03.09.2012

Ashtead to beat expectations

UK based Ashtead, the owner of Sunbelt Rentals in the USA and A-Plant in the UK has published its first quarter results and says that it expects the full year to be better than expected.

Total revenues for the quarter increased 21 percent to £325 million, while pre-tax profits were up five percent to £34.9 million- however this is after taking a one off hit of over £25 million to redeem $550 million dollar of high interest bearing notes due to mature in 2022. The company says that this will save it over £8 million a year in interest costs.

Sunbelt increased revenues by 17 percent in North America to $432.1 million, 13 percent of this growth came from its larger fleet and four percent from improved rates. Physical utilisation actually fell from 72 to 70 percent year on year due to the larger fleet taking time to get out. Operating income leapt almost 55 percent to $114.4 million.

In the UK A-Plant saw revenues climb six percent to £49.7 million all of which came from having a larger fleet available for rent. Yields were roughly flat. Operating income improved over 30 percent to £3 million.

Group capital expenditure for the period was £223 million 12 percent up on last year – net capital expenditure after used equipment disposals was also up 12 percent to £156 million. The company says that it expects to spend around £450 million for the full year and sell around £100 million of used equipment.

Ashtead's chief executive, Geoff Drabble, said: "We are delighted with this record performance as we continue to benefit from the trends established in the business over a number of quarters. The markets in which we operate have performed as anticipated with gently improving conditions in the US and a more challenging outlook in the UK. We do not anticipate any significant changes to this environment in the short term.”

“Against this back-drop our continued market share gains are again reflected in our strong growth in fleet on rent and improving margins demonstrate our operational efficiency. Given the momentum established in the business, we now anticipate a full year result materially ahead of our previous expectations."

Vertikal Comment

This of course a very positive set of numbers from Ashtead, the only modest downside is that its UK rental rates slipped slightly during the period. A-Plant is a ‘major player’ in the UK market and along with Lavendon, Speedy, Hewden and AFI can lead the market with rate discipline.

The decision to pay off debt that was costing nine percent a year also makes good sense given that the payback is just three years, while the notes had a further 10 years to run before maturity.

Overall Ashtead is in good shape and looks to be benefiting from the consolidation of the consolidators (United’s takeover of RSC) in the USA and is clearly preparing to make the most of the next upswing on both sides of the Atlantic when eventually it kicks in.