6 September, 2011

Unaudited results for the first quarter ended 31 July 2011

Read and download the first quarter results for the Ashtead Group. You can also view the latest webcast.

Financial summary

20112010ActualAt constant rates
Underlying results1    
Operating profit46.230.2+53%+66%
Profit before taxation33.811.9+184%+211%
Earnings per share4.3p1.6p+174%+212%
Statutory results    
Profit before taxation33.114.0+136%+148%
Earnings per share4.2p1.8p+127%+141%

1 Before amortisation of acquired intangibles and fair value remeasurements


  • Q1 pre-tax profits1 of £34m up 211% at constant exchange rates
      - More than the £31m earned in the full year ended April 2011
  • Sunbelt's rental revenue up 21% driven by continuing strength in both fleet on rent and yield
  • Sunbelt's operating profit margin increases to 20% (2010: 15%) with RoI of 10% (2010: 6%)
  • A-Plant's rental revenue rises 12%
  • No debt maturities until 2016
  • Board now anticipates a full year result substantially ahead of its previous expectations

Ashtead’s Chief Executive, Geoff Drabble , commented:

"Our end construction markets continue to behave in line with our expectations and now appear to be broadly flattening after two years of significant decline. Against this backdrop, the 21% rental revenue and 67% profit growth achieved at Sunbelt show that we are clearly benefitting from the ongoing structural change in the US rental market. Sunbelt has also now delivered 15 consecutive months of year on year rental revenue growth. These structural trends are likely to continue with further increases in rental penetration and Sunbelt's market share expected.

Together with our ongoing improvement in both yield and operational efficiency, these trends resulted in a very strong quarter with pre-tax profits of £34m. August's US rental revenues continued this pattern with growth of 25%. As a result, the Board now anticipates a full year result substantially ahead of its previous expectations."


Geoff DrabbleChief executive020 7726 9700
Ian RobsonFinance director020 7726 9700
Brian HudspithMaitland020 7379 5151

Geoff Drabble and Ian Robson will host a meeting with equity analysts to discuss the first quarter results and outlook at 8.30am on Tuesday 6 September at the offices of UBS at 100 Liverpool Street, London, EC2M 2RH. The meeting will be webcast live for the information of shareholders and investors via the link at the top of this release and there will also be a replay available via the same link shortly after the meeting concludes. There will, as usual, also be a separate call for bondholders which will be held at 4.00pm UK time (11.00am EST). Analysts and bondholders have already been invited to these meetings but any eligible person not holding an invitation should contact Astrid Wright at Maitland on +44 207 379 5151.

Trading results

 Revenue EBITDAOperating profit 
Sunbelt in $m361.1297.3134.6100.873.944.2
Sunbelt in £m222.5199.482.967.645.629.7
Group central costs   -   -(1.6)(1.5)(1.7)(1.5)
Net financing costs(12.4)(18.3)
Profit before tax, remeasurements and amortisation33.811.9
Fair value remeasurements-2.5
Profit before taxation33.114.0
Profit attributable to equity holders of the Company20.79.1
Sunbelt  37.3%33.9%20.5%14.9%
A-Plant  27.3%31.0%5.0%5.1%
Group  34.9%32.8%17.2%12.6%

First quarter results reflect continued improvement in the US with Sunbelt's rental revenue growing 21% to $328m (2010: $271m). This comprised a 10% volume increase in fleet on rent, 7% higher yield and a first-time contribution from Empire Scaffold. In the UK, A-Plant's first quarter rental revenue grew by 12% to £42m (2010: £38m) including 3% growth in average fleet on rent and 5% yield improvement.

Total revenue growth for the Group of 21% at constant rates (12% at actual rates) also included higher used equipment sales revenue of £14m (2010: £9m) as we increased capital expenditure and hence sold more used equipment.

Costs remained under close control with the reported growth in staff costs being due principally to the first time inclusion of Empire. Consequently, Sunbelt's EBITDA increased by $34m or 76% of the net $45m increase in Q1 rental revenue as adjusted to exclude the $12m first time impact of Empire's largely pass-through erection and dismantling labour recovery billings. This high "drop through" demonstrates the benefits of the significant operational gearing in the business.

Group pre-tax profit before amortisation of acquired intangibles and fair value remeasurements grew to £34m, 2.8 times greater than 2010's £12m. This reflected the operating profit growth and lower net financing costs of £12m (2010: £18m), mainly as a result of the benefits of the debt refinancing undertaken in the fourth quarter of 2010/11.

After £1m of intangible amortisation, the statutory profit before tax was £33m (2010: £14m). The effective tax rate on the underlying pre-tax profit was 37% (2010: 35%). Underlying earnings per share grew 174% to 4.3p (2010: 1.6p) whilst basic earnings per share were 4.2p (2010: 1.8p).


Capital expenditure

Capital expenditure this year will, as usual, be concentrated in the first, second and fourth quarters of the year as we maximise expenditure for the seasonally stronger summer months. Accordingly Q1 expenditure was £156m gross and £140m net of disposal proceeds (2010: £51m gross and £41m net). As a result the average age of the Group's rental fleet at 31 July 2011 was 40 months (2010: 44 months)

Sunbelt's fleet size at 31 July of $2.3bn is 9% larger than it was a year ago whilst average first quarter physical utilisation was 72% (2010: 69%) as we successfully put the new equipment received this quarter out on rent.

For the year as a whole we continue to anticipate investing around 175% of depreciation or about £325m gross and £250m net of disposal proceeds. This rate of investment will hold the fleet size at around the size reached at the end of the quarter, giving us the fleet needed to service the increased demand we are generating and enabling us to continue to reduce fleet age enhancing the quality of our offering to our customers.


Return on Investment

Sunbelt's pre-tax return on investment (operating profit to the sum of net tangible assets, goodwill and other intangibles) in the 12 months to 31 July 2011 recovered to 10.0% (2010: 6.3%) and, despite end construction markets remaining at 30 year lows, already exceeds the Group's pre-tax weighted average cost of capital. In the UK, return on investment remains weak at 1.2% (2010: 1.1%) reflecting continuing excessive supply in the UK market. For the Group as a whole, returns are 8.1% representing a substantial recovery from last year's 5.2%.


Cash flow and net debt

Debt increased this quarter in line with plan. This resulted from the capital expenditure made to grow and renew the fleet and due to the usual seasonal increase in working capital that occurs in the first quarter as activity rises in the summer months. We expect the working capital increase to largely reverse in the second half. Net debt at 31 July 2011 was £848m (2010: £806m) whilst the ratio of net debt to EBITDA was 2.8 times (2010: 3.1 times), well within our 2-3x target band.

The Group's two debt facilities remain committed until 2016 (March 2016 for the senior bank facility and August 2016 for the $550m senior secured notes) whilst ABL availability was $511m - substantially above the $168m level at which the Group's entire debt package is covenant free.


Current trading and outlook

August saw both Sunbelt and A-Plant deliver good year-on-year revenue and profit growth continuing the pattern established in the first quarter. Given the on-going structural change in the US rental market and the strong current performance, the Board now anticipates a full year result substantially ahead of its previous expectations.


Forward looking statements

This announcement contains forward looking statements. These have been made by the directors in good faith using information available up to the date on which they approved this report. The directors can give no assurance that these expectations will prove to be correct. Due to the inherent uncertainties, including both business and economic risk factors underlying such forward looking statements, actual results may differ materially from those expressed or implied by these forward looking statements. Except as required by law or regulation, the directors undertake no obligation to update any forward looking statements whether as a result of new information, future events or otherwise.