be confused with what would be. So our bolt-on M&A that we would do in large part would be incremental to those greenfields and as I've said, it is as busy a pipeline as we have seen. As you know, based on -- I'll say this gently, only completing 5 acquisitions over the last fiscal year, we have been firmly holding to our valuation metrics, and it goes through the ordinary meat grinder in our business of both location, where it is, proximity to the rest, the specialty business line that it may bring, the culture of the business, the reputation of the business, but also the valuation, and we thought there was a bit of a disconnect there for a while. And none and I mean none of the businesses that we had interest in, have transacted. So there's a number of them out there that we have talked with and we have put our valuation on and they're choosing to contemplate, and we're choosing to wait. So time will tell in terms of what that is. But make no mistake, it is a robust landscape. And in the meantime, we're just going to grind away doing what we do, adding to the next chapter of the 401 locations that we have talked about. And Alex the [indiscernible].

I'll take the bonus depreciation, and I'll give you some color on tax more broadly. So as you think about sort of the GAAP tax rate and the statutory tax rate, that's typically we anticipate around the 25%, 26% rate. Now if you shift over to the cash tax because we do have such a significant amount of depreciation, cash tax is around 34%. And so your specific question, what's the potential impact of going from the current regime where we're winding down the bonus depreciation to the big beautiful bill proposal where we reinstate the 100% depreciation, that will be worth of around 10 percentage points. So that would take you from your 34% to your 24% roughly around $200 million of cash impact. So it is a fairly material impact. Of course, as we thought about guidance, we thought about current tax regime, we didn't contemplate what may happen in the future. So that would be upside to the guidance that we provided.

Annelies, you also sort of alluded to what would the impact be on the broader economy. I'd say that may be a touch above our collective pay rates here. But worth mentioning related to the bonus depreciation, that also includes capital investment in manufacturing, production, so construction in other word -- in other words. And the other one, of course, from an overall consumer appetite, if there were the ability, and I'm either stating a pro or a con in this, but when it comes to taxes on -- over time, as for instance, that's quite a boost to the skilled trade across the land and obviously, as a big part of the overall consumer. So time will tell. Obviously, it's going through this process through Congress, which is at a minimum, an interesting one to watch as it goes through this process, of course, of reconciliation. Anything else, Annelies?

That's very clear. Just coming back to the market share gains briefly, again, that pace of adding new customers that you've done, how much of that do you think has been sort of the launch of 4.0 or rather do you think that, that pace of new customer wins? Do you think you can continue that over the coming year and in years ahead?

Yes. I mean, look, just to point out, the 42,000 customers. Those are accounts that we have opened, we rented. Rest assured, there is a pipeline of accounts that has been opened that we haven't quite yet gotten to the rental point. Some of those happened yesterday that will rent next week, et cetera, but just do the math here. You had 118,000 over the course of 3 years, and then you had 42,000 in the course of the first year of 4.0. So it's all, in a way, remarkably normal. The biggest difference is when you look at cost of acquisition of these new accounts, this year, of course, absent bolt on, these are just fresh, organic, brand-new accounts that the sales force has gotten. So we have every confidence not only to speak to our market share gains, but think about it more broadly when we get off of that market share piece, which is just look how big the landscape is in terms of opportunity for growth. Our business has been around for a bit, right? And we've added 140,000 new accounts over the course of 4 years. That's really what you have to think about in terms of how much progress there is to extend as we talked about so often the proliferation of rental with so many different customers out there. I mean, our room for opportunity to ongoing growth in customers is dynamic.

And we now move on to Will Kirkness from Bernstein.

I just had a couple of clarifications questions really. The first one, just looking at rental revenue growth in the fourth quarter, general tools was plus 1% from minus 1% in Q3. Just with the reallocations that have happened, I wondered if you could give us a number as you did with specialty. Secondly, just kind of thinking about utilization, I guess you gave the uplift of a couple of percentage points would be. Is that about how far away you feel you are from a good utilization number? Or is there even a little bit more to do? And then lastly, just on the accounting side, there looks to have been a reallocation in central costs and also to U.K. profitability. I just wondered if you could explain that?

Let me start and then I'll have Brendan follow up. So on the rental revenue in Q4, the number that you would look at as it relates to reallocations probably wouldn't affect your comparable. Remember, film and TV has always been within the specialty business. The difference is we didn't report specialty. So it would have been in the Canadian segment. And then the oil and gas business was historically within -- again, would have been within the general tool business. But again, we didn't report that externally, so that would be within the U.S. reported segment. So there really wasn't a reallocation issue, as you look at the historical reporting comparability. In terms of the reallocation of support costs, that predominantly affects the North American business. So that wouldn't affect the profitability of the U.K. business. Remember, the U.K. business largely has all of its own support costs, whereas within North America, a lot of that cost is held centrally within our support office. So what we tried to do was pull out things that were not directly contributing to the contribution of those individual reporting segments, but it would not have affected the U.K. profitability margin. And remind me again, Will, because I lost track, what was your second question?

