Earnings Call: Q4 2020

Jun 16, 2020

Hello, and welcome to the Ashtead Group Plc Full Year and Fourth Quarter Results. I'll shortly be handing you to Brendan Horgan and Michael Pratt, who will take you through today's presentation. And there'll be an opportunity for questions later in the call. But for now, gentlemen, please begin. Good morning, and welcome to the Ashtead Group full year results presentation. In ordinary times, we would be together in person and through webcast from the London Exchange Building. Well, these are anything but ordinary times and therefore I am in our field support office in Fort Mill, South Carolina where I've been throughout this period. Joining me on the line, of course, from our London office are Michael Pratt and Will Shaw. So despite being separated by 4,000 miles of ocean, we will, in today's virtual world, together cover the year's results. Before getting into the highlights of our fiscal year performance, I will take this opportunity to extend my deepest thanks and appreciation to our devoted team members who have come through valiantly during this unprecedented period. We're in a service business that delivers, services and maintains tangible assets, acts that cannot be done remotely. And as such, our people have come through directly and indirectly for our stakeholders every day. We also have a leadership team who assembled in a manner that fully demonstrates their experience of past cycles and their acute understanding of our business to set a course for our team that I believe you'll see in today's results and in the period to come will set the bar in terms of performance. It is in the spirit that I turn your attention to Slide 3 to share with you what we communicated throughout our organization in early March. Simply put, we defined our stakeholders and honed our focus, energy and efforts on coming through for each during this period to ensure all could weather this storm and emerge in a position of strength. Beginning with our people, and as we always do, we made their safety our first priority, and I'm incredibly happy to report a record year from a safety metric standpoint for our U. S, U. K. And Canadian businesses. During this period, it was something every one of our team members had to stay focused on in a time when, let's face it, distraction would have been easy. Adjacent to safety is one's own well-being, and their career is an important part of this. From the outset of COVID-nineteen, we set our sights on safeguarding these careers, believing we could deliver savings elsewhere and maximize our opportunities by engaging team members across the business with the comfort of knowing we were there for them. It's easy to be a great employer during good times. It's what businesses do during times of challenge that define their real character. As you now see, we have retained our workforce and we've done so in good standing. For our customers, we were there for them as essential service providers during these remarkable times. We quickly adapted to the new normal by leveraging our technology and scale to satisfy our customers' demands and requirements. Our customers were working to manage through these times and we were right there with them. For our investors, in a way it's simple. The actions taken by and for our people and customers allowed us to outperform the market by maximizing revenue opportunities. These actions, coupled with the very early cash optimization, cost base and liquidity measures we implemented, leave us in a position of strength and confidence to announce today to retain our final dividend. I'm proud to say that at this juncture, we've come through for all our stakeholders. However, say so while recognizing we still have work to do as we navigate the markets to come. Turning to Slide 4, We've attempted to give you a glimpse into the strategy we formed in conjunction with the decisions and business actions I've just covered. There's always a strategy behind our actions. And as you will see, this is not our normal multiyear plan nor is this a departure from where we believe the business will go in the long term. Rather, in times like these, we believe it's important to establish very clear and achievable short term milestones. We're currently nearing the end of what we titled our extreme preparation phase, which we believe will yield continued outperformance as markets are fully reopened or at least reopened in what is for now the new normal. When some in the business community and indeed in our own industry were and are internally preoccupied. We were and we remain laser focused on engaging with our customers and continuing down a path of strategic initiatives. Let's now turn to Slide 5 for some full year highlights before Michael walks us through group and business unit financials. The business has delivered yet another year of strong growth and industry leading performance. Doing so despite the impact on our end markets of the sudden and unprecedented actions taken by governments and the private sector to contain the spread of COVID-nineteen in the latter half of our 4th quarter. This performance delivered a 2nd consecutive year of profit before tax of £1,100,000,000 and important to note record free cash flow of 792,000,000 dollars We again invested throughout the year in all phases of our capital allocation priorities with a measured balance between existing store fleet investment, new greenfield openings, bolt on M and A and returns to shareholders through dividends and share buybacks. Doing so while remaining within our long term leverage range of 1.5 to 2 times. Our ability to stay within this range under current trading conditions when we reported leverage of 1.9 times just at Q3 highlights the cash generative ability of our model. This supports our confidence in the proposed filed dividend I previously mentioned of 33.5p amounting to a full year return of over 40p. These results in tandem with the ongoing confidence in our business model, strategy and end markets, will allow us to further demonstrate in the coming year the powerful cash generative ability of our business and the further strengthening of our market position. Before I add some necessary color, I'll now hand it over to Michael to cover the financials. Michael? Thanks, Brendan, and good morning. The group's results for the year ended 30 April 2020 are shown on Slide 7, and it's been another strong performance despite the challenges of the Q4. Once again, I've set out our results on both a pre- and post IFRS 16 basis. However, I'm only going to comment on the pre IFRS 16 figures given it is these that are consistent with the prior year. The group's rental revenue increased 8% on a constant currency basis. Despite the drag from the 4th quarter, the EBITDA margin remained healthy at 45%. With an operating profit margin of 25%, underlying pretax profit was £1,100,000,000 while earnings per share were consistent with last year on a constant currency basis. Turning now to the businesses. I will just refer to performance by geography. Slide 8 shows the performance in the U. S. Rental and related revenue was up 9% for the year. As expected, the rate of revenue growth slowed as we progressed through the year, and this was compounded by the pandemic in the 4th quarter. As a result, 4th quarter rental revenue this year was the same as last year. As we've discussed, we took a number of actions to conserve cash at the onset of the pandemic, including a hiring freeze and reducing discretionary staff costs, use of third party freight hauliers and other operating expenses consistent with reduced activity levels. However, the one thing we did not do as a result of pandemic was reduce the largest and most important part of our cost base, our people. In addition, recognizing the more difficult economic environment we find ourselves in, we increased our reserve against receivables in the 4th 4th quarter, results in a drop through rate for rental revenue to EBITDA of 35% for the year. This results in a still healthy 48% EBITDA margin. Operating profit was the same as last year at $1,540,000,000 at a 28% margin and ROI was 21%. Turning now to Canada on Slide 9. Rental and related revenue growth of 26% reflects a benefit from acquisitions over the last year, including William F. White acquired in December. Organic growth was a healthy 8%. The White's business was our most severely affected by the pandemic and has contributed virtually no revenue since early March when production activity ceased. And it will probably be August or September before it ramps up again. However, while we always thought the prospects for Whites were bright, the demand for content has only increased as a result of COVID with more and more people turning to streaming services, and so prospects are even brighter. Canada generated EBITDA of $142,000,000 and operating profit of $53,000,000 at margins of 34% 12%. We only entered the Canadian market in 2014. And while we have built a sizable business, it remains immature as we develop our cluster strategy and introduce our specialty businesses. As a result, the 4th quarter