Industrial equipment hire firm Ashtead more than quadrupled its annual profit and upgraded expectations for this year as slow construction markets push a growing number of cash-strapped customers to rent rather than buy equipment.
The British firm, which makes over 80 per cent of revenue from its US business Sunbelt, on Thursday posted a pretax profit of 130.6 million pounds ($205.6 million) for the year to April 30, ahead of an analyst consensus of 122 million, according to Reuters data, and the 31 million it made last year.
Shares in the FTSE-250 firm, which had started the day up 41 per cent on a year ago, were up 4.3 per cent to 261.35 pence at 0845 GMT, while analysts at Jefferies upgraded their profit forecast for 2012/13 by 15 per cent to 160 million pounds.
Ashtead, which hires out equipment from diggers to small tools, said clients looking to save cash by renting rather than buying expensive equipment in slow construction markets had boosted profit, while it had also won work from smaller firms struggling to compete with its fleet size and prices.
Chief Executive Geoff Drabble told Reuters the firm expected more of the same this year and had based its upgrade on a flat US construction market as state and federal finance pressures, mortgage restrictions and weak consumer confidence mute any immediate recovery.
“Lack of available credit and an uncertain outlook is about as good as life gets for us because people rent rather than buy,” he said.
In an interview in March Drabble told Reuters that, while it continued to benefit from a shift to renting, it expected stronger revenue growth to come once construction markets recover as its prices rise in line with demand for equipment.
American firm United Rentals Inc, the world’s largest rental company, posted a 6.3 per cent rise in first quarter profit in April.
Full-year revenue at Ashtead’s US Sunbelt business -the second largest in America -grew 23 per cent to 945.7 million pounds, and the group said it was focused on expanding its footprint this year mainly through organic growth, although options for small bolt-on acquisitions were increasing.
In Britain, rental revenue at its A-Plant business grew by 9 per cent and Ashtead said its ability to invest when others can’t meant it would grow profit again this year despite its dismal outlook for the country, exacerbated by problems in continental Europe.