Through time utilization, as I would have [indiscernible]. Look, we feel good about our sort of reaching that inflection point in terms of year-on-year. So you've got a bit of late capacity there, which, of course, we will exercise, which really gives you -- it's quite a nice position to be in. In other words, you've got some latent capacity to realize progress as we've demonstrated, but also as we do see whenever it may be, some of the market conditions turning where you can actually test that and be confident of that before you were to up CapEx as a -- for instance. But furthermore, across the industry, what we've seen is a better balancing from a supply and demand standpoint, which will underpin that rate piece that I've talked about. But again, Will, just to reference on that Slide 22, I appreciate there's that one piece on GT. That has got oil and gas as the U.S. and Canada, but those are reflected across the 8 quarters as shown. And you're not going to have all that big of a difference between U.S. and Canada. Canada had some pockets of some real strength and then a bit of drag from a resi standpoint in Ontario, in particular. And then U.S. was -- broadly when you look at it kind of across territories, it looks a bit like that, the minus 1%, plus 1%.

We're now moving to a question from Arnaud Lehmann from Bank of America.

Firstly, just a clarification on Q4 rental revenue, the published is plus 1% and then on a billing day basis, plus 3%. Is this just a working day effect? Or is there anything else to mention the small discrepancy. Secondly, on your fiscal '26 CapEx guidance? Is it all replacement at this stage? Or is there any growth? I think at the midpoint, about $2 billion, is there any growth CapEx in there at this stage? Or it's just replacement? And lastly, I guess more broadly, your business model is working, there's less growth, less CapEx and therefore, more free cash flow generation at least for fiscal '26. What is your mindset about it? Are you disappointed by the growth or are you happy about more free cash flow, i.e., if tomorrow growth comes back, will you happily ramp up the CapEx very quickly, which would negatively impact your free cash flow? I mean, it's more of a qualitative question, but any color would be helpful.

Yes. I'll start with the last one there in terms of this [indiscernible] happy. Look, you just run the business. And as we've said at our current scale and margin, it's one of the remarkably powerful and dynamic attributes of this business. We say sort of internally -- I've said to a number of people, I say record free cash flow. And I say record free cash flow, and I appreciate that technically, it's a touch short of record free cash flow. But I'm going to use that actually to bring you to a slide that I think is important to understand, which is Slide 32. And the reason why I can't say, in fact, record free cash flow was, in fact, in fiscal year 2021, we generated $1.823 billion in free cash flow. And this year, we generated $1.790 billion in free cash flow. But look at the difference. Back in 2021, you remember, of course, that was really the full year of COVID where you completely cut us pick it off from a CapEx standpoint and you deal with that black swan event, which we did. And a lot of that investment would come very, very late in the year and you invest less than $1 billion, whereas this year, we still put a hardy $2.5 billion of CapEx in the investment to maintain our fleet to grow. Make no mistake, our fleet in certain segments where there's strong, strong demand, but we still generate nearly $1.8 billion in free cash flow and the way in which we allocated, we were very pleased to do, remarkably comfortable with a $1.5 billion buyback. So not disappointed at all in the growth. That's just a matter of what happens from an end market standpoint. The key to it all, Alex would have touched on this in his prepared script. Yes, it's the growth, but it's also the remarkable resilience and now so clearly demonstrating the strength of the free cash flow through the cycle. Alex also commented on the shorter lead times. Rest assured, when we see increased demand, whether that be come from even more mega project wins or fueling specialty businesses like our power and HVAC business that grew over 20% last fiscal year, our Climate Control business, that's still growing and really strong figures or some of our even smaller but newer businesses like temporary Fed or temporary walls for our industrial tool business, we will fuel those in a minute. Our load banks team comes to us and says, can we have an extra $50 million in CapEx because we have an order pipeline that will be higher than the fleet that we have, the inventory that we have in our fleet. Of course, we will, and we have all the flexibility to do so. And at some point in time, we'll see markets turn from a local standpoint the other way. And very quickly, we will amp up that CapEx. And from a lead time standpoint, today, you're talking for your core products, 60 to 120 days, some of the things around power, et cetera, are a bit longer, but those, of course, were planned differently. Your first question is purely billing days, a number of days so nothing else to that. And our CapEx as it relates to fiscal year '26, it's really a tale of 2 worlds. Our general tool business would have been really leaning into a replacement exercise. And certainly, let's not forget this phrase that we've so often used, growth disguises replacement. So John and the team who will have gone through their CapEx planning, if you have an area that's got a bit less demand and you have 10 telehandlers replaced, you may only replace 7 of them, but as a company, we'll buy 10, and we'll put those extra 3 into a market that's growing significantly. From a specialty standpoint, of course, there's replacement, but you'll have more growth embedded in that given the nature of the trajectory of that business.

