05.03.2019

Another strong quarter for Ashtead

Ashtead has posted 20 percent revenue growth in the third quarter to the end of December.

Looking first of all at the nine months year to date numbers, total revenues were £3.39 billion 19 percent up on the same period last year. As usual the majority of the growth came from Sunbelt in North America. Pre-tax profits for the period were 23 percent higher at £850.9 million.

Sunbelt revenues for the nine months were 20 percent higher at $3.76 billion, due to a combination organic growth, - 75 percent - including new store openings, while bolt on acquisitions added a further 25 percent. The company opened 89 new locations in the nine months and increased the size of the fleet on rent, adding $939 million new equipment over and above replacement equipment. Physical utilisation slipped one percent to 71 percent. Operating profit for the period was $1.21 billion up 21 percent on the year.

Sunbelt Canada continues to benefit from the two major acquisitions and saw revenues increase 59 percent to $256.6 million, with a 43 percent hike in operating profit to $47.4 million. Utilisation was 60 percent.

In the UK A-Plant saw revenues improve two percent to £360.4 million with utilisation improving one percent to 69 percent. Operating profit however were almost four percent lower £54.7 million.

Moving on to the third quarter group revenues were £1.14 billion 20 percent up on the same period last year, while pre-tax profits for the period were £17 percent higher at £240.9 million.

Sunbelt revenues for the quarter were $1.26 billion up 22 percent on the same quarter a year earlier, with operating profits also rising 22 percent to $363 million.

Sunbelt Canada saw quarterly revenues rise 28 percent to $89.3 million, operating profits however slipped 10 percent to $11.1 million.

In the UK A-Plant revenues were one percent higher at £109.9 million, while operating profits improved three percent to £36.9 million.

Looking at capital expenditure, in total the group has spent £1.29 billion so far, over 28 percent higher than the prior year, and says that it expects full year expenditure to come in at around £1.66 billion. The average age for the fleet is stable at 32 months.

Most of the expenditure - $1.3 billion went into the Sunbelt fleet which maintained the average age of the fleet at 32 months.
Canada spent $151.4 million, its fleet has an average age of 28 months.
In the UK A-Plant capital expenditure £78.2 million roughly half for replacement and half for growth. The average age of the fleet increased from 31 to 36 months.

Net debt at the end of the period was £3.72 billion compared to £2.63 billion last year, partly due to currency shifts.

Ashtead chief executive Geoff Drabble said: "The group delivered a strong quarter with good performance across the Group. As a result, group rental revenue increased 18 percent for the nine months and underlying pre-tax profit increased 18 percent to £888m, 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 £1,290 million in capital and a further £491 million in bolt on acquisitions in the period which has added 112 locations and resulted in rental fleet growth of 18 percent. This investment reflects the structural growth opportunity that we continue to see in the business as we broaden our product offering and geographic reach and increase market share.”

“Reflecting this opportunity for profitable growth, we expect capital expenditure for the year to be towards the upper end of our previous guidance £1.6 billion. Looking forward to 2019/20, we anticipate a similar level of capital expenditure to this year as we execute on our strategic plan through to 2021. Whilst these are significant investments we remain focused on responsible growth so, after spending £550 million to date on our share buyback programme, we have maintained net debt to EBITDA leverage at 1.8 times. Therefore we remain well within our target range of 1.5 to 2.0 times reflecting the strength of our margins and free cash flow.”

“Our business continues to perform well in supportive end markets. Accordingly, we expect full year results to be in line with our expectations and the board continues to look to the medium term with confidence."

Vertikal Comment

Another quarter of exceptional growth, achieving such substantial growth quarter after quarter is incredible. Clearly the company is on a roll and has kept it going by fuelling/funding the strong momentum that has built up. It is showing no signs of abating and looks well placed to maintain the growth into the new financial year.

The same cannot be said of A-Plant in the UK, although its quarterly numbers are encouraging, but whether this is something that it can sustain in the fourth quarter remains to be seen. The company is well placed in the UK market but could do some much better, if only it could gather some of the Sunbelt spirit and open mindedness.

Overall though another first class performance.

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