Inventiva SA

PAR:IVA

Hello, and welcome to the Ashtead Group plc Q3 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. Please go ahead.

Thank you, operator, and good morning, everyone, and welcome to Ashtead Group Q3 results presentation. I'm speaking from our U.S. support office and joined by Alex Pease and Will Shaw. As you know, Alex joined in October and formally took over from Michael as CFO at the end of February. Since joining, Alex has been highly engaged, getting to know our people and our business and working closely with Michael and the broader finance team to ensure a seamless transition. I speak on behalf of so many of our colleagues when expressing the gratitude we have for the countless contributions Michael has made to the success of our business.

To consider, just for a moment, the then and the now difference in this business, be it our sheer scale, profitability, financial strength, or track record of success during his 21 years, it's a body of work over a career that anyone should be proud of. And personally, what a pleasure it's been to partner with Michael over the years. So for this, it's more of a see you later than goodbye, as we'll continue to have access to Michael's wise counsel until September, when he formally retires from the group.

Before turning to slides, and as we always do, I'll begin this morning by addressing our Sunbelt team members listening in, specifically recognizing their leadership in the health and safety of our people, our customers and the members of the communities we serve. In December, we closed our calendar year with a total recordable incident rate of 0.65 and a lost time rate of 0.11. Both of these metrics represent record performance in frequency and severity, the precise intent of Engage for Life.

Additionally, we successfully launched our driver safety profile in January to anyone in our organization operating Sunbelt Rentals vehicle. The driver safety profile is a proprietary system, which deploys a risk-based approach to reducing our exposures on the road. And although early in development, we are already seeing positive trends. The key to this really is it's another example of not allowing complacency into our culture. So thank you. Thank you for your efforts to date and your ongoing commitment to Engage for Life.

Given it's Q3, we'll keep today's update relatively brief, starting with the highlights on Slide 3. The business delivered strong performance in the period with group and U.S. rental revenues up 5% and 4%, respectively, trading in line with our December guidance. Total revenues were flat year-on-year, largely reflecting lower used equipment sales as we expected. These rental revenues and strong fall-through delivered group EBITDA growth of 3% to $3.9 billion, PBT of $1.7 billion and EPS of $2.91. These are record revenues and EBITDA for the first 9 months with EBITDA margins of 47% at the group level and 49% in the U.S. And before the impact of lower gains on asset sales, these are record PBT levels as well.

From a capital allocation standpoint, in accordance with our Sunbelt 4.0 priorities, we invested $2.1 billion in CapEx, which fueled existing location fleet needs and greenfield openings. We expanded our North American footprint by 54 locations through 43 greenfield openings and a further 11 through 2 bolt-on acquisitions. Despite these levels of investment, we delivered free cash flow of $858 million in the 9 months. We commenced a new shareback (sic) [ share buyback ] program, of course, in December of up to $1.5 billion over 18 months and finished the period at 1.7x net debt to EBITDA, comfortably within our long-term range of 1x to 2x.

Our team is laser-focused on Sunbelt 4.0, advancing each of the 5 actionable components, which you know as customer, growth, performance, sustainability, and investment. I'll highlight a few successes beginning with the growth among our largest U.S. customers, specifically our top 200, where our strategic account team and the organization at large are advancing our relationships and positioning to deliver greater than 20% rental revenue growth year-on-year with these customers. These wins have been gained through mega projects, cross-selling and embedding win-win partnering programs, all obsessed with the success of our customers. There's a broad group of customers servicing construction and non-construction end markets.

Second is our full launch of VDOS 4.0, our vehicle dispatch optimization system, which many of you would have seen when we were in Atlanta at Powerhouse, which has been reimagined and repowered to improve availability, utilization, efficiency and user experience, resulting in more wins through a clearer path to say yes to our customers. Every branch and market logistics operation is using this new system and beginning to realize its early benefits.

And third is the growth and margin progression of the 401 locations that we opened or we added during Sunbelt 3.0. These locations have collectively grown rental revenues 30% in the 9 months versus last year, while progressing EBITDA margin in excess of 300 basis points, a key deliverable in our overall plan to improve margin by 3% to 5% over the course of Sunbelt 4.0. These results and investment activities demonstrate our confidence in our end markets and the fundamental strength in our cash-generating growth model. End market conditions remain broadly as they were in December. And accordingly, we expect full year results in line with our December guidance.

In December, we announced our intention to move our primary listing to the U.S., and following extensive engagement with shareholders, resulting in broad support of the proposed move, we announced our plans to proceed by seeking shareholder approval at a June EGM with the U.S. listing expected to take effect in the first calendar quarter of 2026.

And with that, I'll hand it over to Alex to cover the financials and outlook in more detail. Alex?

Thanks, Brendan, and to our colleagues in the U.S., good morning, and to those of you in the U.K., good afternoon. Thanks for joining. The group's results for the 9 months are shown on Slide 5. Group rental revenue increased 5%. Total revenue was flat, reflecting the planned lower level of used equipment sales. Our growth was delivered with strong margins and adjusted EBITDA margin of 47% and an operating profit margin of 26%.

As expected, the lower level of used equipment sales resulted in lower gains on sale of $58 million compared with $165 million a year ago, which affects the absolute level of EBITDA and operating profit. After an interest expense of $429 million, adjusted pretax profit was 5% lower than last year at $1.7 billion. The higher interest expense, which increased 7% compared with this time last year, reflects principally higher absolute debt levels. In the press release, you'll notice that we have amended our disclosures to adjust out nonrecurring costs associated with the move of the group's primary listing to the U.S. These amounted to $5.8 million in the period. We will continue to track these as we move through this and the next fiscal year. Adjusted earnings per share were $2.91 for the 9 months.

Turning now to the businesses. Slide 6 shows the performance in the U.S. Rental revenue for the 9 months grew by 4% to a record $6.6 billion. This has been driven by a combination of volume and rate improvement, demonstrating the power of our diversified business model as well as our disciplined execution. As Brendan will discuss later, strength in mega projects and our hurricane response efforts have also mitigated ongoing weakness in the local commercial construction market. We estimate that hurricane response efforts contributed between $90 million and $100 million to rental revenue in the 9 months, weighted more heavily in the second quarter. The flat total revenue reflects the lower levels of used equipment sales compared to last year, which I referred to earlier.