impact on the business was more severe than that experienced in the U. S. Turning now to Slide 10. U. K. Rental and related revenue was down slightly at £408,000,000 While this is similar to the trend for the 9 months of January, we had started to see the early signs of improvement from the actions being taken to better integrate the business units and improve the go to market approach. As a result, we had expected 4th quarter revenue to be ahead of the prior year. One of the actions we took earlier in the year was the defeat exercise to resize the fleet given market conditions, and this was a key contributor to the 8% increase in operating costs. Also in terms of the cost base, it's important to note that it includes the full cost of all our employees. We have not laid off anyone nor have we sought assistance from the government's coronavirus job retention scheme. As a group, we took the conscious decision not to use government assistance programs either here in the U. K. Or elsewhere. These more recent factors, combined with small losses on the D fleet compared with gains on sale last year and the cost of realigning the business have contributed to weaker margins this year with an EBITDA margin of 30% and operating profit margin of 8%. As a result, UK operating profit was £36,000,000 Slide 11 sets out the group's cash flows for the year. Now you may think I'm biased because I'm in finance, but I think this is one of those compelling slides you'll see today. The healthy margins we discussed earlier produced cash flow from operations of GBP 2,400,000,000 giving us substantial flexibility to enhance shareholder value in these uncertain times. However, the most compelling part is the free cash flow 2 thirds of the way down the page. Brendan has mentioned this record free cash flow of £792,000,000 and that is after capital expenditure of £1,600,000,000 £792,000,000 is more than double our best ever year for cash flow generation in 2018. It's worth dwelling on this for a moment as you think about the cash generation profile of this business, both this year, the year we've just started and in the future. In 2020 2021, we're going to spend about GBP 1,000,000,000 less on capital expenditure than we did last year. And while I'm pretty certain our earnings will be lower and hence cash flow from operations will be lower than this year's £2,400,000,000 we expect that free cash flow generation this year will be well ahead of the year just gone. We used this year's cash flow to fund £453,000,000 of bolt on M and A as we broadened our specialty capabilities and enhanced our geographic footprint. And we spent £449,000,000 on our share buyback program. Slide 12 updates our debt and leverage position at the end of April. As expected, net debt increased in the year as we continue to invest in fleet and bolt on acquisitions and continued our buyback program. In addition, the adoption of IFRS 16 added GBP 883,000,000 to debt on the 1st May. Despite events in the Q4, the actions we took to optimize cash flow ensured we maintained leverage within our target range of 1.9 times net debt to EBITDA, excluding the impact of IFRS 16. Both our leverage and well invested fleet continue to provide a high degree of flexibility and security in these more uncertain times. On Slide 13, I've laid out our debt structure. We have said previously that a strong balance sheet gives us a competitive advantage and positions us well for the medium term. This has never been more relevant than in the current environment. In November, we took advantage of good debt markets and issued $600,000,000 of both 4% and 4.25% notes and used the proceeds to redeem the $500,000,000 of more expensive notes during 2024 and pay down an element of the ABL facility. Then in April, as the pandemic took hold, we accessed an additional $500,000,000 of liquidity through our senior credit facility, increasing the facility to $4,600,000,000 for 12 months to provide additional flexibility over this period of uncertainty. Our ability to access additional liquidity at this challenging time demonstrates the financial strength of the group. It's also important to recognize that we have again chosen not to and indeed have no need to use government funding programs designed to assist those not in such a strong financial position. We are well financed with substantial liquidity and our investment grade rated. This activity in the debt markets has provided us with access to more capital for a longer period of time and with a smooth maturity profile. Our debt facilities are committed for an average of 6 years at a weighted average cost of 4%. And with that, I'll hand back to Brendan. Thank you, Michael. We'll now move on to some operational and end market detail beginning on Slide 15. In the Q4, Sunbelt U. S. Experienced a 3% drag in our organic business, while benefiting from revenues derived from bolt on acquisitions for a combined flat quarter and a full year growth of 10%. This is a solid performance under what clearly became a much more challenging environment late in the year. However, given this environment, I'm certain interest is more on current trading, which we'll address on Slide 16. You will see in the chart on the top left of Slide 16, despite the unprecedented pace and level of impact COVID-nineteen had on end markets throughout the U. S, our business has proven remarkably resilient. Our April U. S. Rental revenue came in 12% lower than last year, with general tool lagging by 15% and our specialty business growing an impressive 9% above last year. Notably better than we indicated might be the case in our April 27 trading update. Further, you will see a steady improvement in May's actual performance in rental revenue on a billings per day basis, where specialty held strong with another month of 9% growth and general tool improved to minus 10% for a combined minus 8. The bottom left chart reflects the operating districts of our general tool business, delineated by level of construction related restrictions. The middle column reflects each band at its lowest point and the far right column reflects the most current fleet on rent as of June 12 against the pre COVID peak. The operating districts within markets that experienced the highest levels of construction restrictions experienced a drop of 39% from their pre COVID peaks. And today, as you'll see, have fully rebounded as a group. This despite New York City having just last week begun reopening. I believe this demonstrates the increased diversity of our end markets and reinforces the message we have been attempting to illustrate for years. Importantly, notwithstanding this level of disruption to our business and indeed the industry, rates have remained stable and we have experienced 0 downward movement through today. Turning to Slide 17 and further illustrating on a full year basis our general tool and specialty businesses outpacing of the market by a combined three times. It's important to highlight both the resiliency demonstrated in our general tool business given the previously mentioned level of construction shutdowns as well as the specialty business performance during this period. As you will see in the year on year growth figures organized across the bottom of the slide, growth like this in our specialty business clearly indicates a number of things. 1, the non construction nature of the business 2, how non cyclical it is proving to be and 3, the undeniable structural change present in our business units with this level of growth in the current markets. We believe there is more of this to come in the future. Although we've taken a short pause in our greenfield program due to travel restrictions, we anticipate returning to new openings in the Q2 with an emphasis on our specialty business expansion. Turning now to Slide 18, we'll look into the latest forecasted activity levels within the broad U. S. Construction market as well as industry forecast through 2023. Dodge starts and put in place data across the top of the slide picks up the not surprising decline in construction starts, forecasting a retraction of roughly 15% in the year, which leads to a put in place forecasted decline of 7% for 2020 and a further 1% in 2021 that then builds through 2023. 