Ashtead back in black after overhaul

Plant hire group Ashtead today hailed a return to underlying profits after it reaped the benefits of a life-saving financial overhaul.

The group saw signs of a trading improvement in both the US and UK which underpinned confidence in progress during the current financial year.

Pre-tax profits before exceptional items of £7.6m (€11.3m) for the year to April 30 were higher than the £1m (€1.5m) expected by analysts and an improvement on losses of £1.8m (€2.7m) posted a year ago.

The figure would have been 33% higher had the company not felt the impact of currency swings in the US, where it does two-thirds of its business.

Shares surged 14% as investors digested positive comments from chief executive George Burnett that the group had returned to financial stability.

Ashtead saw its debts spiral to £622m (€927.5m) in the years that followed the acquisition of US plant hire business of Rentokil for £334 million in June 2000.

Within weeks the American market had peaked and began to move into a long and cyclical decline, while conditions also became tougher on this side of the Atlantic.

Ashtead secured an extension to its banking facilities to September 2007 and carried out a bond issue earlier this year to ensure its survival.

Costs relating to the restructuring meant the group posted bottom-line losses of £33.1 million against a deficit of £42.2m (€62.9m) a year ago.

Mr Burnett said borrowings had been lowered to £526.7m (€785.3m) by the end of April and the company was cash flow positive – meaning it can generate enough money to run the business without incurring debt.

A major overhaul of it’s a-Plant business in the UK was starting to pay off with the division returning to growth during May and June when like-for-like sales pushed ahead by 2.4%.

The group has sold off three non-core businesses to achieve annual savings of £15m (€22.4m) and refocused on three product categories of general equipment, tool hire and specialist equipment.

These changes were completed in January and led to annual turnover at A-Plant, which operates from more than 200 outlets, falling 12.6% to £155.9m (€232.5m).

Economic recovery in the US was also boosting confidence and revenues from its Sunbelt Rentals division have risen 10.9% in the past two months.

This builds on the 4.7% growth to $572.8m (€466m) over the 12 months to April 30, reflecting higher rental rates and utilisation rates.

The company said it remained alert to the impact of higher interest rates and a further weakening of the US dollar on its next set of annual results.

But it added: “The board is encouraged by the improving trends in its businesses and in the markets in which they operate, and believes that further progress should be achieved in the coming year.”