Hello, and welcome to this Ashtead Group first quarter results analyst call. Throughout this call, all participants will be in listen-only mode, and afterwards, there will be a question and answer session. Just to remind you, this session is being recorded. I will now hand you over to Geoff Drabble, Chief Executive. Please begin.
Good morning, everybody, and welcome to the Ashtead Group PLC Q1 results conference call. Suzanne and myself will as usual in this shorter Q1 update, present a few slides on the financial and operational performance of the business. We will then swiftly move on to the Q&A and therefore hopefully bring you right up to date with our current performance and what trends we are seeing in the business. Starting with the overview on page two, we are obviously very pleased with a very impressive quarter. The momentum established over the last year continued with 26% rental revenue growth in Q1. This growth continues to be highly profitable, resulting in record pre-tax profits of GBP 99 million and generating 43% group EBITDA margins. We have consistently reinforced our belief that return on investment through the cycle is the key measure in this industry.
To see group ROI at 17% so early in the cycle is particularly encouraging. Our strategy remains focused on organic growth, with gross CapEx of GBP 279 million in the quarter, and I will specifically cover this fleet growth in the operational review. Fleet Management is a key part of our medium-term cyclical planning, as is our debt planning. Therefore, we were pleased as part of this process to extend our ABL facility in August. Suzanne will cover this in more detail in a moment, but in short, we got more for longer, and it costs less. Importantly, it again provides us with a very firm capital base from which to continue to invest in the business. With that very brief overview of the highlights, I will hand you over to Suzanne to cover the financials in a little more detail.
Thanks, Geoff, and good morning. I am pleased to share with you this morning on slide three our first quarter numbers. It is encouraging to see last year's positive trends continue into the new fiscal year. For the quarter just ended, we reported an underlying pre-tax profit of GBP 99 million compared to GBP 61 million for the same quarter last year. Rental revenue was again the main driver of profitability. It increased by 26% as compared to the same quarter last year. Our performance was further enhanced by our operational leverage, and as a result, our EBITDA margin increased from 40%-43%, and importantly, our operating profit margin rose to 27%. We believe these improving metrics, along with group's return on investment of 17%, clearly demonstrate the strength of our largely organic growth strategy, as well as improvement in both our U.S. and our U.K. businesses.
Geoff will discuss this in more detail in a moment. slide four shows our debt and leverage position at the end of July. As you'd expect, given our growth trends, we invested significantly in our fleet and took advantage of market opportunities. As a result, our debt increased in the first quarter. From a leverage perspective, the increase was more than offset by higher earnings. Therefore, our net debt to EBITDA leverage ratio declined from 2.4 times last July to 2.1 times this year or measured at constant currency 2 times. This reduction was in line with our previous comments that improving EBITDA margins would allow us to support further growth while still continuing to delever. We anticipate that leverage will reduce to approximately 1.8 times by the end of the fiscal year. Therefore, we maintain our medium-term guidance of below 2 times leverage.
As Geoff said, our capital structure is always a key focus area for us, and we further improved it during the quarter. On slide five, we summarized the recent changes we made to our senior debt facility, all of which enhance our financial flexibility. We upsized the facility from $1.8 billion to $2 billion, a change that we believe is prudent given both our growth and the strength of current credit markets for larger, well-capitalized companies. Had the new facility been in place at July 31, our borrowing availability would have been $657 million. We also took the opportunity to extend the facility's term for another five years, and it is now in place through August 2018. Finally, but equally importantly, our borrowing costs will be reduced under the new agreement.
The rate of interest we currently pay has been lowered from LIBOR plus 200 basis points to LIBOR plus 175 basis points. With the new facility in place, our weighted average debt maturity is now six years. Our weighted average interest cost is well below 4%, and we effectively have no financial monitoring covenants unless our borrowing availability falls below $200 million. The ABL structure we have in place is well suited to our cyclical asset-intensive business, and it has proven itself during the downturn. At this stage, we believe our overall debt structure, combined with our young fleet age, positions us well to take advantage of prevailing market conditions. That concludes my comments, and I will hand it back over to Geoff.
