20.06.2013

Sharp rise in profits at Ashtead

Ashtead, owner of Sunbelt Rentals in the USA and A Plant in the UK has reported its full year final results, showing a sharp rise in profits.

Total revenues for the group were £1.36 billion 19 percent higher than a year ago, while pre-tax profits jumped 65 percent to £215.5 million. The company says that underlying profits were £246.7 million a jump of 87 percent.

Looking at the fourth quarter to the end of March, revenues were up 17 percent to £347.6 million while underlying profits almost doubled to £52.2 million – reported profits were £50.3 million up 52 percent on the year.

Sunbelt represents the bulk of the group’s revenues and profits, its revenues increased by almost 22 percent on the year rise to $1.82 billion. Operating profits grew 56 percent to $452.5 million. Looking at the fourth quarter revenues improved by just over 26 percent to $294.9 million with operating income up almost 63 percent to $62.4 million.

Back in the UK A-Plant had revenues for the year of £206.1 million, an improvement of almost 10 percent, while operating profits were up over 67 percent to £12.2 million. This trend continued into the fourth quarter with profits climbing 65 percent on revenues up just over four percent to £52.7 million.

Group capital expenditure for the year was £580 million, most of this - $521 million - was spent on rental fleet replacements with the balance going on delivery vehicles and IT equipment. Used equipment sales totalled £103 million. The net effect was to reduce the average age of the fleet from 37 months to 32 months.

The company says that this year it intends to spend £560 million and the bulk of it will go on fleet expansion, rather than on any further reductions in the age of the fleet.

Chief executive Geoff Drabble said: "We are delighted to report another excellent set of results with key financial and non-financial metrics at record levels. Our largely organic investment strategy has again delivered strong revenue growth together with margin and return on investment improvement. We continue to make significant investment in the business with capital expenditure of £580m in the year and a similar level planned for the coming year. As a result of our strong margins, we are able to support this investment while at the same time continuing to deliver.”

“With this momentum established in the business, cyclical recovery still to come and a strong balance sheet to support growth opportunities, we anticipate that our profits in the coming year will be ahead of our earlier expectations."

Vertikal Comment

Another excellent set of numbers from the world’s second largest equipment rental company, while Sunbelt continues with its solid track record of growth it is encouraging to see A-Plant start to post more substantial improvements in what is still a sluggish and variable market.

The big question is where does the group go from here? Logic would say that it could benefit from a bit more transatlantic balance, but it still has enormous potential for growth in North America – it is less than half the size of United Rentals for example.

The bigger question of course concerns any long term aspirations it may have for wider geographic expansion. Given its solid financial performance in recent years, many shareholders would probably prefer that it carries on doing the same – rather than commit to any overseas adventures and distractions.

Overall a very encouraging set of results for the company and the industry as a whole.