Ashtead gets off to good start ahead of expected hurricane boost

Ashtead, the construction equipment specialist, reported strong growth in rental revenue and profits in the first quarter of its financial year, adding that clean-up efforts after Hurricanes Harvey and Irma were likely to increase levels of demand for its fleet.

Underlying rental revenue increased 25% at constant exchange rates to £828.8m in the three months to 31 July and underlying pre-tax profit surged 30% to £238m.

At the reported level, which includes amortisation and the effects of the weak pound, revenue was up 16% to £880.1m and profit before tax 19% to £228.9m, with earnings per share jumping 20% to 30.2p.

There was strong growth in both US-based Sunbelt and UK business A-Plant.

Sunbelt, which added 20 new stores in North America in the quarter through greenfields and bolt-ons, lifted revenue 15% to $983m, while A-Plant revenues increased 23%.

Chief executive Geoff Drabble said while reported results benefited from weaker sterling, the level of growth rental revenue at constant exchange rates showed the continuing good momentum.

"Our end markets remain strong and a wide range of metrics have shown consistent improvement. We continue to execute well on our strategy through a combination of organic growth and bolt-on acquisitions."

Significant investments were made to the fleet in the quarter, with £377m poured into capital expenditure and £116m on bolt-on acquisitions.

"At the end of the quarter both businesses were performing well, in line with expectations and with positive momentum," Drabble said, touching upon the effects of Hurricane season in the American south that will require a major clean-up effort and then a multi-year rebuild programme.

"It is too early to attempt to quantify the impact of Hurricanes Harvey and Irma accurately on our business. However, it is evident that it will result in an increase in demand for our fleet and we will provide an update at the end of Q2.

"Looking forward, as a minimum, we expect that the impact will help to underpin the current market assumptions in our 2021 plan and therefore the board continues to look to the medium term with confidence."

Net debt increased to £2.6bn from £2.35bn at the end of last year, but the ratio to EBITDA remained at 1.7, which Drabble put down to the company's strong margins offsetting the capex and M&A spend, though there was a £40m currency translation benefit and a debt refinancing in July and August saw average debt maturity extended to an average of seven years.