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Strong start from A-Plant

12. September 2017 | Comments (0)

Ashtead, owner of Sunbelt Rentals in the US and A-Plant in the UK, has posted a strong set of numbers for the first quarter.

Overall revenues increased 16 percent to £880.1 million due to a combination of organic growth and bolt on acquisitions, possibly helped a by a weak sterling exchange rate. Pre-tax profits for the quarter were 19 percent higher at £228.9 million.

Sunbelt Rentals saw revenues increase by more than 15 percent to $982.8 million, roughly half down to organic growth and almost as much from acquisitions. Utilisation held steady at 71 percent and operating profit jumped almost 19 percent to $319.7 million.

In the UK A-Plant also did well with revenues growing more than 23 percent to £118.8 million thanks to acquisitions such as Plantfinder and Hewden, as well as increases in some store sales. Utilisation improved slightly to 69 percent, while operating profits leapt over 27 percent to £22.4 million.

Group capital expenditure was up 15 percent to £377 million while disposals from the fleet totalled £23 million. Net debt increased 9.5 percent to £2.57 billion.

Chief executive Geoff Drabble said: "I am delighted to be able to report another strong quarter for Ashtead with group rental revenue increasing 25 percent and underlying pre-tax profit increasing by 30 percent to £238 million. The reported results were impacted favourably by weaker sterling but, with 17 percent growth in group rental revenue at constant exchange rates, we have continuing good momentum.”

“Our end markets remain strong and a wide range of metrics have shown consistent improvement. We continue to execute well on our strategy through a combination of organic growth and bolt-on acquisitions. We made significant investments in the quarter, spending £377 million on capital expenditure and £116 million on bolt-on acquisitions.”

“Our strong margins ensured that, despite these levels of investment, we remain comfortably within our target range for net debt to EBITDA of 1.5 to two times. A successful refinancing has provided us with a low cost, long-term platform for further responsible growth.”

“At the end of the quarter both businesses were performing well, in line with expectations and with positive momentum. Hurricane season has already generated significant activity which will require a major clean up effort and then a multi-year rebuild programme. Currently, our efforts are focussed on supporting our colleagues, neighbours and customers and we stand ready to provide further assistance. It is too early to attempt to quantify the impact of Hurricanes Harvey and Irma accurately on our business. However, it is evident that it will result in an increase in demand for our fleet and we will provide an update at the end of the second quarter. Looking forward, as a minimum, we expect that the impact will help to underpin the current market assumptions in our 2021 plan and therefore the board continues to look to the medium term with confidence."

Vertikal Comment

Yet another set of excellent numbers from Ashtead, which really seems to be firing on all cylinders at the moment. A-Plant in particular is making the most of the changes that have occurred in the UK market and is more than matching the exceptional performance of its US affiliate Sunbelt. However it now needs to execute a smooth transition at the top, as Richard Thomas takes over from Sat Dhaiwal, who retires next year.

All the signs are that A-plant will reinforce and build upon its newly won position of UK market leader, while Sunbelt will keep chasing United which is only maintaining the margin of its lead through a string of large acquisitions.
Ashtead has clearly found the winning formula these last few years, but as always the challenge is keeping it, and building on it over the longer term. So far there are no major signs of the ship creaking.

Results like this are good for the company and good for the industry.
Dino LIft

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