Ashtead barely breaks even on £1.1bn turnover

Ashtead has seen its pre-tax profit melt away to a mere £800,000 on a turnover of £1.1bn.

 

The latest figure, which barely keeps the group out of the red, compares with a pre-tax profit of £110m in the previous year when turnover ran to £1bn.

 

Undeterred, the plant hire group’s statement on the Stock Exchange this morning headlines the latest results as being a “rrobust performance despite difficult market conditions”.

 

Ashtead’s financial year covers the 12 months to 30 April.

 

The latest figure was trimmed back to near-zero as a result of the burden of £87m of exceptional items and amortisation costs.

 

Management’s on-going comfort in future prospects is undimmed and this is reflected in the decision to pay shareholders £13m by way of dividend on their investment, a similar figure to 2008.

 

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.

 

“While infrastructure and utility work continues to hold up, the relative lack of finance available for private sector commercial development makes it inevitable

 

“We believe that a combination of financial constraint and uncertain order books will result in contractors, particularly in the US, increasingly choosing the rental option.

 

“We therefore expect the established trend towards increased outsourcing of equipment supply in the US will accelerate through the cycle.

 

“At the same time our industry remains fragmented with a number of smaller rental companies surviving on leasing finance often with low or zero cost interest rates which historically was provided by the equipment manufacturers.

 

“As this source of finance has become increasingly scarce and substantially more expensive, we expect the rental market to consolidate further during the downturn.

 

“In the face of reducing demand, we have reduced our rental fleets by around 10%, merged or shut 100 profit centres and reduced our workforce by around 14%. Overall these actions resulted in savings of around £100m.”

 

A-Plant

The UK operation’s rental division’s turnover declined 8% to £190m.

 

This reflects a 6% increase in average fleet size, physical utilisation of 67% (2008: 71%) and an 8% reduction in average yield. First-half growth was followed by a rapid reduction in the second-half.

 

Action taken to reduce A-Plant's costs resulted in a 12% reduction in underlying full year operating costs (excluding depreciation) to £145m and a much larger 23% reduction in the fourth quarter to £31m.

 

A-Plant's full year underlying operating profit was £16m down from £30m in the previous year.

 

The group closed the period carrying net debt of £1.0bn, little changed from the start of the period.

 

Interest charges were put at £72m.

 

Within the total figure for exceptional items and amortisation costs, five of the main elements were:

 

• £66m profit from the sale of Ashtead Technology
• £52m charge from the US cost-reduction programme
• £32m charge from the UK cost-reduction programme
• £44m of exceptional operating costs
• £44m of amortisation costs.