Hello, and welcome to the Ashtead Group plc Q1 Results Analyst Call. I will soon turn it over to Brendan Horgan and Alex Pease, who will lead the presentation today. Now, Brendan Horgan and Alex Pease of Ashtead Group plc, please take it away.

Great. Thank you, operator. Good morning. Thank you for joining, and welcome to the Ashtead Group Q1 Results Presentation. I'm speaking to you this morning from our support office in Fortville, South Carolina, where I'm joined by Alex Pease and Kevin Powers, with Will Shaw on the line from London. Given this is the first quarter, we'll keep this relatively brief. You'll see we've updated the presentation format a bit as we do from time to time. But as usual, I'll start with safety on Slide 4. To begin, I'd like to address our Sunbelt team members listening in, specifically recognizing their leadership and help in the safety of our people, our customers, and the members of the communities we serve. In particular, I'd like to acknowledge our professional drivers, who are on the road every day and lead from the front in our obsession with Engage for Life and our obsession with customers. They drive over 1 million miles while performing over 30,000 deliveries and pickups every single day. We know that the more we drive our exposure increases. I'd like to recognize this team for not only delivering on our promise to our customers, but also doing it safely. Just as we invest in our fleet, we also invest in the safety of our people and our communities, and illustrated herein, you can see the significant improvement in rear-ending events. Our efforts are delivering results following the performance of the business, which we will discuss, but more importantly, on the safety of our people. So to our drivers, thank you. Thank you for all your efforts and your ongoing commitment to Engage for life. Turning now to Slide 5. Key messages you'll hear from Alex and me today are the following: First, this is a solid set of results with our expectation of group rental revenue growth of 2.4%. Second, the strength of free cash flow after CapEx investment in fleet and business expansion, demonstrating that through the cycle free cash flow power of the business at our scale and margin. Third, while our key construction end markets remain mixed, we are seeing clear signs of positive momentum in many of our internal and external leading indicators such as quotes, reservations, and planning momentum. More on these later. Mega project activity continues to be strong, and we're winning share across our regional and national strategic customers. Fourth, we continue to deliver against the 5 actionable components of our Sunbelt 4.0 strategy with growing momentum every day. Fifth, we're confident in reaffirming full-year guidance for rental revenue growth and CapEx while increasing it for free cash flow. And finally, the work to move the primary listing to the New York Stock Exchange in March 2026 is on track. As part of this process, we're planning an Investor Day in New York shortly following our listing and hope to see you there in person. We'll, of course, be sending out to save the date shortly. Moving on to the financial highlights of the first quarter on Slide 6. Group rental revenues were up 2.4%, consistent with the 0% to 4% guidance we gave in June. I mentioned some leading indicators a moment ago, so let me expand. We actively track leading indicators such as quotes, reservations, daily new contract activity, and continuing contracts as a way to measure the health of our pipeline. And all these indicators are trending positively and favorably compared to what we experienced a year ago this time. While it is too soon for these leading indicators to form certainty, we're cautiously optimistic that these trends in our business will continue and are early signs of the local nonresidential portion of our end markets recovering. When they do, we'll experience accelerated momentum and improved results. Group adjusted EBITDA was flat at $1.3 billion and EBITDA margins of 46% reflected the mix effect of higher ancillary revenue primarily related to the Power & HVAC business as well as the proactive repositioning of our fleet to drive utilization and unlock pockets of growth. Increased repair costs also represent a headwind to margin as a larger portion of the fleet comes out of warranty coverage as we expected. From a capital allocation standpoint, and in line with our Sunbelt 4.0 priorities, we invested $532 million in CapEx, focused on a mix of replacement and growth. Free cash flow was $514 million, which apart from the COVID impacted fiscal year 2021 is a record for the quarter, demonstrating the resilience of our business while we continue to invest in growth. This strong free cash flow generation is supporting the current $1.5 billion buyback program, which we are on track to complete in the current fiscal year, in addition to repaying $90 million in long-term borrowings in the quarter. Moving on to our segmental performance on Slide 7. Rental revenue growth for North America General Tool was 1% in the quarter, reflecting positive volume momentum and resilient rates in end markets, which continue to be mixed. As expected, we continue to be in a moderated local nonresidential construction market through the first quarter, offset in part by the ongoing strength of the project landscape and the broader nonconstruction markets. During the quarter, we repositioned the rental fleet as we focused on improving time utilization across General Tool with good results. As expected, specialty performed well with a growth of 5% despite the drag from oil and gas and the Film & TV business in Canada, both of which were not previously reported in specialty and were down in the quarter. The Specialty segment's strength was led by the Power & HVAC business, which grew double digits as we continue to provide a wider scope of value-added services to our customers. On a constant currency basis, U.K. rental revenue was down 2%, reflecting the ongoing challenges in the U.K. markets. Slide 8 shows the fleet on rent for North America over the last 4 fiscal years, and you can clearly see that our efforts to drive growth with the existing fleet have resulted in improved time utilization. While this has come with temporarily higher transportation costs, it's the right trade-off to make for the business as it will support a more constructive rate environment and improve ROI over time. It also demonstrates our disciplined and flexible capital allocation approach. On the next couple of slides, we'll cover the activities and outlook for the North American construction end market. On Slide 9, we've set out the main lead indicators for the construction sector, Dodge Starts, Dodge Momentum Index, the Architectural Billing Index, and the Fed Fund rate. The outlook for construction growth continues to be underpinned by mega projects and infrastructure work, which remains strong. In many cases, we are gaining further momentum. We made great progress in mega project wins in the quarter with a growing funnel of future projects and advancing market share with our strategic customers, both regional and national. This clearly demonstrates the cross-selling prowess across the Specialty and General Tool businesses as well as the advantage of Sunbelt's significant breadth and depth of products, solutions, and expertise. Combined with the technology platform, that is able to deliver efficiencies and value in a range of complex applications. As it relates to our local nonresidential end market, we remain in a moderated environment. However, in addition to the previously mentioned internal leading indicators of quotes, reservations, and activity, where we are seeing positive trends, I'd like to call your attention to the Dodge Momentum Index in the bottom left of the slide. This index represents nonresidential projects, excluding manufacturing, that are below $500 million and entering the planning phase for the first time. This is, therefore, highly representative of future velocity in what we refer to as the local nonresidential construction market. This clearly indicates strong demand and development and we are confident that the strengthening and planning activity across our nonresidential construction end markets will lead to an increase in starts likely within a period of 12 to 24 months. So while this is clearly a positive leading indicator, it will take some time for this planning to translate into project starts. However, when it does, we are poised to benefit. On Slide 10, you can see how the start forecasts translate into the latest Dodge put in place figures. It's worth flagging that Dodge has now increased their 2026 forecast for growth in construction, excluding residential from 2% to 4% in their June report, reflecting some of the more positive lead indicators we're now seeing. It's also important to note that these numbers are significantly influenced by the strength of mega projects, which affect our large strategic customers as opposed to the SME portion of our customer base. Before I hand it over to Alex, I'll just touch on our Sunbelt 4.0 strategic plan on Slide 11. We're now 5 quarters into a 20-quarter plan, and as I detailed in June, our teams have been laser-focused on advancing each of the 5 actionable points, which are customer, growth, performance, sustainability, and investment. While I'm not going to give you a further detailed progress report today, I will say that our clarity and mission throughout the organization is certain, and our momentum is building. We'll share more details as we progress throughout the year and in particular during our upcoming Investor Day. With that, I'll hand it over to Alex to cover the financials in more detail.