Thanks, Suzanne. Just a couple of quick slides from me on operations before we shoot straight to Q&A. Starting with Sunbelt, really not much to add here from what we said at the year-end. Both fleet on rent and yield have continued to perform well in the quarter, as you can see from slide six. This has resulted in a very pleasing 25% rental revenue growth, again, reinforcing our industry-leading performance. We have accelerated capital spending in light of the high activity levels, and the fleet size is now 18% larger than one year ago. As we have stated many times, we are fortunate to be able to flex our fleet size readily due to short lead times from suppliers and individual assets being relatively small increments of expenditure. As in previous years, we will continue to be proactive in response to market conditions and invest as required.
This investment has allowed us to pleasingly get physical utilization back to more normalized levels, which will allow us the headroom to continue to provide excellent customer service, react to what we see in the marketplace, which is improving demand, and therefore continue to gain market share. Importantly, as well as focusing on growth, we continue to ensure that this is profitable. Drop-through of rental revenue growth to EBITDA remained a very healthy 63%. Moving to A-Plant, after all of the difficult times, it's really pleasing to report a continuation of recent trends and a very strong performance. A-Plant's rental revenue growth was obviously very strong at 35%, but this does include two acquisitions made during the quarter. However, stripping those acquisitions out, revenue still grew 12%, which is very good in current markets. Now, as in the U.S., we are clearly gaining share.
Also as in the U.S., our drop-through from this revenue growth was good at 60%. We believe that our strategy of first stabilizing the business, as we did some time ago, followed by sensible investment, continues to pay dividends, and we anticipate further progress as we leverage the group's strength. That ends this very brief first quarter update. To summarize, it's been another period of good revenue growth, margin progression, and basically just more of the same. We continue to think carefully about the cycle and have continued to invest in the fleet and refinance the ABL. Both of these actions have positioned us well for further growth, whatever market conditions may prevail. As a result, the board anticipates a full-year result ahead of its earlier expectations. With that, we now move on to Q&A, where we will follow the usual protocols. Over to you, operator.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press zero one on your telephone keypads now. You may press zero two to withdraw your question, and there will now be a brief pause while questions are being registered. Our first question comes from the line of Justin Jordan of Jefferies. Please go ahead. Your line is now open.
Good morning, Suzanne and Geoff. Well done, obviously, in Q1, as always, the market is forward-looking. It focuses on Q2 and God knows whatever fiscal 2015 thereafter. Can you just talk a little bit about current trading in August? I'm just curious to know what rental revenue growth was in both Sunbelt and A-Plant in August, and just what trends you may be seeing. Is anything changing in either macro environment or the competitive landscape in either geography?
You're absolutely right. The great set of Q1 results, but they're already yesterday's news, and we, like you, are focused on the future. We're very encouraged by our current trading. August revenue growth was at 20%. It's true, we face ever tougher comparators. The key to this is what we're seeing sequentially. What we've seen in both Sunbelt and A-Plant is strong sequential growth. We've seen good growth all through each month as the year has gone by, have seen improvements in volume and improvements in yields. We sit here today with, yet again, record levels of fleet on rent in both geographies and improving trends in yields. I know there are some macro concerns out there about tapering of quantitative easing. We have not seen anything like that out in the marketplace.
I think you have seen in both of our geographies, there was broadly encouraging macro data on construction only yesterday. We look at a number of other key non-financial metrics which support the sense that we're very busy out there. Contract count is up, contract length is up, contract value is up, and the lead time in which people are requesting delivery of equipment is down, which in our world all points to a very busy market. We invested heavily in fleet growth in Q1, and based on the plans we have for Q2, intend to continue to do so throughout Q2. We are very encouraged about progression in yields and progression of fleet on rent.
Thank you.
Thank you. Our next question comes from the line of Mike Murphy of Numis Securities. Please go ahead. Your line is now open.