The third actionable component of Sunbelt 4.0 is performance as we look to leverage the infrastructure and scale developed during 3.0 and improve margins. The team is making strong progress driving value from our significant investments in logistics, telematics and maintenance execution, and we're already seeing results. The team is also demonstrating strong cost control discipline with operating costs almost 3% below prior year. These actions contributed to a drop-through for the 9 months of 71% and an EBITDA margin of 49%. Reflecting the impact of lower gains on disposals and the higher depreciation charge on a larger fleet, operating profit was approximately $2 billion at a 28% margin and ROI was a strong 20%.

Turning now to Canada on Slide 7. Rental revenue was 16% higher than a year ago at CAD 662 million or USD 478 million. The major part of our Canadian business, excluding the Film and TV business, is performing well with rental revenue up 12%, driven by volume and rate improvement as it takes advantage of its increasing scale and breadth of product offering. Following settlement of the strikes in North American film and TV industry, activity levels demonstrated a reasonable recovery, but remained somewhat soft which, when combined with some uncertainty related to tariffs and non-resi construction, is leading to a weaker outlook, which I will discuss in a few minutes. Overall, the segment contributed an EBITDA margin of 45% and an operating profit of CAD 139 million and USD 101 million at a 19% margin, while ROI is 12%.

Turning now to Slide 8. U.K. rental revenue was 4% higher than a year ago at GBP 461 million or USD 589 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 and will in the future. As a result, the U.K. business delivered an EBITDA margin of 29% and generated an operating profit of GBP 44 million or USD 56 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 9 sets out the group's cash flows for the 9 months and the last 12 months. 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, particularly the collection of receivables, which has resulted in cash flow from operations of $3.7 billion in the 9 months. As many are aware, 2 of the key attributes of our business model is both the resilience across a range of market conditions, which I have mentioned previously, as well as the agility with which we can control capital spending, reallocating capital dynamically to maximize value for the enterprise.

In this environment, where demand is lower and we have some latent capacity, we spent $2.4 billion compared with $3.8 billion last year. We adjusted our priorities to principally fund fleet replacement as well as some pockets of growth. This strategy generated free cash flow for the 9 months of $858 million and $1.5 billion over the last 12 months despite some of the transitory softness that we have discussed.

While we've reduced our capital expenditure this year, 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 we've dynamically reallocated our spending to growth markets such as power and HVAC, our specialty businesses more broadly, as well as mega projects where the demand is higher. We're also using our improved logistics and telematics systems to proactively reposition existing fleet to higher growth markets. One example of this is utilizing latent capacity in our network to fund more than 60% of the equipment required in our greenfield locations. This is how we can continue to grow even when our absolute spending in capital dollars is lower.

Slide 10 updates our debt and leverage position at the end of January. The decrease in debt in the period relates to a reduction in external borrowings, partially offset by an increase in lease liabilities. In addition to the capital expenditure, we returned $387 million to shareholders through our dividend and $88 million through share buybacks at an average price of just over GBP 51 per share. As a result, excluding lease liabilities, leverage was 1.7x net debt to EBITDA, well within our stated range of between 1x and 2x, and we expect to be in the 1.5x to 1.6x range at the end of April. This includes the impact from the share buyback program, but does not include any potential impact of M&A activity. On the M&A front, we have a robust pipeline, which we continue to develop and will pursue opportunistically as long as it is accretive to growth and generates margins and return in line with our capital allocation expectations.

On Slide 11, we show the structure of our debt. We've said previously that a strong balance sheet gives us a competitive advantage and positions us well for the medium term. In November, we amended and extended our senior credit facility such that we now have $4.75 billion committed until November of 2029. Pricing has been adjusted down slightly and is based now on the applicable interest rate plus a margin of between 1.25% to 1.375%. Other principal terms and conditions remain unchanged. One key feature of our debt is the maturity schedule, and we have no imminent maturities. The extended profile is smooth with no large individual refinancing needs. That being said, we do have a $550 million maturity coming due in August of 2026. Given our extremely strong liquidity, low-cost ABL and attractive rate of 1.5% on that bond, we will likely not undertake to refinance the paper until much closer to the August 2026 time frame. As a last point on the capital structure, our debt facilities are committed for an average of 6 years at a weighted average cost of 5%.

Now turning to Slide 12 and our guidance for revenue, capital expenditures and free cash flow for this year. At a consolidated level, results are in line with expectations that we set in December with group revenue growth unchanged within our original range of between 3% and 5%. By region, we're providing the following updates. We expect U.S. rental revenue growth within our original range of between 2% and 4%. In Canada, we expect rental revenue growth between 9% and 13%. And in the U.K., rental revenue growth at the low end of our original range of 3% to 6%.

As a reminder, our Canada business total rental revenue represents approximately 6% of the total group revenue and the revised outlook represents approximately $35 million or less than one-half of 1% of our consolidated fiscal year 2024 group rental revenue. From a capital expenditure standpoint, our range of $2.5 billion to $2.7 billion is unchanged as we continue to reallocate our capital dynamically and optimize our fleet size to drive utilization. Based on this guidance, we expect free cash flow for the year of at least $1.4 billion.

As we mentioned to a number of you following our first half results, we're planning to update our fiscal year 2026 capital and revenue guidance when we report our fiscal year 2025 results and our fiscal year 2026 budgeting process is complete, which is in line with more normal practices.

And with that, I'll turn the call back over to Brendan.

Thanks, Alex. We'll now move on to some operational detail, beginning with the U.S. on Slide 14. The U.S. business delivered good rental-only revenue growth in the 9 months of 4%. Specialty performed strongly with growth of 14% in the period with General Tool up 1%. This, of course, includes some puts and takes as it relates to the hurricane response efforts, as Alex covered.

As expected, we continued to realize somewhat softer local non-res construction market activity through the quarter, offset in part by the ongoing strength of the mega project landscape and the broader non-construction markets. Importantly, rental rates have continued to progress year-on-year, doing so despite industry utilization levels still lagging highs reached in previous years. This is ongoing affirmation of the progressing structural change in the business and leveraging our internal pricing tools and disciplined rate approach.

Moving on to Slide 15, 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 and starts momentum and put in place. Outlook for construction growth continues to be underpinned by mega projects and infrastructure work, which continue to gain 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-function sellers and solutions experts are highly engaged with these contractors, our customers and, in many cases, the owner or developer themselves, bringing a broad range of solutions and capabilities to bear on these not only large but highly complex projects. At the same time, the local commercial construction space is softer than it was in recent years, as the prolonged higher interest rate environment has weighed on local and regional developers. This predominantly impacts some of the small, mid and regional-sized contractors, SMEs, as some will refer to it, which is a powerful and important segment of our customer base. It will take some time for this segment to see meaningful uptick. However, it will rebound. And when it does, I think it will quite strongly.