Thanks, Brendan, and good morning to everyone. Starting with the first-quarter results for the group on Slide 13. Group total revenue increased 2%, and rental revenue increased 2.4%. The EBITDA margin and EBITA margin were 46% and 24%, respectively. The slight drop in margins reflects a number of factors, including the higher level of ancillary revenue, most notably EMV work in our power business, which is typically at a lower margin level. An increased level of internal repair costs, which we anticipated as we had roughly 13 percentage points less of our fleet on warranty coverage and an expected increased cost of repositioning the fleet to higher-growth markets, driving improved time utilization and ongoing rates. After an interest expense of $131 million, reflecting lower average debt levels, adjusted pretax profit was 4% lower than last year at $552 million. As explained previously, we're adjusting for nonrecurring items associated with the move of the group's primary listing to the U.S. These costs amounted to $12.7 million in the quarter. Adjusted earnings per share were $0.953, and ROI on a trailing 12-month basis was 14%. Slide 14 illustrates group revenue and EBITDA progression over the last 5 years and in the first quarter, highlighting the significant track record of growth over a range of economic conditions. Turning now to the individual segments and starting with General Tool. Slide 15 shows the performance for our North American General Tool. Rental revenue for the quarter grew by 1% to $1.5 billion, driven by improved volume, time utilization, and stable rates. As I explained previously, margins were impacted in the period primarily by investments in repositioning the fleet for growth as well as higher internal repair costs largely related to warranty recoveries. EBITDA was $871 million at a strong 53% margin. Operating margins were 32%, and ROI was 20%. Turning now to North American Specialty on Slide 16. Rental revenue was 5% higher than the first quarter last year at $854 million as the nonconstruction market continues to be strong, particularly in power & HVAC and Climate Control. This strong rental revenue growth in the quarter was primarily impacted by the inclusion of both Film & TV and oil and gas, which were not included in the results prior to our resegmentation. Margins in Specialty were flat with an EBITDA margin of 48% and an operating margin of 33% as mix related to high ancillary revenue impacted margins as well as the higher internal repair costs. These headwinds were offset by continued strength in rates and will pay dividends in the back half of the year. ROI was 31%, again, clearly demonstrating the higher returns achievable in the Specialty business. Turning now to the U.K. on Slide 17. And please note that all of these numbers are in U.S. dollars. U.K. rental revenue was 4% higher than a year ago at $212 million. The U.K. business delivered an EBITDA margin of 25% and generated an operating profit of $16 million at a 7% margin, and ROI was 6%. In line with the 4.0 strategy, we continue to focus on improving the business's operational efficiency and long-term sustainable returns through a broad range of efforts, including footprint realignment, targeted asset sales, and G&A discipline. Across our North American segments, we've shown the resilience of our business and returned to growth and significant cash flow generation while continuing to invest for the future. While a U.K. business continues to be challenged, our disciplined operating model, robust transformation plan and strong execution gives us a high level of confidence in the future. Combined, our results clearly demonstrate the full power of Sunbelt and the strength of our Sunbelt 4.0 strategy. Slide 18 illustrates the flexibility and agility of our capital allocation framework. When markets are experiencing the transitory headwinds we have experienced recently, we manage our capital budget to support strong utilization and rate discipline. When markets are more robust, we accelerate capital spending to capture growth and market share. In all cases, we generated significant free cash flow in excess of our investments, which we returned to shareholders in the form of dividends, debt repayment and share buybacks. You see this clearly in fiscal years 2021 and 2025, when we generated around $1.8 billion of free cash flow in both years. And as you can see, we have started the year strongly with over $500 million generated in the first quarter, over 3x the level generated in the first quarter of last year, and we're well on track to deliver record free cash flow generation this year. Slide 19 updates our debt and leverage position at the end of July. We reduced external borrowings by $91 million in the quarter in addition to the $523 million reduction in borrowings last year. We also returned $332 million through share buybacks at an average price of just over GBP 45 per share while continuing to invest over $500 million in CapEx. As a result, excluding lease liabilities, leverage was 1.6x net debt to EBITDA, well within our stated range of between 1 to 2x net debt to EBITDA. We expect to be in the 1.5 to 1.6 range at the end of April, including the impact from the share buyback program, but not including any potential impact of M&A activity. While I'm speaking of M&A, we have a robust pipeline, which we continue to develop and pursue opportunistically as long as it is accretive to growth and generates margins and returns in line with our capital allocation expectations. Turning now to Slide 20 and our latest guidance for revenue, capital expenditure, and free cash flow for fiscal year 2026. Our guidance for group rental revenue growth is unchanged at between flat and plus 4%, reflecting the ongoing dynamics in some of our end markets. The plan for gross capital expenditure is unchanged in the range of $1.8 billion to $2.2 billion. Finally, we expect free cash flow to be between $2.2 billion and $2.5 billion, which is an increase of $200 million over June's guidance and reflects the expected cash tax benefit from the reintroduction of 100% bonus depreciation based on our current CapEx plan. And so with that, I'll hand it back to Brendan to close this out.