And we're moving on to a question from Neil Tyler from Redburn Atlantic.

Two questions still, please. Firstly, just back to the topic of capital allocation and M&A. Just to -- I wonder if you can help me understand the -- you mentioned -- you've been very clear that the -- it's price that's the sort of sticking point in terms of M&A. So I guess, theoretically, were the price to come down, would you be happy bringing acquired assets and branches into the business even if demand hadn't improved much. And would you, I suppose, mirror that, in that scenario, with a reduction in your own CapEx to try to drive up utilization, if you understand the sort of, I guess, the perspective I'm coming from. So that's the first question. And the second question, really sort of shelving the Dodge construction forecasts for the time being. Have your customers or conversations with your customers altered at all since the events of early April and the uncertainty that they've created. Brendan, perhaps you can sort of talk about anything that you want to -- in terms of how the conversations might have altered against that context.

Sure. Thanks, Neil. I'll work backwards on that. Our discussion with the larger customers, but also the owners in that sense, so I'm speaking to this mega project landscape, they've not really changed much. Obviously, everyone is trying to just understand what the rules of engagement are. But when you look at what the strength is really in that segment, there's obvious things we've talked about around EV and batteries in general that are a bit softer really, in our view, that's more about to do with just demand in general. But outside of that, when you look at data centers, I can take data centers 3x in terms of not only what those progressing to start, but also the pipeline is in that environment. When you look at semiconductor, when you look at LNG, those plans are continuing to move forward. So with those larger customers, we're continuing to see their pipelines actually expanding. So their outlook is actually improving even when it comes to sporting arenas, et cetera. We're just trying to get a grasp of course, of what those costs might be. I think there's varying expectations in terms of what it all may come out too. In terms of capital allocation, the scenario you painted was it more of businesses that we like and we'd be happy to acquire would be more in our level of valuation. Well, of course, we would acquire them. And I don't think you take a short-term view on that, most of these that we would do, you have this interplay between are you adding fleet to a marketplace which is part of what you're getting to, and what was for a period of time, probably oversupplied a bit to where we are today. Look, we look at an acquisition, not as a 6-month or what's going to happen in the current year. These are long-term decisions in nature, and that's exactly how we take them. So yes, we would do that. And really, one doesn't necessarily depend on the other as it relates to what we take our CapEx down. It all depends on the deal. Generally speaking, the type of acquisitions we do, one of the common characteristics is they're undercapitalized. These are individual businesses, they don't get overly leveraged. And what we bring is quite often, quite a growth to the overall fleet mix, but also you have picked up on a really good point, Alex made in his prepared remarks, how we've been able to fuel 60% of the fleet of our greenfields we opened during FY '25 through existing fleet and locations, speaking to some of that latent capacity. So that's our view, big pipeline out there. I'm glad you asked about that commentary around customers. Now when you talk to our OSRs and VMs about local customers, I think the same thing will tell you they're just scraping and [indiscernible] -- a bit more, because if you look at most -- any skyline in some of the cities, there's just a bit less of that out there than what there once was. So that's one that, of course, we keep a close eye on when it comes to activity day in and day out.

And from Barclays, we now have James Rose with our next question.

I've got 2, please. The first is on general tool margins versus specialty margins and the EBITDA gap between them is about 6 points at the moment, 54% to 48%. Is that a sensible gap we should expect in the longer term? Or how would you characterize? Is there more upside in general versus specialty for the longer term? And then second, if we look at the ROI for specialty which is 30%, is that a level which you think could be sustained all throughout 4.0? Is that a sensible sort of incremental ROI we can think about for specialty?

