01.03.2016

Ashtead continues to sparkle

Ashtead, owner of Sunbelt in the USA and A-Plant in the UK has posted further strong growth in its third quarter results.

Looking at the nine months to the end of December, Sunbelt saw revenues increase by 21 percent to $2.47 billion, mostly through organic growth, but with some contribution from the several bolt-on acquisitions made during the period. Utilisation remained stable at 72 percent, but over half of the $1.03 billion of capital expenditure went on fleet expansion, rather than replacement. Operating income for the period increased just under 20 percent to $771 million.

In the same period A-Plant reported revenues of £263.9 million, nine percent higher than last year, mostly due to organic growth, although £46 million of the £112 million capital expenditure was for fleet expansion. Operating profit for the period increased 25 percent to £47 million.

In the third quarter Ashtead has only given numbers in sterling at this stage. Sunbelt achieved £526.6 million, almost 21 percent higher than last year, although a good deal of this will be due to currency exchange factors. Operating income was 146.6 million almost 18 percent up on the same period in 2014. The numbers suggest that the latest quarter was not as good as the previous two, but still well up on the year.

Third quarter revenues for A-Plant were £85.6 million - almost 12 percent higher on the same period last year - while operating profit jumped 55 percent to £10.7 million.

The group as a whole achieved revenues of £1.88 billion for the nine months over 25 percent higher than for last year, while pre-tax profit improved 26 percent to £465 million. The company says that its overall average age of its fleet is now 25 months, compared to 26 months last year. It also added that this means that next year’s capital expenditure will largely be targeted at growth rather than fleet replacement. This year it expects to spend around £1.2 billion, while next year is likely to be in the region of £700 million to a billion, although it will react rapidly to changing circumstances and opportunities.

Chief executive Geoff Drabble said: "The group delivered another strong quarter resulting in underlying pre-tax profits of £482 million for the nine months, up 20 percent at constant exchange rates on the prior year. We continue to grow responsibly, generating strong returns and maintaining leverage within our stated objectives. Group Return in Investment was a healthy 19 percent and our leverage reduced to 1.9 times EBITDA. Our continued success demonstrates both the strength of our strategy and the overall health of the markets we serve."

“Looking forward, while we are watchful of the broader economic environment, we continue to see encouraging growth opportunities and expect double digit fleet growth in the US in 2016/17. As our fleet replacement expenditure naturally moderates, we enter a phase of the cycle where we anticipate both good earnings growth and significant cash generation. As a consequence our leverage will trend towards the lower end of our range of 1.5 to 2.0 times net debt to EBITDA which provides the Group with a high degree of flexibility and security."

“With both divisions performing well, strong end markets and our strategy clearly working, we expect full year results to be in line with our expectations and the Board looks forward to the medium term with confidence."

Vertikal Comment

Another excellent result from Ashtead, suggest that it is winning market share in both the USA and the UK, growing at a faster rate than the other major rental companies with which it competes. The company certainly appears to have a winning formula at the moment and should easily post another record year at the end of March, with substantial potential to do the same or more in 2016/17.