2020 is forecasted to decline to levels nearing 2016 activity and do not appear to be anywhere near what we experienced in the 2000 and eight-two thousand and nine Great Recession period. It's important to remember that although we have enjoyed a long period of total construction growth from the 2010 low point, the 2019 peak of this cycle fell far short of the previous cycle's 2,006 peak as illustrated well in the bottom left graph. Perhaps explaining in part the forecasted decline being less than experienced in 2008, 2009 as there seems to be need and demand for more work. None of these forecasts herein are our own, rather a collection of the best available market data and should be further recognized that these were published only weeks after the market felt the impacts of COVID-nineteen related restrictions. At this stage, the forecast looked to be reasonable. However, time, of course, will tell. Beyond the level of precision in the forecast, perhaps we are most comfortable stating that any scenario along these lines will likely create a period of rental penetration gains whereby businesses of all types and sizes will increasingly be looking for options other than the long term CapEx commitments and equipment ownership cost, which rental offers with a short term OpEx option. However, given the clear impact to construction markets, let's take a closer look on Slide 19. Dissecting a bit further, the construction starts decline of 100 and $26,000,000,000 in 2020. We should understand its composition and perhaps more important focus on the $720,000,000,000 that will remain. This, of course, is the piece our sales force is most focused on. The decline is spread between the broad non building, residential and non res components of construction. Within non res, retail and hotels are the obvious areas impacted. It's not too hard to form an opinion that the retail landscape is continuing to change and will have a lasting impact. The non building decline is largely coming from a decline in power plant construction. And the residential impact makes up 35% of the decline in total starts with the majority falling on single family construction, which seems to recover reasonably well in following years. Moving from headwinds to tailwinds on the bottom half of the slide, I think you will agree that at this stage, they seem to be sensible in terms of where demand remains or is indeed increasing. The headlines of growth in the healthcare, warehouse and data centers all make sense and have each been pockets within construction that were growing as a result of structural change in their own right. Notable of course is healthcare. The years leading up to COVID-nineteen, the trend had been opening a large number of small, convenient urgent care centers, purpose built for outpatient care, in and out, not beds for longer term care. This, of course, has been tested recently and the forecast suggests an increase in hospitals capable of inpatient care. Warehouse and office construction each bring a vital need to today's e commerce world we live with a move toward local warehouse distribution to subsidize mega regional centers and of course, the data center component of office construction. Remember, data centers are included in the office data. So although office construction is expected to decline in 2020 before regaining momentum in 2021, it's important to point out that data center construction is now 20% of all office construction and a rather large portion of data center builds are difficult to forecast. For this reason, I believe the risk in these forecasts are to the upside. In all, there are headwinds and tailwinds. And in many ways, movements between construction types like I've just covered act as structural benefits to the overall option of rental. Let's move from the construction market to the sizable maintenance, repair and operations market. This contains the spaces you have heard us speak to often over the years: square footage under roof, facilities maintenance and the large municipal OpEx spend, all areas with very low rental penetration and less cyclical in nature given the fact this all already exists. I can spend a day covering this. However, I'll spare you and speak to some emerging trends in facility maintenance and our view on the entertainment and live events. The increase in demand surrounding facility maintenance has been evidenced by years of growth within our specialty business and certainly highlighted during the most recent COVID period. The definition of and expectations for clean are certainly changing and it is reasonable to believe this is more of a permanent movement than a temporary one. All aspects of running and maintaining a facility require various product solutions ranging from floor cleaning to air quality and further from portable access to power generation. These opportunities are not going away, rather increasing. As it relates to entertainment and live events, this is an area that went from significant year on year growth to virtually 0 revenues overnight. This of course will not be the case forever. It will take some time to get things going again and there may also be a new normal for this space. We are working closely with our customers to create solutions for the challenges that lie ahead. It is reasonable to suspect there will be more rental product required to meet new expectations for live events and many of these fit squarely into our wheelhouse. Combined, I'll remind you, the verticals represented on this slide make up more than 50% of our business and have ample room for ongoing structural change. Moving on now to Canada on Slide 21. You'll see the pace of decline in fleet on rent is similar to that which we experienced in the U. S, however, a bit steeper due to the extent of market shutting down and a less mature specialty business. Nonetheless, you can clearly see the ongoing recovery from trough levels. Our business in Canada has grown significantly over the last few years to today's coverage of 75 locations and we are positioned increasingly well to gain further share during this period and his overall end market growth returns. In December, we acquired William F. White, Canada's leading rental provider of film and television production equipment and studios. Similar to the live event space across our markets, film production went from all time highs to near 0 in a matter of weeks. During this time of shelter in place, the world has experienced a vast increase in content consumption, leading to an obvious undersupplied market. We expect some early reopening in this space later this month. And although a full recovery will take some time, when production is in full return, which it will be at some point, we are positioned incredibly well. Like the work the rest of our Canadian team has undertaken with our competition is in a position of a furloughed workforce and limited or near 0 staff. Our team, however, is fully intact and has been continuously engaged with our customers collaborating to bring filming back in an environment safe for all involved, leveraging the full range of Sunbelt products. Our runway for growth in Canada remains long. As we turn to Slide 22, we'll cover perhaps the worst kept secret in the U. K. Rental industry. The capital markets unveiling, if you will, of Sunbelt Rentals U. K. You may recall we had planned a capital markets event for the last week of April, during which we were going to cover, among other things, the work we had put into our U. K. Business and our decision to unify under one brand. So in the absence of the CMD, we'll deliver an abbreviated version today. In March, we gathered our U. K. Team in Manchester to cap off the initial phase of Project UNIFY. Part of this was combining over 20 brands into one powerful, fresh and unified Sunbelt Rentals. This action was far more than a rebranding exercise. For years, we've operated in a disparate nature. We had, by far, the industry leading lineup of specialist products and services. However, we did not achieve the cross selling benefits that a portfolio like this should bring. Said simply, although we were 1 company, we operated in silos and didn't act like 1 company. Cross selling when done the right way not only improves our combined value to our customers, it also creates a far broader and more diversified end market. We believe we will demonstrate this in the years to come, which will ultimately lead to a better business for our customers and better financial returns as we should expect. Unproceeded at the time, but now a clear early example of our cross selling efforts and capabilities has been fully demonstrated during the COVID-nineteen national response efforts. Let's turn to Slide 23 for a closer look. As the Department of Health moved to establish testing sites throughout the U. K, our team worked with a number of outsourced suppliers to furnish a broad range of products required to meet the needs and specifications for such a complex undertaking. You will see that Sunbelt Rentals was a material participant in setting up over 70 testing sites on what was an incredibly short time line. We further came through for private sector customers such as supermarkets to aid in necessary social distancing efforts. Beyond the near term impact on trading, this demonstrates to our business internally and to our customers the real potential power of Sunbelt Rentals in this new unified approach. The longer term consequences, we believe, will be a step change in the perception of Sunbelt Rentals as a leading supplier who came through during difficult times. I'm incredibly proud and grateful for the large Sunbelt U. K. Team who participated in these hands on setups, which required a high degree of choreography and logistics among our specialty and rental solutions services. Turning now to Slide 24 and to wrap up the U. K. Business detail. We can comfortably say that the results will show we have significantly outperformed the competition over this period. And although a difficult year as a result of our cultural and strategic heading change, coupled with the unforeseen challenges to the mainstream business during the COVID-nineteen period, we did deliver on our commitment to the market to generate over £100,000,000 in free cash flow. Our U. K. Business is positioned well. We've made good progress and continue to outperform. Certainly, more to come in the period ahead as we continue to refine our strategy to achieve attractive, sustainable long term returns for our U. K. Business. On Slide 25, we put forward our CapEx plan for the fiscal year. Consistent with our April trading statement, you will see our plan for the year is gross CapEx of around £500,000,000 largely focused on replacement and specific areas of high demand product. 