Ashtead Group PLC

LSE:AHT

Earnings Call Transcript 2019-Q1

[Geoffrey Drabble, CEO & Director]

Good morning, and welcome to the Ashtead Group Q1 Results Call. With me this morning is our Group Finance Director, Michael Pratt; and Group Chief Operating Officer, Brendan Horgan. And as always, this is one of our shorter updates, so after a brief explanation of the financial performance and operational trends we are seeing in the market, we'll move on swiftly to Q&A. So let me give you a few highlights from the first quarter. So clearly it's been another strong quarter with pleasing growth in both revenue and profitability. We continue to execute well in support of markets, and this combined with the benefits of tax changes and the share buyback, the result is a very healthy 46% increase in our earnings per share. We made further progress in our strategic objectives with 19 greenfields opened in the U.S. and a number of acquisitions completed in or just after the quarter, which are detailed in this morning's press release. I'll cover a couple of these deals in a moment as I think they highlight the range of opportunities available to us to both grow and diversify the business. Having committed GBP 300 million to date, you will have also seen from today's press release that we have increased and extended the share buyback program, which I'll cover in more detail later. This level of buyback allows us to continue to focus on investment in organic growth and bolt-on M&A whilst maintaining leverage within our targeted range of 1.5 to 2x EBITDA. So once again, a consistent execution of our long-stated capital allocation priorities and an adherence to responsible growth. The business continues to perform well with supportive end markets and a clear operational strategy for further growth. So the benefit of weaker sterling, we now anticipate results ahead of our original expectations, and we can look to the medium term with confidence. So with that, I'll now hand over to Michael to cover the financial detail for the quarter.

[Michael Richard Pratt]

Thanks, Geoff, and good morning. The group's first quarter results are shown on Slide 5, and as Geoff said, it's been an encouraging start to the year with strong growth in revenue and profitability. The group's rental revenue increased 19% on a constant currency basis. Margins were broadly flat despite opening 20 greenfields and completing 5 acquisitions in the quarter. The EBITDA margin was 48% and the operating profit margin, 30% in the quarter. As a result, our underlying pretax profit was GBP 286 million, an increase of 23% at constant currency. The more significant 46% increase in earnings per share reflects the benefit of the lower U.S. tax rate, resulting in overall effective tax rate of 24% compared with 34% a year ago. Turning to the businesses. Slide 6 shows Sunbelt U.S.'s first quarter results. Rental and related revenue was up 18%, as Sunbelt continued to benefit from generally strong end markets. The operational efficiencies of mature stores offset the drag effect of new stores, whilst maintaining the EBITDA margin at 51%. As a result, operating profit improved by 22% in the quarter at a 33% margin. Turning now to Sunbelt in Canada. Slide 7 illustrates how the scale of our operations in Canada was transformed by the acquisition of CRS last year. As a result, year-over-year comparisons are not particularly meaningful. In absolute terms, Canada has contributed a revenue of $77 million and an operating profit of $14 million in the quarter. As we discussed in June. We expect EBITDA margins of around 40% and operating profit margins of around 20% for the Canadian business absent the effects of M&A. Consistent with these expectations, Q1 margins were 37% for EBITDA and 19% for operating profit, which Geoff will comment on later. Turning now to Slide 8. A-Plant's rental and related revenue grew 3%. This reflects a 5% increase in pure rental revenue but a lower rate of growth in ancillary revenue. The market in the U.K. remains relatively flat and competitive. As a result, the EBITDA margin remained at 38% for the quarter, while the operating profit margin was 18%. Slide 9 updates on debt and leverage position at 31 July. As expected, net debt increased in the quarter, as we continued to invest in fleet, on bolt-on acquisitions and continued our buyback program. At the end of the period, our leverage ratio was towards the lower end of our targeted range of 1.6x -- at 1.6x EBITDA. And as shown on the bottom, right, there's a healthy gap between the value of our net debt and the secondhand value of our fleet. Both our leverage and well-invested fleet will continue to provide a high degree of flexibility and security as we go forward. The structure of our debt is shown on Slide 10. We said previously that the strong balance sheet gives us competitive advantage and positions us well for the medium term. During the quarter, we took advantage of good debt market to strengthen our balance sheet position further, extending our debt maturity and increasing our flexibility. We issued $600 million of 5.25% bonds, which mature in 2026, providing us with access to more capital for a longer period of time. A key feature of our debt is a profile. We have no imminent maturities and the extended profile is smooth with no large individual refinancing needs. Our debt facilities are committed for an average of 6 years as a weighted average cost of less than 5% And with that, I'll hand back to Geoff.