Yes. I'll start here. I mean, look, fundamentally, and actually, it was quite lost on some over the course of 3.0, when we so rapidly expanded our specialty business. But the specialty business is going to have -- it's going to be less capital intensive and, therefore, smaller D. So fundamentally, you have a specialty business that will generally have a lower EBITDA margin than you will do with general tool. But then when you get to EBIT or operating profit, you'll have a higher margin relative to general tool and from an ROI standpoint, of course, a lower capital-intensive business that is going to lead to fundamentally a higher ROI at the levels which we have. I wouldn't -- I mean I would -- certainly, from an ROI standpoint, maintaining that over the course of 4.0, there's no reason why one of the things you'll see in the future of our CapEx as we go forward. When you think about mix, there are so many product assets within specialty, in particular, that just have a longer useful life than does gen rent. Take, for instance, large generators, load banks, air conditioners, chillers. These are not machines that are operated with someone sitting in the seat or holding the steering wheel. These are self-contained units that have the capability to run for a long, long time and the customers are remarkably happy with them over time. So again, that speaks to, James, the very nature of that book value getting lower and of course, your return being higher. There will always be puts and takes in any sort of year. Take for instance, this year, we had a strongest of the year we had in specialty was. Remember, it was absent a lot of that E&D revenue from the project, of course, that we have talked about that had the issues late last year and through this year. So we were absent so much of that labor revenue that we would have otherwise had and specialty still posted those really strong results despite that headwind, which actually carry on a bit into the now new current year. Does that -- was that -- did I get both of your questions there, James?

Yes.

And we're moving on to a question from Allen Wells from Jefferies.

A few for me, please. You obviously talked a lot about the optimistic outlook for mega projects. Could you maybe just remind us what the rough portion of your North American business is now exposed to these types of projects and how that's maybe trended year-over- year? And then secondly, just on specialty, if I understand that correctly, so the Q4 growth would be 8% without the reclassification that compares to 9%. That's obviously still slowed a little bit during the year and it's running slightly below that of your largest peer, which I think is closer to 15%. Can you maybe talk a little bit about some of the color around the slowdown, maybe where some of that relative underperformance is, particularly thinking about is it more end market related or the specific verticals that you're exposed to? And then third question, just maybe some comments on rates and apologies if I missed this for earlier. Obviously, you still talk about rates progressing positively. Just provide a bit more color around this and maybe how you think about expectations for FY '26. Anecdotally, we hear that, obviously, the rate environment is a bit more challenging. And maybe at the local market, there's a bit more kind of questions around some of the rate discipline in the industry, but maybe bigger players versus smaller players, that's less relevant, but any comments there would be really appreciated.

Well, I'll take them in order 1, 2 there and maybe Alex will touch on 3 around rate. Mega mix, first of all, let's go to 30,000 feet. Half of our business is non construction, half our business is construction. In recent years, from a start, not a put in place, you've had about 30% of starts that would have met our definition of mega projects. That would be $400 million and above. Everyone has kind of got a different measure as related to that, even from an analyst's standpoint, but nonetheless, that's what ours is. That's not yet making up 30% of the put in place by the very nature that we've talked about in terms of time, in terms of ramp. And as we've said, we will enjoy at least 2x our shares. So I think those give you the component parts to sort of build to that mega project. But overall, you're talking kind of still single digits but approaching high single digits of the overall revenue, but we would expect that to climb as this more progressive starts and you get some more crust as it relates to those. Specialty, look, I appreciate you quoting some others from time to time, and you can pick any point in the cycle, and there were all differences based on what is happening from an end market standpoint. We have designed our specialty business and our specialty business segments. To be clear again, to be very much broad from a TAM standpoint and actually help us from an overall diversity and balancing our business out during certain times of economic cycles. Let's not forget to reflect over, say, for instance, post COVID, when we saw still explosive growth in our specialty business. And when you think about those lines, it's worth understanding the puts and takes, as I said. So if we just look at the year, power and HVAC plus 20%; climate, 10%; industrial tool 15%; trench, plus 13%; ground protection, plus 11%; temporary fencing, plus over 150%; plus 60% for temporary walls. But you will always have things like scaffolding, minus 17%, 18% because it's going to be a lumpier business when you have big projects, you're going to have businesses like our temporary structures where you have got some minor camps that come down, where you've got some mega projects that were expensive in temporary structures that will come down. You can't miss the broader point of what really is a runway for ongoing structural progression within specialty. We will spend much more time measuring that up against what someone else might quote is, as their version of specialty, it's all demonstrating specialties ability to continue to grow.