2nd hand pricing has thus far been reasonably stable and therefore we indicate net CapEx to be around 300,000,000 dollars Turning now to Slide 26. Our capital allocation priorities remain unchanged. Throughout the year, we invested in organic growth elements and although as I've just covered, we anticipate fiscal 2021 to be a significantly lower CapEx year, we will resume greenfields in the Q2. Similarly, we suspended bolt on activity in early March, and I do not expect a return in the immediate term. However, it is worth noting that our business development team has remained engaged to assess opportunities when our desire to pursue strategic bolt ons continues. Announced today, of course, our dividend remains intact and should emphasize our progressive dividend policy. And like M and A, we have paused our buyback program for the time being as we navigate this period from a leverage perspective. However, buybacks clearly remain a key part of our longer term capital allocation strategy. Moving to Slide 27 and in conclusion, we have delivered another strong year despite the swift and unforeseen impacts COVID-nineteen had on markets the world over. Our performance through this period has perhaps demonstrated more than ever before the resiliency and agility incumbent in our business today. We will progress through the year in a manner that will improve our positioning in the market and take advantage of the amplified structural change opportunities we believe exist. And while doing so, we anticipate another year of record free cash flow. It is for these reasons I can comfortably report the Board looks to the medium term with confidence. And we'll now turn the call over to questions. So, operator, back to you. Thank you very much. The first question is from the line of Will Kirkness, Jefferies. Please go ahead. Your line is open. Thanks. I've got a couple of questions, please. Firstly, as we think about the progress through the year, clearly, 1st and second quarter look like it will still be on a recovery trajectory. But then how are you thinking about the second half? Will there be an air pocket with regard to construction starts given a bit of uncertainty? Because actually that Dodge forecast for 'twenty one and 'twenty two looks pretty good. And then secondly, could you talk a bit about the non construction exposure? I think it's something you're going to talk about if you have to market this day, which didn't happen, just so we can get a sense of some excitement about the infrastructure build and how that might impact you in the coming years? Thanks very much. Yeah, thanks Will. Well look the first one, that's really the biggest question out there isn't it in terms of what does construction look like which is why we've obviously spent some time on it. How how you take it, there is no doubt that there will be a very natural pause in terms of work on what will be future starts. And that will lead you to some period of decline, which clearly is built in from a put in place standpoint and we're showing that 15% decline in starts. But if you look a little bit closer into the data, what you'll see is, you'll see starts on a sort of constant dollar basis get back to where they were in 2019 between 20222023. And of course, some of the greater detail we went into around res and non res in particular. I think one that's probably worth looking at as well would be also just square footage. And I don't know the numbers off top of mind anyway, but we were about 4,100,000,000 square feet under roof that was started in 2019 and we get back to that same point in 2022. But no matter what in 2020 2021, we will certainly have a bit less than what we had. So I think look that is the part that I mentioned very specifically just now. These are very early forecast. If I were given an opportunity which of course none of us will get to sign up for these specifically, I can tell you I would take a -seven put in place in 2020 and a recovery from that point. When it comes to non construction, yes, we were going to cover quite a bit of that in CMD and we were going to give more detail than ever before about our specialty business and that's really the big takeaway. Look at what the specialty business has done and so much of that is surrounding non construction. And I'll also point out, we've been able to post this progress of 9% growth in specialty, notwithstanding the complete end to events for the time being. You think back to what we had done from an event standpoint, the last notable event was a PGA Golf tournament in Orlando, Florida, the Bay Hill Classic that was that week in March before everything came to a complete end. So we will see a return to that, but it's really coming down to what I talked about around facility maintenance, overall square footage under roof. We see this big, big shift overall in the economy to these big distribution centers, big, big spaces in terms of overall size and scale and those are just significant opportunities from a rental standpoint. And then of course we have some of the areas that will no doubt emerge not just from a construction standpoint, but also in the non construction to your point around data, telecom, municipalities in general and by that we mean the overall maintenance repair and operations of the markets that we serve. So certainly a lot more to come in that very difficult to do over a call. We will most certainly be having a Capital Markets Day when we can all sort of return to being in the same room with one another. Okay. Thanks a lot. Cheers. Our next question is from the line of Annalise de Meulen at Morgan Stanley. Please go ahead. Your line is now open. Just a couple of questions from me. You talked about your CapEx guidance that, that will be focused this year on specific areas of high demand product. Could you elaborate a little bit on that, where that will be and what those pockets are that you're seeing specifically that you want to focus on this year? And then secondly, just on the rates. You've obviously talked about the rates being broadly stable year on year. Do you have any sense as to where that's going into Q1 and Q2? And are you seeing it across the board? Or are you concerned about discipline in the industry potentially slipping around rates? Thank you. Sure. Thank you. From a CapEx standpoint first, it's just as we said, we're going to invest where there is demand in the business. There will be a component of that of course which will be replacement of assets that have reached the end of their useful lives and still carry high utilization levels and there is quite a bit of that. But in terms of our focus from a growth perspective, we're certainly a fair amount of that CapEx will be allocated. It is largely in our specialty business. We have had significant demand from a power generation standpoint. We talked about air quality as being a significant area of investment, which we will continue. We do not think that that is a trend that will go away anytime soon. Our flooring business of course and remember I've mentioned the continuing or restarting of greenfields in Q2. So certainly that will take a portion of our CapEx as well. I guess rates, it's a bit like Will's question around construction. That is another big question and time will tell. What we can report on as we've said, and just to be completely clear, when we say I think the question was kind of remotely flat. They have absolutely not gone down over this period of time. Certainly, it is Q2, Q3, I think as we begin to reemerge to a activity level of making up some time specifically in the construction market where we will really test what the discipline is in the end. I'm not really concerned about the discipline of the leaders in the industry. I think thus far you've heard from them all and they are reporting very similar sort of rate results, but also rate posture as what you're hearing from us. I do think it's a worthwhile anecdote. If you look at Slide 16 for instance, you'll notice our overall when we showed the sequential movement in revenue in our various businesses general tool specialty and oil and gas. Look at our oil and gas business in the month of May, our revenues were off 55%. Now that's not usually something one would highlight in a results presentation. Reason why I bring that up in conjunction with rates, our volume was off about 55% in