Ashtead Group PLC (OTCPK:ASHTY) Q1 2019 Earnings Conference Call September 11, 2018 3:30 AM ET
Executives
Geoffrey Drabble – Chief Executive Officer
Michael Pratt – Group Finance Director
Brendan Horgan – Group Chief Operating Officer
Analysts
Rajesh Kumar – HSBC
Rory McKenzie – UBS
Andy Murphy – Merrill Lynch
Will Kirkness – Jefferies
Steve Woolf – Numis Securities
Geoffrey Drabble
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 update, so after a brief explanation of the financial performance and operational trends we’re seeing in the market, we’ll move on simply to Q&A.
So let me get into a few highlights from this 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 on our strategic objectives with 19 greenfields opened in the U.S. and the 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 the moment as I think they highlight a range of opportunities available to us to both grow and diversify the business. Having committed GBP 300 million to date, you will have also see from today’s press release that we’ve increased and extended the share buyback program, which I will cover in more detail later. This level of buyback allows us to continue to focus on investment in organic growth and both on M&A, whilst maintaining leverage within our target range of 1.5x to 2x EBITDA. So once again, a consistent execution of our long-stated of capital allocation priorities and an adherence to responsible growth.
The business continues to perform well to support end markets and a clear operational strategy for further growth. So the benefit of weaker sterling, we now anticipate results ahead of all original expectations and we can look to the medium-term with confidence.
So with that, I will now hand over to Michael to cover the financial detail for the quarter.
Michael 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 for 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 five 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% of constant currency. The more significant 46% increase in earnings per share, reflects the benefit of the lower U.S. tax rate, resulting an overall effective tax rate of 24% compared with 34% a year ago.
Turning to the businesses, Slide 6 shows Sunbelt US’s first quarter results. Rental and related revenues 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, plus maintaining the EBITDA margin of 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 contributed a revenue of $77 million and 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 27% for the Canadian business after the effects of M&A. Consistent with these expectations, Q1 margins were 37% per EBITDA, and 19% of 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 UK 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 31st July. As expected, net debt increased in the quarter as we continue 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 low end of our target range of 1.6x — at 1.6x EBITDA. And as shown on the bottom right, as a healthy gap between the values of our net debt and second hand value of our fleet. But 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 is a 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, expanding our debt maturities and increasing our flexibility. We issued $600 million of 5.25% bonds, which mature in June 2026. Providing to that there’s a more capital for a longer period of time, a key feature of our debt EBIT 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 six years as the weighted average cost of less than 5%.
And with that, I’ll hand back to Geoff.
Geoffrey Drabble
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 for 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 it is just a timing issue, and in particular there’re maybe 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’re almost hover that comes ahead from September as we lack closed connectivity. So remember there was $100 million of revenue in the final eight 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 be positive in the plus 2% to 3% range, and the mix continues to trend towards longer rental periods reflecting both the strengths of the market 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. As I said before, I am 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 drive in the quarter from 19 greenfields and the integration of 11 acquired stores.
Most encouraging is the continued improvement in ROI, reflecting our better rigs 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 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 two deals in late of July and early August, which demonstrated different ways that we can continue to develop the business. So let’s start with Mabey, which is a bridgehead into two 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’s a market, which is growing, and has significant cross selling potential, particularly in markets such as transmissions, entertainments and oil and gas. This field significantly increases our freight 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 of a player in a highly comfortable billion dollar plus rental market. What we we’ve been looking for was a credible in-house engineering capability before to form the platform for the growth and role of strategy. Mabey with eight 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 until further bolt-on M&A. Therefore, excited about the midterm potential for Mabey, a business, which we first approached many years ago.
Thank you. And, well, hello again. I’m glad that you are again 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 the call. Look, I will kick off from where we left off, which, I think, is Page 15. We got three or four slides to pass through to and then we’ll, as quickly as we can, get on to Q&A.
So starting again on Page 15, where we are looking at the recent acquisition of Interstate. This is a very obvious geographic infill where they’re the market leader in the small geography with another product range where it will create and we can fill out the clear cluster and cross sales. So this enhanced cluster will generate all the market share, the margin benefits we’ve discussed before, most recently at the Capital Markets Day. So it’s a well-worth profit for us. If you look at the map, Baltimore and Washington D.C. are geographies where we’ve clusters and significant market share for some time. So those we have planned to move north and east 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 this geography and products and then leveraging all 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, which you can see from the chart, and we’ve completed two further acquisitions in the quarter. So a good progress in the market where we still have low market share and lots of opportunity. There has a bit of confusion at the year-end around the margins in Canada. So let me just try and explain some of which as the trends are positive. And we continue to have a lot of moving parts, as we developed 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 of 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 margins for Canada that we guided you to the yearend 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 a flat profit year-on-year after what was a difficult period towards the end of last year. As you can see the remained volume opportunity, but there is also rate pressure, which we anticipated. So our focus on costs, fleet spend and physical utilization will deliver solid performance after a good start for year, but there is 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 onto capital allocation. And our priorities remained unchanged. You can see from Page 18, here that our priority remains investment in the business through both fleet spend on bolt-on M&A. And after this, we have returned to shareholders, always mindful of our leverage targets. So with this in mind we determine, that it’s appropriate to increase and extend our share buyback program. So you can see original GBP 500 million to a GBP 1 billion program in the 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 on the constant review envelope date on both the scale and duration of the program where appropriate. The key here is that with our strong margins of cash generation, we see the buyback program is 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 plus 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 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 the balance sheet that provides a long-term platform for further responsible growth. And we’ve also increased and extended the share buyback program.
