Ashtead confirms division sale and reports "strong" results

By Murray Pollok24 June 2008

Ashtead Group has reported strong results for its US and UK rental businesses and confirmed the sales of its specialist equipment division, Ashtead Technology, to a management buy-out team backed by private equity firm Phoenix Equity Partners.

The buy out group will pay £95.6 million in cash for Ashtead Technology, which rents electrical and environmental monitoring equipment to offshore and industrial customers from 14 locations in the UK, Singapore and North America. It reported revenues of £26.5 million and 40% profit margins for the year to 30 April. Andy Doggett, managing director and Andy Holroyd, president in North America, led the buyout and will continue to manage the business.

Ashtead said both its main rental businesses, Sunbelt Rentals in the US and A-Plant in the UK, had performed strongly in the year and that market conditions remained good in both countries, with physical utilisation of equipment currently higher than at the end of the last financial year, when the fleet was smaller.

Sunbelt's figures, which include a full year of the acquired NationRent business, reported flat revenues of US$1.5 billion but profits up by 21% to $331 million. The company said revenues were affected by the decision to cut out "low margin" equipment sales carried out previously by NationsRent. It said market weakness in Florida had been more than offset by good growth elsewhere.

Profitability at A-Plant, meanwhile forged ahead, up 46% to £30.2 million on a turnover of £214.8 million. Ashtead said the improved profits reflected the shift in strategy towards fewer, larger depots. It also said it was now the UK's "market leader" in the provision of combined plant and tool products.

Ashtead said its fleet age and mix were now at optimum levels, which meant that investment in fleet in the year to 30 April 2009 would be considerable lower than the last financial year, falling from £330 million to £230 million. The growth component of that investment will fall from £126 million to £50 million.

Ashtead's chief executive, Geoff Drabble, said the results were strong and that prospects were good for continued good performance; "In May both Sunbelt and A-Plant delivered improved year on year performance. We continue to enjoy high levels of utilisation and expect to benefit further from the momentum established in the Group. Therefore, despite the current economic uncertainty, the Board anticipates the Group continuing to trade in line with its expectations in the coming year."

The company said that although private commercial investment in the US would be affected by the economic uncertainty, "other areas such as institutional expenditure and industrial markets are likely to remain more robust. We are a late cycle business with only 5% market share and continue to perform well."

Of the UK market, Ashtead said the residential market and new commercial offices where sectors most affected by the economic climate, but that "the overall picture for our served market remains healthy. Infrastructure and utility work remains good and we are well positioned to benefit from major projects such as the Olympics, Crossrail, M25 widening and changes to the energy infrastructure.

"These factors together with the opportunity to drive further market share gains from A-Plant's current single digit market share give us confidence in the prospects for the year ahead", said Ashtead.

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