Yeah, morning, guys. A couple of questions, please. First of all, on yield. Can you shed a little bit further light on the 6%? I think when we spoke at the end of last year, Geoff, you were suggesting that the rates of yield improvements that you saw throughout last year were probably not sustainable in the current year. Secondly, talk a little bit about the mix of the fleet. If so, that's fair enough. Other areas such as the specialty, which I know you focused on in the past, are they doing better than the average, please?
Yeah. Look, no, they are good questions. Yeah, look, clearly, after such a strong year last year, you can have concerns about the sustainability of that as you go into a new year. I think just because of the high activity levels, Mike, we have been pleasantly surprised with the volume growth that we've had, but also our ability to get yield improvements. As I said, sequentially, we had a very good July and a very good August. With rates depend on activity levels. As I said, contract count is up. Contract duration is up quite a bit, which is interesting. What that means is people are scared to give up their fleet. In value of contract. We often quoted in the past that 50% of all demand is called in either the day before or wanted for same-day delivery. Current stats are we're at nearly 70% on that.
That's just people are busy and are having to react. In that environment, that's a very positive rate environment. We ought to be able to take advantage of that both through pure rate and ancillaries like things like transportation charges, hence, a very strong yield.
Thank you.
In terms of mix of business, it's been very widespread. Again, all of our geographies are strong. All of our product sectors are strong. If anything, the specialty businesses are facing the tougher comparators. We had a whole range of significant weather events last year, all through Q1, and we've had none this quarter. These numbers are without extreme events. You know Q3 is going to be a tougher comparator with Hurricane Sandy. Despite that, the core market around small scale non-residential construction is strong for us. You can see areas of the market linked to government expenditure, where you see negative impact of sequestration. Whilst residential, and I know there's lots of speculation about this, really is a very small proportion of our business. What exposure we have, it's a very good market right now.
All in all, we think market conditions are favorable, and I would point to the fact that we've got 18% more fleet than we had one year ago. As I said, and we continue to spend heavily on capital.
Okay. Can I just follow on from that? You've obviously pulled forward a little bit of capital expenditure into Q1. You're keeping the same figure for the full year. Can you just explain a little bit more about your thinking about that? I know normally Q2 and Q3 were below net additions to the fleet. Q4 very much depends upon the outlook for the following year.
Well, that's the key. Look, Q2 is going to be strong again. There's no question about that. Therefore, you could look at the expenditure in this quarter and the end of the second quarter and say, the risk is undoubtedly to the upside in terms of our capital expenditure. You're absolutely right. What will dictate the quantum will be what we do in Q4. What we do in Q4 will be based around an economic outlook we take around January and February time. All we're trying to signal to people here is people get too obsessed with our capital number. We look a quarter out. I've used the analogy before. This isn't real capital expenditure. It's like asking Sainsbury's how many loaves of bread they're going to have on the shelf. It's stock in trade more than it's capital.
Our not upping our guidance is in no shape or form any lack of confidence in our business. The fact of the matter is, eight weeks after the year end, we haven't sat down and done a Q4 forecast yet because we're so busy trying to get in everything we can for Q1 and Q2.
Just following on from that, any change in terms of prices of new kit? Presumably, you're buying new kit, other competitors are buying new kit. Can you just say what the situation is at the moment across the piece in terms of?
Yeah. We're seeing very little inflation this year.
Okay.
I think I point out, if you look at the Dodge Report, expenditure on fleet industry-wide is down, not up.
You're increasing market share.
Look, whatever stats you look at, our biggest competitor, the Global Insight numbers, the general construction markets point to somewhere around 6% growth. There's clearly a big delta between that number and what we're delivering. Clearly, that's market share growth.
Thanks, yeah.
Okay. Thanks, Mike.
Thank you. Our next question comes from the line of Andrew Nussey of Peel Hunt. Please go ahead. Your line is now open.
Hey, good morning. It's Andrew Nussey. Just a couple of questions, if I may, around A-Plant, which obviously is staging quite a remarkable turnaround. Can you give us a little bit more feel around the volume dynamics there? I'm conscious utilization continues to improve. On the yield side, again, the improvement yield, that's the first improvement yield we've seen for a number of quarters, and whether that's rate rise or mix impact, just a little bit more flavor on that turnaround that you've seen in the first quarter.
