Sunbelt drives growth for Ashtead

This contrasts with a comparatively weaker domestic market where the UK A-Plant rental revenue grew by just 3 per cent to £416m. Chief financial officer Michael Pratt attributes this to the maturity of the UK market as well as the pervasive economic uncertainty making customers more reticent to make large spending commitments. Moving forward, he expects next year to be “not dissimilar to last year in terms of revenue growth... but we will be reshaping the fleet to generate better returns”. The group intends to reduce capital expenditure in the UK, shrinking the under-utilised fleet and instead spending on growth areas of the business.

With a near-30 per cent increase in gross capital expenditure to £1.6bn in FY2019, there is the danger that heavy ongoing fleet investment could become a capital burden if demand slows. However, physical utilisation rates remain stable – 71 per cent and 69 per cent in the US and UK, respectively. A similar level of capital expenditure is expected in FY2020 with the intention of driving low double-digit revenue growth.

Continuing its strategy of supplementing organic growth with acquisitions, the group spent £622m on 24 bolt-on acquisitions (versus £392m last year) adding 146 locations across the group. As a result, net debt has swelled by 38 per cent to £3.75bn, increasing to 1.8 times adjusted cash profits (although this remains within group’s target range of 1.5 to 2 times).

Peel Hunt forecasts adjusted pre-tax profit of £1.27bn and EPS of 208p in the year to March 2020, rising to £1.38bn and 227p in FY2021.