Great. Thanks, Alex. Before summing up, I'll just touch on capital allocation. During the quarter, we made good progress on our Sunbelt 4.0 execution. As part of this, we've continued to invest in the business. So during the quarter, we invested $530 million in CapEx. We opened 10 greenfields in North America, of which 6 were General Tool and 4 Specialty with a clear line of sight to achieve 60 greenfields in the full year. We invested $20 million on 2 bolt-on acquisitions. The M&A pipeline, as Alex just referred to, remains robust, and we expect to acquire additional businesses as we progress through the year. We'll pay the final dividend of $0.72 per share on September 10, following its approval at yesterday's AGM. This amounts to $306 million. Finally, we returned a further $330 million through share buybacks and expect to complete our $1.5 billion program by the end of this fiscal year. All this is consistent with our long-held policy, and we'll continue to allocate capital on this basis throughout 4.0. Turning to Slide 22. And in summary, there are 2 primary takeaways one should gather from our update today. One, the quarter resulted in exactly what we expected in revenue growth, improving utilization, free cash flow, and advancing our 4.0 plan, leading us to reiterate our revenue and CapEx guidance while increasing it for free cash flow; and two, we're experiencing positive leading indicators in our internal business activity levels and pipeline coupled with an encouraging indication of market demand statistics. And with that, we will open the call for Q&A. So back to you, operator.

