Ashtead remains profitable as market hits bottom

04 December 2009

Ashtead Group remained profitable during the six months to 31 October despite revenues falling 24% in the period. Pre-tax profits in the most recent quarter actually more than doubled to £10.4 million.

The group, which owns Sunbelt Rentals and A-Plant, said market conditions would remain difficult for the second half of its financial year (to 30 April 2010). It said demand would decline as private sector projects started before the downturn are completed.

Ashtead said there were reasons to believe that the current winter season represented the bottom or near to the bottom of the market. However, it said that US stimulus related work and improving residential construction markets would help bolster demand until a more general economic recovery brought an increase in non-residential spending, which was "most likely" in the Spring of 2011.

Sunbelt's rental revenues fell by 32% to US$266.3 million in the quarter to 31 October, while rental turnover at A-Plant fell 26% to £39.0 million. Total revenue reductions - including sales of new equipment and consumables - were 36% for Sunbelt and 30% at A-Plant.

Ashtead's chief executive, Geoff Drabble, said; "These results show that, while market conditions have remained difficult throughout the first half, the actions we took last winter to cut costs and reduce fleet size prepared our businesses for the conditions ahead and ensured that margins held up well.

"Our operational performance is strong and we are clearly gaining market share. This has helped protect our profitability and deliver strong cash generation in the first half."

The cost reduction programme has cut operating costs by 34% at Sunbelt and by 26% at A-Plant. Dollar utilisation - defined as rental revenues divided by average fleet at
original cost - over the twelve months to 31 October 2009 was 49% at Sunbelt (down from 61% for the preceding year) and 49% at A-Plant (down from 57%). Physical utilization was 65% at Sunbelt (67% in 2008) and 67% at A-Plant (70%).

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