Yes. So I'll touch on the rate expectations. Obviously, we don't talk specifically about rate other than to say that we do. We have seen it continue to progress, and we anticipate seeing it continue to progress. And that's driven by a couple of things. Obviously, Brendan refers frequently into the structural progression of the industry and the level of discipline that we've been demonstrating, all the players have been demonstrating really just managing fleet capacity and healthy balance sheets that allow us to do things that maybe we hadn't been able to do in years past. But more importantly, we view pretty strongly that we're able to capture the value for the service that we provide to the marketplace. So we are not a commodity industrial cyclical business, we are a business services company. And so let me give you some examples of how that manifests itself. First of all, the quality of our assets is second to none. So when we talk about replacement capital this year and utilizing latent capacity, don't confuse that with diminishing the quality of our assets. Brendan mentioned about the mix of our fleet being variable, the levels of utilization, perhaps allowing us to extend the useful lives for some period of time, but our assets are second to none. The second is the breadth of our asset portfolio. So when you think about competing with a smaller, local providers, they just can't provide the breadth of products and services that we can provide. And so we're able to extract value because of that. Third, the customer service. Brendan will talk about the logistics and our ability to place fleet anywhere within our clustered markets, our ability to mobilize service 24 hours a day, if an asset breaks down. And then just the scale that we have to service national accounts on a national basis that again, local regional providers can't do. So frequently or almost always, as Brendan will talk about in one-on-one. The quality of the conversation with our customers does not revolve around rate. It really revolves around the breadth of service and that we can provide. And so yes, we continue to expect rates to progress based on all those things that I've described.

And our final question for today comes from Carl Raynsford from Berenberg.

Just 3 for me, which are clarifications, really. But the first on your growth guidance of 0% to 4%. I appreciate that you've adapted the reporting segment. But is there any way you could give some color on how the U.S., Canada and U.K. fit into that equation, please? The second [indiscernible] depend on how the cycle progresses over the next 12 months. But are you able to give any sort of guidance around used equipment sales versus the 2025 number of $470 million based on how you're seeing things today? And lastly, just really a follow-up on Will's question around the U.K. I see cost is down around 6% or 7% in North America general tools as the proxy, but roughly flat to very slightly down in the U.K. Whether this is immaterial from a group perspective and perhaps a misunderstanding, but could you touch on if there's a structural issue in the U.K. around the ability to drive efficiencies like you had in the U.S.?

Yes. So let me take the first part of your question and then I'll turn it over to Brendan to talk specifically about the U.K. So on the 0% to 4% guidance, breaking that down, I think I gave sort of directionally the split between GT, especially in my prior comments. As it relates to the U.S. versus Canada, we think about those as the North American market, and so there's a lot of synergy across the 2 markets. Canada, obviously, you'll see we anticipate continued softness in the film and TV business, which we pointed to, again, in the prepared remarks. I don't think we anticipate that changing. But that -- going forward, you'll see reflected in the specialty results. The other area in Canada where -- which is perhaps a little bit different than the U.S. market as we have more heavy exposure to residential construction, particularly in Ontario, sort of the eastern provinces. And that part has been a little bit softer. So in terms of relative strength between the U.S. and Canada, I would anticipate the U.S. being a little bit stronger, a little bit overweighted on that 0% to 4% growth, partially offset by the Canadian business. And then I actually didn't -- I heard you ask the question about used equipment sales, but I didn't fully hear it. Brendan is nodding at me that he did hear it, so I'll turn the last 2 questions over to him.

Yes. I think really from a -- you'll see and, of course, the guidance of proceeds of $475 million. And if you do the math on that, we have a bit less gains year-on-year, which is a combination of quantum, but also really us just taking kind of the residual values, if you will, that we've been experiencing towards the back part of the year. We saw it come down over the course of the year. We've been experiencing some flattening in that as of recent months and if history is a predictor of the future, that tends to normalize when you do kind of find that bottom point quickly. So that's what our position is. Obviously, as we go through the quarters, we'll update if there's any change. But that's not really the underlying business. I appreciate the fact that it impacts cost. Your point on costs around the U.K., as you would have heard kind of throughout 4.0, et cetera, this business has improved remarkably in terms of the service we're giving to our customers and the operational capabilities. What Phil and the team are laser-focused on now incumbent in 4.0, which, in short, is to achieve acceptable levels of returns and sustain them. And part of that challenge is just the cost base that goes along with this business, in particular, G&A, and that is part of parcel of the plan that the team is employing. I'm sure that Alex and I would both agree that they have a good plan on the table for the year, and we'll see how that progresses. But in the end, that is a business that is cash generative. And when we get that margin and by extension, return level to where it need be. Part of that will indeed be cost and just the reconfiguring of how we deploy that.

And that concludes today's Q&A session. So I'd like to hand the call back to the management team for any additional or closing remarks.

Yes. Thank you, everyone, for taking the time this morning and allowing us to go through our growth in the year, the real resilience that we have in this business, illustrating our advancement in all our Sunbelt 4.0 actionable components and, of course, the cash. So thank you for your time, and we look forward to speaking with you at Q1.

This now concludes today's call. Thank you for joining. You may now disconnect your lines.