[Geoffrey Drabble, CEO & Director]

Thanks, Michael. So let's start our operational review by first looking at the revenue growth in Sunbelt. So as you can see from the chart on Page 12, it's been a good start of the year with organic growth particularly strong at 17%. Our mature stores continue to perform well, as do the newer stores we've opened both this year and last year. Bolt-on growth is lagging behind our original plan but this is just a timing issue and, in particular, the Mabey deal which we completed at the end of the quarter; and the Interstate deal, which came just after, were expected to close earlier. We remain committed to our strategy, and we've got a good pipeline, so we anticipate further developments during the year. I would just stress that whilst this is a very strong performance versus our full year forecast, there are much harder comps ahead from September as we lap hurricane activities. So remember, there was a $100 million of revenue in the final 8 months of last year, which may or may not reoccur this year. Notwithstanding the anomalies of hurricanes, the overall trends remain good. Rates continue to tick positive in the plus 2% to 3% range, and the mix continues to trend towards longer rental periods reflecting both the strength of the markets and the change in habits of our customers, as they continue to switch to rental. There was a 2% improvement in yield as we balance out rates, contract rents and product mix. And as I said before, I'm not sure this yield metric tells you a lot in current conditions, but we continue to report the number for what it's worth. What is notable, however, is the continuation of our strong margins highlighting the strength of the underlying business given the inevitable drag in the quarter from 19 greenfields and the integration of 11 acquired stores. Most encouraging is the continued improvement in ROI, reflecting our better rates and fleet profile. This is also reflected in dollar utilization, which has improved to 55% from 53% last year and is detailed in the press release. So as I said at the start, some really encouraging trends so early in the new financial year. That's about it for the performance in the quarter in the U.S. But on pages 14 and 15, I just want to demonstrate how we continue to implement our 2021, strategy. We completed 2 deals in late July and early August, which demonstrate the different ways that we can continue to develop the business. So let's start with Mabey, which is a bridgehead into 2 specialty markets that have significant growth potential, ground protection and trench shoring. Ground protection, as you know, is a business where we are the market leader in the U.K. and where we've been growing our presence in the U.S. from a small start. It is a market which is growing and has significant cross-selling potential, particularly in markets such as translation, entertainment and oil and gas. This deal significantly increases our fleet size in this product, expands our geographic coverage and brings a strong management team. It's a very obvious platform for further national growth. Trench shoring is an area where we are aware that others have a strong position and we've been a bit part player in a highly profitable billion dollar plus rental market. What we we've been looking for was a credible in-house engineering capability to form the platform for growth and roll up strategy. Mabey, with 8 locations focused in this field and a first-class reputation, particularly for more complex ground works, provides that and, therefore, we anticipate further expansion in this area both organically and through further bolt-on M&A. Therefore, excited about the midterm potential for Mabey, a business, which we first approached many years ago. Thank you. Well, hello again. I'm glad you were able to rejoin us. Over recent years, we've had a number of firsts at Ashtead, but that's certainly the first time we've had to evacuate during a call. Look, I will kick off from where we left off, which I think is Page 15. We got 3 or 4 slides to bash through and then we'll, as quickly as we can, get on to Q&A. So starting again on Page 15, where we're looking at the recent acquisition of Interstate. This is a very obvious geographic infill, where they're the market leader in a small geography with another product range, where it's very clear that we can fill out the clear cluster and cross sell. So this enhanced cluster will generate all the market share, the margin benefits we've just -- we discussed before, most recently at the Capital Markets Day. So it's a well-worth property for us. If you look at the map, Baltimore and Washington, D.C. are geographies where we've had