When this inevitability happens, we're in a position of strength to benefit with customer relationships, coverage of products, services and markets and capacity, all part of our long-held clustered market strategy. There are some recent positive indications, which you'll gather from the improving momentum index on the bottom of the left slide. This Dodge Momentum Index grew 6% in January, coming from both commercial and institutional planning increases. In fact, the growth was diverse to the extent that every tracked nonresidential vertical experienced positive momentum in the month. This DMI measure was up 26% when compared to a year ago, with the commercial segment up 37% from January of '24 and institutional up 9%.

Of the projects entering planning, 33 were valued at $100 million or more. Notably, 6 of the 33 meet our definition of mega projects. We, of course, define that as $400 million and above internally, and therefore, 27 were below that level, which was a nice mix of lodging, hospitals, schools, warehouse and smaller data centers. So it's examples like this that highlight the inevitability of heightened activity, to which I've covered our readiness to benefit.

Moving on to Canada on Slide 16. Our business in Canada continues to deliver good results with rental revenue growth in the 9 months of 16%, coming from existing General Tool and Specialty locations as well as greenfields and bolt-ons. And as is the case in the U.S., rental rates continued to progress in the 9 months, which we expect to continue to be the case moving forward. Alex has touched on the more current trends. Despite this, our focus in Canada is clear and the actions embedded in the 4.0 plan are to continue to increase our addressable markets beyond construction as we've done so well over the years in the U.S. Our runway for growth, improved density, market diversification and margin improvement remains.

Turning to the U.K. on Slide 17. The U.K. delivered rental revenue growth of 4%, driven by market share gains in an end market, which continues to favor our unique positioning through the industry's broadest offering of General Tool and Specialty products, which is unmatched. The Sunbelt 4.0 plan for the U.K. will lead to an ever more diverse customer base and increased TAM, while bringing greater focus and discipline on the necessary levers and actions to deliver acceptable and sustainable levels of ROI and free cash flow. This business has transformed in recent years. And as I've said previously, Sunbelt 4.0 is designed to add the final piece to this transformation.

Turning now to the summary on Slide 18. Our performance has been strong, and we are very well positioned in overall healthy end markets. Trading is in line with our December guidance, and we've reaffirmed our full year expectations for the group. Our road map is clear, and the organization is laser-focused on 4.0 execution. We're making good initial progress with our plans to move our primary listing to the U.S.

And finally, I'll highlight a few key takeaways from today's update. The strength and optionality of our business model, clear demonstration of the outputs of structural progression in our business and our disciplined approach to profitable growth. These factors, combined with our strong margins and cash flow through the cycle, provides us a great amount of flexibility and capacity in our allocation of capital in line with our clear and well-understood priorities. Our outlook is positive and our confidence in executing and delivering our Sunbelt 4.0 plan is high. And as such, we look to the future with confidence.

And with that, operator, we're happy to open the call for Q&A.

[Operator Instructions] And up first, we have Lush Mahendrarajah from JPMorgan.

I've got 3 questions, if that's okay. And I can take them one at a time, if that helps. The first is just looking at Slide 14 and that fleet on rent chart and sort of the green line for '24-'25 pulling away from '23-'24 in February, I guess. Can you just give us color what's happening there? What was February trading like? And I guess, was there any benefit from sort of the fires in California in there as well?

Go ahead and fire away, Lush, give us all 3.

Okay. The second is on CapEx. Just looking at the guide versus sort of what you've done year-to-date, does that imply there's not really any or sort of minimal rental CapEx to be done in Q4? Just checking my math there. And then as we go into next year, how should we think about that? Is it just sort of replacement, I guess, and sort of very limited growth, because I presume you've got some time to sort of grow into. And then thirdly was just on margins and drop-through, obviously, sort of another strong sort of drop-through in Q3, although I appreciate it's on small numbers. I guess, how should we think about drop-through going forward through sort of Sunbelt 4.0?

Great. Thanks, Lush. I'll start with your first and Alex may add some color to it. I mean, first things first, it's better that the line is above rather than below. So there's some positive indication there in terms of momentum. Obviously, when you look at how that translated into rental revenue, there's a bit of mix influencing that. I would be careful here not to get too carried away, let a few months equal a trend rather than a month. But nonetheless, I think it's showing some of the benefit there. And as it relates to CapEx and margin drop-through, I'll turn it over to Alex.

Sure. So on your CapEx question, I think you're largely right. As we think about what happened in Q4, the balance of the year, it's largely focused on replacement versus where we were at the earlier part of the year. But that being said, I think it's really important to focus on the point I made in the prepared remarks about how we're dynamically reallocating capital from areas where we're experiencing lower growth, particularly in the General Tool business and kind of the local non-residential construction and reallocating that to areas where we're experiencing higher growth, Power and HVAC being a very good example. And I think you should really expect that as you look out to next year.

Obviously, we're not at a point where we're providing CapEx guidance at this point. But it's reasonable to expect, as Brendan has mentioned in all of his remarks, that the small, medium enterprise and the local non-resi construction market will continue to be soft, at least for the first half of the year, which means in that portion of the business, we'll focus largely on replacement, but that's not going to come at the expense of opening greenfields, repositioning capital that's latent currently in the network to source those greenfields and then funding pockets of growth like Power and HVAC. You did ask a small question around hurricanes and the fire impact. And I would just say that, that's fairly de minimis as it relates to our overall capital expenditure plan.

And then your last question was on margins. And I just think it's really a tribute to the team and the cost discipline that we've demonstrated. The market conditions have been turbulent. We can't control that. But what we can control is our cost and rate discipline and driving utilization, and that's reflective in the 71% drop-through. If you were to look historically, that's incrementally probably 300 to 400 basis points better than it has been at prior periods this year and as much as 10 to 13 percentage points better than it has been in prior years. So that just shows the continued margin progression of the business as we get into Sunbelt 4.0. So hopefully, I hit on the majority of your questions. Brendan, anything I missed?

No, I think that's great. Lush, thank you.

I'm sorry, can I just sort of check, just in that February number, there isn't -- I know you said in relation to CapEx, but is there any impact from sort of hurricanes or the California fires in the sort of February number?

In February, there would be no hurricane impact. And as I said, we do have some power and fencing equipment in response to the fire efforts, but it's fairly de minimis.

And we're moving on to a question from Rob Wertheimer from Melius Research.

The comment you made on just being able to sort of fill the greenfield sites with some of the fleet you have in excess was interesting. I know this is a little bit of an unfair question, but do you have room to continue that for a while? And then more just thinking about growth in an industry where the smaller end has slowed. I'm not sure how you think tactically about greenfield versus acquisition growth, if that's even possible. I wonder if it's likely that we see a shift towards acquisition as some of your smaller competitors have slowed down?

