Sunbelt's Integration Propels Strong First Half for Ashtead

Jan. 1, 2008
Leatherhead, England and Fort Mill, S.C. Ashtead Group Plc said Sunbelt Rentals' underlying operating profit rose 27 percent to $196.6 million in its

Leatherhead, England and Fort Mill, S.C. — Ashtead Group Plc said Sunbelt Rentals' underlying operating profit rose 27 percent to $196.6 million in its fiscal first-half, while its United Kingdom unit A-Plant's underlying operating profit rose 41 percent to £16.5 million (about U.S. $33.3 million). While 77 percent of Ashtead's revenue comes from Sunbelt, the company's United Kingdom division, A-Plant, grew 18 percent during the period, which ended Oct. 31.

Sunbelt Rentals' half-year revenue was $809.1 million, up from $597 million in the previous year, which did not include NationsRent revenue. Pro forma revenue for the combined companies dropped from $827.7 million the previous year. However, pro forma margins for Sunbelt improved from 18.7 percent in 2006 to 24.3 percent in the just-ended period.

“Sunbelt's pro forma margins continue to improve as we realize the benefits of the NationsRent acquisition with the actions taken to lower costs and increase dollar utilization driving improved profitability,” said the company. “As planned, Sunbelt's revenue growth continues to be limited by our curtailment of the low-margin sales of new equipment previously undertaken by Nations-Rent. Excluding revenues from equipment sales, rental and rental-related revenues grew 2 percent in the second quarter to $392 million and by 1 percent in the first half to $754 million. Dollar utilization was 63 percent on Oct. 31, 2007, compared to a pro forma 62 percent April 30, 2007.”

“In the U.S., the integration of NationsRent has been completed successfully and we are now driving the combined business back towards the market-leading margins and returns achieved previously by Sunbelt alone,” said Ashtead's chief executive Geoff Drabble. “In the U.K., the work we have undertaken to reposition A-Plant Hire has led to a significant improvement in its performance…. Our experience on the ground, supported by many lead indicators, is that activity levels in our primary markets in the U.S. and U.K. remain good being driven primarily by a mix of corporate and public-sector involvement. Notwithstanding current concerns over broader macro economic conditions, we continue to see strong demand for our equipment and services.”

Ashtead said that at Sunbelt, the former NationsRent fleet has been successfully reconfigured and physical utilization levels for the combined businesses are now consistent with those achieved by Sunbelt alone before the acquisition. The company said it will now target investment in growth capital as opposed to fleet reconfiguration, which will improve the revenue and contribution of the existing profit center infrastructure.

“Looking forward, our focus is on organic growth,” the company said. “We intend to develop those geographic areas where we now have a presence following the acquisition into the broader clusters which are central to our business model and are proven to deliver higher returns. These clusters will be supported by the ongoing development of our specialty businesses where we have added seven Pump and Power profit centers over the last 18 months.” The company said that although growth in the U.K. will be primarily organic, the company might selectively make small bolt-on acquisitions.

Ashtead is based in Leatherhead, England. Sunbelt Rentals, No. 2 on the RER 100, is based in Fort Mill, S.C.