So finally then, our business is performing well. We have got a positive outlook and we continued to benefit from weakest sterling. And it’s a consequence, we expect full year results to be ahead of our original expectations and we look to the medium term with confidence.
So with that I’ll hand over to operator and let’s go into Q&A.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question comes from the line of Rajesh Kumar from HSBC. Please go ahead. Your line is now open.
Rajesh Kumar
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 lot large acquisition, which potentially forces them to limit future M&A and look inwards. So do you think you’ve got an opportunity in the U.S. or will it be like before focus on expanding Canada and a bit in the U.S?
Geoffrey Drabble
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 it is laid out on the chart that 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 working within our leverage guidance of 1.5x to 2x. There is 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 comp where we leave those options open to us but also recognizing the benefit of share buybacks when we’ve got strong cash generation from very strong margin. So it doesn’t change anything. There’s the ability to still do a little bit more in all categories.
Rajesh Kumar
And do you think that with the 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
I don’t think it. I think when you get to this stage, when you got two 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 like United, and some of the smaller players — there is a — we have some advantage, but I don’t think this makes the whole piece of different. What you also got to look at is one of the [buying] and this could be some significant fleet reconfiguration. And therefore is that actually going to be significant to be more organic spends into than we put in. I think answer to that has is probably being note.
Operator
Thank you. Our next question comes from the line of Bilal Aziz, UBS. Please go ahead. Your line is now open.
Rory McKenzie
I’m sorry to disappoint. It’s actually Rory Mechanize 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
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 that one.
Rory McKenzie
Okay. Great. And I did want to ask about the comparatives ahead of that and what we still expect. Of course, we’re going full cost hurricanes and whether even a storm pace to be heading to North Carolina. But can remind us on the saving of the comps from last year and what might this year?
Geoffrey Drabble
Yes. Yes, look, so the first 4 months, it really — if you look at it, it was what, 25th of September, Brandon, when…
Brendan Horgan
August 6 was the first, then September 10 was number two.
Geoffrey Drabble
Then September was number two. 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 two of quarter two, 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 two. And then, it’s sort of like — it sort of trickled down into quarter four. 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 storms are going to hit or not hit, Brendan can give you sort of some color on that where we had storm center opened since Sunday.
Brendan Horgan
Yes, we have. I mean, we — as you would expect we have that very early activity before the storms, which is the kind of the first responders and the [indiscernible] if you will, state and city preparing for what could be a 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 been reasonable degree of certainty, but time will tell. And then, of course, it’s a matter of what we expect 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 [indiscernible] in the months to come.
Rory McKenzie
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 side.
Geoffrey Drabble
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 of 19 greenfields in the quarter is a bunch of greenfields. Already in the second quarter what we’ve done 7 or 8 there. So there’s a high greenfield activity right now. If you look at the business like the size of Mabey within 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
Thank you. Our next question comes from the line of Andy Murphy from Merrill Lynch. Please go ahead your line is now open.
Andy Murphy
I have got a few — I just want to kick off just following up on the margin question, in the U.S. EBITDA margins is kind of 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 the — on an underlying basis driving those margins up and down?
A – 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. So they’re just [indiscernible] it’s just noise around the numbers as much through one-off of incremental cost that just flow through.
Geoffrey Drabble
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.
Andy Murphy
Okay. And a second question it was on the UK and if your yield taking down 3% but your drop through was very high. And a kind of what expected as the other way around the drops it would be very low…
Geoffrey Drabble
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 cloth accordingly, based on our outlook for the U.K. market, which is not terrible but it’s certainly not a big growth market either.
Andy Murphy
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
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 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 [indiscernible] 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. It usually comes in so late in the year.
Geoffrey Drabble
So if you got to Page 24 in the pack, it’s always better 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 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 [indiscernible] within the year ago.
Geoffrey Drabble
So we like new risk, I guess, 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
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. Go ahead. Your line is now open.
Will Kirkness
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 both-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
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.
Will Kirkness
The specialty bolt-ons, what sort of EBITDA range, has that changed much?
Geoffrey Drabble
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.
Will Kirkness
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 helped from a rate perspective or do you think that there’s more volume that could come your way?
Geoffrey Drabble
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] the overall environment as to that of 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 to do all bolt-on M&A.
Operator
Thank you. Our next question comes from the line of Steve Woolf from Numis Securities. Please go ahead. Your line is now open.
Steven Woolf
I’m left with sort of weight 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? Thanks.
Geoffrey Drabble
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
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 somewhere 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 dare hug those employees like we do new recruits as well. So complicating it for sure but I think, in a way, help them win.
Operator
Thank you. There’re currently no more questions in the queue. So, I’ll hand the call back to you speakers’.
Geoffrey Drabble
Yes, okay, if there’s no more questions, I guess [indiscernible] of this call and we look forward to speaking to you again in December. Thank you very much.
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