the month of May, which led to that level of revenue. So the point being, in the oil and gas space, where there has been a rather long downward trajectory in terms of that overall market dating back well into 2019 and here we are still holding true to our rates. So I think if that's if that offers a glimpse into what rate discipline may look like in the broader market, I'd say that that is a pretty positive sign. But obviously, the next few quarters will be very telling. That's very clear. Thank you for the detail. Can I just follow-up on the first one with regards again to the new openings for the year? Do you have any sense of what the split will be between sort of general tool and specialty at this stage? Yes, it will be roughly it will be 75% of the new openings will be specialty in the year. Okay. Perfect. Thank you. Our next question is over the line of Stephen Goulden at Deutsche Bank. Please go ahead, Stephen. Your line is now open. Hi, thanks for taking my question. I've got 3, if you don't mind. Of course, Stephen. So if you look at EBITDA margins in Q4, I think sort of underlying was down about 6 percentage points. And clearly, as you'd said, the cost takeout so far has been relatively limited, no use of furloughing. How should we think about that going forward given, obviously, you'll have the, I guess, the full impact of the cost measures taken so far in coming quarters, obviously, also the cadence of the rental revenue growth improves. And are you seeing that with May? So how should we think about those margins going forward? And second question would be sorry, could you just remind us on what's the mix of events and also mix of oil and gas given that you called it out there in the slide? My understanding is that oil and gas is low single digits, but I just wanted to clarify that. And then last question would just be in terms of the overall industry, and I guess kind of points to what you were saying before in terms of pricing discipline as we get through the year, how would you say what's life like for some of your smaller competitors? How much leverage would you say that they have? How much pain have they gone through in the last couple of months? And I guess within that, you brought out on that slide the IHS forecasts kind of minus 16%. And you're currently doing sort of minus 8% at close to the worst, right? And you're saying that you're essentially outperforming the industry by around 3x. So can you give us a bit of color for what the wider industry looks like and maybe any reflections on what that might mean for market share gains and also for discipline? Yes, of course. Good questions. Well, let's start with the let's start with fall through as you said and speaking to EBITDA margins. Obviously, as you would have heard from Michael, very early on in a business like ours, you're going to have a disproportionately high fall through. You have a certain fixed cost base particularly given the strategic decisions that we've taken. But you will see that moderate. I mean, keep in mind also there will be certain provisions at the end of the year during times like this that you will take that will have a further drag on that. I would as you know, we're not giving much in terms of guidance. I would say you'll see it improve as we progress toward where our revenue levels were. I don't know if Michael, as he is in London, has anything to add to that and then I will go on to the next questions that you had. Yes. I guess what we've always said is, Tony, when revenues are going backwards on average, we would typically see we talk about 25% of our cost being directly available. And as you referenced, we made the conscious decision not to lay people off, etcetera. So the largest part of our cost base we intend to keep intact. So on an average basis, you might expect roundabout 75% of drop through down to EBITDA of the loss in revenue. Having said that, I suspect that's more higher in the initial phase, so it was in the April time frame and into Q1. Whereas as the year goes on, it will probably by the time you get to Q4 and you're lapping lower level numbers, it probably moderates somewhat. So that's more how we're looking at it, and it will be ultimately where you end up will depend on how where we end up on the top line as well. So moving on, if that answers your question on fall through, good question on events and oil and gas. So the events business, yes, we've talked about it a lot. It's a very hard one to put a precise number on because the size of events range so significantly. So when we look at our events and the way in which we code those in our system, those that have any sort of scale to them will be in the market basket I'm talking about. They wouldn't include a taste of Charlotte, 2 blocks sort of event that would have a couple of light towers, a couple of generators and air conditioner or 2 if you will. You can appreciate how hard it is to grab all that. But our events business on the larger side is circa $200,000,000 but you have to think about that from a seasonal standpoint and during this period we've gone through is the heavier portion of that season. You don't do much in terms of events in sort of November, December, January, etcetera. And what we've seen is, we've seen that largely being offset by our response to COVID, which there has been quite a bit of as you can imagine. Oil and gas, look we were very, very specific here. You'll see at the bottom of slide 16 in the bullet points. In the month of May, our oil and gas business was 1% of revenue. So we were very intentional, of course, of putting that out there because it just doesn't really matter. What does matter more so would just be the overall economic impact of oil and gas in some of our regions and from an overall macro standpoint. Rates, and I think you asked this in a really important way as it relates to the smaller competitors out there. And that's where you have to understand the bigger picture. And I think, during a time like what we've just gone through surrounding COVID, It is separating in a significant manner those that have the capabilities, the sophistication, the professionalism, the technology to really do things swiftly and do them completely. The point in that is, customers are expecting more and more. I mean think about it, you'll notice the very cover of our slide deck has curbside pickup. So in a matter of 2 weeks following COVID's initial outbreak if you will, every single one of our locations had completely adapted their capabilities to service our customers through curbside. So all of our customers came to all of our locations and keep in mind during this period, you had a lot of ultra light contractors if you will still doing work out there. You had consumers doing quite a bit as they were at home. And we brought them curbside service in a very, very seamless way, touchless payments, etcetera, etcetera. It's the small competitors that can't do that. So it's not a matter of what you rent a skid steer loader for 2 days. It's a matter of how you can do it, the quality of your product, the quality of your systems. So it's really changing times. I can tell you, from a sales force perspective, going on a construction site, let's just say, is very different today than what it was last June. Today to go on a construction site, you have to have certification, you have to have on proper PPE, you have your temperature taken before you go into the job, you have to be very specific about your reason for a visit. Your reason for a visit today can't be I'm going to drop off a box of donuts and offer someone a cheaper scissor lift. That's a long, long time ago. Today, it has changed and the customers' expectation has changed. I would go so far to say as some of these smaller independents, if they offered 50% discounts for the most part, the customers won't even hear them. It's just not what they're focused on right now. I hope that addressed all of your questions, Steven. Yes, it did. Thank you very much. That was very helpful. Okay. We now go on to the line of Rob Wertheimer at Melius Research. Please go ahead. Rob, your line is now open. Thank you and good morning everybody. Brendan, that was a great answer. It's kind of touching on what I wanted to ask about. You guys are a growth company and you've done a lot of growth and you're taking a very reasonable pause in CapEx growth for the next year. What are you kind of focusing the organization on and what sort of tangible steps are you trying to do to accelerate that step function change that you think can sort of come to you in this change? I mean, you mentioned curbside pickup, that was a great example. Order intake, I don't know if there's something you can span upon there, just general things that you're doing to sort of accelerate this push, I guess, for market share really in a difficult time? Thanks. Yes, Rob. Thanks. Look, I mentioned one of the very early slides, I think it was Slide 4, in terms of what we were internally focused on beyond the stakeholders, if you will, in terms of our business plan during this period. And one of the things that we highlighted was