clusters and significant market share for some time. So there's always been a plan to move north and eastern to the significant markets of Philadelphia and New York. And you recall the acquisition of Pride, that many of you visited recently. We started the ball rolling in New York, and we believe Interstate will have a similar impact in both Philadelphia and the New York market. So again, it's recognize the importance of buying a dominant player in its geography and products, and then, leveraging our breadth and scale to enhance market share and margins. So this is a deal that fits all of those criteria. Moving on to Canada on Page 16. And a lot of good progress here also. The business continues to have strong underlying growth, as you can see from the chart. And we completed 2 further acquisitions in the quarter. So good progress in a market where we still have low market share and lots of opportunity. There's a bit of confusion at the year-end around the margins in Canada. So let me just try to explain some of it is, as the trends are positive. And we continue to have a lot of moving parts as we develop Canada and, therefore, it's easy to get distortions when you're dealing with small numbers in a new business. Results in Q1 are exactly in line with what we said at the year-end, and we need to adjust for fleet disposals from acquisitions where we have the revenue but no gain on sale in these assets because these assets are fair valued on acquisition, which is what we've -- how we've done it for some time now. When we made these adjustments, the EBITDA margins are 39% and the EBITDA margins are 20%, the key being obviously the EBIT gain margin. Importantly, in terms of long-term margin development, dollar utilization is a very healthy 59%. So in summary, the 40% EBITDA and 20% EBITDA margin for Canada that we guided to at the year-end are clearly very achievable even with high activity levels and a little noise from M&A. As we said at the year-end, it's very much a year of consolidation at A-Plant, as we show here on Page 17. And as Michael detailed earlier, it's a good start. Just, say, flat profits year-on-year after what was a difficult period towards the end of last year. As you can see, there remains volume opportunity but there's also rate pressure, which we anticipated. So our focus on costs, fleet spend and physical utilization will deliver solid performance after a good start to the year; but there's no easy wins in the current market. But I do remain hopeful of year-on-year profit growth over the balance of the year. Moving on to capital allocation. And our priorities remain unchanged, you can see from Page 18 here that our priority remains investment in the business through both fleet spend and bolt-on M&A. And after this, look at returns to shareholders, always mindful of our leverage targets. So with this in mind, we determined that it's appropriate to increase and extend our share buyback program. So against the original the GBP 500 million to GBP 1 billion program ending in April '19, where we most recently guided the GBP 600 million, outlay will now be GBP 675 million. In addition for the year to April '20 we will complete a further buyback of no less than GBP 500 million. We keep this program under constant review, and we'll update on both the scale and the duration of the program where appropriate. But the key here is that with our strong margins and cash generation, we see the buyback program as an integral part of our medium-term strategy to enhance shareholder value. To summarize then -- well, it's only the first quarter and there will be some unusual hurricane-related comps to deal with in the rest of the year, but there is no doubt that this is an encouraging start to the year. Strategically, we continue to execute well on our 2021 plan with good same-store growth, a number of greenfields and some exciting bolt-on M&A. Importantly, this growth is supported by very healthy margins and cash generation, which provides us with a range of options to further enhance shareholder value. The bond which we successfully completed in July gives us a balance sheet that provides a long-term platform for further responsible growth. We've also increased and extended the share buyback program. So finally then, our business is performing well, we've got a positive outlook and we continue to benefit from weaker sterling. And as a consequence, we expect full year results to be ahead of our original expectations, and we look to the medium term with confidence. And so with that, I'll hand over to the operator and let's go on to Q&A.

[Operator]

[Operator Instructions] Our first question comes from the line from Rajesh Kumar from HSBC.