Look, let's be clear. Remember, in terms of the volume growth, we've been seeing that for two or three quarters now. We have been starting to see share gain for a while now. The revenue growth is up 9%. You're right in pointing out the big chunk of that's physical utilization. I think the fleet size is only up about 3%, and the rest of it is utilization. The market conditions aren't still great in the U.K. Not surprisingly, unlike the U.S. where frankly, I wouldn't be against the utilization coming down a little bit further to give me some headroom to gain market share. We're not in that position in the U.K. with the returns on investment. We're still at this sweating the assets phase. Fleet on rent is going well across a very broad base. Yields, be careful.
Remember, all through last year we were saying, I know we're saying -1% to -2%, but it's not as bad as it looks because there's one contract distorting the numbers. The same is true with the +3%. It's not quite as good as it looks. It's not like there's been this significant leap in performance between Q4 and Q1. We told you all through last year that the underlying numbers were 1%, maybe 2% growth. It's just the comparators sorting themselves out. Nothing spectacular has happened in the first quarter. Both in the U.K. and the U.S., our progression on volume and our progression in rates tends to be lots of small baby steps, not big changes. It is mildly positive, and the volume is good. Like I said, we've got 12% growth again in August, 36% or 37% including the acquisitions.
It's nice to see a business that's had a difficult time really benefit from some very sensible management decisions and taking a longer-term view. If we get any help whatsoever from the economy, which I think still up for grabs whether that's going to be the case or not, then clearly we're incredibly well-positioned.
Continuing to look out for any sort of potential small bolt-ons as along the lines that you've done in the last 12 months?
Yeah. Look, in both geographies. We think that there is a very good pipeline of predominantly specialty small bolt-on acquisitions. That's both in the U.S. and the U.K. Again, our primary focus will be organic growth. We still got, in both markets, relatively low market share. I think we find ourselves in a very strong competitive position. A number of our customers and a number of our competitors remain poorly invested in our balance sheet, both in terms of its fleet and our capital availability is very strong, and we want to leverage that. The key to this is look at our ROI. In Sunbelt, there's a group at 17%, in Sunbelt it's 25%.
It's tough to find M&A which is going to give me anything like the sort of returns I'm getting from organic growth, and we don't see any short or even medium-term concerns about our ability to keep very healthy organic growth. It's been a very dull story for a while now, Andrew. If there's any summary for this Q1, it's just more of the same.
Okay. No, that's very clear. Thanks, Geoff.
Thank you. Our next question comes from the line of Alex Magni at HSBC. Please go ahead. Your line is now open.
Thanks. Morning, Geoff. Morning, Suzanne.
Morning.
Hi, Alex.
Just a question on the rate of headcount growth at Sunbelt. That's started to sort of pick up certainly ahead of depot growth. We had about 12% year-on-year growth in headcount in Q1. Is that the normal rate of headcount do you think we're at? Is there that much tension in the depot network?
What we said, Alex, for some time is that we have used up a lot of the spare capacity, which you see in the 60% drop through guidance that we've given spare capacity in terms of having extra employees, extra trucks, et cetera. That's sort of been used up. As our volume continues to grow, yes, we will add headcount. Specifically to your question, though, don't forget when you're looking at it year-over-year, that we have opened a number of greenfield stores. We've made a number of small bolt-on acquisitions. If you strip those out, it's probably around 50/50 or so of the headcount growth that you're looking at. About 50% of it relating to acquisitions.
Okay. Got it. Thank you.
Sorry to interrupt. It's not going to be linear. Suzanne's absolutely right, and the point you're alluding to is right, which is you get some free growth early on when you're using spare capacity. We're beyond that point. However, that doesn't mean 10% volume growth equals 10% headcount growth. We're not at that stage by any stretch of the imagination. Of course, as Suzanne says, there is a lot more capacity available in the headcount we've put into the greenfield sites.
