03.03.2009

Ashtead holds steady

Ashtead, one of the world’s largest equipment rental companies, owner of Sunbelt in the USA and A-Plant in the UK has reported nine month revenues up eight percent in Sterling terms to £799 million, while Pre-Tax profits before exceptionals fell three percent to £87 million.

The rosy results reflect a strong first half and the benefits of a strong dollar and do not include substantial cost reduction expenses of over £57 million for the year to date, reducing the Pre Tax profit to £30 million. Third quarter revenues were up nine percent to £252 million, while Pre Tax profits prior to exceptionals plummeted 41 percent to £11 million.

Looking at the individual businesses in their own currencies:
Sunbelt achieved revenues of $1.1 billion, a fall of three percent on last year, however operating income for the same period plunged over 66 percent to $224 million.

The third quarter saw revenues drop 15 percent to $308 million, and operating income 45 percent to $37.5 million. This reflected a reduction in Sunbelt's fleet size of three percent, while physical utilisation dropped four percentage points to 62 percent resulting in seven percent reduction in yield.

In the UK A-Plant saw its nine month revenues fall almost four percent to £154 million, while operating income in the same period fell over 33 percent to £14.5 million.

The last quarter was harder though, with revenues dropping 14 percent to £44 million while making a slim operating income of just £300,000 compared to £5.4 million last year.

A-Plant’s fleet was two percent larger than the last year but utilisation was
Dropped six percent to 62 percent, with yield falling seven percent.

The group says that capital expenditure so far this year has been £234 million, of which £206 million was spent on the fleet. This compares with £301 million last year a fall of 22 percent.

At the same time the company has managed to sell off over half its planned equipment disposals, raising £72 million and expects the balance to be gone by the end of its fiscal year.

Next year it is planning a spend of £150 million for replacement equipment only,

Ashtead's chief executive, Geoff Drabble said:
“As anticipated market conditions became more difficult in Q3. Revenues in both markets were adversely affected both by volume and yield whilst we continued to benefit from the stronger dollar. Our strong market positions have also ensured a good relative performance and we anticipate continuing to gain market share.”

“We have generated strong net cash inflow which demonstrates the ongoing flexibility of our business model through the cycle as we reduce capital expenditure and adjust our cost base to market conditions.”

“In the medium term, the recently enacted US infrastructure package will also help support our end markets although we continue to be cautious as to the timing and likely quantum of the benefit. We also anticipate that the recession will lead to both increased rental penetration and a greater market share for the larger, better financed rental companies such as ourselves.”

“Our debt package remains committed for the long term and is structured to support us through the cycle. Whilst we are operating in difficult and uncertain markets we have been preparing for these conditions for some time. Our actions in right sizing the business, which are already evident in our performance, together with our strong balance sheet allow the Board to anticipate full year results for profit and cash in line with our expectations.”

Vertikal Comment

In its largest market of North America, Sunbelt appears to be holding its own or better, This combined with the expected quicker upturn in the USA, combined with strong dollar should see the company make a strong recovery probably in the second half of its next fiscal year.

In the UK A-Plant is not as well placed and is suffering more than some others, but this is probably more reflective of its fleet mix than anything else. The company has come on leaps and bounds in the past 18 months, but is not as well placed to cope with the current environment as it might have hoped.

Ashtead says that it is generating strong cash surpluses, and paying down debt, a good deal of which is already benefiting from lower interest rates. The company says that all of its debt is secured and it is therefore in good shape to come through the recession and possibly benefit from some opportunities later in the year?