15 March, 2005
Third Quarter & Nine Month Results to 31 Jan 2005
Ashtead Group plc, the equipment rental group serving the US and UK construction, industrial and homeowner markets, announces its results for the third quarter and nine months ended 31 January 2005.
Unaudited results for the third quarter and nine months ended 31 January 2005
- Group nine months pre-tax profit before goodwill of £20.9m (2004* - £4.5m)
- Group nine months pre-tax profit of £14.3m (2004 – loss of £23.1m)
- Group Q3 pre-tax profit before goodwill of £0.8m (2004* - loss of £6.6m)
- Group Q3 pre-tax loss of £1.4m (2004 - loss of £14.6m)
- Sunbelt nine months profit** of $84.7m (2004 - $53.1m)
- A-Plant nine months profit** of £8.5m (2004 - £2.5m)
* additionally, in 2004, before exceptional items
** Sunbelt’s and A-Plant’s profit comprises their operating profit before goodwill amortisation and, in 2004, exceptional items.
Ashtead’s chief executive, George Burnett, commented:
“Achievement of a pre-goodwill profit in what is by far our seasonally weakest quarter underlines the strength of the recovery we have seen in all three divisions. Sunbelt again delivered a strong performance with third quarter dollar revenues up 19.3% reflecting improving markets, increasing market share and the shift from ownership to rental in the US . A-Plant and Ashtead Technology both also exceeded last year’s third quarter performance by a significant margin.
Current trading conditions are now good in all our markets. The Board continues to be encouraged by the underlying performance of each of our divisions and looks forward to a successful outcome for the year.”
|Cob Stenham||Non-executive chairman||020 7299 5562|
|George Burnett||Chief executive|
|Ian Robson||Finance director||01372 362300|
|The Maitland Consultancy||020 7379 5151|
For the nine months to date, Group profit before tax, goodwill amortisation and exceptional items (2004 only) increased to £20.9m from £4.5m in 2004 (£2.9m at constant exchange rates). After goodwill amortisation and exceptional items, pre-tax profits were £14.3m compared with last year’s loss of £23.1m. Cash tax earnings per share were 6.3p (2004 – 1.4p). After goodwill amortisation and exceptional items, and the accounting tax charge, basic earnings per share were 1.3p in 2005 compared to the loss of 7.9p in 2004.
The Group performed strongly in the seasonally weakest third quarter delivering a profit before tax, goodwill amortisation (and, in 2004, exceptional items) of £0.8m (2004 – loss of £6.6m). After goodwill amortisation and exceptional items, the pre-tax loss was £1.4m compared with the loss of £14.6m in 2004.
Review of nine months trading
|Turnover*||EBITDA*||Divisional operating profit**|
|Sunbelt in $m||501.6||429.7||167.0||131.6||84.7||53.1|
|Sunbelt in £m||271.6||255.0||90.4||78.1||45.8||31.4|
|Group central costs||-||-||(4.5)||(4.0)||(4.5)||(3.9)|
|Profit before tax **||20.9||4.5|
* In 2004, before exceptional items.
** Before goodwill amortisation and, in 2004, exceptional items.
Despite a 10% year on year decline in the US dollar, Group turnover increased by 4.1% to £398.1m, EBITDA by 12.4% to £125.9m and total divisional operating profit by 61.2% to £51.9m. The underlying growth, measured at constant exchange rates, was stronger with turnover up 10.7%, EBITDA up 19.9% and total divisional operating profit up 76.2%. The Group’s profit margins also improved. EBITDA margins rose from 29.3% to 31.6% and the total divisional operating profit margin increased from 8.4% to 13.0%.
Sunbelt continued to perform strongly in the nine months with both rental rates and utilisation continuing to rise. Turnover grew 16.7% to $501.6m reflecting growth of approximately 7% in rental rates and an increase in the nine months utilisation rate from 65% to 70% whilst the fleet size remained broadly constant. Turnover growth was broadly based with all regions and all major product areas trading ahead of last year.
The nine month figures reflect further strong growth in the third quarter where turnover was up 19.3% compared with the same period last year thanks to continuing high utilisation levels and further year on year rises in rental rates of approximately 7%. As predicted construction activity in Florida remained strong in the third quarter in the aftermath of the hurricanes earlier in the year, an effect which is expected to continue into the next financial year. The new profit centres opened in the first half continued to make good progress and further new locations in Miami and Phoenix will be opened in the fourth quarter.
Sunbelt’s turnover improvement reflected market share gains and growth in non-residential construction activity (which rose 3.6% in the year to December 2005) as well as the continued shift from ownership to rental. Sunbelt’s divisional operating profit was up 93.2% in the third quarter from $11.8m to $22.8m. For the year to date it grew 59.5% to $84.7m representing a margin of 16.9% (2004 – 12.4%).