Understood. Okay. Then just following up on the question on yield. Just rough numbers, but do you have a sense of how much of the yield growth was driven by identifiable non-pricing things, so design revenues in some of the specialty businesses or fuel pass-through revenues?
Yeah, no. It's a relatively small proportion of the two. Out of the six, it's probably two. Yeah, about two. You're right. It's an important element, and I know we've talked about this before. Go back to what I was saying about that activity level and the shorter-term nature of people's ordering cycle. All of that helps you improve things like your transportation revenues. Certainly, things like transportation revenues, revenue protection plans, all those ancillary revenues have improved during the quarter, which is encouraging. Again, is a reflection of better activity out in the marketplace.
Sure. Okay. Then just last one from me, sort of minor balance sheet question. The provisions, are those mostly captive insurance provisions and sort of why there seem to be a fairly sharp pop in Q1?
Yeah. The provisions consist principally of self-insurance provision, there are a number of other things. In the U.S., for example, you might have provisions for sales tax liabilities and things like that. Some of it is just timing in nature.
Okay.
Nothing significant.
Understood. Thank you.
You're welcome.
Thank you. Our next question comes from the line of Mark Haddon of Oriel Securities. Please go ahead. Your line is now open.
Good morning. Just a quick question on the staff costs. I think following up a bit on Alex's question. Was it staff cost to revenues in the quarter, appreciate it is a quarter, sort of 25% of total revenues? It's quite low. Is there some sort of a catch-up effect as these more people come in, as it were, to the next period? Sort of looking at the staff numbers, do they kind of arrive towards the end of the period, and that's going to have an effect going forward?
No. In the case of Greenfields, for example, it just really relates to when the store is opened or when acquisitions come on. It's really more driven by that than anything else. I wouldn't say that it's weighted more toward the beginning or end of a quarter.
Okay. A view with regards to sustainability of that type of ratio? It's quite low.
Yeah, look, at the end of the day, the labor cost is a relatively, in the grand scheme of things, a relatively small portion of our total revenue, especially as we get yield improvements. You wouldn't expect an improvement in the ratio.
No. That's right. That's just part of the operational gearing that we talk about.
If you're getting 63% drop-through, clearly the cost base per se is reducing as a percentage of the revenue.
Exactly.
Okay. Thank you.
Thank you. Our next question comes from the line of Gregory Krikorian of UBS. Please go ahead. Your line is now open.
Morning, Geoff. Morning, Suzanne. Three questions from me, if I may. Firstly, just in terms of the competitor backdrop, and in particular, United Rentals. What do you think the catalyst will be for URI to start catching up on growth? I mean, clearly no one expects them to lag indefinitely. Secondly, should we infer anything from the very modest slowing in the Sunbelt growth rate over the quarter? What do you read from that, if anything? Thirdly, in terms of the operational efficiency drive in the U.S. and your efforts to reduce fleet downtime, how long should we expect that to take before it perhaps starts to show up in the numbers? Thanks very much.
Yeah. Okay. Look, at the end of the day, Mike Kneeland is far better positioned to talk about his revenue growth than I am. Look, United clearly have, not unsurprisingly to either us or I suspect them, had a lot of integration issues. One would anticipate that their revenue growth would trend towards ours sometime soon. They're a year through the acquisition. I heard some comments in their last call saying that they anticipated their rental revenue to trend upwards in the third and fourth quarter. Of course, they don't have the same headwind we had from Hurricane Sandy because you'll recall they made great note of the fact that they didn't have a big impact from Hurricane Sandy. Yes, you would expect their revenue growth to trend upwards.
However, as I've said this many, many times, our great opportunity in benefitting from structural change is not from United Rentals. This is our third year of very good growth, and it happened way before any United RSC sort of integration problems. United are a very, very strong company in a very good industry, in which all of the large players, in my opinion, will continue to gain share. Yes, I would fully anticipate their rate of revenue growth to improve over time, and I expect them to continue to benefit as we will from overall market share gains in a recovering market. That's the first one. In terms of so-called moderation of growth, well, I'm somewhat surprised at that. Look, we have upped our guidance on the back of upping our expectations from revenue.
