16.09.2021

Another strong quarter for Ashtead

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

Total revenues for the quarter - now reported in dollars - were $1.85 billion, a 21 percent increase on the same quarter last year. Pre-tax profits jumped 74 percent to $416 million.

The USA contributed $1.46 billion of the revenues - 79 percent of the total - which was 14 percent up on the same period last year. Operating profits were 33 percent higher at $423 million.

Canada saw revenues jump 64 percent to C$148.7 million, while last years marginal loss was turned into a c$34.6 million profit this year.

In the UK total revenues jumped an eye watering 54 percent to £190.2 million, much of it down to merchandise sales to the Department of Health. Rental revenues were £99 million, a 24 percent improvement on the first quarter last year. Operating profit almost quadrupled to £31.5 million.

Capital expenditure for the period was $551 million, compared to $122 million last year. Slower deliveries of new equipment in the face of growing demand, caused the company to reduce used equipment sales from the fleet, taking the average age up to 41 months, compared to 38 months this time last year. The company is now forecasting a full year spend on new equipment of $2 to $2.3 billion. Net debt was reduced from 6.3 billion last year to $5.7 billion this year.

Chief executive Brendan Horgan, said: "The group delivered a strong quarter with rental revenue up 22 percent over the prior year, but more importantly up 12 percent when compared with the first quarter of 2019/20, both at constant currency. This reflects continued market outperformance across the business. I never cease to be impressed by all our dedicated team members who have enabled this performance, delivering for each of our stakeholders, while ensuring our leading value of safety remains at the forefront of all we do.”

“Our performance continues to illustrate the benefits of our long-term strategy to broaden and diversify our end markets, while maintaining a strong balance sheet. In the quarter, we invested $551 million in capital across existing locations and green fields and $123 million on five bolt-on acquisitions, adding a combined 29 locations in North America. This investment takes advantage of the ongoing structural growth opportunity that we continue to see in the business as we execute our Sunbelt 3.0 strategy.”

“Our business is performing well in supportive markets with strong momentum. The benefit we derive from the diversity of our products, services and end markets, our investment in technology and ongoing structural change, enhanced by the environmental and social aspects of ESG, enables the Board to look to the future with confidence and we now expect business performance this year to be ahead of our previous expectations."

Vertikal Comment

Another stunning quarter from Ashtead, although one has to remember that we are comparing with the first full Covid quarter last year. However, having said that, the US is nicely ahead of 2019 levels, as is Canada. While that is also true of the UK, take away the sales to the Department of Health and it is roughly back to 2019 levels.

All in all, this is an impressive result, and it is good to see it accelerating its investment in new equipment for the fleet. Although the company makes a significant point of stating that it has cut costs and most discretionary spending. While running an efficient operation is always important regardless of how strong business is, the wording in the report smells a little of ‘squeezing the pips’ to extract the last drop of profit. All too often this includes cutting sales, marketing and other less tangible expenditures, which are often treated as costs by financial types, rather than the investments that they are - or should be - which eventually hurts the long term success of the business.

Hopefully that is not the case here.