[Rajesh Kumar, Analyst]

Just looking at your share buyback guidance this morning. How are you thinking about capital allocation, especially given that United Rentals has just done a large acquisition, which potentially forces them to limit future M&A and look inwards? So do you think you have got an opportunity in the U.S.? Or will it be, like before, focused on expanding Canada and a bit in the U.S.?

[Geoffrey Drabble, CEO & Director]

Yes -- look, I don't think the proposed acquisition of Blue-Line by United changes our capital allocation at all. And as we said many times and as laid out on the chart, our priority remains organic growth and that will always be our priority. So if market opportunities present themselves, we will very readily spend more on fleet growth. And so if market share gains are available in the U.S. we will certainly go after them. And I think the whole point of the scale of the buybacks that we have proposed, even we are working within our leverage guidance of 1.5 to 2x, there's still plenty of flex in there for incremental CapEx and there's flex in there for incremental M&A. So we're trying to pick a sensible path where we leave those options open to us, but also recognizing the benefit of share buybacks when we've got such strong cash generation from very strong margins. So it doesn't change anything; there's the ability to still do a little bit more in all categories.

[Rajesh Kumar, Analyst]

And do you think that with their increased scale, they may have an advantage over you when it comes to procurement? Or is the advantage not differentiable at your scale?

[Geoffrey Drabble, CEO & Director]

I don't think -- I think when you get to this stage, when you've got 2 very significant players like ourselves and United, I think it is highly unlikely that there's any significant opportunities for -- big opportunities and leverage. And I think, clearly, the likes of ourselves and United and some of the smaller players, we have some advantage; but I don't think this makes the whole heap of difference. What you also got to look at is what are they buying and this could mean some significant fleet reconfiguration and, therefore, is there actually going to be -- significantly be more organic spend than we put in? And I think the answer to that has historically been no.

[Operator]

Our next question comes from the line of Bilal Aziz, UBS.

[Rory Edward McKenzie, European Support Services Analyst]

It's actually Rory McKenzie at UBS. So the questions then. Firstly, on yield, do you think that the headwinds for mix of more monthly rentals is starting to stabilize? It looked more stable year-on-year in Q1 than in Q4 for example.

[Geoffrey Drabble, CEO & Director]

Yes, I think there's a chance that's the case. There's still the opportunity -- there's been a big shift. 72 good, 73 yes. So the relative to the scale of headwinds we've had in most recent years that's unlikely. Look, it will depend on all kinds of things like -- weather contribute, hurricanes, so in terms of precision, I'm not swearing that there will never be further headwinds from mix. But you're right, the scale is likely to mitigate from now on.

[Rory Edward McKenzie, European Support Services Analyst]

Okay, great. And actually, I did want to ask about the comparatives ahead and what we should expect. Of course, we can't forecast hurricanes and weather, even a storm which appears to be heading to North Carolina. But can you remind us on the phasing of the comps from last year and what it might mean this year?

[Geoffrey Drabble, CEO & Director]

Yes. Yes, look, so the first 4 months, it's -- it really -- if you look at it, it was what, 25th of September, Brandon, when...

[Brendan Horgan, Group COO & Executive Director]

August 6 was the first, then September 10 was #2.

[Geoffrey Drabble, CEO & Director]

Then September was #2. So basically, we started seeing the impact in September. So if we look at our August year-over-year revenue growth, it was still around that sort of 19%, 20% level that we've seen all through the first quarter. So we'll start seeing it from month 2 of quarter 2, and we have $100 million of revenue, which we sort of allocated to the hurricane activity. And the question is; what will it be, and how will we lap it thereafter? So the biggest quarter was quarter 2, and then, it sort of like -- it sort of trickled down into quarter 4. But even in quarter 4, there was $15 million to $20 million of revenue. So we'll have an impact. Do we know if the hurricane is going to hit or not hit, Brendan can give you sort of some color on that, we have had a storm center open since Sunday.