Therefore, with the strong sequential growth we have seen through the quarter, our expectation for annual revenue growth has increased, not decreased. Under no circumstances did we believe with such a strong second half to last year, that we would maintain 26% growth throughout the year. I don't think anybody with any numbers out there expected that to be the case at all. The key to me is not on year-on-year comparators, but look at the sequential improvement in our activity levels. As I said, we are having what by any previous sort of benchmark is a very good season. August showed a lot of fleet growth over July and September, whilst it's very early days, early indications are that's going to show good growth over August.
The key is our activity levels, the key is that sequential improvement in volume and yield, they all remain positive. For the third question, yes, you're absolutely right. We have started a number of initiatives, to some degree, you're seeing some of those initiatives starting to play in now. I think most people would anticipate with the long period of growth that we would have, that the drop-through would have fallen way below 60% right now. I know we have had previous calls in the past where people expressed some concern at our ability to maintain a broadly 60% level that we said we would be able to achieve. There you can see we're seeing it at 63% still despite the greenfield starts.
In terms of the bigger savings that we've discussed in the past, they're starting to bear fruit and starting to see them in non-financial metrics. In reality, these things take 12 to 24 months to substantially come through in individual line items. Lots of little improvements is what is allowing us to maintain a very healthy 63% drop-through. You're seeing some of it now and you will continue to do so, which is why we are very comfortable reinforcing our guidance that even though we've used up some spare capacity, even though we're doing a number of greenfield sites, that a very, very strong 60% drop-through is a very achievable long-term target in this business.
Okay. Very clear. Thanks very much.
Thank you. Our next question comes from the line of Justin Jordan of Jefferies. Please go ahead. Your line is now open.
Thanks, guys. I've just got a follow-up question. I'm sorry for being a bit glib here, but I'm kind of looking at physical utilization and dollar utilization. In the statement you mentioned about 73% physical utilization in Q1. Now, I guess the glib comment for me is, of course, well, anyone can achieve that. You just cut your prices. The follow-up question, I guess, is more on dollar utilization, because you've improved that over many, many quarters and over several years now to 61% over the last 12 months. I'm just kind of thinking over the next, I guess, two, three, four or five years, where do you think you could take that within Sunbelt? It's already at a level that's 15%-18% better than major U.S. peers at this point.
I'm just kind of wondering where it could get to in this cycle and what would be the determining factors of achieving something better in terms of dollar utilization.
Look, Justin, you're right. That's the problem with physical utilization, which you've highlighted in the past. Look, dropping the prices is a fairly drastic way to improve your physical utilization. A much easier way is to just sell some fleet. Yes, physical utilization is one part of a bigger equation. People will talk about various metrics. The catchall is dollar utilization. It covers the efficiency at which you're using your fleet and the pricing. You're right, we're delighted in a period where you're coming off very strong performance last year that we yet again improved dollar utilization to 61%, which if you remember our model, just demonstrates why we're getting 25% return on investment. Our view is this, which is we peaked historically in the mid-60s. We think we can get there again.
Our rates now are back to where they were at the previous peak. In some areas, a touch better. The reason why our dollar utilization isn't there is because they have to be better just to keep pace with the inflation we've seen over the cycle in fleet. Brendan and the guys do fantastic reporting and fantastic ways of really driving home to the sales force that previous peaks and rates are not relevant because the cost of equipment is higher. Therefore, looking at that relationship, given how early we are in the cycle to be at 61%, we're pretty confident that we will get back to that mid-60s level again. To do that, we may have to have lower physical utilization, but bigger pricing increases because we're able to service a customer better.
To just look at physical utilization only looks at half of the equation, in my opinion. Well, one third, because the other part, of course, is the original cost of your assets.
