Strong nine months for Ashtead

UK-headquartered Ashtead, the parent of US-based Sunbelt and UK-based A-Plant equipment rental companies, has reported strong momentum in its results for the nine months to 31 January, 2016.

Rental revenues were up 17% year-on-year for the period to £1.68 billion (€2.16 billion), while operating profit jumped 20% to £543 million (€698 million).

Sunbelt reported revenues of £1.62 billion (€2.08 billion), compared to £1.26 billion (€1.62 billion) for the same nine months in the previous financial year, while operating profit increased to £505 million (€648 million) from £397 million (€509 million).

Ashtead said Sunbelt had seen good market growth over the period, despite headwinds from the oil and gas industry. It said it had opened 51 new greenfield locations - compared to 25 new greenfields for the previous year.

Sunbelt also spent US$73 million (€67 million) on acquisitions over the nine months, which added a further nine new locations. Average nine month physical utilisation was 72% – stable year-on-year.

Meanwhile, A-Plant produced revenues of £264 million (€339 million), up from £242 million (€311 million) for the same nine months in the prior year. Operating profit increased 25% year-on-year to £47 million (€60.3 million).

Capital expenditure

Group-wide capital expenditure for the nine month period was £790 million (€1 billion) net of disposal proceeds, up from £701 million (€899 million) during the same nine months in the company’s last financial year.

For the full year, it said it expected gross capital expenditure to reach the top end of its guidance, at around £1.2 billion (€1.5 billion) at current exchange rates, reflecting both strong activity levels and the impact of weaker sterling.

The company said, “We are now entering a very different replacement cycle as we lap our low capital expenditure years of 2009, 2010 and 2011 and therefore our replacement spend will be much lower than recent years.

“However, we continue to expect strong growth capital expenditure generating double digit fleet growth. Our operating model, and short delivery lead times, allow us to flex our capital spend quickly. Reflecting our desire to be watchful of broader economic trends before finalising our Q3 and Q4 2016/17 spend, we have a broad range for next year’s capital expenditure of £0.7 billion (€898 million) to £1 billion (€1.3 billion).”

Ashtead chief executive Geoff Drabble said, “Our continued success demonstrates both the strength of our strategy and the overall health of the markets we serve.

“Looking forward, while we are watchful of the broader economic environment, we continue to see encouraging growth opportunities and expect double digit fleet growth in the US in 2016/17. As our fleet replacement expenditure naturally moderates, we enter a phase of the cycle where we anticipate both good earnings growth and significant cash generation.

“With both divisions performing well, strong end markets and our strategy clearly working, we expect full year results to be in line with our expectations and the Board looks forward to the medium term with confidence.”