11.12.2018

Another strong quarter from Ashtead

Ashtead, owner of Sunbelt Rentals in North America and A-Plant in the UK has posted a strong first half in terms of revenues and profits, however in the UK business experienced a tougher second quarter.

Ashtead as a whole achieved first half revenues to the end of October of £2.25 billion up 19 percent on the same period last year, with most of the growth coming from North America. Pre-Tax profits improved 25 percent to £610 million. Group capital expenditure for the first six months was £1.06 billion, with full year upper level forecasts of £1.58 billion compared to £1.24 billion last year. The average age of the rental fleet increased from 30 to 31 months.

In the USA Sunbelt saw revenues improve 20 percent to $2.5 billion mostly due to organic growth – both same store and new locations, with 63 new stores added in the first half, the majority of which are specialty locations. Rental revenue was up 19 percent, thanks to increased fleet on rent, while rates remained at the same levels as last year. Operating profits were almost 21 percent higher at $847.1 million. Capital expenditure on the rental fleet was $1.07 billion, with full year expenditure forecasts increased to $1.6 billion compared to $1.35 billion last year.

Sunbelt Canada reported an 84 percent jump in first half revenues to $167.4 million, around two thirds of which was due to the acquisitions of CRS and Voisin. Operating profits increased 74 percent to $36.3 million. Capital expenditure so far is $120 million with a full year forecast of $160 million, compared to $76 million last year.

In the UK A-Plant revenues were just two percent higher at £251 million, although rental revenues were up five percent to £191 million, thanks to greater utilisation and fleet on rent partly offset by lower rental rates. Used equipment and other sales fell. Operating profit for the six months was 5.5 percent lower at £44.2 million. Capital expenditure on the rental fleet was £62 million, with a total of £95 forecast for the full year, compared to £137 million last year.

Moving on to the second quarter Sunbelt revenues were $1.47 billion, with an operating profit of $462.1 million, while north of the border revenues at Sunbelt Canada were $90.5 million, with operating profits of $22 million. In the UK A-Plant saw revenues slip by one percent to £124.9, while operating profits dropped almost 10 percent to £22 million.

Group net debt at the end of October was £3.6 billion compared to £2.85 billion last year a good slice of this was due to exchange rate fluctuations between Sterling and the Dollar, along with further acquisitions and the share buy back programme.

Ashtead chief executive Geoff Drabble said: "The group delivered a strong quarter with good performance across the group. As a result, group rental revenue increased 18 percent for the six months and underlying pre-tax profit increased 19 percent to £633 million, both at constant exchange rates.”
“We have invested £1,063 million in capital and a further £362 million on bolt on acquisitions in the period which has added 80 locations and resulted in a rental fleet growth of 15 percent. This investment reflects the structural growth opportunity that we continue to see in the business as we broaden our product offering and geographic reach and increase market share.”

“Whilst these are significant investments, we remain focused on responsible growth so, after spending £425 million to date on our share buyback programme, we have maintained net debt to EBITDA leverage at 1.8 times. Therefore, we remain well within our target range of 1.5 to 2.0 times reflecting the strength of our margins and free cash flow.”

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

Vertikal Comment

Yet another highly positive set of numbers with growth remaining close to the 20 percent level, but it is clear that A-Plant in the UK has started to struggle a little as competition in some key areas gathers steam, in particular Speedy, which had been losing business to A-Plant in recent years, has now regained its mojo and is clearly winning some of the business back.

But it is not just down to competitors regaining their strength, some divisions of A-Plant have slipped back, as strategies have changed or evolved. A-Plant has a new chief executive in Richard Thomas, who will surely be looking to halt any declines and stop a one quarter downward trend from turning into a negative shift that gathers steam. While the UK market is always tough, there is still plenty of work out there and in many areas A-Plant is strong enough to lead on rates holding them firm, rather than joining a downward progression.

Overall however this is another strong result from the green liveried group.