Our first question today is from Annelies Vermeulen of Morgan Stanley.

I get 2 questions, please. So just on your margin expectations for the rest of the year, I think your margins improved in Q4, thanks to some of those cost controls you spoke about previously. But clearly, we're a little bit under pressure this quarter due to the factors you mentioned on ancillaries, fleet repositioning, repairs, et cetera. So should that continue through the remaining quarters? Or was Q1 a bit of a one-off in that regard? And do you have further plans offsetting cost control factors for the remaining 3 quarters? And then secondly, on your free cash guide upgrade, just wondering if you had any plans at this stage for that cash, either in terms of deleveraging or more buyback. You mentioned that you plan to acquire additional businesses through the year. So within that, could you perhaps comment on the M&A environment in terms of valuations, willingness to sell, et cetera?

Sure, thanks for the question. I'll start and then hand it over to Brendan, particularly regarding M&A. First, I don't view our margins as being under pressure. They remain strong in a moderately growing environment. As I noted earlier, they were affected by several factors that we are intentional about managing. The first was increased internal repair costs. Looking back two to three years, we invested around $4 billion in capital expenditure during those years. Last year, we invested about $2.5 billion, and this year we're projecting around $2 billion. As we see these large capital investments aging, the warranty costs will naturally decrease since warranties typically last about two years. We anticipated this timing relating to our capital investments. The second factor affecting margins was the increased repositioning of our fleet, which is a strategic choice we made. This repositioning aims to enhance time utilization, positively impacting our rate and enabling us to grow without additional CapEx. This is an intentional and beneficial strategy that will yield results in the latter half of the year. Finally, the last issue pertains to our revenue mix. We're seeing higher ancillary revenue, especially in our Power & HVAC business, which has significant expenses but lower margins than the core rental business. This is also tied to the fleet repositioning in the General Tool division. All margin pressure points are under our control, and these strategic decisions position us well for the latter half of the year. We remain very focused on cost control, as always. This focus is a key aspect of our Sunbelt 3.0 strategy. I want to clarify that any slight margin compression should not be misinterpreted as a loss of our focus on cost control; rather, it reflects our commitment to positioning for growth and margin expansion as the market improves. Regarding our free cash flow guidance, we've increased it by about $200 million due to the Big Beautiful Bill and the reimplementation of accelerated depreciation, along with continued strong EBITDA growth. Concerning the use of this free cash flow, we consistently maintain a solid pipeline for M&A activity and employ a flexible capital allocation strategy. We're on track to complete our $1.5 billion share buyback program before the fiscal year ends. We also support a strong dividend, and as the market recovers, we will raise our CapEx expectations to seize new growth opportunities. Now, I'll turn it over to Brendan to discuss M&A activity further, as it's one of his areas of expertise.

The business development team has been active. As we have mentioned before, there is a strong pipeline, and that continues to hold true. We have several businesses under letter of intent that we expect to finalize this quarter for just over $100 million, and I anticipate this amount increasing as we move through the year. Regarding your question about multiples and expectations, I would say the pressure in that area is easing. There are currently many buyers in the market for various reasons. We are in a good position, but ultimately, this isn't a rush for mergers and acquisitions; it’s about acquiring businesses that align with our strategic goals. They fit into our Sunbelt 4.0 plans between Specialty and General Tool. Overall, our pipeline remains strong.

Just to double-check on the margins, those fleet repositioning costs, and so on. Is that something that will continue in Q2? Or have you done the bulk of that kind of in Q1?

Look, we always are repositioning our fleet. And as mega-project activity increases, we'll be positioning the fleet to take advantage of those opportunities as projects ramp down, and we obviously take the fleet off of those projects and reposition. So this is just part of our business. One of the things that makes our business such an interesting environment to operate in is that we can take advantage of our scale because we do have that nationwide footprint. So we'll always be repositioning our fleet. What is a little anomalous about this quarter is that we are really focused on the time utilization and making sure we're unlocking these pockets of growth in the markets where it exists. So look, as the market recovers, will that subside somewhat? Of course, yes, it will. Will we ever stop repositioning our fleet proactively? Probably not.

