Recession will encourage outsourcing says Ashtead
18 June 2009
The company, which owns A-Plant in the UK and Sunbelt Rentals in the US, said it also expected rental markets to consolidate further during the downturn, with smaller rental companies unable to rely on low or zero cost leasing finance from equipment suppliers, as they have in the past.
Ashtead said; "With strong market positions in both the UK and the US, supported by young fleets and sound long-term debt facilities, we continue to expect that we will emerge from the current downturn with greater market share and, in the US, in a market with enhanced penetration."
Ashtead made the comments as it released its final quarter and full year financials for the 12 months to 30 April 2009. Revenues fell by 5% to £232.1 million for the final quarter, but grew 2% to £1.07 billion for the full year.
Operating profits for the final quarter fell by 59% to £16.4 million while operating profits for the year were 17% down at £155.0 million.
Ashtead's Sunbelt results were boosted by the stronger dollar. Sunbelt's revenues in dollars fell by 21% over the year to US$1450 million, although actually grew by 7% when expressed in UK sterling. A-Plant's sales for the year fell by 2% to £208.0 million.
For both companies, the final quarter was the worst performing, with A-Plant seeing a 28% fall in revenues and Sunbelt falling 24% (in local currency).
Ashtead's chief executive, Geoff Drabble, said; ""Market conditions weakened further during the fourth quarter. Revenues in both the US and UK markets were adversely affected by lower volumes and yields although we continued to benefit from the stronger dollar.
"Whilst infrastructure and utility work continues to hold up, the relative lack of finance available for private sector commercial development makes it inevitable that construction volumes overall will remain weak."
Ashtead said its cost cutting programme, undertaken in the second half of the year, has reduced its rental fleet by 10%, closed or merged 100 branches, and cut its workforce by around 14%. The company said its annual cost savings would be £100 million. The company has made a one-off charge of £83 million relating to these cost savings.
During the year, A-Plant's physical utilisation fell from 71% to 67%, while average yields (rental rates) fell 8% on average. At Sunbelt, utilisation fell 2% to 66% and yield fell 5%, although the final quarter saw yield 14% lower than the previous year.
Mr Drabble said that May and early June had seen rental volumes in line with its expectations while rental yields "have shown some tentative signs of flattening month on month". The company said it confirmed its expectations for 2009/10 as given in its trading update in May.
