09.12.2015

Another blistering quarter for Ashtead

Ashtead, owner of Sunbelt in the USA and A-Plant in The UK, has reported another substantial increase in revenues and profits during the first half.

The overall group saw revenues for the first half rise 28 percent to £1.26 billion, with pre-tax profits rising by the same percentage to £331.9 million. The second quarter was slightly less exuberant with revenues climbing 22.5 percent to £648.9 million, while pre-tax profits improved 25 percent to £176.5 million. Net debt at the quarter was £1.98 billion up from £1.57 billion this time last year.

Looking at the two businesses:

Sunbelt achieved first half revenues of $1.68 billion 23.5 percent up on the same period last year, while operating profits improved 22 percent to $547.4 million. In the second quarter revenues increased 18 percent to $864 million, with an operating profit of $289 million - 19 percent higher than in the same quarter last year. Much of the increase is due to rising utilisation which touched 75 percent compared to 73 percent last year - rates were flat, showing no improvement over last year.

In the UK A-Plant increased revenues by eight percent in the first half to £178.3 million, with operating profits climbing 18 percent to £35 million. In the second quarter revenues were up five percent to £88.3 million while operating profits improved 14 percent to £16.8 million. The increases were due to a one percent improvement in rental rates and an eight percent greater volume in terms of fleet out on rent.

Capital expenditure for the group was £696 million, compared to £588 million last year, the company says that given the way the markets are going it will increase its capital expenditure forecasts for the full year by 10 percent, from £1 billion to £1.1 billion- although of this increase will be spent with Sunbelt where utilisation is stronger than in the UK. Sunbelt will now spend between $1.4 and $1.5 billion, While A-Plant will spend between £140 and £150 million - slightly lower than originally planned.

The average age of the group fleet at the end of the period was 24 months, down from 26 months this time last year.

Chief executive, Geoff Drabble said: "I am pleased to be able to report another strong quarter resulting in underlying pre-tax profits of £343m for the six months, up 21 percent at constant exchange rates on the prior year. Even with significant levels of investment, we continue to grow responsibly, generating strong returns and maintaining leverage within our stated objectives. Group Return on Investment was a healthy 19 percent, and our leverage reduced to 1.9 times EBITDA."

“We continue to execute on our strategy to diversify the markets we serve, both in terms of geography and sector. Sunbelt's 22 percent rental only revenue growth demonstrates clearly the benefits of this strategy and the overall health of our broader markets. We invested £696m in capital expenditure and opened 38 new locations in the US. Given the profitable growth opportunities evident in our markets, we are increasing our full year guidance for capital expenditure to c. £1.1bilion."

“With both divisions performing well, strong end markets and our strategy clearly working, we now anticipate a full year result ahead of our previous expectations and the board looks forward to the medium term with confidence."

Vertikal Comment

Another very substantial performance from Ashtead, with growth in all areas, both organically and from small bolt-on acquisitions. The results are particularly impressive in that several competitors - on both sides of the Atlantic -working in the same markets, offering the same range of products are struggling.

However when a company seems to buck what appears to be the underlying trend, senses are alerted to the possibility of accounting errors etc… Ashtead however has been through that before, and put tough controls in place at the time, to ensure that it would not reoccur. Additionally when you look deeper into the company it is clearly well managed at almost every level, and calmly gets on with its business, keeping its fleet up to date while maintaining a stable workforce and thus benefiting from continuity which on its own can make a major difference. In the UK A-Plant is also steaming towards UK market leadership for 2015.

All in all an excellent set of numbers.