A-Plant continued to build on the improvements in its performance seen in the first half of this year. Although total turnover for the nine months declined to £117.6m from £118.4m in 2004 as a result of the 2003/4 non-core disposal programme, on a same store basis turnover increased by 5.9% as a further improvement in year on year performance was achieved in the third quarter. The year to date figure reflected a fleet size which was approximately 5% smaller than in the equivalent period last year, an increase in utilisation from 59% to 64% and growth in rental rates of approximately 3%. The growth in rental rates in the third quarter was 5%.
In its seasonally slowest third quarter A-Plant’s divisional operating profit improved to breakeven from a loss of £3.1m in 2004. As a result its nine month divisional operating profit grew more than threefold to £8.5m (2004 - £2.5m) representing a margin of 7.2% (2004 – 2.1%). Although this signifies a considerable increase in its return on capital employed, we are increasing investment in the higher return tool hire product to help improve returns further. In addition to the current 69 branded Tool Hire Shops, a further 22 plant locations already offer the tool hire product. During the course of the next twelve months 26 more plant locations will start carrying the tool hire range of which 8 will be fully equipped by 30 April 2005. It is intended that all 48 plant locations will be co-branded as Tool Hire Shops by April 2007 – an increase of 70% on the current 69 fully branded locations.
Thanks to the breadth of its product offering and its geographic coverage A-Plant continues to benefit from its major account business. A-Plant recently agreed a new five-year contract with Balfour Beatty Utilities and a two-year extension to the existing three-year contract with Skanska UK plc which together are estimated to be worth over £25m.
Ashtead Technology substantially improved its performance in the third quarter with the quarter’s revenues up from £2.1m to £2.9m and divisional operating profit up from £0.1m to £0.7m reflecting recovery in its offshore markets. For the nine months turnover is now unchanged from last year at £8.9m. The first UK environmental rental store was opened in Hitchin at the beginning of the year and the US environmental rentals expansion continued with an opening in Atlanta in October. Both stores are developing well. Nine month divisional operating profit was £2.1m (2004 - £2.2m). There is now good reason to believe that the oil majors will fund greater offshore exploration and construction activity in 2005 from which Ashtead Technology should benefit.
Capital expenditure and net debt
Capital expenditure in the nine months was £89.8m of which £80.1m was on the rental fleet (2004 - £49.7m in total). Capital expenditure was increased significantly in Q3 to enable Sunbelt to take advantage of the improving economic conditions in the US . £18.8m of the fleet expenditure was for growth with the remainder being spent to replace existing equipment. Disposal proceeds of £25.0m (2004 - £17.0m) were achieved in the period generating a profit on disposal of £3.6m (2004 - £1.0m). The markets used for disposing of used rental equipment continue to be healthy. As previously announced capital expenditure for the year to 30 April 2005 is expected to total £120m to £130m.
The tax effect on cash flow was again minimal and is expected to remain so.
Net debt at 31 January was £490.8m, a reduction of £35.9m since year-end and £44.5m in the twelve months since 31 January 2004. At constant exchange rates these reductions were £22.7m and £32.5m respectively.
New asset based bank facility
As previously announced, the Group completed the syndication of a new $675m five-year asset based first priority senior debt facility on 12 November 2004. Based on January 2005 debt and EBITDA levels, the Group has now achieved the necessary targets to reduce the interest rate payable on borrowings under this facility to LIBOR plus 225bp from the average of LIBOR plus 260bp payable when the facility closed. This 35bp reduction in interest cost, which took effect from 28 February, provides a useful partial offset against the recent increases in US dollar LIBOR and means that we are now borrowing at the lowest interest rate tier in the facility’s interest rate grid. $110m was available under the new facility at 31 January 2005.
Current trading and outlook
Achievement of a pre-goodwill profit in what is by far our seasonally weakest quarter underlines the strength of the recovery we have seen in all three divisions. Sunbelt again delivered a strong performance with third quarter dollar revenues up 19.3% reflecting improving markets, increasing market share and the shift from ownership to rental in the US . A-Plant and Ashtead Technology both also exceeded last year’s third quarter performance by a significant margin.
Current trading conditions are now good in all our markets. The Board continues to be encouraged by the underlying performance of each of our divisions and looks forward to a successful outcome for the year.
There will be a conference call for equity analysts at 9.30am this morning. A simultaneous webcast of this call will be available through the Company’s website, www.ashtead-group.com and there will also be a recorded playback available from shortly after the call finishes.