Annelies, if I could just reinforce what Alex mentioned about the performance actionable component. Our expectations of progressing margins over the course of 4.0 very much remain intact. We have the playbook in order to do it. At the full year, we would have highlighted some of those actions around MLOs, as we call them market logistics, operations, and market service operations, and we continue to progress that throughout the quarter. I'll just remind everyone, it's not linear in terms of that progress from the starting point to the ending point. We made good progress in margin progression over the course of last fiscal year, and we will certainly return to that as we progress through 4.0.

We'll now move to Suhasini Varanasi of Goldman Sachs.

Just a couple for me, please. Your commentary on leading indicators and business momentum seems to suggest that maybe the August trading environment was a bit better than last year. Would you say that was true? And is it possible to give some color on how August trading was? And then the second one, just to go back to the point on the margins that Annelies asked, sorry about that. Is it possible to quantify the impact of the repair cost, the ancillary revenues, the repositioning of the fleet, just so we can understand if there was any lumpiness in that particular quarter? Should we think about any of them unwinding in Q2?

Sure. August trading is in line with what we expected, very similar to what we would have seen in Q1. Just on your point there, I think it's worth turning to Slide 9 for those of you that have the deck in front of you, and this references, of course, the external indicators. We talked about the internal leading indicators of our business, which is really activity, activity in quoting, activity and reservation, daily contract transactional activity, which we're seeing strength in that pipeline or indicators. When you look at that Dodge Momentum Index in the bottom left, just to reiterate what that actually represents: These are projects that Dodge accounts for that are entering the planning phase but these are projects under $500 million in total starts value and excluding manufacturing. This is a good barometer of that local non-res construction market that we've been talking to for a period of time now. So these are positive signs not to be confused with. We're still in a moderated non-res construction environment. That shifts, if you will, for what was moderating to be in a position where we are, the positivity in all that are these good signs, but when you look back to, say, 2022, 2023, those years where we saw far more robust starts activity, this funnel is shaping up to demonstrate the beginnings of that. But again, a reminder, as it does take 12 to 24 months on average before you actually see these planned projects progress to starts.

I'll address the margin question. The IRR cost was approximately $30 million higher year-over-year. Last year, about 39% of our fleet was under warranty coverage, whereas this year that figure dropped to around 26%. This accounts for the 13 percentage point difference I mentioned. Additionally, fleet repositioning costs increased by about $5 million compared to last year, but we expect that to improve as the nonresidential construction market recovers. This strategy is aimed at enhancing our margins over time. It's also typical in any business to implement merit raises around this time of year. Consequently, salaries and wages increased by roughly 3%, which aligns with trends across various industries. In a growth context, with around 2.4% growth and a 3% rise in salaries, this will impact margins. However, as we advance and tap into growth opportunities, it should be mitigated. Lastly, I want to highlight the progress of the third actionable component of Sunbelt 4.0. We mentioned last year that we had four sites active in the market logistics centers for a full year, resulting in significant double-digit improvements in outside hauler expenses, which was about $60 million at year-end. We're on track to implement over 30 additional locations this year, enhancing our capacity in this area. Furthermore, we've just launched our market service operations, focusing on optimizing repair and maintenance spending and leveraging our economic strategy in key markets. Thank you for all the questions.

And Brendan, just 2 quick follow-ups, please. Was there any comment that you would like to make on current trade in August, please?

The comment I made was that it's very similar to Q1.

Next question will be coming from Will Kirkness of Bernstein.

So first question, just on utilization. I wondered if you could give us some help on how much headroom you have there before you might need to start looking at when to switch on the CapEx a bit more? And then linked to that, I suppose, rates. Should we think of rental rates as flat here or maybe a touch higher?

Yes. Will, on utilization, it's very much by category. There's a bit of headroom in certain product categories. But we're also quite happy, if you will, with some others as we're constantly working to maximize the fleet that we have invested in and the fleet positioning, not only the repositioning, which Alex has talked about in so much detail, of existing fleet, but also just managing the landings that were planned throughout the year. What was planned to go into a certain metro area is very agile and can go to the next metro area that is experiencing more demand. We've got a bit of headroom there compared to our almost anomalous levels of high time utilization. When we will increase the dial as it relates to increasing CapEx comes down to demand. We're doing it as we go through the year, whether it's a mega project win or it is a market that is exceeding our thresholds for time utilization, which allows for ongoing order capture, and we'll see what things look like at the half-year as it relates to CapEx, and we'll give you an update at that point in time. I think your assessment of rates is a good one. They are strong and resilient. We continue to see discipline across the industry, particularly concerning CapEx levels and fleet landings as well as dispositions. That's all remarkably healthy. We progressed steadily in the Specialty business.

Next question is coming from Rob Wertheimer of Melius Research.