[Brendan Horgan, Group COO & Executive Director]

Yes, we have. I mean, as you would expect, we have that very early activity before the storms, which is the kind of the first responders and the municipal agents, if you will, state and city preparing for what could be landing. But we're still far away from being sure at all. One, if it lands; and two, where it lands. I mean it, looks like it has a reasonable degree of certainty, but time will tell. And then, of course, it's a matter of what the extent of that will be. But I think, Rory, if you look at it, you'll notice on Slide 23, that would have our time utilization both as our general equipment business and our specialty business, and you'll see there where you see the specialty business lapping the hurricane activity that we had a year ago. Albeit very strong underlying utilization you can see some of those comps that we're going to discuss in the months to come.

[Rory Edward McKenzie, European Support Services Analyst]

Yes, great. That's helpful. And then, just lastly if I may. The drop in rates of around 50%, same as in Q4, do you still expect to improve below 50s this year overall? And I guess, as it kind of relates to the weather, the cost comp might get easier on the other side.

[Geoffrey Drabble, CEO & Director]

Yes. Look, I mean it depends on a lot of bunch of things. It will depend on the precise mix because of the weather but also the quantity of greenfields and bolt-on M&A. Because 19 greenfields in the quarter is a bunch of greenfields. Already in the second quarter, we've done 7 or 8 there. So there's a high greenfield activity right now. If you look at a business like the size of Mabey with, in total, 10 locations, that's good. There's going to be a fair bit of integration there too. So it's going to be 50 to 51, 52, it's going to be in that area precisely. It will as much depend on what happens with the greenfields and the bolt-ons and the one-off costs as it does to the underlying pace of margin improvement in the mature stores.

[Operator]

Our next question comes from the line of Andy Murphy from Merrill Lynch.

[Andrew Murphy, Analyst]

I've got a few. I just want to kick off just following up on the margin question. In the U.S., EBITDA margins came down a little bit. EBIT margins were up a little bit. So can you just talk us through the drivers there of what is really, on an underlying basis, driving those margins up and down?

[Michael Richard Pratt]

Well, you're into roundings, aren't you, on EBITDA? And as we say, you've got the one-off costs, et cetera, on integration, et cetera, underlying margins are still consistent on -- upon a trajectory, but when you've got all the greenfields, et cetera, it impacts it. In the past, where when you're going to a position where you're getting good rate, et cetera, and the inflationary impact on fleets has dropped away, you haven't got the drive from depreciation. So your fleet is able to generate as you would -- you'd have positive rate, et cetera, you're getting better dollar utilization, which then flows through. So you've got your drop-through but you haven't got depreciation and fleet accelerating more so you end up, just the math to walk you through, to an EBITDA margin which moves forward slightly. But they're just -- [indiscernible] round [indiscernible] it's just noise around the numbers as much through one-off of incremental cost that just flow through.

[Geoffrey Drabble, CEO & Director]

I mean there's a lot of things [ that might strike ]. Remember, we talked a lot in the past of what originally was taking ROI in dollar utilization backwards, and a lot of it was to do with fleet inflation and the sort of imbalance of the quantity of new fleets we were buying. Now we're in more steady state and now we've lapped some of that significant Tier 4 inflation, you can see that's what's helping us drive that very positive trend in our ROI. So there's nothing significantly happening within the business. A lot of this is just maths as we balance a few things out.

[Andrew Murphy, Analyst]

Okay. A second question I had was on the U.K. Your yield came down 3% but your drop-through was very high. I kind of would've expected it to be the other way around, the drop-through would be very low.

