Ashtead posts strong first-half results on US building recovery

Ashtead delivered a vote of confidence in the recovery in US construction after the London-listed tool hire group posted strong results for the first half of the year.

The company behind the Sunbelt Rentals brand in the US said it saw “clear signs” of recovery in North America – which accounts for about 85 per cent of its revenues – with construction permits up and big demand for building workers.

“That matches our experience on the ground,” said Geoff Drabble, chief executive. “It just seems very busy out there.”

Mr Drabble was less positive about the UK, where it was “too early to call a significant recovery” – though he highlighted hotspots of residential development and London property. “If you walk round London, it is a building site,” he said.

Ashtead, which is expected to join the FTSE 100 index of blue-chip stocks this month, has benefited from improving US and UK economic fortunes and a continuation of the shift towards renting, rather than buying, equipment.

It has also been expanding, opening 34 new stores in the six months to the end of October and hiring almost 500 staff. This has paid off in market share, as Ashtead has taken advantage of a US industry in which there are 5,000 rental companies, but only a handful with significant scale.

Sunbelt is the second-biggest US operator with 6 per cent, behind United Rentals, which has 12 per cent of the market.

In the six months to the end of October, Ashtead reported pre-tax profits of £207.8m – up 82 per cent, partly thanks to an £18m exceptional charge in the prior year period.

Stripping out this and other one-off items, underlying pre-tax profits were up 49 per cent at £212.3m on revenues up 23 per cent at £849.7m. The company said it anticipated full-year profit would be towards the upper end of expectations of £328m-£350m.

Ashtead is maintaining its focus on the rental of diggers and tools on short-term contracts – an approach that contrasts with UK rival Speedy Hire, which is moving towards fully fledged rental services contracts with large construction groups.

“The whole point of Bob the Builder is he is very flexible,” said Mr Drabble. “One day he’s putting up conservatories, the next he’s doing decking. He can adapt his business model quicker than a Skanska or a Balfour Beatty can. That’s why we like those guys.”

The shares ended the day up 3.7 per cent at 740p.