I have two questions. First, could you discuss your ongoing experience with mega projects, specifically regarding market share, capture rates, and profitability? Second, could you elaborate on the market service areas that Alex mentioned? What has prevented you from pursuing this previously, and what potential do you see in it?

Thanks, Rob. I'm going to start with your second question around what is the market service operations. You'll remember the chronology of strategic growth plans we have. We had Project 2021, we had Project 3.0, all very much pointed to increasing our density and creating what we define as these clustered markets. It was at that point when you have the ability to not only form the scale but also that level of density in the marketplace where it makes sense. Long ago, we would have done market field service that we would have put in place in all of these areas. Now a combination of that density, but also the technology that's in place. If you take, for instance, our VDOS system, which was a total remake over that period of time, it builds automatically the manifest for dispatch, et cetera, and allows us to do it at the market level. Alex also touched on this market service operations, which is the next step from market field service. We're optimizing our repair and maintenance spending leveraging that clustered economic strategy in the markets where we have scale. We're also bringing better service to our customers overall. As it relates to mega projects, we can comfortably characterize our ongoing momentum last year. For instance, in the quarter, we were awarded 9 mega projects. Our batting rate on that is really high. It's a typical task of larger, more sophisticated, more capable teams with good resumes who have completed and participated in projects at scale and complexity. We continue to feel remarkably good about our overall share there. We're at least 2x our overall market share, and that comfortably remains the case. So not only a good quarter in wins but also a continuing good environment in terms of adds to the overall pipeline. A lot of diversity in these mega projects.

Rob, I want to make a couple of additive points. First on the MSA MLO. This is the demonstration of the progression of the business over time from an industrial commodity to a true service business. It demonstrates the scale of Sunbelt that just can't be replicated. It's on the back of the technology investments and the back of the Sunbelt 3.0 strategy, and it's really implementing everything that we described back in Powerhouse. So I really think it's the continued transformation of the company to this business service orientation, which is delivering distinctive and differentiated value to our customers. Second, on the mega projects, just to dimensionalize it because a lot of times in these sessions, people think of mega projects and data centers. Of the 832 projects that we're involved in, 64 are data centers. It's a very broad and diverse pipeline, around 400 of those are listed in the other category. Around 200 of those are in the infrastructure domain. So it's just a very, very diverse funnel, with total project counts around 830. If I look out into 2026 and 2028 that project count grows from 830 to 1,053 representing a $1.4 trillion in potential project value.

Next question come from James Rose of Barclays.

I've got 2, please. Firstly, can you update us on how tariffs are impacting the business? And then secondly, I see you've won the contract for the Olympics. Any color you can provide on that bid would be much appreciated, and congratulations.

Yes. Thanks, James. First, on the tariff piece, and Alex will add some color here as well. The key point for where we are today is our agreements with our OEMs are intact, and the current year spending, therefore, from a CapEx standpoint is protected. If you set aside tariffs, our starting point for our negotiations for next year for those that aren't multiyear agreements would actually be flat to down, and we will deal with tariffs as they come. These are obviously a moving target. It seems from week to week. But overall, there are some other puts and takes around tariffs.

Yes. Look, this year, as Brendan mentioned, it won't have any impact. All of our agreements are in place, so it's not a headwind for this year at all. As we look forward, we'll work with our OEM suppliers to mitigate the impact. We're an importer of record on only about 20% of our fleet, so relative to others, we are much more highly domestically oriented, which mitigates this impact right out of the gate. If I were to dimensionalize it, we put it in the range of, call it, between $50 million and $58 million of potential headwind at the low end to $200 million at the high end, obviously, as Brendan mentioned, that changes almost daily, certainly weekly. Last point I'll mention is we do have about $17 billion of OEC here domestically in this market. We have massive flexibility in terms of what we can do with that, whether it becomes looking to remanufacturing as options for how we mitigate the impact of tariffs, extending the life of that fleet to get through current trends or any sort of transitory headwinds. We have huge amounts of flexibility. As tariffs impact the market, that pushes more people towards rental because they can't have the advantages of scale with suppliers the way we do. I wouldn't say we're happy about the tariff environment, but we're certainly a net beneficiary relative to others in the market.