Yes. Thanks, Rob. We do think as we continue to fuel these greenfields, it's 2 ways. One, it's some of the latent capacity Alex mentioned just in the marketplace where we open these new locations. And if you really think about it, it points to, obviously, when we do add a greenfield, those are market share gains. And as I mentioned, of the 400 locations over the course of 3.0, which was between greenfields and bolt-ons, look at the strength and the growth, 30% year-on-year and also progressing the margins, as I had said.

But the other way that we will fuel greenfields prospectively during this sort of environment is with what our replacement CapEx plans will be next year. So we'll do that very last minute test. If we have telehandlers to replace in a metropolitan area where we're also opening a greenfield and in one portion of the town or for that matter, another town or another metro area altogether, we can divert that replacement CapEx where we find that there isn't the need in the Q2 or Q3, it may be, and also use that to fuel the greenfield openings.

Your question is a really good one when it comes to greenfield bolt-on in a market environment like this. Obviously, we have been quite disciplined, as you know, when it comes to bolt-ons and holding our line from what we're valuing these at, which takes a bit of time. I do think you're going to see that turn in the quarters to come, and you're going to see more of our bolt-on engine revving up. The environment is interesting right now in terms of who there are buyers out there for some of these businesses, and we like our positioning with that. But we wouldn't completely put the greenfield program on ice as we always do, we'll assess where we want to be geographically, which we have that road map for throughout 4.0. And we'll look to see what sort of independence could be there to replace that greenfield.

But certainly, that alleviates, to some degree, some pressure when it comes to the amount of fleet overall that's put into a market. I hope that answers your questions, Rob.

There's one other point that I'd make, Rob, just to help with the quantum of the greenfields and the bolt-ons. Brendan mentioned the 401 locations growing 30%, which obviously is a great metric. The other great metric is the total rental revenue contribution from that is $1.15 billion. So it's a meaningful contribution to the overall growth story.

And from Goldman Sachs, we now have Suhasini Varanasi with our next question.

I have 3, please. The first one is on the U.S. Organic rental revenue growth feels like it slowed a little bit in this quarter, especially when adjusting for the hurricane activity. Can you maybe discuss what changed Q-on-Q, whether it was local commercial construction or whether it's mega projects? And can you also share latest trends in February? And the second one is on tariffs, please. Do you see the risk of tariffs affecting cost of construction and therefore, the ability of projects to start and finish on time, on budget in the U.S.? And the third one is, can you maybe -- on larger M&A transactions in the space, can you just remind us your thoughts on doing larger deals versus smaller bolt-ons?

Sure. When it comes to the quarter, I mean, you're right. Clearly, we can see, between Q2 and Q3, there was one part of that, of course, being a heavier, as Alex had mentioned, hurricane impact in the quarter. But I think really, when it comes to end markets, it is what we saw in December. So no real change there in terms of that local piece. But I want to expand on that a bit.

When you think about our business and our business model as it relates to a very or a highly diversified end market, we do lean, as an organization, compared to some others out there, more heavily on that SME overall end market. And we do that unapologetically. In other words, we like that mix through the cycle. I've said it quite clearly, that market will rebound. And when it does, we are poised remarkably well to take advantage of that. And that is really the heartbeat of America in so many ways, that SME network, which we are positioned in order to progress. One of the questions was on February trading overall, Alex.

Yes, sure. So maybe just before I answer that question directly, I really do think, as Brendan points to frequently, you have to look at the individual subsegments of our business when you talk about the overall growth story. So even though GT is a little bit soft because of the non-resi construction that we're talking about, mega project activity continues to be incredibly strong and the Specialty business is still growing in double-digit percent. So it just underscores the power of the diversified model that we're building here. February trading, I would say, is in line, right? So we're sort of flattish year-over-year, which is in line with our expectations, and we have every confidence that we're going to deliver on the guidance that I reiterated at the end of the call.

You did have a question, before I turn it back over to Brendan on the larger scale M&A, on tariffs, the impact on construction and kind of on our business. We've actually done some analytics. And I would say the anticipated impact on our business is relatively small, call it, $25 million, $30 million in EBITDA, and it's really concentrated in 2 primary areas. The first is the small piece of equipment that were the import of record from some of the tariff-impacted countries. And then the component parts that our suppliers are bringing in, that represents about 5% to 10% of our total spend.

So in terms of our underlying economics, I would say we're really sort of not heavily exposed. In terms of others, our competitors, our anticipation is that they will be more heavily exposed to tariff impact because of their sourcing strategies for their capital. And I don't really have a strong point of view yet on how that will impact local construction. If you're a bull, I think you could say it's incrementally positive, because it will drive increased reshoring or onshoring of domestic manufacturing. That's certainly one intention to ramp up our domestic manufacturing. And it will increase the focus on a Build America manufacturing base. But I think it's really too early to say for sure.

And maybe I'll turn it over to Brendan to talk philosophically about larger scale M&A versus some of the bolt-on strategy we've had.

Yes. I mean it's been an interesting period, hasn't it been, when it comes to M&A activity in the industry. I would say a couple of things. One, none of what has happened, whether it be on the smaller bolt-on end or the larger M&A, were businesses that we wanted or fit, more importantly, our overall strategy. Not criticizing any of the deals that have happened at all. I think they're all perfectly fine for the buyers and the sellers. As you know, we've said consistently, we like our lean from a greenfield and augmenting and adding to that by way of bolt-on M&A.

And from a larger scale standpoint, particularly those with significant overlap just isn't what our strategy is built on. Certainly, from a Specialty standpoint, we've said very clearly that if we can significantly add to one of our Specialty business lines or add something that isn't in our overall makeup, that's something that we would certainly consider. But I think it's quite clear in terms of 4.0, what our strategy is, and none of these moves are changing that strategy whatsoever.

That's very clear. Just one quick follow-up. Just to clarify, when you mentioned February trading was flattish year-over-year, was that the organic rental number that you were talking about in the U.S.?

I'm sorry, that's all we can give -- yes, that would all be really...

All Alex is saying there is rental revenue in the U.S. is all we would ever quote at this stage, considering the ink is dry now, is flat rental revenue on a billings per day basis in the U.S.

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

I know the visibility is still relatively limited, but just curious what your thoughts are on where we are in the rental cycle and what you're looking for to really give you that confidence that a demand inflection is coming within those local accounts?

