Hello and welcome to the Ashtead Group Second Quarter Bondholder Call. Throughout the call, all participants will be in a listen-only mode, and afterwards, there will be a question-and-answer session. Just to remind you, this conference call is being recorded. Today, I am pleased to present Michael Pratt, Finance Director. Please begin your meeting.
Good afternoon. With me today is Brendan Horgan, our Chief Executive, and Will Shaw, our Director of Investor Relations. The webcast of our early analyst meeting and the related slide presentation are available on our website. I'll refer to the slides during our call. I will begin by coming to some financial highlights from the release and the events in this webcast, and then open the call for your questions. As an overview, it's been a strong performance. Our North American end markets continue to show strength, and we've continued our strategy of growth through greenfield opening and bolt-ons, supplementing our same-store growth. The group results for the half-year are shown on slide five.
As it is for the first quarter, we set out the results on a pre- and post-IFRS 16 basis, and I'm only going to comment on the pre-IFRS 16 figures given that it's been consistent with the prior year. The group's rental revenue increased 13% on a constant currency basis. The EBITDA margin remained strong at 48%, all while opening 31 greenfields and completing 11 acquisitions in the period. With an operating profit margin of 30%, underlying pre-tax profit increased to GBP 705 million, while earnings per share increased 11%, reflecting both the profit improvement and the impact of the share buyback program. On the next three slides, I'll review the divisional numbers, beginning with Sunbelt and the U.S. Slide six shows Sunbelt's first half results in the U.S. Rental and related revenue was up 15%.
This is a good performance when you set it against two years which were impacted by significant hurricane activity. In contrast, this year, the hurricane season was much quieter, even to the extent that it was a small drag on our results. The EBITDA margin was strong at 50%, although it does reflect some pressure from the relatively lower rate of growth when compared with prior years and the drag effect of the significant number of new locations added in the last couple of years. This contributed to a drop through rate for rental revenue to EBITDA of 48%. Operating profit improved 11% to $940 million at a 33% margin, and ROI was 23%. Turning now to calendar on slide seven, rental and related revenue growth of 19% included some benefit from acquisitions over the last year. Organic growth was a healthy 10%.
This generated EBITDA of $80 million and operating profit of $40 million, margins of 40% and 20%. The Canadian business is performing as we expected and is benefiting from last year's fleet investment, as the fleet acquired in the second half of last year is being increasingly put to work. Turning now to slide eight, A-Plant's rental and related revenue was down slightly at GBP 218 million. The small increase in total revenue reflects a higher level of used equipment sales than a year ago, as we defleeted underutilized and low-returning assets, consistent with the plan we outlined in June. The market in the U.K. remains relatively flat and competitive. This environment, combined with small losses on the defleet compared with gains on sale last year and the cost of realigning the business, have contributed to weaker margins, with an EBITDA margin of 32% and operating profit margin of 12%.
As a result, operating profit was GBP 30 million for A-Plant. Slide nine sets out the group's cash flows for the first half of the year. The strong margins we discussed earlier produced cash flow from operations of GBP 1.2 billion, giving us substantial flexibility to enhance shareholder value within our capital allocation framework. This free cash flow was more than sufficient to fund both our replacement and growth capital expenditure in what is the season's highest spend period. We invested GBP 937 million as we grew the fleet in a strong U.S. market and continued to take market share. In addition, we spent GBP 246 million on bolt-on M&A as we broadened our specialty capabilities and enhanced our geographic footprint, and GBP 250 million on our share buyback program. Slide 10 updates our debt and leverage position at the end of October.
As expected, net debt increased in the period as we continued to invest in fleet and bolt-on acquisitions and continued our buyback program. In addition, the adoption of IFRS 16 added GBP 883 million to debt on the 1st of May. Leverage was within our target range at 1.9 x on a constant currency basis, excluding the impact of IFRS 16, and 2.2 x including it. Both our leverage and well-invested fleet continue to provide a high degree of flexibility and security in support of our strategy. As we've said on many occasions, a strong balance sheet gives us a competitive advantage and positions us well for the medium term. As shown on slide 11, in November, we took advantage of good debt markets to strengthen that position further.
We issued $600 million of both 4% and 4.25% notes and used the proceeds to redeem the $500 million of more expensive five and 5/8 notes during 2024 and pay down an element of the ABL scrupulus. This provides us with access to more capital for a longer period of time at a lower cost and with a smooth maturity profile. Our debt facilities are committed for an average of six years at a weighted average cost of 4%. The final slide that I'll reference before entering the call-up for Q&A is our CapEx plan for this financial year, which appears on page 23. The overall group guidance remains unchanged at $1.4 billion-$1.6 billion for gross capital expenditure, and we have left the ranges unchanged.
However, given our current expectation for a flattish U.S. construction market in 2020, we are planning for U.S. CapEx to come in towards the lower end of this range. In Canada, given first-half spend, we're likely to be towards the top end of the range for the full year, and in the U.K., given market conditions, we'll be towards the bottom end. That concludes my comments, so we'll move on to Q&A. Operator, will you please provide the instructions for Q&A?