our unwavering commitment to continue to progress our strategic deliverables and efforts. And one of those things was this, again, we would have unveiled during Capital Markets Day internally we've called Project Kronos, which is a order capture mechanism. As you know, we talk a lot about availability, reliability and ease. Well, this is a big amplifier of ease for our customers, but it's also a big amplifier of ease for our team members who are servicing our customers. And what Kronos really, really leads to in the near term is e commerce. It makes it easier for our customers from a digital perspective to trade with us. So it's just another example of what we know our customers are looking for. If you think about our business in terms of the transactional activity that we have in the years years of data, we know that we have a very predictable and a very repeatable customer base in terms of their transactions and it's things like this that will truly separate the likes of Sunbelt and another competitor or 2 of ours out there from the rest of the pack. I think that's the thing that certainly, Rob, we're great readers of your work and you really understand it and it's the difference that we know from our customers. Their patients on how they can trade with us, health and safety, quality and dependability of equipment. There is an increasing gap between the likes of us and the rest. That's very helpful, very helpful. And then you mentioned 2 or 3 competitors. So obviously technology is becoming a greater Is it just when you see what you're doing with technology, a couple of other firms doing it? Is it just when you see what you're doing with technology, a couple of firms doing it? And I'll stop there. Thank you. Yes, well look, I think will the regionals get there? This last 90 days has certainly not helped. So if you think about some of the regionals that are out there in terms of their current financial condition, they're probably not talking about £792,000,000 of free cash flow and looking forward to a year of another record free cash flow. So look, if they do, it's going to be a hell of a long time. And when that time may come, we will be on to bigger and better and the newer things. This is not something that we stop with. This is a very, very foundational element of our go forward strategy. Thank you. Our next question is from the line of Andrew Hollingworth at Hollen Advisors. It's Very useful and insightful points you've made about the sort of U. S. Competitive environment. I wonder if you could sort of give us a similar sort of backdrop to the U. K, particularly in the light of your sort of competitive experiences there in terms of rates and pricing and obviously the changes that you're making. And I think I'd just be quite interested as to your view as to whether the sort of structure of the market needs to change. Do you need to intend to offer more services rather than more direct rental? Or do you think that the sort of competitive landscape needs to change for the return on capital to improve? Well, it looks terrible to say perhaps something like, one shouldn't let a good crisis go to waste. I mean, look, this is a time when there will be very clear winners and there will be very clear losers and perhaps even more so when we talk specifically about the U. K. Landscape. What the business, the leadership and the team overall have been able to do in the U. K, not just during this time, but leading up to this time in terms of identifying what exactly we were pointing to be to our customers in the U. K. Yes, there's that service element that so often is brought up, but we did just name the business Sunbelt Rentals. So rentals is fundamentally key to what we do. There are services that go along with it by way of you have to have labor when you're setting up 42,000 traffic cones and signs as we will have illustrated on the slide. But there is a even bigger disparity between well positioned, well financed and well organized businesses in the UK versus the U. S. Now in times leading up to this, that has probably been more a negative than it has been a positive. I think what we will actually finally see is the big switch in terms of customers. I think a bit like what I've talked about in terms of the U. S, customers' expectations are simply changing. The same dynamic I gave in terms of a job site in the U. S. And a job site in the U. K, it's very, very similar. Just anyone can't show up on a project, you have to have a meaningful and substantive reason for being there and that's what we're seeing. Look, the results of having done what we did and let's not forget ultimately and I think we all would agree that we will see some more government sort of infrastructure work come out of all this in the U. K. And a business like ours who took no government assistance, maintain a full payroll, opportunity to win that business. So we look at this to be a step change in market share and I think the beginning of a change overall in the landscape of the U. K. Rental space. And just following up on that, can I just clarify in terms of your sort of rebranding and repositioning of the U? K. Business, is there any I mean, obviously, you're not going to sort of make it a headline, but is there a slight subtle change in terms of your attitude towards share and pricing in that or not? I mean, we no different than in North America look to be the leading provider. The leading provider in the U. K, I think most certainly will continue to be also the largest. Yes, there is a rebranding, but as you will have picked up from the spirit of this, we know through all the work we've done in the business that there is a significant increase in revenue opportunity if we simply just cross sell among these specialties. We have customers who we do virtually all their work, let's just take for instance in the ground protection or formerly known as live business. We have customers that we do 100% of their ground protection and we did none of their telehandlers, none of their lights, none of their power and none of their HVAC. Well, I think what you're going to find is we're going to leverage relationships with those customers. Pricing is not going to be our heading, good service is going to be our heading and we think that the customers there will see savings on their end simply through efficiencies. So during this period of gain that we've experienced since early March through today, I can tell you that pricing has not been on one single headline. Great. Very helpful. Thank you. Our next question is from the line of Alan Wells at Exane BNP Paribas. Please go ahead. Alan, your line is now open. Hey, good morning, Brendan. Just a couple for me. I just wanted to follow-up on those comments around Specialty. Could I just ask, was there any one off benefits in April May within the Specialty business? Obviously, I know there's a bit of a balance sheet as to what's truly one off, etcetera, in there. But anything that sort of stand out that maybe propped up the 9%. And then within that, just any general comments around those subsectors, obviously, that you detail out on the slide. What held up better than rest? Just some color on that would be really useful. And then second question, any overall thoughts, obviously, some noise out overnight on infrastructure billing in the U. S. Or trunk pushing that further forward? How you think about that, the infrastructure opportunity as far as Ashsted is concerned and how that impacts the outlook for the next 12 months as well? Thank you. Sure, Alan. Thank you. Specialty, so have there been one offs? Certainly, I would call the COVID response in terms of power, lighting, HVAC, etcetera for temporary hospitals is a one off. I think it will be quite a tail to that. I don't think there will be any rush to take that down. But I would look at it more as a offset to the events piece I mentioned earlier. That is probably a better way to look at it. But through all that, I mean, keep in mind, the momentum the specialty business had on the way into all of this. We were already significantly changing in terms of the overall growth prospects and we were very, very early in rental penetration. So if you think about again the foreign business which I love to talk so much about was up over 30% again for the year and the quarter would not have looked all that different that continues to grow. I mentioned earlier this big, big sort of shift overall in the U. S. Landscape of square footage under roof around distribution centers, data centers, etcetera. We see a big, big traction there. If we look at our power business, our power business is doing phenomenal and only a piece of that has to do with COVID related response. We've had a big surge of wins on our larger generators. I'll give you a for instance, there's a few states that had quite a bit of emergency standby work having nothing to do with COVID. California you may have heard of something called PSPS which is proactive safety power shutoff. So it's sort of following on from the wildfires. You will recall, We have roughly 80 megawatts of power on rent to California in purely