07.09.2016

Ashtead rise continues

Ashtead, owner of Sunbelt Rentals in North America and A-Plant in the UK has reported a strong first quarter.

Total revenues for the quarter were £707.1 million, 14.5 percent up on last year, while pre-tax profits increased by precisely the same percentage to £177.9 million.

In the USA Sunbelt revenues improved to $853.1 million, almost four percent higher than in the same period last year. Operating profits increased just over four percent to $268.9 million.

In the UK A-Plant saw revenues rise over seven percent to £96.4 million, although rental revenues increased 15 percent to £75 million, the difference being lower sales of used equipment from the fleet. Operating profits were just under four percent higher at £17.6 million.

Utilisation across the fleet remained the same as last year at 72 percent, while capital expenditure dropped six percent to £328 million, however net capital expenditure increased almost seven percent due to lower used equipment sales from the fleet, which had the effect of increasing the average age of the fleet from 25 to 26 months. Net debt in the period increased 30 percent to £2.3 billion due to capital expenditure and acquisition investments, but mostly due to the shift in exchange rates converting US dollar debt to Sterling.

Chief executive Geoff Drabble said: "The Group delivered a strong quarter with rental revenue increasing 12 percent and underlying pre-tax profit of £184 million. The underlying performance of the business continues to benefit from a clear and consistent strategy of organic growth supplemented by bolt-on acquisitions. In the quarter, the reported results were positively impacted by weaker Sterling (£17m) but this was broadly balanced by the impact of lower gains on fleet disposals (£12m) as we reduced our replacement capital expenditure.”

“The continued improvement in our margins is particularly encouraging - with Group EBITDA now a record 48 percent. These healthy margins and our strong balance sheet provide flexibility to continue to invest in our long-term structural growth opportunity and enhance returns to shareholders.”

“We will continue to grow responsibly, adhering to the capital allocation priorities we have outlined. We have therefore invested £328 million by way of capital expenditure and a further £64 million on bolt-on acquisitions. In addition, we spent £17 million under the share buy-back programme and all of this was achieved whilst maintaining leverage well within our stated range of 1.5 to 2.0 times net debt to EBITDA.”

“Both divisions are performing well, our end markets are strong and with the benefit of weaker sterling, we expect full year results to be ahead of our expectations and the board continues to look to the medium term with confidence."

Vertikal Comment

Given the numbers we have seen from its main competitors, this is another strong performance by Ashtead, although an atmosphere of normality seems to be creeping in, following several years of exceptional growth levels, which substantially outpaced the market. The underlying tone of the earnings release even seemed a little subdued and in places perhaps almost apologetic? But this may be more down to us being over sensitive and thus seeing things that are not actually there?

What is clear is that both parts of Ashtead’s business are outperforming their sectors and increasing their share of the market. So in conclusion another excellent set of numbers from Ashtead as perhaps it takes a cautious breath.