18.06.2019

Double digit growth continues at Ashtead

Ashtead, owner of Sunbelt in North America and A-Plant in the UK has published its results for the full year to the end of March.

Total revenue for the year to the end of March increased 18 percent to £4.14 billion, with positive contributions from all three businesses. Pre-tax profits improved 20 percent to £1.01 billion.

Sunbelt USA achieved revenues 19 percent higher at $4.99 billion, five percent of it due to acquisitions and the rest from organic growth. Operating profits were 19.5 percent higher at $1.54 billion.

In Canada Sunbelt revenues increased 54 percent to $344 million, with 18 percent of the improvement due to organic growth and the balance due to acquisitions. Operating profits almost doubled to $54.8 million.

In the UK A-Plant revenues were just over one percent higher at £475.1 million, but operating profits were lower at £62.3 million compared to £70.2 million, this in spite of a one percent improvement in rate yield thanks to a better product mix.

Fourth quarter growth for the group continued at a similar pace with total revenues of £1.1 billion, up 17 percent on last year, although pre-tax profits were only 10 percent higher, due to higher exceptional costs. At this stage Ashtead does not show revenues in local currencies for Sunbelt, although though the growth rates appear to have been maintained, while A-Plant saw revenues decline 2.5 percent to £114.7 million, while operating profit was almost halved to £7.6 million.

Capital expenditure for the year totalled £1.587 billion, more than 28 percent higher than in the previous year, while the company sold £202 million of used equipment from the fleet compared to £158 million last year. In spite of the additional investment the average age of the fleet increased from 32 months a year ago to 34 months this year.

Net debt at the end of the fiscal year was £3.75 billion, compared to £2.7 billion last year, partially due to dollar-based debt transferring to a Sterling amount, plus the cost of acquisitions and capital expenditure.

Chief executive Brendan Horgan said: "The group delivered a strong quarter with good performance across the business. As a result, group rental revenue increased 18 percent for the year and underlying pre-tax profit increased 17 percent to £1,110m, both at constant exchange rates.”

“We continue to experience strong end markets in North America and are executing well on our strategy of organic growth supplemented by targeted bolt-on acquisitions. We invested £1.6 billion in capital and a further £622 million on bolt-on acquisitions in the period, which has added 146 locations across the group. This investment reflects the structural growth opportunity that we continue to see in the business as we broaden our product offering, geographic reach and end markets, thus increasing market share and diversifying our business.”

“We remain focused on responsible growth. Our increasing scale and strong margins are delivering good earnings growth and significant free cash flow generation. This provides 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 £675 million under our share buyback programme announced in December 2017, which has now concluded, and expect to spend a minimum of £500m on share buybacks in 2019/20.”

“Our business continues to perform well in supportive end markets. Looking forward, we anticipate a similar level of capital expenditure in 2019/20, consistent with our strategic plan. So, with our business 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 exceptional year from Ashtead, although it is becoming increasingly dependent on North America for growth and profits. However, having said this A-Plant is a leading player in the UK market. It is a wonder that the major rental companies in the UK seem unable to influence any lasting improvements to the unsustainable rental rates in the country, while the majors in the USA appear able to do so.

It is true that the UK market is highly competitive and the small geographic size of the country compared to its economic size probably makes maintaining any rate policies more challenging. However when it comes to the aerial lift market for example the top six rental companies control more than half the national rental fleet - if they all improved their rate discipline, the smaller companies would follow. However, this issue is older than the equipment rental industry in the UK, so don’t hold your breath.

All in all a very positive result from Ashtead, which continues to manage to combine a clever acquisition policy with strong organic and greenfield growth.