[Geoffrey Drabble, CEO & Director]

Well, not really. I mean, yes, it's really straightforward. We think the U.K. market is a tougher market and we're aggressively -- we've been aggressively reducing costs. It was one of the reasons why the drop-through was so low in the second half of last year because the exceptional costs, which as you know we don't have exceptional costs, at reducing our cost base were included in the operating numbers. So it's a reflection of how we see the makeup of the yield, which is relatively flat with a little bit of top line growth, some rate pressure; but we will overcome the rate pressure by a more diligent approach on overheads. Now we're continuing to invest in some key areas like IT, for example, but again, you will see the lower fixed spend too, so we're cutting our costs accordingly, based on our outlook for the U.K. market, which is not terrible but it's certainly not a big growth market either.

[Andrew Murphy, Analyst]

Okay. And then, finally, just on the CapEx. At what point for the current year do you sort of shut up shop in terms of what you think your CapEx expectations will be? Are we sort of through the hump where you -- it's unlikely that CapEx could go up this year because of the timing?

[Geoffrey Drabble, CEO & Director]

No. Not at all. I mean, really the most important -- in terms of -- as you know, we have a seasonal business. So we have a very busy period from May until October. Brendan and I sit down do a budget every single year, and the climb in fleet on rent from May to October is always a slightly scary one, and then we always seem to do it. So an important period for us is around that October, November, December period where we start thinking, what do we need for similar -- the following year that we need to bring in, in March, April, May that year? So no, we're probably going to the most important period where we are reviewing our CapEx in the next couple of months.

[Michael Richard Pratt]

As we say if you go back over time, we would certainly tend not to comment on CapEx at Q1 because it's too early in the season. But when we have a look at CapEx and change our guidance, it is typically Q2, and then we do a further revisit when we get to Q3. The biggest [question] is if what was that Q4 spend and what is our view of next year versus this year. We're recognizing that actually whatever you spend in Q4 has very little if any impact on our earnings for '18, '19 because it comes in so late in the year.

[Geoffrey Drabble, CEO & Director]

So if you got to Page 24 in the pack, it's always best to look at this in dollars because currency has an impact in all of this. And we have spent $366 million in the first quarter in growth CapEx as against an outlook of $850 million to $950 million. Mike's better at math than me. So I'm guessing that means in 25% of the year, we spent 40% of our CapEx.

[Michael Richard Pratt]

Wait, and I got the sense that it's front-end loaded. And so if you're looking at growth from -- you can go easy, go back to last year's Q1 presentation. So our growth CapEx this year is slightly ahead of where we were last year in that period. What we have done, we spent -- because of just the timing of things and dynamics, we spent a little bit more on replacement in Q1 than we did a year ago.

[Geoffrey Drabble, CEO & Director]

So the likely risk is to the upside in terms of our capital guidance. But again, as we said, hey, let's see what happens in terms of needs for hurricanes and not needs for hurricanes. And in the first quarter, let's get to December because as much as anything else, it gives us a chance to look at next summer. But as we sit here today, Brendan, what's your gut feel on fleet spend?

[Brendan Horgan, Group COO & Executive Director]

I'd look no further than the slide that we have that shows time utilization and rates. Look, if you think about an end market in terms of the activity that we're experiencing today. When you have a supportive end market that has been able to absorb from the utilization standpoint all of our fleet growth, not just in our same stores but in our greenfield as well as in our bolt-on locations, and you have a rate environment in this 2% to 3% range that we've been experiencing, we would be pretty bullish I would believe and I would anticipate us being on the higher end of that spectrum.

[Operator]

Our next question comes from the line of Will Kirkness from Jefferies.

[William Kirkness, Equity Analyst]

I just had a couple of questions. And firstly, just thinking about the capital allocation point. The sort of -- even with the buyback and CapEx, depending on the bolt-ons, it doesn't look like you are troubled at the top end of that leverage range. I just wondered what your thoughts were around that.

[Geoffrey Drabble, CEO & Director]

Well, we weren't in trouble unless we spend a bit more on CapEx, which we maybe hinted at a little bit in the last question. Perhaps we will have a reasonable pipeline of M&A, too. So our objective isn't to hit a leverage guidance number, but our objective is to grow responsibly allocating capital as we said. So you're, right, there is a room for more bolt-on M&A. There's room for more organically fleet growth. But again, as we said in an earlier question, what we said for the following year is a minimum number. And there's a maximum number. And so I think we're trying to pick this path where we keep a little bit of headroom, which could be allocated in any of the key areas that we see important in terms of enhancing shareholder value. Now that's -- we think it's fairly straightforward, but yes there is headroom available to us.