Thank you. If you would like to ask a question, please press 01 on your telephone keypad. If you wish to withdraw a question, you may do so by pressing 02 to cancel. That is 01 if you would like to ask a question. Our first question is from Yilma Abebe from JP Morgan.
Thank you. Two questions for me. I guess, firstly, if we could talk about M&A and the M&A environment. We typically ask those questions, but I was wondering if there's anything of note here in terms of your M&A strategy, size of acquisitions as you go forward here versus what you've done in the past, and any high-level call on the M&A front, please.
Yeah, sure. Look, I think in general, our M&A strategy is exactly as it has been. It's part of our 2021 plan, and we like the bolt-on end of the spectrum. In terms of landscape change, it's, again, not all that different. We have, as we usually do, a number of conversations always going on. Keep in mind, a bit more than half of the deals we do aren't deals that are out there in a process, so they're just relationships that are built. No, absolutely the same. We have no interest whatsoever in doing any big landscape sort of changing deals, so our strategy remains exactly as it was.
Okay. Thank you for that. You're talking about sort of in a flattish construction environment in 2020 versus 2019. Can we maybe talk about that in a little bit more detail? In what areas do you expect growth? What areas do you expect weakness? Maybe some details around that, please.
Yeah. First of all, let me just say, yeah, we're saying flattish, but it is flattish, but in a very strong market. The absolute levels of construction from an activity standpoint today are very strong, particularly when it relates to the capacity that's in the environment or in the market. I can highlight some relatively strong areas, as we would have actually called out in one of the appendix slides around, say, for instance, office construction.
Slide 33. If you look at slide 33, you'll see that we called out office buildings. Now, why did we call out office buildings? There's two reasons. One, we've talked about data centers for a while. Two, if you think about the comparing and contrasting of the construction end market today versus the construction end market back in the lead-up to the 2006, 2007 peak, you would have had a very robust retail environment in terms of retail construction, and you would have had a very, very significant residential bubble, mostly driven by single-family construction. If you think about some of the high points of the market as we look even into the forecast years, look at office building starts. You can see the forecast there all the way through 2022 remains strong.
It's not necessarily the overall level that it's showing in 2019, but we wanted to make sure everyone understood that at those levels, in absolute, it is strong. The actual office buildings is where the data centers fall, just from a statistical standpoint. That is where they decided to put data centers back when they started. We also called out the significance of that. Not only will you see the 2019 wins that are indicated on the slide, in total, we thought it was interesting to point out that the starts from a data center standpoint between 2018 and 2019 are actually larger than the total of the starts from 2008 all the way through 2014.
There are some real high points in the market that are just different than what they were before, that even at these forecasted, as you said, sort of weaker levels, there's still some robust elements in total. The other important thing, if you really think back to 2006, 2007, one of the key contributors of the overall construction slowdown was the fall in residential. Look at the bottom-left chart there, and you'll notice what has been driving this recovery just hasn't been residential. Obviously, we're much more tied to, from an actual project, we would rent into the multifamily piece. Similar to what I would have said on our broader call this morning, anywhere in that forecasted 2019 through 2022, 2023 area, that's still a high activity level, which we are very comfortable with..
Thank you. That's a great color. One more question, and I'll pass it on here. When you look at sort of your various markets and the industry overall, what's your sense in terms of the supply of equipment and demand as you see it for the overall industry? I guess maybe related to that, what's your outlook on the pricing front as you go as we move forward here in 2020?
That's a very important question when it comes to pricing. The first part of your question was to get to pricing. Look, we, for the first time in quite some time, said we'd be on the lower end of our CapEx range. Frankly, for a number of years at the halfway point, and certainly at the three-quarter point, we would typically increase the CapEx forecast or guidance to the current year. We are on the lower end of the spectrum as we speak. That is very in keeping, if you will, as to what we've seen from our U.S. peers.
In general, I think what you're seeing is what we've been saying all along for a number of years now. We expect to see better overall discipline as businesses like ours do look a couple of years out. That's exactly what we're doing.
If you think back to our full-year results, we came out with a forecast, and at the time, it was showing total put-in-place construction to be a bit down in 2020 and a bit more down in 2021. What is this revised forecast? It is showing + 1% in 2020 and - 4% in 2021. When we are entering a flattish, albeit busy, construction environment next calendar year, we are going to take a view at it as we have, and we are going to be on the lower end of our CapEx guidance. I think all of that will ultimately be one of the key ingredients to a much better pricing environment next time around, and we will see what that end market is.
I don't think any of us are forecasting anything like 2008, 2009, but in a relatively benign environment, like it seems as though from a construction standpoint we're entering over the next couple of years, I think pricing will be fine to good.
Thank you very much. That's all I had.
Just as a reminder, if you do wish to ask a question, please press 0 one on your telephone keypad now. That is 0 one if you would like to ask a question. There seem to be no further questions at this point, so I will hand the word back to Michael.
Thank you very much. Just say, thank you for everyone joining and showing your interest, and we'll look forward to updating you again post our Q3 numbers, which will be in early March. Thank you.
This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.