Ashtead reports 41% profit growth in 2010
By Maria Hadlow16 June 2011
The Ashtead Group which comprises A-Plant operating in the UK and Sunbelt in North America has announced a 11% growth (to £948.5 million) in turnover and a 41% growth in profit for its financial year ending 30 April 2011.
Ashtead's chief executive, Geoff Drabble, said, "We enjoyed an encouraging year where our focus on gaining market share and improving yields resulted in strong growth in Group profits.
"The performance of Sunbelt in the US was particularly pleasing with good momentum established that has carried into the new financial year with sustainable improvements in both fleet on rent and yield. Against a backdrop of still challenging end construction markets we are clearly benefitting from both the structural change in the US rental market and self help from the programmes we initiated during the downturn. In the UK, performance also improved in the second half and we delivered year on year profit growth."
Rental revenue grew 10% in Sunbelt to $1084 million reflecting a 5% increase in average fleet on rent, 3% growth in yield and a for the first time a contribution from Empire Scaffold which was acquired in January. Sunbelt's total revenue growth of 13% was enhanced by higher used equipment sales revenue as the company began cyclical reinvestment in its fleet and, therefore, sold more used equipment.
A-Plant's total revenue growth was 2% including 1% growth in rental revenue to £154m. Its average fleet on rent grew 2% whilst yield declined by 1%.
Ashtead said that both Sunbelt and A-Plant demonstrated improving trends through the year, which is reflected in fourth quarter performance. Sunbelt's Q4 rental revenue growth was 19% reflecting a 6% growth in fleet on rent, 6% yield improvement and a first-time contribution from Empire. A-Plant's rental revenue growth in Q4 was 6% reflecting 4% yield growth and 2% growth in fleet on rent.
Improvement in revenue and profit has generated one-off cost increases as sales commission and staff incentives recovered from last year's depressed levels. The company has also been affected by fuel price increases. Ashtead has continued to maintain a tight cost control was maintained throughout the year which ensured that operating costs rose more slowly than rental revenue in both businesses.
Ashtead also recognised that margins were impacted by significantly higher, but inherently lower margin, used equipment sales revenue this year of £61m (£27m in 2010). Despite this, full year EBITDA margins were 32% in Sunbelt (28% at the low point of the last cycle in 2003) and 26% at A-Plant. For the Group as a whole the full year EBITDA margin was 30% (2010: 30%).
The company reported, "The momentum we established throughout the past year has carried forward into May with encouraging levels of fleet on rent and yield growth. For the month, rental revenue grew by 21% in Sunbelt, measured in dollars, and by 11% in A-Plant.
"Looking forward we remain cautious over the outlook for end construction markets in the short term, particularly in the UK. However, we continue to benefit from the structural shift to rental, market share gains and the improvements we have established in all key areas of our business. Together with our balance sheet strength and strong market positions, this makes us confident of another year of good progress."
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