Okay, thank you. Just a quick follow-up just on I guess expansion plans going forward. You talked earlier about equipment prices being broadly flat or equipment inflation being pretty muted year-on-year. Can you just expand a little bit just on lead times? I'm just wondering whether, if things are recovering, whether they are pushing out and whether that might impact on growth plans going forward.
Yeah, no. As you saw in Q4, when we pulled forward GBP 100 million of capital, we are able to access fleet readily available for two reasons. Lead times as of themselves are not terribly onerous. Whilst we don't make firm commitments to our suppliers, we do give them good long-term indicators. Oftentimes, our manufacturers, because we've been a very steady and consistent customer over the years, will build ahead of our delivery schedules, and therefore, we're able to pull forward equipment they've built perhaps for the next quarter. We're able to pull that forward. Whilst it's true there are one or two asset categories where lead times are a little bit longer, in the main, we have the ability to flex our fleet readily. I think two things to note. We've talked a lot about the uptick in gross CapEx in the quarter.
Another way where we flex our fleet, remember, is disposals are down year-on-year in the quarter, too. Again, just demonstrating the level of demand. It's hard to take the fleet off people at the moment. We have two ways of flexing our fleet size, additions and reduction of disposals, and that's one of the great big benefits of having a young fleet.
Okay. I'm just thinking this through. If you've upsized your financial headroom by $200 million, your lead times haven't materially changed, fleet CapEx or fleet costs haven't materially changed. You've got increased headroom and a little bit of flexibility on what you bring in and the pace at which you bring it in. I'm just thinking in terms of back in June, you were talking about 30-40 branch openings in fiscal 2014 and 100 over the next 2-3 years. Is that still the central case plan, as it were?
Yes, absolutely. Let's be clear. We've refinanced as part of our long-term cyclical planning. We haven't refinanced as part of some short-term desire to spend, that there's some imminent spending spree. We were more than capable, because of our high margins, of investing heavily in the fleet with our organic cash flow. Please don't read the refinancing as preparing to spend anything. Look, we're very fortunate that we're not facing undue inflation at the moment. That's great. That will undoubtedly help dollar utilization. Lead times are relatively short, and therefore, we are able to flex the fleet without taking long-term capital bets. I personally am not terribly worried about tapering of quantitative easing. There is no point making a big call on Q4 before I have to. You might as well be armed with all of the information you possibly can before you make that call.
Very clear. Thank you.
Thank you. Our next question comes from the line of Steve Woolf at Numis Securities. Please go ahead. Your line is now open.
Morning. Just to follow up on CapEx, just to sort of any flesh you can give on what areas of kit you're adding at the moment, and particularly in the CapEx that was brought forward slightly. Or is it fairly broad and going into greenfield more than existing at this point?
No. Yes, some of it clearly is going into greenfield. We opened about eight locations in the quarter, so we probably put about GBP 40 million into greenfields. The vast majority, as you can see, went into existing locations to satisfy increased demand. It is a very broad base. We've talked about this before. We are very careful in our investments in fleet that certain product categories do not become too large a % of the total, and we've talked about this before. Our view is things like big aerial are commodity products, and we shy away from having too big a proportion of our fleet. We do cap certain investments in certain product categories.
As a result, we ensure that we maintain the strength of our business or what we think is the strength of our business, which is the very broad range of equipment that we offer, which appeals to a very broad range of customers. That's an important consideration, that we don't just chase the current hot market, but we-
Sure
keep our strategic differentiation.
That's great. Thank you.
Okay.
Thank you. Just to remind all participants, if you would like to ask a question, please press zero one. You may press zero two to withdraw your question at any time. There may be a further pause while questions are being registered.
Operator.
Go ahead.
If there aren't any questions, operator, I think what Suzanne and I would like to do is just thank everybody for their participation. The Q1 conference call is always a somewhat shorter update, but we're delighted to say, as I said earlier, very pleased with the fact that it is business as usual, and we continue to see good sequential improvements in our performance. With that, thank you very much for dialing in today.
Thank you. This now concludes our call. Thank you for attending. Participants, you may disconnect your lines.