07.03.2007

Ashtead revenues up-earnings down

Ashtead, the owner of Sunbelt/Nations Rent and A-plant has posted its third quarter results for 2006/07. Revenues rose steeply in all of the groups businesses, as did EBITDA.

However Earnings Per Share fell markedly in the third quarter (to the end of Jan 2007) as the business coped with increased debt from its acquisition of Nations Rent, prior to any significant integration savings coming into play.

A-Plant the UK based rental company, saw its third quarter profits almost double on revenues up almost 23 percent as physical utilisation rose to its highest level in years.

Looking at the year to date A Plant revenues rose by almost 18 percent to £140 million. EBITDA rose by a similar percentage to £43 million while operating profits grew by 46 percent to £14 million.

With physical utilisation growing to the best levels in many years Ashtead says that it is now looking for A-Plant to start improving its rental rates as it goes into its new fiscal year.

Sunbelt revenues grew by 56 percent to $958 million reflecting the NationsRent takeover, with EBITDA up by 50 percent and operating income rising by 40 percent.

Ashtead says that integration savings started to come through in January as the Nations Rent office was closed and the offices at consolidated in Charlotte. The company is now working on pulling the Nations utilisation and other performance levels up to those of Sunbelt.

Vertikal Comment

The Nations Rent deal was a risky one for Ashtead which has suffered from big American acquisitions in the past. This one required a good deal of extra debt at a time when the market has started to look a little shaky.

However if it can maintain its third quarter pace, in terms of improved performance, while bringing the promised savings on stream, the deal could begin to look good by late 2007 particularly if the market begins to pick up in the second half as many forecasters predict it will.

In the UK A-Plant is beginning to regain its form at a time when at least one of its main competitors is reporting a tough market and showing no growth. A-Plant though is now only a small part of the group and cannot possibly compensate for a large hiccough in North America.

The full year results will be interesting.