So James, for the rest of the audience listening, James is picking up clearly on a press release that we would have put out yesterday about 4 p.m. Eastern time in conjunction with the LA '28 Committee. Yes, Los Angeles 2028 Olympic summer games. It's a great win for the team. They've been working on this for 2 years or longer. We didn't speak to it in our prepared remarks as we're still nearly 3 years out. But we'll get to scale, revenue, capital, execution, et cetera, in due course. The big picture really is since this was asked, our selection or win here represents the breadth, depth, scale of solutions and the supporting technology in terms of what the team presented to the body that was making this decision. Just to be clear, we are the official rental equipment solutions partner. That's across our General Tool equipment, Power & HVAC, ground protection, fencing, and I'm sure I'm missing something there. To be awarded something as significant as this, you have to have a clear track record of thinking back to a previous question around mega project success. So much of it comes down to your resume and our ability to demonstrate our delivery of solutions on complex and large-scale events and projects while doing it safely is really what led to this overall result. It was a pleasure working with that LA 2028 Committee who is laser-focused on delivering a great game. So yes, we're pleased to have had that win. I'm sure that we'll cover a bit more of that when it comes to our Investor Day in March.

We'll now move to Katie Fleischer of KeyBanc Capital Markets.

Sorry to beat the dead horse here on the margins. But just any detail that you can give on progression within Specialty and General Tool through the remainder of the year? And if we should expect any significant changes from this quarter's levels? And then turning to the local accounts. When you think about the green shoots that you've seen there so far. Do you think that's mainly driven by the clarity on tariffs, interest rates? Just any color there on what you think is making those customers a bit more confident and what you think they need to see in the future to really start that recovery?

Yes. So I'll hit the margin point and then Brendan will obviously talk about market conditions. On margin, I think the real driver of margin progression over the balance of the year will likely be the progression of rate as well as utilization. We mentioned a lot, we're really driving improved time utilization and that will support rate progression over time. As you think about modeling out the balance of the year, we would not want to take our PBT of $550 million and multiply it by 4. That wouldn't be appropriate for a number of reasons. Obviously, there's seasonality in there. But don't forget, we did have $100 million of hurricane-related revenue last year. So far, we've not seen a single hurricane this year. If you think about how that unfolded Q2 versus Q3, that was $60 million in Q2 and about $40 million in Q3. So as we look out at the balance of the year, I think it's reasonable to expect that margins will continue to look similar to how they look this quarter. As the market conditions recover, obviously, we'll see the benefits of that scale and leverage on the fixed cost. So Brendan, why don't you hit on the market conditions?

Katie, I think in many ways, you answered your question. The key really is, and this has not been a demand issue as it relates to local non-res. It really has been uncertainty. The way we view it is there's 3 legs to it. First, there was the interest rate environment or the cost of borrowing, and we've gone from where we were to clearly being in a period of easing what the velocity of that will be. I'm sure we'll be in tune on September 17. What we hear from the Fed. However, I think it's clear out there that we are in this ease environment, and we'll see how that progresses. The second, which was quite important was actually the tax legislation or the so-called Big Beautiful Bill. Now we have clarity with tax rates extended both business and personal, and very importantly, the bonus depreciation element. The third leg, I think, to it all is the tariff environment. Up until this point, certainly, I think most would say the damage, so to speak, is not as bad as what has been feared. As we see those easing, I think you see that translate into that Dodge Momentum Index. It is quite different between where it is today and where it was at the end of last calendar year. From December of 2024 to where we are today, it is 36% more in terms of what's in that momentum index. If you exclude the small fractions of data centers that are in that below $500 million range, you're still plus 26%. That just underpins the level of demand that's out there, and we look forward to seeing those projects and the planning progress to starts.

Next question will be coming from Rory McKenzie of UBS.

It's Rory here. Two questions on margins. No, I'm kidding, they're about rental rates, the other topic. Within the group average rates being stable, are there any regions or products that you saw achieved good increases or any that came under pressure? And then secondly, within Sunbelt 4.0, I know you were budgeting for kind of annual rate increases over the planned cycle. Can you talk about if you think that's still feasible? Especially, Brendan, I think you just commented, you were looking to OEMs for fleet cost to be flat to down. So maybe can you talk about how we think of pricing power into any recovery, your customers' affordability of cost increases, and maybe some of those points to discuss, please.

First on rates, look, as I said, Specialty is steady as it goes. In our Specialty business where it is so clear we're providing overall solutions. As we see this business continue to reflect more and more the hallmarks of a business services company, we'll do the same. General Tool, there are no particular geographies to speak to or even product categories. It's just been a bit more benign. In no way, shape, or form are we suggesting that we won't regain momentum as it relates to rates. Let me just point out, the rate environment is strong. If you look back at how rates have performed in the business over the last 18 or 24 months when there was lower time utilization in the overall industry, it is in stark contrast to what we would have experienced in other cycles. Nothing to call out as it relates to product specifically or regions and very much what we would have laid out as our internal working plan as it relates to our ability to pass on inflationary pressures after we actually drive the efficiencies as best we can through the organization to our customers ultimately with some small margins is very much a focus, and we have all the confidence that we will achieve that.

