11.09.2018

Record quarter for Ashtead

Ashtead, owner of Sunbelt Rentals in the USA and A-Plant in the UK has reported a strong first quarter.

The group as a whole posted a 22 percent rise in revenues to £1.05 billion a new record and its second ever billion pound quarter. Pre-tax profits for the period were up 23 percent on last year to £274.4 million.

Sunbelt USA saw revenues jump almost 21 percent to $1.17 billion, while operating profits increased almost 22 percent to $385 million. The business added 30 new locations during the quarter, most of which were specialty locations. Utilisation was the same as last year at 73 percent.

Revenues at Sunbelt Canada almost quadrupled to $76.9 million due to the acquisitions of CRS and Voisin which virtually created the stand alone Canadian business. Operating profits tripled to $14.3 million,

In the UK A-Plant revenues increased a more modest six percent to £125.6 million thanks to increased fleet on rent, but partially offset by lower yields/lower rates due to a “combination of product mix and rate pressure in the competitive UK market “. Operating profits were flat at £22.2 million.

Capital expenditure for the quarter was £465 million – more than 23 percent up on the same period last year, while used equipment sales from the fleet were £50 million. The average age of the fleet is 32 months, compared to 29 months a year ago.

Chief executive Geoff Drabble said: "The Group delivered a strong quarter with rental revenue increasing 19 percent and underlying pre-tax profit increasing 23 percent to £286m, both at constant exchange rates.”

“Our end markets remain strong and are supported by continued structural change 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 £465 million by way of capital expenditure and £145 million on bolt on acquisitions in the quarter.”

“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 £300 million to date under the share buyback programme announced in December 2017. In line with our capital allocation priorities we have decided to increase and extend our current buyback plans. The level of share buyback will be increased to £125 million per quarter resulting in a total outlay of £675 million under the programme announced in December 2017. The programme will be extended for financial year 2019/20 with an anticipated spend of at least £500 million.”

“Our business is performing well in supportive end markets. With the benefit of weaker sterling, we expect full year results to be ahead of our expectations and the Board continues to look to the medium term with confidence."

Vertikal Comment

We said enough in the recent past about how Ashtead manages to maintain growth levels of 20 percent or more without making mega acquisitions, seeming to defy gravity. The company looks set for its first £4 billion year, ($5.2 billion), but more importantly it manages to achieve this without sacrificing margins.

The company is clearly doing something right, particularly in the North America. All very positive, and long may it last.