Ashtead Group plc, the equipment rental group serving the United States and United Kingdom construction, industrial and homeowner markets, last week announced its results for the half year and second quarter ended Oct. 31, 2004.
In the first half group profit before tax, goodwill amortization and exceptional items (which arose only in 2003) rose 81 percent to U.S. $39.1 million, from U.S. $21.6 million in 2003 and by 114 percent at constant exchange rates. After goodwill amortization and exceptional items, pre-tax profits were U.S. $30.5 million compared with last year’s loss of U.S. $16.5 million. Earnings per share based on the pre-tax profit before goodwill amortization and exceptional items and after an imputed 30-percent tax rate increased to 8 cents from 4 cents in 2003. After goodwill amortization and exceptional items, and the accounting tax charge, earnings per share were 4 cents in 2004 compared to the loss of 6 cents in 2003.
In the second quarter, group profit before tax, goodwill amortization and, in 2003, exceptional items rose 52 percent to U.S. $28 million from U.S. $18.5 million in 2003, and by 71 percent at constant exchange rates. After goodwill amortization and exceptional items, the pre-tax profit was U.S. $23.7 million compared with the loss of U.S. $972,500 in 2003.
Sunbelt continued to perform strongly in the first half with both rental rates and utilization continuing to rise, particularly in the second quarter. As a result first half turnover grew 15.6 percent to U.S. $342 million, reflecting growth of approximately 7 percent in rental rates and an increase in utilization rates from 67 percent to 72 percent while its fleet size remained broadly constant. Turnover growth was broadly based with all regions and all major product areas trading ahead of last year.
Turnover also benefited from additional work in the second quarter from the aftermath of the Florida hurricanes. Construction volumes in Florida are expected to continue to be strong for at least the next year. New profit centers were opened in Houston, Chicago and Vancouver, Wash., in the first half and further new profit centers are planned for Miami and Phoenix.
Sunbelt’s turnover improvement reflected market share gains and growth in non-residential construction activity as well as a continued shift from ownership to rental. Sunbelt’s first half divisional operating profit grew 49.9 percent to U.S.$61.9 million, up from U.S. $41.3 million in 2003, representing a margin of 18.1 percent.
A-Plant continued to build on the improvements in performance seen in Q4 last year and Q1 this year. Although total turnover for the six months declined to U.S. $156.8 million from U.S. $162.4 million in 2003 as a result of last year’s non-core disposal program, on a same store basis turnover increased 3.6 percent. This reflected a fleet size that was approximately 5 percent smaller than in the equivalent period last year, an increase in utilization from 60 percent to 66 percent and broadly constant rental rates. All three of A-Plant’s divisions improved with the Tool Hire division achieving the highest growth rate. New Tool Hire shops were opened in Harlow and Croydon and trading has just commenced at its new accommodation business in Cumbria.
A-Plant’s first half divisional operating profit grew 51.8 percent to U.S. $16.5 million, from U.S. $10.9 million in 2003, representing a margin of 10.5 percent.
“The Group again performed strongly in the second quarter reflecting improving markets, increased market share and the shift from ownership to rental in the U.S.,” said George Burnett, Ashtead CEO. “A-Plant also showed strong growth building on the improvements seen since the completion in January of its refocusing program. Our new five-year senior debt facility, which was successfully completed just after the end of the period, provides us with greater flexibility to invest and a lower interest cost.
“Current trading conditions in both our main markets remain strong. Whilst the continuing weakness of the U.S. dollar and any further interest rate rises may adversely impact second half performance, the board remains encouraged by the underlying performance of both our main businesses and by the Group’s long term growth potential.”
Ashtead Technology’s turnover declined 11.8 percent to U.S. $11.7 million at actual exchange rates as growth in its onshore environmental rental businesses was offset by slow offshore market conditions. Its first U.K. environmental rental store was opened in Hitchin at the beginning of the period and the U.S. expansion continued with an opening in Atlanta in October. First half divisional operating profit was U.S. $2.7 million, down from U.S. $4.1 million in 2003. Towards the end of the period, activity levels in the North Sea market improved. Commentators are now increasingly confident that the oil majors will be funding greater offshore exploration and construction activity in 2005 from which Ashtead Technology should benefit in due course.
Capital expenditure in the six months was U.S. $123.1 million of which U.S. $117.7 million was on the fleet. These expenditure levels were significantly higher than last year reflecting the improving U.S. economic conditions.
As previously announced, Ashtead Group completed syndication of a new U.S. $675 million five-year asset-based first priority senior debt facility on Nov. 12, 2004. At closing U.S. $490 million was drawn under the facility and was used, together with cash on hand, to repay the amount outstanding under the previous first priority senior debt facility and the debtors securitization. Demand for participation in the facility was very strong enabling improvement in interest margin to be achieved during syndication.
As well as reducing costs, the new facility offers greater flexibility on capital expenditure levels. Indeed, in light of the positive trading trends in Sunbelt and the Group’s strong cash performance, capital expenditure for the current financial year is now expected to be in the region of U.S. $233.4 million to $252.9 million as opposed to the previous guidance of U.S. $194.5 million to $204.2 million and last year’s figure of U.S. $140.6 million.
Charlotte, N.C.-based Sunbelt Rentals is No. 4 on the RER 100.