a standby mode. I mean, that's a big, big dollop of power that only a couple could possibly do. We have something similar in Texas and in New York of course not related to wildfires, but more direct to states and municipalities for standby. Telecom space which has been really doing well, which you could tie to perhaps being sparked by way of COVID, but I think it's one that we could all agree will continue on forward. So really the specialty business across the board, it's very difficult to find weak spots inside of specialty. We would be kind of comparing what does 9% growth look like versus what does 35% growth look like. So it is good compared to good. From an infrastructure standpoint, we'll see what happens. None of the forecast that we would have put out in Dodge have anything don't assume anything outside of what has already been going on through the FAST Act and the like. I've been at this for a long time and I've been waiting for over 20 years for a significant infrastructurestimulus package. We haven't seen one yet. I'm not holding my breath. The key will be this, if one comes, will we be benefactors? Absolutely for certain. We are positioned very, very well from an infrastructure standpoint and us and 1 or 2 others would be significant net benefactors. Great. Thank you. Okay. Our next question is over the line of Rajesh Kumar at HSBC. Please go ahead. Hi, good morning. Just in terms of COVID-nineteen impact, as a lot of things are changing, are there any new opportunity sets coming up? I noticed you talked about a bit more digital innovation and things like that. But in terms of market segments, are there any new market segments that you think might be more relevant in the next 3 to 5 years resulting from the way the world has changed post COVID-nineteen or you would expect the world to change post COVID-nineteen? And the second one is, when you talk about small customers, obviously, they are struggling more, understand that, but they also tend to hold their assets for longer than an ACHTAD or either Drentals. So just coming just thinking about the CapEx they would have spent about 10 years back or 7 years 8 or 9 years back, they would be selling in the next couple of years. So what are your thoughts on the supply in secondhand market and what does that mean for rates? Yes, Rajesh, thank you. From a specialty standpoint of what the opportunities are, first of all, let's not forget the overarching theme, which continues to be structural change. So it continues to be rent versus ownership, and it continues to be the big will get bigger and I think this period amplifies that. There are some very obvious areas within our specialty lineup thus far that will significantly be that will grow directly related to this. And I think it would be prudent to think that continues. So whether that be flooring, climate control, air quality, I mentioned we have over 5,000 air quality units on rent today ranging from air scrubbers UV light air cleaners that are in many, many applications. 1 we haven't talked much about that I think you'll see some structural changes as well is on the consumer side. Of course we've seen a big pickup in our consumer trade, which is no doubt a highlight. We were going to talk quite a bit about in the CMD some of our pipeline of specialty business and that remains very active. We have a number of businesses that are either in the very early stages of development or in stages of planning as we speak. So overall, the key to it all is, we have incredible opportunities from a cross selling standpoint. We have deep reach into a number of customers that we know have needs for products beyond what our current offering is today, which we will continue to exploit as we go through this. As it relates to your point on the small competitors, yes, they have a markedly different fleet age, which puts them in a rather vulnerable position right now once again. And I think also probably doesn't come up enough when it comes to the rate discussion or rate concerns that are out there. When you have a significantly aged fleet compared to what we would have for instance, rate again is not something that is easily put on the table. I'm not worried about the impact in secondhand markets. I mean, it's a bit like what construction looks like a year from now, time will tell. But thus far when it comes to secondhand values, they've remained pretty strong. I think the last Rouss report that just came out last week indicated after a bit of a tail off in the last 2 months, a bit of a recovery in the most recent weeks. So all that is encouraging and we haven't seen any evidence of that changing. Overall, when you look at it, it is not all that important in terms of the long term prospects of the business in terms of what we might get from a secondhand value. It's not going to have an overall tie to things like rental rates or time utilization like that would have been tied to previously. Understood. Thank you. Okay. So, our next question is over the line of Arnaud Lehmann at Bank of America. Please go ahead. Arnaud, your line is now open. Thank you very much. Good afternoon, gentlemen. I guess a couple of questions. Did you just clarify something you said earlier, Brendan, around bolt on acquisitions. Did you say you would start you would resume bolt on acquisitions from Q2? And also related to that, are you implying that the CapEx spending that I guess you were very fast to reduce for fiscal year 2021, would you if things are progressing in line with expectations going back to normal progressively or the new normal, would you say that there is upside to your CapEx guidance? That's my first question. And my second question is more a broader question about the yourself and the big competition, in particular United Rentals. URI has been very active with big M and A in the past years. Now we know they are more focused on, let's say, deleveraging. So they are less likely to consolidate the market going forward also in a slower environment. How do you think that could affect the overall industry or your strategy in particular if maybe they might decide that they want to copy your strategy in terms of organic growth to some extent, adding more supply to the market. So do you think there is space for both Sunbelt and URI to add capacity to the market? Thank you very much. Yes, great. Well, let me be clear with bolt ons. We remain paused on bolt ons as we've said. What I was referencing is our business development team does remain active in the market talking to business owners. And as time goes by, we will take decisions based on the quality of a business we may be looking at and our desire to do it at that juncture. The key to it is from a long term strategic standpoint, our strategy hasn't changed. It hasn't changed as it relates to bolt ons, it hasn't changed as it relates to the balance of our capital allocation, strategies such as buybacks. We're just managing through this time from a leverage perspective and we'll take it from there. Look, it's we just put out our full year results and gave our first guidance for CapEx for the year of about £500,000,000 So it would be a bit premature to say that there upside to that. Time will tell. We'll let you know sometime around December when we do first half. Look, if there is if utilization is strong and we can rent, it's the first line of our capital allocation priority. So of course, we would invest in the business. I think as we stand here today, we think that the amount of CapEx we set aside or we have contemplated will suffice. URI, you'll have to ask them. I think their strategy will be what their strategy will be, ours will be what ours will be. There is so much space in terms of what we have in terms of growth for both of our businesses in a market that still remains significantly fragmented. Certainly, they have seemed to indicate that they are going to delever rather than M and A for the time being. But just as we are a massive cash generating business as you have seen and you will see amplified in the period to come, so we united. Sooner or later, we have to do something and United has to do something with their cash. Time will tell. I would be surprised if there were never another acquisition, but I apologize to them. I shouldn't even have said that. That is a question for them, which I'm sure that they will answer. But the big thing is there is ample space for us and United to thrive for quite some time. Thank you very much. Okay. Our next question is over the line of Tom Bolton at Berenberg. Please go ahead. Your line is open. Hi, yes. Good afternoon, everyone, and good morning, Brendan. Thanks so much for taking questions. Just got a few left over, if that's okay. The first one is on utilization rates, if you're able to say what physical or time utilization rates were in May, if you could, and for each candidate, U. S. And U. K, if you're able to? And then related to that, to the extent that utilization rates have come down and fleet have come off rent, are there any costs associated with getting that fleet back on rent that we should think about sort of potentially