19.06.2018

Ashtead maintains growth record

Ashtead, owner of Sunbelt Rentals in North America and A-Plant in the UK has reported another year of strong growth. Although A-Plant in the UK suffered from rate pressure.

Total revenues for the group were 20 percent higher at £3.7 billion, with pre-tax profit rising 16 percent to £862 million, following one off debt restructuring costs and flat profits in the UK.

In the USA Sunbelt achieved revenues of $4.15 billion, 18 percent up on last year, with rental growth of 20 percent partly offset by lower new and used sales. 15 percent of the growth was organic, while five percent came from a number of bolt on acquisitions. The company added 62 new stores during the year, around half of which were specialty locations. Utilisation was 72 percent compared to 71 percent last year, while rental rates were flat. The company estimates that around $100 million of its revenue came from clean up work with hurricanes Harvey, Irma and Maria. Operating profits were 20 percent higher at $1.29 billion.

Sunbelt Canada almost tripled its revenues, to $223 million, most of it due to the acquisition of CRS in August. Operating profits also tripled to $28.4 million.

In the UK, A-Plant revenues were 13 percent higher at £471.7 million, of which rental revenues were £344- also 13 percent up in the year. Due to a larger fleet, and better utilisation, partially offset by negative rate pressures and product mix. Operating profits fell almost two percent to £70.2 million.
The group as a whole reported a 15 percent rise in capital expenditure for the year to £1.24 million. The average age of the fleet increase from 20 to 32 months. The company expects capital expenditure levels for the current year to remain the same. Net debt at the end of April was £2.7 million, eight percent up on the year.

Chief executive Geoff Drabble said: "I am delighted to be able to report another very successful year for Ashtead with rental revenue increasing 21 percent and underlying pre-tax profit increasing 21 percent to £927 million, both at constant exchange rates.”

“Our end markets remain strong and are supported by the continued structural changes in our market as customers rely increasingly on rental while we leverage the benefits of scale. We continue to execute well on our strategy through a combination of organic growth and bolt-on acquisitions, investing £1.2 billion by way of capital expenditure and £392 million on bolt-on acquisitions in the year. Our strong margins and lower replacement capital expenditure are delivering good earnings growth and significant free cash flow generation. This provides us with significant operational and financial flexibility, enabling us to invest in the long-term structural growth opportunity and enhance returns to shareholders while maintaining leverage within our target range of 1.5 to 2.0 times net debt to EBITDA. We have spent £200m under the share buyback programme announced in December.”

“All our divisions continue to perform well in supportive end markets. Looking forward, we anticipate a similar level of capital expenditure in 2018/19 consistent with our strategic plan. So, with all divisions performing well and a strong balance sheet to support our plans, the board continues to look to the medium term with confidence."

Vertikal Comment

Another strong set of numbers from Ashtead, which continues to benefit from strong organic growth in North America. In the UK A-Plant continues to increase its market share but is clearly running into some stronger competition as Speedy begins to regain its mojo, and large regionals such as CW Plant expand, not to mention the emergence of strong specialists such as Ardent.

Having said all that, the group continues to outpace most of its competitors, in terms of organic revenue growth and pre-tax profitability. For example, United Rentals only seems to stay out in front by making major acquisitions, and while being 35 percent larger than Ashtead, has lower pre-tax profits. It is though hard to see how the company can maintain its recent 20 percent growth trends without making more or larger acquisitions. The trouble with that is that they usually distract from the main business, leading to lower profits as customer service suffers.

The company will hopefully continue with its current strategies and maintain its focus on being easy to deal with and customer service. There is still plenty of room for growth in both the UK and North America.

Another positive set of numbers