Katie, I think when you look at it, there are a few things to consider where we are in the rental cycle. Of course, we will, in June, alongside of our full year results, as Alex has mentioned, give guidance in terms of revenue and CapEx. And that second piece is very important when it comes to CapEx. And what we've seen in the industry has been a very disciplined CapEx approach. And that's a key ingredient as we're navigating this transitory state from a local end market.

What we're seeing in local end markets, as I would have indicated in my opening remarks, as I mentioned, projects entering planning. So planning is not to be confused with starting. All projects that enter planning won't necessarily progress to start. The vast majority will. And what that shows is demand. And the reason why I highlighted those 33 projects in January that were over $100 million was how many of them, 27 to be exact, were below that mega project level. And that's precisely what we're talking about when it comes to local ordinary run-of-the-mill non-res construction. So that is one of the breadcrumbs that gives us the overall confidence.

And furthermore, just this sort of lag that we've seen, and people really have to get their minds around, the real engine behind that local non-res construction, and it's these local regional developers. It's not the contractors themselves who are deciding, should I build or not build. They're all eager and ready to do so. It's just a matter of those developers sensing some level of stability from an interest rate environment. So as Alex has said, in no way, shape or form are we calling when we think we will see that. As time progresses, we will.

The key to understanding is where we are and where the industry is positioned, which is healthy. We're in a position to be able to, early on, as that inevitability happens, take advantage of those opportunities with our existing latent capacity. And therefore, from a CapEx standpoint, the important discipline to measure there, you don't start to invest that growth CapEx until such a time when you see actually that market turning.

So I think overall, look, we're in a great position. The industry structurally is in such a good position in order to navigate little patches like this. And as I've said, certainly, we lean in that SME space. But let's not forget how well we're doing as we continue to take more share. I mentioned those top customers, and that's a mix of, of course, mega project wins, but also just great contract wins and taking more share of wallet with these larger customers as we are so well positioned to do.

Okay. That's helpful. And then just another kind of broader macro question. Is there any concern around labor within the rental market, given this new administration in the U.S.? If labor is a bit more difficult to get on some of these projects, do you think there's a risk to maybe the local accounts in particular?

Well, when it comes to skilled trade, right, we've talked about this for so many years now. One of the great market dynamics that -- and I say great, meaning significant market dynamics we've gone through now for several years, most notably post-COVID, is just skilled trade scarcity. Skilled trade scarcity is a tailwind to structural progression and more specifically, deepening rental penetration.

Overall, these contractors -- I mean, is labor a risk to the total volume of construction? Are tariffs a risk to the cost of construction and therefore, delaying things? All of those things can be possibilities. However, projects will progress, just like we've seen in the mega environment. And we will see again when it comes to resi, when it comes to non-resi, they will make do. But the key to it really is, when it comes to rental, how rental is positioned overall for that, we're a great aid in that environment. Whereas in the end, you'll end up having a bit more equipment than you otherwise would have had with a bit less labor. And then furthermore, you'll have an even faster trend to rental away from ownership.

And our next question now comes from Annelies Vermeulen from Morgan Stanley.

Just I wanted to sort of revisit your Sunbelt 4.0 plan. I appreciate there are different components to the plan, but thinking specifically about your rental revenue growth, the CAGR of, I think, 6% to 9%. Clearly, growth is below that this year if we assume those softer end markets continue into the first half. I'm just wondering how much risk there is to that if you look over the total 5-year plan. Rates, I think, have stayed higher for longer than perhaps we anticipated when you set out that plan almost a year ago and a softer local construction market piece as well. So just wondering how you're thinking about that and how confident you are in growth in years 3, 4, 5 of the plan accelerating to compensate for a slower start, shall we say?

And then just 2 quick ones. You mentioned in the opening remarks that rates continue to progress. So just to clarify, you're still seeing positive year-on-year rate growth in the last quarter. And then lastly, on the U.S. listing time frame, last year when we spoke, there was a plan to move to U.S. GAAP accounting. Just an update on the timing of that, please.

Let me kick it off, and then I'm going to actually turn it over to Brendan, and then I'll wrap up with maybe some commentary on the listing time frame. But just as it relates to your question on 4.0, look, we're 6 months into a 5-year plan. We are certainly not going to back off our targets that we set. And there's no reason to indicate that the market is not going to continue to progress exactly in line with what we communicated. We're in a transitory period as we've talked about. So it's a little bit of a soft start, but in no way does that change our aspiration or our expectation for the future, and I'll let Brendan give a little bit more specifics, and then I can wrap up the progress of the listing.

You're precisely right. Annelies, on rates, yes, we've continued to see positive year-on-year movement there. We are very focused on that being a really key contributor to our growth over the years as we've so clearly laid out in Sunbelt 4.0. Let's not overlook the importance there when it comes to the CapEx piece that we've talked about before. And hence, what you're seeing in the marketplace is great discipline surrounding that, as you will see with us as we get forward to June and we talk about our overall levels of CapEx. So that keeps us in a really good position and enables us to continue to progress rates.

And our focus, frankly, is internally utilizing our tools, utilizing our dynamic pricing systems that we have, recognizing that throughout all of the deciles of our customer base, we have opportunities and, not least of which, a bit of an inflationary environment doesn't hurt that either. That actually adds a bit of momentum. And I think that, that's what you'll be hearing across the board. Just like you would have followed back in 2021, 2022, 2023, when there was such inflation, particularly around construction materials, which I think is an important one also for the audience here to contemplate when it comes to these tariffs. Construction has been through so many periods of significant inflation and construction just figures out how to deal with all that. But all of those are key features when it comes to our ability to continue to progress rate, both discipline, levels of fleet and this sort of inflationary environment. And finally, on U.S. listing?

Yes. So the U.S. listing, there's really not too much of an update other than what we talked about in the prepared remarks, which is that we anticipate being ready to ring the bell on the New York Stock Exchange in the first part of next year, so basically about 12 months from now. There are a number of process steps, which we can take you through probably off the call, one of which is the conversion from IFRS to U.S. GAAP. There's a couple of regulatory filings that we need to do. Really, the next milestone to focus on, as Brendan mentioned in his prepared remarks, is the EGM, which is scheduled in June, where we'll seek formal shareholder approval. And we'll keep you posted on how the progress goes, but no change in our expected time line at this point.

And from UBS, we now have Rory McKenzie with our next question.

It's Rory here. Two questions, please. Firstly, good to hear rental rates are still progressing, because some of the external data suggests that it looks quite flattish. Are there any regional differences within that rates picture? And anything you could say about current tenders which are going out there into the market on rate? And then secondly, in terms of CapEx plans, have you still done the first round of budget forecasting internally at this point? I guess, is not giving the first look CapEx guidance anymore just a change in external communication? Or are you also changing your internal processes given some of the volatility you've seen over the past couple of years?

