08.09.2009

Ashtead drops 19%

UK based rental group, Ashtead, owner of Sunbelt in the USA and A Plant in the UK, has reported its first quarter results with revenues falling 19 percent to £221.6 million.

In the USA Sunbelt saw revenues drop 32 percent to $288 million (rental revenues dipped 29%, while sales fell more severely). However when translated to sterling the fall was a more modest 16 percent.

In the UK A-Plant saw revenue fall 28 percent to £42.6 million (rental revenues fell 26%)

In terms of profits the group has reported pre tax profits down my more than 92 percent to £8.2 million, however Ashtead also reports ‘Underlying profits’ which were £8.8 million a fall of just over 75 percent.

Sunbelt posted operating income of $38.9 million a fall of 58 percent compared to last year, while A-Plant saw operating profits fall 84 percent to £1.1 million.

The company says that rental yields – an indicator of rental rates, was down 12 percent at Sunbelt and 10 percent at A Plant, but it adds that during the quarter rental yields have stabilised.

Physical utilisation was 66 percent at Sunbelt and 67 percent at A Plant, the company says that the average age of its rental fleet is now 37 months, compared to 31 months at the same point last year. The Sunbelt fleet is 40 months – 41 months for aerial lifts – while the A-Plant fleet has an average age of just 29 months.

Capital expenditure during the quarter was £15 million, all spent on replacement equipment and trucks, this compares to £108 million for the first quarter of 2008. The group says that it expects to spend a total of around £100 million this year.

The group is generating considerable amounts of cash which it is using to pay down its debt during the quarter it reduced its borrowings from £1.04 billion to £873 million.

Ashtead's chief executive, Geoff Drabble, said: “As anticipated market conditions remain difficult; however, the actions we have taken to cut costs and reduce fleet size have ensured that our margins have held up well. Our continuing focus on developing stronger customer relationships and maintaining an infrastructure to provide excellent customer service throughout the cycle has been rewarded with clear market share gains.”

“We expect that market conditions and trading levels will remain largely unchanged for the second quarter. Visibility for Q3 and Q4, our seasonally more challenging periods, is less clear both in terms of demand and the pricing environment. However, the board continues to believe that the actions taken will deliver full year results and cash generation in line with its expectations.”

Vertikal Comment

A weaker pound has helped soften the fall in revenues at Ashtead, but the reduction in costs that the company made earlier this year are clearly shining through allowing the company to remain profitable at the bottom of the recession. At the same time it is making a significant impact on reducing debt which will put it in a strong position to take advantage of any recovery opportunities.

It American fleet is though getting ‘long in the tooth’ and the company will need to start ramping up its capital expenditure by the start of the new year. The fact that it still intends to spend at least £100 million this year suggests that it is well aware of this.

The group is relatively optimistic of the mid term opportunities and believes that the worst of the downturn is now behind us. The company is in good shape financially and it will be interesting to see how it uses this position over the next 12 months,