[William Kirkness, Equity Analyst]

The specialty bolt-ons, what sort of EBITDA range, has that changed much?

[Geoffrey Drabble, CEO & Director]

No, I don't think so. No. I mean, clearly look, specialty is a little bit different. The multiples are typically a little bit higher but it depends what -- how you're looking at it, like which multiples. So we've had this sort of question before. People get overly hung up on EBITDA multiples because that's how everybody values businesses. We believe revenue multiples, EBITDA multiples but as importantly, multiples of the fleet that you are acquiring are all important metrics. I wouldn't have said that the multiples have gone up significantly, of course. We're further along in a cycle, therefore, the sums are higher because people are tending to do better in this stage in the cycle than perhaps they were doing earlier in the cycle. But the multiples haven't changed materially.

[William Kirkness, Equity Analyst]

Okay. And just one follow-up question I had on Blue-Line. I think they were low prices in the marketplace. So is that -- do you think that will be helpful from a rate perspective or do you think that there's more volume that could come your way?

[Geoffrey Drabble, CEO & Director]

Look, I believe that consolidation in the marketplace typically improves the pricing environment. It's true, Blue-Line were not premium prices in the marketplace. If you do the maths from [indiscernible] both the NPV, the tax losses, there's about -- over [800 million ] of tax losses carried forward. That was in the business. That made a lot of profits or priced very high. So it being under the ownership of United [indiscernible] helped the overall environment as does other consolidation. So I think lands a very important point. I think we talked about this over the year-end. We talked about this gap between ourselves and United and the rest, and I think it just further enhances capacity as do our bolt-on M&A.

[Operator]

Our next question comes from the line of Steve Woolf from Numis Securities.

[Steven John Woolf, Analyst]

I'm left with sort of wage growth and sort of finding people in the market at the moment. Could you sort of talk about those elements of -- so with the employment and the U.S. at the moment?

[Geoffrey Drabble, CEO & Director]

Yes, it sucks, which is why I'll live it to Brendan to answer that question because he's dealing it more hands on than I am at the moment.

[Brendan Horgan, Group COO & Executive Director]

Yes, Steve. I think that it's -- obviously, we talked about it quite a bit. It is not easy to find -- particularly, I think when you look at the employee base that we referred to as the skilled trade positions, drivers, technicians, et cetera. But I will say probably similar what we would've said at full year. When you think about where those employees can go to work, what potential employees can go to work, I think it is the likes of us and maybe a couple others out there that are more likely to attract those that are career minded and looking for opportunities to advance. So by no means am I saying this is easy. There's no question it is a burden, to a degree, on the business. But let's not forget also that, that is one of the tailwinds from a structural change standpoint. So we see the benefit of that in that our customers, if we struggle when it comes to drivers and mechanics, think about a small shop that may own a couple million in kit or maybe 1 million. But they will really struggle, so we see the advantage of that. And then it's also, from time to time, when we do augment our greenfield program with some of these bolt-ons, like what we did with Interstate. If you look at that Interstate business in that geography, which was so important to us, that comes with not only a great sales force but a very seasoned and tenured group of mechanics and drivers who are very well known in the market. And we bear hug those employees like we do new recruits as well. So complicating it for sure but I think, in a way, healthy win.

[Operator]

There are currently no more questions in the queue. So I'll hand the call back to you speakers.

[Geoffrey Drabble, CEO & Director]

Yes, okay. Well, if there's no more questions, I guess, I'll apologize for the rather disruptive nature of this call. And we look forward to speaking to you again in December. Thank you very much indeed.

[Michael Richard Pratt]

Thank you.