16.06.2011

Ashtead up 11%

Ashtead, owner of Sunbelt in the USA and A-Plant in the UK, has reported its full year results with revenues up 11 percent while underlying profits surged more than 600 percent.

Revenues overall for the year were £948.5 million 11 percent higher than last year, while pre-tax profits before exceptionals were £31 million, compared to £5 million last year. However after allowing for mostly non-operational one-off costs – largely the early redemption of a number of its more onerous loan obligations - it cut pre-tax profits to £1.7 million compared to £4.8 million last year.

Sunbelt saw revenues rise more than 13 percent to $1.225 billion with an operating profit of $162 million, compared to $116.6 million a year ago. Revenues in the fourth quarter were up over 19 percent, with operating profits up more than 25 percent.

Sunbelt's revenues were helped by higher used equipment sales as it began reinvesting in its fleet. Rental revenues alone grew 10 percent to $1,084 million, reflecting a five percent increase in utilisation, a three percent growth in rental yield and a first-time contribution from Empire Scaffold which was acquired in January.

A-Plant revenues grew two percent to £165.8 million, while operating profits surged 50 percent to £2.7 million. In the fourth quarter revenues were up more than eight percent to £44.6 million while operating profits more than doubled to £800,000.

A-Plant’s rental revenue for the year was £154 million - up just over one percent - with utilisation up two percent while low rates reduced rental yield by one percent.
In the fourth quarter rental revenues increased six percent made up of a two percent improvement in utilisation and a four percent growth in rates.

Capital expenditure at the group rose to £225 million from just £63 million in 2010, most of this was for rental fleet replacement with the balance spent on delivery vehicles, property improvements and computers. Disposal proceeds were £65 million compared to £32 million last year, giving net capital expenditure in the year of £160 million.

The average age of the rental fleet at the end of April was unchanged over the year at 44 months.

Ashtead says that it expects capital expenditure to increase further this year to around £325 million and £250 million net next year. It says that this level of investment will expand the Sunbelt fleet size by between one and three percent depending on demand.

The company reduced its net debt by £73 million to £776 million.
Ashtead's chief executive, Geoff Drabble said: "We enjoyed an encouraging year where our focus on gaining market share and improving yields resulted in strong growth in Group profits. The performance of Sunbelt in the US was particularly pleasing with a good momentum established that has carried into the new financial year with sustainable improvements in both fleet on rent and yield.”

“Against a backdrop of still challenging end construction markets we are clearly benefitting from both the structural change in the US rental market and self-help from the programmes we initiated during the downturn. In the UK, performance also improved in the second half and we delivered year on year profit growth.”

“Looking forward we remain cautious over the outlook for end construction markets in the short term, particularly in the UK. However, we continue to benefit from the structural shift to rental, market share gains and the improvements we have established in all key areas of our business. Together with our balance sheet strength and strong market positions, this makes us confident of another year of good progress."

Vertikal Comment

No matter how you look at it, this is a very good set of results from Ashtead and not only reflects the improving market, but is also the fact that it is out performing its other large competitors in the USA.

In the UK it is still struggling, although it does appear to be heading in the right direction now. It is a major player in the UK but is not a leader in any of the major equipment sectors. It looks as though it has started to lift its rates without seeing its utilisation suffering too much. If it can continue in this line and follow the lead set by some of the other UK majors we could start to see it rivalling its larger American brother.

All said and done - a very encouraging set of results.