02.09.2015

Ashtead continues on up

Ashtead, owner of Sunbelt in the US and A-Plant in the UK has posted another quarter of substantial growth, to kick off its new financial year.

Total revenues for the first quarter increased 26 percent to £618.6 million, while pre-tax profits for the period rose by 23 percent to £155.4 million. Most of the growth this year came was organics with the group opening 50 new locations since the end of the first quarter 2014.

In the USA Sunbelt revenues jumped more than 28 percent to $820.8 million, while operating profits climbed almost 25 percent to $258.2 million. Physical utilisation for the quarter was the same as last year at 72 percent, although in July it was two percent higher than in the same month last year.

In the UK A-Plant posted a more modest rise of 11 percent to £90 million, however operating profits jumped almost 25 percent to £17 million. Yields were flat, however the volume of equipment on rent increased 10 percent on last year.

Capital expenditure for the quarter was £349 million – 23 percent higher than in the first quarter 2014. However the company stepped up the disposal of older equipment from £20 million last year to £58 million this year- helping boost the Sunbelt revenue numbers. The average age of the fleet at the end of the quarter was 25 months, compared to 26 months last year.

Net debt at the end of July was 1.8 billion compared to £1.3 billion last year. The company said that given such a strong start to the year and a positive summer it is very confident of meeting or exceeding its full year forecasts.

Chief executive Geoff Drabble said: "The group delivered another strong quarter. group RoI was a very healthy 19 percent and the growth was achieved whilst reducing our leverage to 1.8 times EBITDA. The strength of the quarter reflects the benefits of another strong execution of a consistent strategy to diversify the markets we serve, both in terms of geography and sector. Sunbelt's 23 percent rental revenue growth clearly demonstrates the overall health of our broader markets and the benefits of our more transactional business model”.

“Particularly encouraging is that, after a weather-impacted spring, our seasonal improvement in demand was very strong, resulting in record levels of physical utilisation in July on a fleet that was 26 percent larger. As a consequence, we confidently invested £349 million in capital expenditure in the period, opened 19 greenfield locations and made one small bolt-on acquisition. We are therefore very much on track to achieve our plans of mid to high teens fleet growth in the US and open 50 new locations in the full year. We continue to invest and grow responsibly, generating strong returns and maintaining leverage within our stated objectives”.

“With both divisions performing well, strong end markets and our strategy clearly working, we expect full year results to be in line with our expectations and the Board looks forward to the medium term with confidence."

Vertikal Comment

Another dazzler of a quarter from Ashtead, which appears to be outpacing most of the other large rental companies, both in the USA and the UK. One cannot but help wonder how such a large business can keep growing at this pace when some others are struggling. If Ashtead had not had had such a heavy 'shake out' a dozen years or so ago -when a black hole was discovered in its US accounts - we might wonder if creative accounting was helping the numbers. However the group is clearly ‘on a roll’ and going through a golden period when it has most things in the business right. The market for rented equipment is also quite buoyant at the moment, in spite of some dismal results in the sector.

While Sunbelt has been performing exceptionally well for some time, it is encouraging to see A-Plant continuing to build the positive progress and momentum built up last year.

A very positive and encouraging set of numbers.