16.06.2015

Ashtead passes £2 billion

Ashtead, owner of Sunbelt Rentals in the USA and A-Plant in the UK has published its full year’s results, showing strong growth in both revenues and profits.

Total revenue for the 12 months was £2.04 billion an increase of over 24 percent on last year and the first time sales have exceeded £2 billion – or $3 billion for that matter. Pre-tax profits jumped 33 percent to £473 million. Capital expenditure for the year was £1.06 billion compared to £741 million last year. After used equipment disposals net capex was £942 million.

In the fourth quarter the group saw revenues increase 29 percent to £538.7 million, while pre-tax profits improved 32 percent to £104.7 million.

In North America Sunbelt achieved full year revenues of $2.74 billion, an increase of over 25 percent, while operating profits increased almost 32 percent to $832.6 million. In the fourth quarter revenues jumped 44 percent to $458.1 million with operating profits of $123.5 million – an increase of over 51 percent. The results came from a 24 percent increase in fleet on rent and two percent from improved yield.

In the UK A-Plant revenues increased just over 20 percent to £323 million, while operating profits leapt 84 percent to £46.3 million thanks to a 13 percent increase in equipment on rent and seven percent from improved yield – due to high an increase in rental rates and a more profitable product mix.

Ashtead chief executive Geoff Drabble said: "2014/15 was another very successful year for Ashtead. The consistent execution of our well-established strategy focused on organic growth supplemented by bolt-on acquisitions has delivered both excellent financial results and significantly enhanced our geographic footprint and the breadth of the markets we serve."

“Our financial performance speaks for itself with Sunbelt and A-Plant achieving rental revenue growth of 25 and 19 percent respectively. Underlying group pre-tax profit rose 35 percent to £490m and we generated a strong return on investment of 19 percent. We invested £1 billion in the rental fleet and £236 million on bolt-on acquisitions during the year. We expect to again invest around £1 billion in capital expenditure in the coming year and we will continue to open greenfield locations and make bolt-on acquisitions to further broaden our market exposure. This growth will, as always, be undertaken responsibly and we will maintain our leverage at, or below, two times EBITDA”.

“Our markets continue to provide both structural and cyclical opportunity. The business model established over recent years has a track record of exploiting these opportunities and we are supported by a strong balance sheet. Therefore the board looks forward to the medium term with confidence."

Vertikal Comment

Another fantastic result from a company that seems can do no wrong. While Ashtead’s UK operation - A-Plant - is a fraction of the size of Sunbelt, it is within reach of becoming the largest equipment rental company in the UK this year or next. It is already the most profitable general rental company and currently the second largest in terms of revenues after Speedy.

When a company keeps posting such strong quarterly and annual increases in revenues and profits with relentless growth, regardless of quarterly slow-downs etc… one begins to worry about the reality behind the numbers. In many cases from the past, companies that appeared to defy gravity - not that Ashtead is defying gravity, the market is after all very good - came crashing down when it became evident that the stratospheric growth had more to do with creative people in the accounting department, than talented operational performance.

However Ashtead already had its accounting armageddon - more than 12 years ago - and tough controls were put in place following a very close brush with collapse. Since then it has worked hard to build a really solid business and has managed to combine the art/skill of being really successful at integrating bolt-on acquisitions, while being equally successful at organic growth, and it is this slightly rare combination that is spurring such positive and consistent growth.

A first class performance from Ashtead that we are likely to become very familiar with over the next few years.