Thanks, Rory. I'll take the first and turn the second over to Alex. Rates really, there is not much change throughout our regions, throughout our Specialty business lines. And the key to that really is when you think back to what I mentioned just a minute ago around our internal dynamic pricing systems. So those systems are driving the results and driving the goalpost, so to speak, that our sellers can work within. And when it comes to tenders that are going on, which there are lots today, specifically around these mega projects, which, of course, are heftier than the average quote that happens on a Thursday afternoon for a Friday morning rental transaction.

And embedded in all of those and then, of course, discussed with our customers are rate increases. And those rate increases with those customers from sort of project to project which, frankly, when you talk to them about, they understand. And furthermore, what they really care about, they care about that mantra you've heard us talk about over and over, availability, reliability and ease. These customers recognize so much that uptime and the right product for the application and the right team that's actually engaged in these projects, that's the difference maker when it comes to them successfully completing their project on budget and successfully completing their project on time. So frankly, as you go through those conversations, it's not the hurdle perhaps you may think it is. Of course, rate is a consideration. However, contract after contract, renewal after renewal, we continue to see rates progress.

And Rory, I'll take the CapEx question. I appreciate you asking it. A couple of things, a couple of comments. First, we are in the middle of budget planning, which is in line with the way we've planned the budget since well before my tenure. So there's literally no change given the market conditions that we've talked about. The only change is that it makes sense to talk about our capital spending when we're talking about our holistic set of expectations for the next fiscal year. And so we've just aligned that accordingly. And so that's kind of maybe a specific answer to your question.

I would say there's a bit of a nuance and I got at it in my prepared remarks that capital allocation and capital planning is a highly dynamic process. This isn't something that we snap a chalk line on at the end of a fiscal year, and it's locked in stone for the next fiscal year. We're constantly evaluating our utilization rates, where the growth is happening, repositioning our capital, what our needs are. So that's going on in real time with the fleet team. Literally every day, they're waking up and working with the line leadership to figure out how to meet our needs and continue to grow the business. So really, you should take great confidence in the fact that we're allocating our capital dynamically to unlock the growth pockets and manage utilization where we can.

I would just add to that, Rory. If you really think about it, it's just us giving CapEx guidance, as we've done over the years, and once upon a time, there may have been some sense behind giving that CapEx so early, but there's just no point in us doing that going forward. So this is far more in line with what anyone else out there would do, not just in our industry, but in any sort of reasonably capital-intensive business, you give that guidance early on in your new fiscal year and in line with -- or at the same time as you're giving your initial revenue guidance.

It makes sense. I guess I'm just a creature of habits. I'm missing that at first look, but it makes sense.

No, I understand, Rory.

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

Following on from that previous question, I guess, in terms of capital allocation. Can you frame for us, either in terms of dollar or time, your thoughts on where you are currently running relative to where is realistic to get to? I'm thinking, obviously, there's been some quite significant fluctuations over the last few years. But one of the lessons you learned, I suppose, through the tighter period of 2021, too, in terms of how to run the fleet more efficiently. So at what point in maybe dollar terms, should we start thinking about the fleet needing to keep pace with revenue? So sort of in basis point terms sort of where we are?

And then the second question I had, in the context of the larger-scale M&A that's going on, how are your branches sort of located, positioned to be able to take advantage from any revenue dyssynergy that might occur in the HERC, H&E transaction?

Yes. Thanks, Neil. Look, first of all, when it comes to your question around utilization, I think there are a couple of things to consider. One, we don't quote time utilization, nor will we. We've mentioned that we have some latent capacity, and that comes from a few things. You pointed out the lessons learned as we went through and the entire industry went through such a prolonged period of supply constraints, coupled with a highly active and demanding high-demand end market. And therefore, we realized new highs. And one could set those aside and say that they were quite exceptional or anomalous given the extraordinary conditions that we face. But at the same time, we achieved that and we delivered that.

It was probably a bit too high when it comes to really just think of units in the yard or availability to say yes, so you probably want to just be a bit lower than that. But furthermore, our overall density, how we've advanced our clusters over the years and how our Specialty businesses have grown so much, whereas we have the ability to actually run at higher time utilization levels. So as we're going through this budget process and the business lines are looking through where we are from a utilization standpoint at a class level, at a total business line, et cetera, we know that there's opportunity to continue to advance that, and that's what we'll do over the years as you get larger. It's just the law of large numbers.

What you really need to pay attention to will be when we actually are in a year where we have a CapEx guidance early on and then all of a sudden, we're halfway through the year, and we dial up that CapEx guidance. That will be the signal that says we see utilization levels remarkably strong and opportunities in the end markets where we are positioned to seize that.

To your second question around the HERC and H&E deal, we're not going to quote anything in terms of proximity analysis, et cetera. You would just expect our business and our people out there to know what's happening there. But all we're doing is plain and simple. As we always do, positioning ourselves obsessed with our customers' success and being there for any needs that they may have. But these are professional organizations integrating these businesses, and they'll do just fine, as we will when we continue to focus on our customers.

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

A couple from me, please. If I just maybe look at the gen rent business and that minus 2% you posted in Q3, could you maybe provide a little bit of comment specifically about gen rent and the pricing versus kind of volume discussions there? I mean, assuming the general comments you made about pricing being positive, I guess it implies gen rent may be down minus 3% to 5%. And that feels a little bit weaker than some of at least the listed peers that we see more regularly. So maybe can you talk a little bit about what's driving that underperformance?

I kind of hear your comments on SME focus and that feels very relevant to maybe a URI, but maybe less so than some of the other larger rental names that would maybe be still heavily focused on that market. So I'm just trying to understand what's going on there. And then also maybe just mindful in the context of the 8% rental growth that you put in your market slides as well, which, again, if I'm looking at, a big chunk of that would be gen rent, if you're delivering slightly below that. So that's my first question.

Yes. Thanks, Allen. I mean the gen rent business, I mean, you put together some of the parts. Yes, there is rate progression there in the quarter, as there has been through the year. We would expect that to continue. So of course, you add that to a bit and you have a bit less volume there as well. Careful about the listed peers and the exposure there. We know the environment quite well, and we know the listed peers in terms of where they lean and what their legacy sort of customer composition is. And our composition is a bit more in that environment. As I've said, all part and parcel of our clustered market strategy. And we are doing great when it comes to taking share in the areas that are more flush with opportunity and work that's out there.

