North American markets remain strong while the UK levels off, according to Ashtead’s results for the first quarter ended 31 July 2019.
The UK market remains competitive, said Ashtead, and so the focus for its UK subsidiary A-Plant is now on operational efficiency and improving returns.
As previously reported, Ashtead is slowing its investment in A-Plant. In the first quarter, no investment was made to grow A-Plant’s fleet. Indeed, A-Plant’s £55-65 million projected capital expenditure for 2020 is earmarked entirely for replacement rather than growth. This compares to £34 million spent on fleet growth last year.
As a result of de-fleeting, higher used equipment sales boosted A-Plant’s total revenues, which grew by 5% compared to the same period last year. Meanwhile, rental revenues were down 1% to £109 million.
Ashtead is, however, continuing to investment heavily in Sunbelt US and Sunbelt Canada.
Ashtead’s Chief Executive, Brendan Horgan, said, “Our North American end markets remain strong and we continue to execute well on our strategy of organic growth supplemented by targeted bolt-on acquisitions.”
In excess of US$1 billion will be spent on growing Sunbelt’s fleet, while up to C$60 million will be invested in expanding Sunbelt Canada’s fleet. In the first quarter, US$368 million was channelled into growing the Sunbelt US fleet, and C$25 million was invested in fleet growth for Sunbelt Canada.
Total revenues at Sunbelt US were up 18% on the same period last year, reaching US$1.38 billion, and within that, rental revenues grew by 18% to US$1.28 billion. Operating profit rose by 15%.
Sunbelt Canada saw total revenue growth of 23%, to C$95 million, and rental revenue growth of 22%, to C$76 million. These results were boosted by recent acquisitions. The subsidiary’s operating profit rose by 10%.
Total group revenues were up 17% to £1.28 billion, and within that group rental revenues increased by 16% to £1.17 billion.
In the first quarter, Ashtead has spent £196 million on bolt-on acquisitions, adding 27 new locations to the group’s network.
Horgan said, “This investment reflects the structural growth opportunity that we continue to see in the business as we broaden our product offering, geographic reach and end markets, thus increasing market share and diversifying our business.”
Looking ahead, he added, “Our business continues to perform well in supportive end markets. Accordingly, we expect business performance in line with our expectations and the board continues to look to the medium term with confidence.”