Tool hire group Ashtead has reported revenues are up by more than a quarter, showing a strong performance in the sector…
Tool hire group Ashtead has successfully delivered a strong performance despite difficulties in the equipment rentals sector.
The firm, which has a market in both the UK and the US, said it had seen a growth in revenues, with figures increasing by more than a quarter. This, Ashtead said, was due to reliance on the US markets.
The group makes 85 per cent of sales through its US rental business Sunbelt. It revealed group revenue rose 26 per cent to £618.6m in the first quarter—discounting foreign exchange movements. Underlying revenue from rentals was 20 per cent higher at £539.6m, while pre-tax profit rose 23 per cent to £155.4m.
In the UK, Ashtead provides equipment such as small hand tools right through to large lifting equipment through the A-Plant brand. It also supplies equipment for construction firms.
Ashtead reported that recovery in the US construction market had given the firm a boost, although warned the exchange rate would reduce the amount of profit made.
Chief Executive Geoff Drabble said: “Sunbelt’s 23 per cent rental revenue growth clearly demonstrates the overall health of our broader markets and the benefits of our more transactional business model.
“Particularly encouraging is that, after a weather-impacted spring, our seasonal improvement in demand was very strong, resulting in record levels of physical utilisation in July on a fleet that was 26 per cent larger.”
The quarter ending the 31 July saw a capital expenditure of £349m. Additionally, the firm opened 19 greenfield locations and made one small bolt-on acquisition.
The performance means Ashtead is “very much on track to achieve our plans of mid- to high-teens fleet growth in the US and open 50 new locations in the full year”, said Drabble, who also said he expected the company’s full year results to hit expectations.
Recently, the Bank of America’s Merrill Lynch, placed a double downgrade on the company, as earnings before interest and tax at Sunbelt declined by 110 basis points to 47.6 per cent. The oil price crash had a negative impact on the firm, which saw rentals to energy customers fall by 13 per cent—although this represents just three per cent of the US revenues.