Ashtead soars away in US as customers rent rather than buy

Industrial equipment hire firm Ashtead forecast “substantially” better full-year results after booming business in its core United States market more than doubled first-quarter profit as cash-strapped customers kept on renting.
By The Newsroom
Published 7th Sep 2011, 07:00 BST

The FTSE 250 company, which hires out equipment from diggers to small tools, yesterday posted a 211 per cent rise in first-quarter pretax profit at constant exchange rates for the three months to July 31 of £33.8m, easily beating market expectations.

Ashtead shares, which have slumped 33 per cent in the past three months because of fears about the impact of a weak US economy on its business, closed up 22p at 134p.

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Chief executive Geoff Drabble said a tougher economic climate meant customers preferred to rent rather than own equipment, while its market share was also increasing as other rental firms struggled to match its scale and prices.

“Given the on-going structural change in the US rental market and the strong current performance, the board now anticipates a full year result substantially ahead of its previous expectations,” a statement read.

Before yesterday’s announcement, according to a Thomson Reuters I/B/E/S poll of 13 analysts, full-year pretax profit consensus was £58.50m.

Investec analyst Wayne Gerry said he anticipated upping full-year estimates from £57.5m to £77m.

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Sunbelt – Ashtead’s unit in the United States, which generates more than 80 per cent of the firm’s revenue – saw first-quarter sales grow 21 by per cent. Meanwhile business back hom in Britain grew by 12 per cent.

Pretax profit for the quarter, which surpassed the £31m posted for the whole of 2011, was also helped by an increased fleet size, rented at better prices and a first-time contribution from Ashtead’s Empire Scaffold business.

The firm said that good growth had continued into August with United States rental revenues up 25 per cent year-on-year.

RBS analyst Justin Jordan wrote in a note: “Stellar first quarter, with profits some 50 per cent ahead of consensus. Positive momentum into the second-quarter, with positive structural growth trends overwhelming macro fears.”

US rivals including United Rentals and RSC Holdings have also seen results improve on increased renting.