Ashtead plc, U.K.-based owner of Sunbelt Rentals and U.K.-based A-Plant, posted a 7-percent increase in fiscal first-half profit last week. While construction is slowing in Ashtead’s markets, company officials expressed hope that increased spending for public sector infrastructure projects could offset the economic slump.
First half revenue for Sunbelt Rentals was about £436.8 million (about U.S. $649.6 million) compared with £401.9 million for the same period last year, an 8.7-percent increase. EBITDA rose from £164.1 million in the year-ago period to £170.6 this year, while operating profit grew slightly from £97.6 million last year to £99.4 million this year.
Group revenue for the first half rose 7 percent from £510.4 million last year to £546.3 million (about U.S. $811.5 million) in this year’s first half, with EBITDA increasing from £164.1 million to £170.6 million.
Sunbelt’s underlying growth reflected weakness in construction activity in a number of Sunbelt’s markets, particularly in Florida and California, while others, particularly Texas, continued to grow strongly. Operating costs grew by 3.6 percent. Delivery costs increased as a result of both the increased fuel cost during the period and increased expenditure on fleet transfers into busier markets. Costs in other areas increased at rates in line with or below inflation.
Sunbelt invested $207.3 million into the rental fleet, about a 6-percent larger investment than the first half of 2007. Physical utilization in the first half was flat at 70 percent, while second-quarter rental rates increased 2 percent sequentially from the rates experienced in the first quarter. As a result, the decline in rental yield for the second quarter relative to last year was just 1 percent, significantly lower than the 5-percent reduction in the first quarter. For the half year as a whole, yield decline was 3 percent.
“Ashtead has continued to perform well against the background of weakening market conditions,” said Ashtead’s chief executive Geoff Drabble. “Our strong and diversified market positions have and will continue to benefit the Group, but it is also important that we take prompt actions based upon realistic assumptions of the future trading environment.”
Drabble said the company is beginning a re-structuring program in preparation for lower levels of demand, with the expectation of generating cost savings of £45 million annually. The program will consist of store closures, fleet and delivery vehicle reductions and other cost reductions. The company plans to trim its fleet by 7 percent.
“Whilst the outlook for the operational trading environment in the second half is weaker and difficult to predict, we will benefit significantly both from lower interest costs and the stronger dollar,” Drabble added.
Ashtead officials said they anticipate that initiatives such as the hoped for Obama infrastructure package and the U.K. government’s intention to bring forward £3 billion in infrastructure spending will begin to impact its markets towards the end of 2009.
Based in Fort Mill, S.C., Sunbelt Rentals is No. 4 on the RER 100. The Ashtead Group is based in London.