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Ashtead maintains dividends despite collapse in UK profits

16 Jun 20 Ashtead Group, parent company of what used to be A-Plant, appears to be getting through the coronavirus crisis relatively unscathed and its shareholders are still in line for healthy dividends.

A-Plant became Sunbelt Rentals UK on 1st June 2020
A-Plant became Sunbelt Rentals UK on 1st June 2020

While profits tumbled 42% in the UK, most of Ashtead’s business is in the US, where it continues to flourish.

For the year to 30th April 2020, Ashtead’s UK business, which was rebranded from A-Plant to Sunbelt Rentals UK in June 2020, generated rental revenue of £349m, down 2% (2019: £357m), resulting from a 2% reduction in fleet on rent. Total UK revenue decreased 1% to £469m (2019: £475m).

Sunbelt UK’s operating profit (excluding amortisation) fell 42% to £36.4m (2019: £62.3m). The board said that this decline “reflects the drag effect of the increased fleet disposals, the challenging rate environment, investment in the infrastructure of the business and, recently, the impact of Covid-19”.

But while the UK delivered an operating margin of 13% for the financial year, Sunbelt US made a 31% return on revenues of £4.3bn, to deliver an operating profit of £1.2bn.

The whole group, which also includes a Sunbelt business in Canada, posted revenues up 9% for the year to £5,054m, with operating profit down 4% to £1,224m.

Final pre-tax profit was down 7% at £982.8m (2019: £1,059.5).

While Covid-19 had an impact on trading in the last two months of the financial year – March and April – this was partly mitigated by emergency response efforts that Sunbelt businesses have been supporting. Sunbelt Rentals has been designated as an essential business in the US, UK and Canada, supporting government and private sector responses to the pandemic. 

Ashtead chief executive Brendan Horgan said: "I am extraordinarily proud of, and grateful for, our team members and their response during a time when our communities were in need.  All levels of the organisation quickly adapted our operations to continue servicing our customers while keeping our leading value of safety at the forefront of all we do.

“While no one could have foreseen the global impact of Covid-19, our business model and capital structure are designed to withstand the cyclical nature of some of our end markets. We took prompt actions to optimise cash flow, reducing capital expenditure and operating costs, and strengthen further our liquidity position. In these unprecedented times, the results of our long-term strategy to mature our business through diversity and scale came through in our performance.

“Looking forward, I am certain these swift actions combined with the strength of our cash flow and balance sheet will serve the group well.  The diversity of our products, services and end markets coupled with ongoing structural change opportunities put the board in a position of confidence to look to the coming year as one of strong cash generation and strengthening our market position. Based on this confidence, the board has decided to maintain its progressive dividend policy and to recommend a final dividend of 33.5p."

Ashtead by numbers

  Nr. of rental stores 2020 Nr. of rental stores 2019 Staff numbers 2020 Staff numbers 2019
Sunbelt US 837 773 14,048 13,015
Sunbelt UK 193 196 3,712 3,789
Sunbelt Canada 75 67 1,506 984
Corporate office - - 18 15
Group 1,105 1,036 19,284 17,803

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