11 May, 2009
To assist investors in the current uncertain economic environment, the Board of Ashtead is providing the following trading update.
Construction markets in the UK and US are, as anticipated, weaker with private sector projects particularly impacted by the shortage of funding. Rental volumes have, however, held up relatively well and are broadly in line with our expectations. Our businesses are well positioned to continue to benefit from the major government-financed infrastructure programmes and we are also gaining market share in our core markets. Rental rate deterioration has, however, been greater than anticipated in recent months due to the weak economy and a harsh winter, leading to a year-on-year decline in group fourth quarter rental revenues at constant exchange rates of 24%.
The cost reduction measures originally announced with our half year results last December are now substantially complete. These comprised the closure of underperforming rental stores, the disposal of rental equipment made surplus by the decline in rental demand and headcount reductions. The final cost reductions significantly exceed our original target and mean that, across the group, our current annualised local currency cost base is now around (£100m) lower than it was last summer. The one-time exceptional charge incurred in delivering these savings, much of which is non-cash, is around £75m. Including the proceeds realised from the sale of the surplus equipment, the programme has generated a net cash inflow of around £40m.
Whilst the Board anticipates underlying pre-tax profits for the year ended 30 April 2009 within the current range of analysts’ forecasts (albeit towards the lower end), extrapolation of recent rental rate and revenue trends suggests that profits in fiscal 2009/10 are likely to fall below the Board’s earlier expectation.
The Board remains highly confident in the Group’s long term strength. The Group generated around £230m of cash in the year ended 30 April 2009 with around £140m from operations and £90m from the sale of Ashtead Technology. Net debt at 30 April 2009 was approximately £1,040m; more than £100m lower than the £1,147m of net debt at 31 January 2009. In addition the Board expects the Group to generate at least a further £100m of net cash flow in 2009/10 after making the appropriate investment in its rental fleets.
With long term committed finances and effectively no earnings based covenants to adhere to Ashtead has the financial flexibility and balance sheet strength to cope with current conditions. This flexibility and strength, coupled with its strong positions in both the US and UK rental markets, mean that the Group is well placed for the future.
Ashtead will report results for the year ended 30 April 2009 on Thursday 18 June 2009.
Chief executive 020 7726 9700
Finance director 020 7726 9700
Maitland 020 7379 5151
Note: Analysts’ forecasts for the profit before taxation, amortisation of acquired intangibles and exceptional items derived from continuing operations for the year ended 30 April 2009 (“underlying pre-tax profit”) range from £85.5m to £95.4m with a consensus average of £91.3m and compare with £112.3m in 2007/8.