weighing on sort of margins in the coming quarters? And then on the question related to the potential for an infrastructure build in the headlines today and how that relates to, I guess, the CapEx guidance for FY 'twenty one today. If we're thinking about €500,000,000 sort of being at a level below depreciation, I guess, implicitly sort of shrinking the fleet or aging the fleet a little bit over the next year or 2. How should we think about your sort of preparedness for that potential infrastructure bill? Would we need to see you sort of redoubling CapEx? Or would you still be sort of relatively well positioned even with that, I guess, much lower CapEx spend over the course of the next year? And then finally, I know the question was asked on Oil and Gas. And I know you appreciate it's a very small portion of the business mix. But are you able to say sort of, I guess, on a sort of wider view of the business, what proportion of the business today is sort of focused in some of the oil and gas heavy states? I guess, if we think about places like Texas, North Dakota, those kinds of places, any way you could help us thinking about that would be helpful as well. Thank you. Yes, Tom. First of all, on utilization, yes, we're not going to quote the exact figures. You don't really need to look any further than Slide 16 for the U. S. And then the respective slides for Canada and the U. The fleet on rent year over year is going to look like utilization year over year. So you can work that out because in the end rental revenue is not being driven by rates, it's being driven by volume. So all those things just tie together. Cost to get back fleet on rent, good question. I would have actually sort of addressed that very early on back on Slide 4 as it relates to what we've been working on during this period, we've called extreme preparation in our business which runs through the 30th June, operational readiness. It's not often and certainly at no point in time during this great growth run we've had coming out of the great recession have we been at the level of utilization we would have been at in March, April May. So during that time, we took full advantage of having the equipment in our yards, because the least expensive time to get the equipment rent ready and checked in and looked at with more time than you ordinarily have is when it's in your yard. So it's less expensive to repair and maintain product in your yard than it is when it's on a customer site. So we took full advantage of that. So I think you would have seen some of that in the fall through figures already. Obviously, we would have had we will have transportation cost that go out in conjunction with the fleet as it begins to or I shouldn't say as it begins, you can clearly see it's more than begun as utilization picks back up, but that's just all in the numbers overall because of course we charge for transportation. So nothing really notable there. Infrastructure, similar comments I answered to the earlier question, time will tell if it comes. Our $500,000,000 CapEx guidance similar to the construction forecast we're using do not contemplate an infrastructure bill. So if there is a significant infrastructure bill and demand justifies it, we have 0 problem spending and we will spend as soon as we need to. It's important to note probably which we haven't picked up on during this call when it comes to one of the advantages that Sunbelt and 1 or 2 others have out there is our purchasing capability, not just from having the money, but also our relationships with the world's leading OEMs. We are in constant contact with them. As you can imagine, their demand is less than what it was. So lead times are not an issue. And if there is a pickup in demand, it will be the likes of Sunbelt who will be first in line and we'll get preferential treatment from our suppliers. Oil and Gas, of course, the numbers that we're citing are exactly the figures for our oil and gas specific business. And of course there is some read across if you will or impact some markets more than others. We don't give exact in terms of what exactly our revenue is for Texas for instance, but not surprising we do see weakness in our South Houston market that would be around that downstream part of oil and gas. And North Dakota, I think our location count there now is 2, and we have about 30,000,000 in OEC. So it's no impact. Okay. Thank you very much. Thank you. Next question is from the line of Jane Spiro, Barclays. It's just one left. So it's just on capital allocation priorities. I know when you talk about the buybacks, you really sort of think of that as the number that plugs in to get you to wherever you want to be in your target leverage range. So given Michael's pride over the sort of cash generation slide of what we expect coming through in FY 2021, I just wonder sort of what's the catalyst to resume the buyback as we head into the second half of this current fiscal year and you get a bit more clarity on construction starts? Or do you want to be at the lower end of your leverage range to retain sort of firepower for organic CapEx and M and A as markets improve? So just keen to really understand where in that 1.9x to 2.4x range you think you should be at this stage of the cycle and how that might change as we move through the next 12 months? Yes, Jane, thanks. That was an exacting question and I may not give you as exacting an answer because there is a it's not a specific point perhaps in that range where we would turn that back on. It also has to do with what our outlook would be beyond this current fiscal year. So as we look into look, we expect we will delever as we go through the year and there will come a time where we will assess quite seriously whether or not we decide to reengage in terms of our buyback. It is not a matter of if, it is a matter of when. So that I will be exacting on. But again, as I said, Q1, Q2, we think we have pretty good feel for and insight into. Q3, Q4, we really need to take a look and realize what the markets may look like at that time. Our range stays the same. Look, it won't be long to where inevitably we think likely we will trend down toward the bottom of that and then that probably does go back to your point which is it's just a number and it's just that plug. And absent M and A, certainly buybacks will come to life. Okay. Thanks. Thanks, Shane. The next question is from the line of Andy Wilson at JPMorgan. I'll try and keep it brief mindful of the client. I have a question around specialty. And if I look at how your specialty business has grown and I look at how it's performing in the downturn, if I was one of your competitors, I would probably be I would say a lot more capital to specialty than I had before. So kind of interested in, if you think they will, if they have the capability and the balance sheet to do so. And if actually, conversely, more of your competitors trying to do more in specialty might actually be good news, given that it sort of, I guess, further legitimizes it almost as an option for more of these non construction buyers effectively or potential renters who used to be buyers. So just very interested in terms of, I guess, how and sort of how this downturn might actually change people as opposed to specialty? Yes. Andy, good question. And you kind of answered it for me toward the end when you said, you thought maybe that more is not bad. And I think there's a very good point around that. In the end, the win in specialty is really the shift in terms of the rental penetration. So it is the shift from ownership to rental is the big, big prize. And to have only one specialist in a market, probably doesn't drive that the way that we would want it to. So more than one is not bad. Let's be clear, albeit our specialty businesses are different. There is another competitor in North America who does emphasize their specialty business, which I can only imagine they will continue to do so. Ours are a bit different. The bigger question really is, well, who can? And we no doubt we'll have 1 or 2 others that do that. But beyond that point, anyone with any sort of significant scale, they're not obvious. So hence the reason why we will continue to amplify our efforts the way that we will through more openings, broader coverage, more fleet investments, and better cross selling. But specialty is certainly a theme that will not be going away, anytime I can see in the future. Thanks, Brendan. I'll leave it there. Thanks. Thanks, Andy. Okay. The last question we have time for today is over the line of Tom Bolton at Berenberg. Please go ahead. Your line is now open. I think I've already asked. Thank you. So I'll leave it there. Thank you very much. Thanks, Don. May I please pass it back to you for any closing comments at this stage? No, I think we've covered all. Thank you very much for taking the time this morning in the U. S. Anyway and this afternoon now in the U. K. And we look forward to seeing some of you I'm sure during our virtual road show. Thank you very much. This now concludes the call. Thank you all very much for attending. You may now disconnect your lines.