We'll now move to Allen Wells of Jefferies.

I have a couple of questions. First, I'd like clarification on rates and repair costs and how they are trending. My understanding is that the repositioning led to a slight improvement in time utilization this quarter compared to the previous quarter. However, when I examine the General Tool rate environment, it appears stable now instead of improving, as mentioned in Q3, which suggests a decline. This indicates that rates have not risen alongside utilization this quarter. Can you confirm this? Regarding the repair costs, it appears this could be a multi-year challenge since your capital expenditures have increased in 2024 compared to 2023. There seems to be a need for adjustments to address this. This is to better understand those dynamics as my first question. Secondly, relating to Specialty, could you provide the growth figures for Specialty, excluding oil and gas and the film business? From my observations, Power & HVAC and Climate experienced double-digit growth, which I understand constitutes the largest segment of your Specialty business. What specific areas outside of oil and gas and film are underperforming and negatively impacting the specialty growth figures?

There's no areas of real weakness in Specialty. When you look across it, you have double-digit growth as I think in the prepared remarks we would have talked about in Power & HVAC. We also have strength in fencing, temporary structure, ground protection. There's a significant drag effect from Film & TV and oil and gas. The upstream oil and gas but also industrial heating, which is very much tied to that piece of the market. That's really all that it is from a headwind standpoint. We don't have the statistics exactly on us in terms of what that would be absent the previously mentioned aspects. On the rate piece that you talked about, your characterization is fine. Look, rates are not digressing in the General Tool business. As you progress time utilization as we have done throughout the quarter, we've just hit that point. Part of that will come down to mix whereas we have a larger portion of our revenue today coming from these mega projects and larger strategic customers. Not to be confused with those rates themselves not progressing because those rates indeed will progress year-on-year, they just make up a larger piece of it. So it is a quarter that we've gone through while maintaining rates and also seeing some sequential movements later in the quarter in General Tool which is positive. Again, we reiterate our confidence in our ability to progress rates over time.

And Allen, I'll hit the maintenance cost point. Your observation is correct that we do have those 2 big years of around $4 billion of CapEx that will continue to have this trend. But let's come back to again that third actionable component of Sunbelt 4.0 and the implementation of the MSOs, which we talked about in leveraging our clustered economics. That will mitigate the impact of this phenomenon of increased IRR. I think Brendan talked at length about that in answering the prior question, that also leverages the scarcity of skilled labor as we can leverage those Tier 3 technicians more effectively. There's just a lot of goodness that comes out of the overall 4.0 strategy, that third actionable component, and then the scale that we have relative to others as we leverage those clustered economics. You should see that mitigate over time. You're right, the phenomenon of having less fleet on warranty will continue as we age those big slug years.

Ladies and gentlemen, we have time for one last question. And the last question today will be coming from Carl Raynsford of Berenberg.

Two from me, please, if I may. The first, going back to both on rates really. Would you be able to quantify the sort of general time lag roughly between time utilization improvements and the pricing improvement if that has happened in the past, a similar dynamic? This is the first one. The second one, just on mega projects. Could you briefly explain the contract dynamics when those projects are multiyear? For instance, do you get a fixed rate step up year-on-year? Or is it more dynamic than that?

So the first, really, what we have experienced, as you would have heard over the last couple of years is a decoupling in many ways between time utilization and rental rates. It was well covered throughout the industry the industry's level time utilization down over the couple of years, and we've seen a resurgence in that more recently. During that period, we progressed rates well over that period of time. I'll remind you of the 3 years of 8% and 6% rate improvement that we would have spoken to and then 2 and a bit or 3% last year. So the time utilization generally does help, but it's really more just the solutions that we're bringing to customers. In terms of mega projects or large strategic customers, the short answer is it varies. From time to time, we'll have a multiyear agreement, and we'll have pricing that will be based on certain cost indexes. From a mega project standpoint, similarly, most often there's an annual allowance for a price increase over the course of a project. Generally speaking, those have that, which is why I made the point earlier there is this mix impact overall from a pricing standpoint, not to be confused that there are individual customers that don't have the allowance within those agreements to increase rates as we go year in and year out.

As we have no further questions, I'd like to turn the call back over to your hosts for any additional or closing remarks. Thank you.

Great. Well, again, thank you all for joining this morning, and we look forward to speaking again at the half year. Have a great day.

Ladies and gentlemen, that will conclude today's conference. Thank you for your attendance. You may now disconnect.