You mentioned other rental names that are out there not seeing that. I don't think -- I'd have to actually disagree with you there. And those that do have a bit more concentration in areas that we're talking about are seeing things that are highly similar. On that line, you're quoting, which is really the industry forecast and reporting, as we have consistently said, they're very good at looking back, not quite as good at looking forward. And I think you'll see some of those revise.

I mean if you think about who the reported peers are on an organic growth basis and on a like-for-like tape measure, i.e., the year ending December, I think you're seeing these being during this time, which is really, in a way, a hallmark of a structurally progressed industry, where you see some more likeness during periods of time like this, and that's exactly what we're seeing. So look, we are happy with the levels of revenue at this stage and poised, as we've said, throughout or consistently through the call when it comes to being prepared for the rebound. And further, as Alex has added during Q&A here, the growth of our specialty business and us taking share and continuing to do very well when it comes to mega projects at our largest customers.

Great. And then second question, as you think about the -- you can obviously keep the 2% to 4% U.S. rental guidance for the full year. Obviously, the 3Q rental growth steps down. That was against a slightly easing comp. I think the comp looks broadly stable, maybe slightly tougher in Q4, and you've talked about a flattish February. So could you just talk about the key variables as you think about the next couple of months that will drive you either to the bottom end or the top end of that 2% to 4% guidance, I mean, as you see it today?

And then just maybe the third question I just ask is a quick one. Can you just give us an update? Is there anything that you can say on the scaffolding project that you called out last year as being a headwind that got into trouble? Is there any movement on that maybe coming back into the numbers as we move forward?

So I'll take both of these, and I'll turn it over to Brendan for a little bit more color. On the guidance, I'll stick with what I said in the prepared remarks, we're within the range of the guidance that we provided of 2% to 4%. In terms of what would lead you more to the north end versus the south end of that, continued progression on the small, medium kind of nonresidential construction side would certainly be a tailwind that we'd welcome. That being said, I think you've heard Brendan say over and over again that we don't anticipate any kind of immediate bounce back of that. Everything else continues to advance. We obviously have a very strong pipeline of mega project activity. But given where we are 2 months left in the year, I think you can rest assured that we're within the range of the guidance that we provided, and I don't see a tremendous amount changing until we get into the middle part of next year.

As it relates to the scaffolding project, this was a large project that we were on where the contractor ran in -- the EPC firm ran into some financial trouble, and we had to take a large reserve. I don't want to get into too much detail prematurely just to say that, that is progressing quite nicely, and we expect to recover all of the accounts receivable balance that was tied up with that project. And Brendan can comment on the scaffolding business more broadly because, of course, we have seen some softness in that business really related to some of the challenges that we were talking about. But Brendan can talk about the operations.

Otherwise, outside of that, scaffold is steady as it goes. The project, of course, was not exclusively scaffold. E&D was a reasonably large part of that, but that's certainly part of a year-on-year where we haven't built anywhere near as much into that project just given the current state of it. But as Alex has said, all of the resolutions are working out quite well, and I'm sure we'll have an update on that when it comes to full year.

And from RBC, we now have Karl Green with our next question.

Yes, let me follow-up from Allen's question on GT. I mean if we switch gears to Specialty, again, looking at the Q3 performance specifically, you had a reasonably soft comp last year. We have the benefit this year of some of the hurricane response work. So I guess the question is, ex the hurricane response work, are you seeing a bit of a slowdown in some of the MRO-type work within Specialty? Or what else would explain that slight dip in terms of the trend performance versus a good first half of the fiscal year? That's the first question.

The second question, possibly I should be directing this to the Dodge guys rather than you, but it would be good to get your perspective. Just in terms of that strong year-on-year performance in the DMI, which historically has been a very good lead indicator with a 12-month lag for activity on the ground. Do you think in terms of the composition of projects which are being reflected in that acceleration in the DMI, that the 12-month lag actually potentially extends a bit? So it could be a little bit more of a gap before you start seeing that come through on your rental volumes and potentially CapEx budget impact as well?

Yes, I'll take the second first. That's why when we covered that real step change in DMI, making the note that it was less mega project leaning than what we've seen in previous periods. So I don't think that really would -- I wouldn't translate that into taking longer, because what we've certainly seen in terms of projects moving right rather than pulling forward is in that mega project space.

When you look at mega projects overall and you look at the planning and the starts, we're seeing more in that data center space. I mean it's quite rich in data centers, but these aren't data centers of old -- these are data centers that are $10 billion plus. And I think when you contrast that with, say, semiconductor or chip fabs, there's just a more seasoned and experienced progressing to start there. So these projects are better understood than, of course, semiconductors being built in the U.S., which, of course, hasn't happened in a long, long time. So I think that's actually quite positive.

And then again, as I said, in terms of mix, some of those smaller, I'd say smaller, between $100 million and just under $400 million projects that -- when you look at what that makeup was of those 27 projects being as broad as they were ranging from lodging to hospital, et cetera, those should progress to start when they want to in more accordance with the time line.

When it comes to Specialty, again, this is a business that, we've said over and over and we've demonstrated, has a long runway for ongoing growth, which is both structural and it's also part of the overall breadth of products and services that we can offer our customers. It doesn't mean that the line in terms of growth is always linear. We don't anticipate, as we would have said with 4.0, over the course of 3.0, the specialty business effectively doubled in 3 years' time. And we were quite clear that we didn't expect that sort of CAGR over the course of 4.0.

There will always be some tie there to sort of overall economic conditions when it comes to some aspects of that, FM, et cetera. But when we look at some of our wins in terms of the component parts of our business that will service those, we see those as being very broad. There's a nice mix of FM. There's a nice mix of MRO from an industrial standpoint that, of course, will absorb some of our Specialty products. But overall, we will see when it comes to going through the budget process in terms of what the Specialty business is shaping up as, but we'd expect that to be a business that grows more so than the General Tool business in the period to come.

And let me just clarify a couple of things. I'm not entirely sure I agree with your comment on a weak comp. So if you look at first half of 2024 year-over-year, we grew 16%; first half of this year, we grew 15%, so completely in line from a year-over-year standpoint. There's some normal seasonality. So if you look sequentially from Q2 to Q3 of last year, you see a slight step down, about $56 million step down from Q2 to Q3, driven by normal seasonality as well as some of the issues that we talked about earlier.

And then you are growing, as we mentioned, strong double-digit growth in Q3 of this year against that comp, but in line with the normal seasonality pattern. And some of that decline is going to be weather-related. So I'm not sure your point on lapping a weak comp is necessarily something to focus on.

And our next question now comes from Carl Raynsford from Berenberg.

Just one quick one left for me, please. On the Canada guidance downgrade, I just want to understand if there are any particular accounts that are slow to cause you to downgrade growth there? Or is it a broader softness of demand? So do you expect that softness to be temporary or structurally lower spend from film and TV studios and streaming platforms going forward?

Yes. So first of all, I want to put the Canada guidance into context. If you take the step down, as I mentioned in my prepared remarks, it represents about $35 million of revenue, which is less than one-half of 1%. So really, we shouldn't spend a whole lot of time talking about it. But your question is a valid one. And I think the way I would think about it is bifurcate the business from the core Canada business, which grew, I think I mentioned in my remarks, about 12%. And so that business is continuing to demonstrate rate progression, structural progression, everything that we talk about as we talk about North America more broadly. And that's being offset by some softness in the film and TV business.

It is recovering from the North America Screen Actors Guild strike that happened last year. So it is recovering, but there are some changes in the nature of content creation, which you'll know from your own experience as we come off COVID and there's less prolific generation of content from some of the streaming providers. So that is a little bit of a headwind. But relative to the core business, it's small and the core business is certainly performing very, very well.

Yes. The revision is proportionally weighted -- overweighted to film and TV.

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

I've got one more on the cost side of things. So in the U.S., I think EBITDA ex equipment gains has been growing ahead of rental revenue all fiscal year. Have you managed to achieve that? Can you carry on doing that going into Q4 and maybe the first half of '26? And what is the cost inflation profile you are experiencing right now?

Yes. James, thanks for the question. This is core to our actionable component #3, which is performance. And if you think about what we put out there in terms of our playbook to progress that 3 to 5 points over the course of our 5-year plan, Sunbelt 4.0, there were 3. Number one, leveraging SG&A. We invested in the SG&A of our organization during our explosive growth of 3.0. And over time, SG&A will be a lesser percent of our revenue, therefore, driving margin progression.

The second one was the progression of the 401 locations that we opened or added over 3.0. And of course, we've talked about that in terms of not just revenue growth, but also margin progression as those businesses begin to look more like our legacy locations. And then finally, is really putting in place, not just from a technology standpoint, but also extracting the value of our density gains over the course of our growth or over 3.0 and, therefore, further improving our margin. So what we're seeing, as Alex would have covered in his prepared remarks, is the discipline in the organization, recognizing what's going on from an end market standpoint.

I mean, if you think about it from an overall headcount standpoint, which, of course, is in the press release, there's really 3 buckets there. One, of course, is going to be the E&D year-on-year, which is roughly 1/3 of that delta. The second is going to be our efforts around G&A. As some of these projects take, for instance, in technology, are fully implemented, you don't need the level of developers that you had before. And these are developers who would have come on board recognizing that it's a couple of year plan and then they go on to find their next. And then the third bucket is going to be really just extracting the benefits as we put in place our market logistics operations, our market field dispatch operations, whereas we can leverage really the resources that we have and do it in a more efficient manner.

[Operator Instructions] And up next, we have Tom Burlton from BNP Paribas.

Sorry, I was cut off, so apologies if I seem to repeat anything here. A few from me. First one is just trying to figure out the kind of true underlying rental revenue performance in Q3, if I strip out the hurricanes, because I think you said at the Q2, I think it was a comment it was $55 million to $60 million, and you now said $90 million to $100 million for the first 9 months. So call it the $30 million then in Q3, it sounds like it was about a 2% tailwind to rental revenue in the quarter?

Yes, your math is right. It was $60 million in the second quarter, $40 million in the third quarter.

Okay. Perfect. So ex-ing that out, I guess, rental-only revenue down 1% in Q3. The second one is trying to, I guess, reconcile that with the earlier question, Slide 14, those sort of lines for fleet on rent. If fleet on rent was up in February and the exit rate was sort of flattish, help me understand kind of how that was possible with rental rates sort of flattish? I'm just trying to make sense of that and sort of appreciate you don't want to be too granular about the most recent rental rate, but just trying to get a flavor for what's going on there.

And then the last one is around mega projects, and it's been discussed a few times, but just thinking in an industry where, I guess, overall replenishment activity and utilization is under pressure and mega is kind of the one area of growth, just thinking what you're seeing in terms of incremental kind of competitiveness, pricing in mega projects and specifically with the tie-up of 2 of the major listed players or big listed players at least in the industry, I just wonder what that means from a competitiveness of maybe a larger, more relevant actor now in the mega project arena?

So maybe I'll kick it off and then turn it over to Brendan for some of the more strategic stuff. On the Slide 14, as Brendan mentioned, look, this is a positive trend. You're seeing sort of deviation or space between last year's trend and this year's trend is a positive thing. You can't -- it's difficult to translate that specifically to the underlying total rental revenue growth, because there's mix impact as it relates to the financials versus that trend line. But the way I would look at the Slide 14 is incrementally positive in terms of the momentum in the industry. And one of the big questions that has come up on a number of calls is where are we relative to the overall cycle. And I think that's a positive data point to suggest that we're sort of emerging out of the softer period that we've been in. So that was one of your questions. And then your second question was around mega project trends and rates. Is that right?

Yes, that's correct. The sort of pricing competitiveness on mega projects more generally and then the specific one sort of regarding H&E and HERC.

Yes. Look, first of all, mega projects, it is an area of good opportunity and great growth. It's not the only. We see many other areas of opportunity, our Specialty business, our greenfields, all the things that we've talked about throughout the call today. What you see there for these mega projects, as I would have said earlier, it may have been when you were off the line, the customers that we're engaged with or the customers that our counterparts are engaged with, what they're looking for is a successful rental operation, a successful safety operation, a provider who is successful in providing a very, very broad range of products and services to these projects in order for them to successfully deliver on what their job is.

So although pricing is part of that, let's not confuse things by saying pricing is first and foremost in this. As we said earlier on the call, from contract win to contract win, we can progress rates on these projects. And look, first of all, there's no transaction that's even done yet. So let's get past the actual closing and then get through the integration, et cetera. There are few in the industry, whether it's before or after the closing of that acquisition, who are capable of delivering what these project demands are, which are quite rigorous. So our positioning remains significantly robust, and we will continue to take outsized share in this mega project landscape.

As there are currently no further questions in the queue, I'd like to hand the call back over to Mr. Horgan and Mr. Pease for any additional or closing remarks.

Great. Thank you, operator, and thank you all for dialing in this morning and afternoon and for your engagement. We'll look forward to updating all of you in June with our full year results. Have a great day.

Thank you for joining today's call. Ladies and gentlemen, you may now disconnect.