UPDATE 1-Ashtead raises year profit target on U.S., UK demand
By Li-mei Hoang
LONDON, March 4 (Reuters) - British industrial equipment hire company Ashtead raised its full-year profit expectations on Tuesday after strong demand in the United States and Britain helped drive a 51 percent jump in third-quarter profits.
Ashtead, which makes 85 percent of its revenue from U.S. division Sunbelt, posted a pre-tax profit of 80.4 million pounds ($134.41 million) for the third quarter which ended on Jan. 31, up from 53.5 million a year earlier.
"We've had three good years of growth," CEO Geoff Drabble told Reuters, adding it was down to structural growth and cyclical recovery in the construction market.
"What we are very fortunate to be able to do is build on that momentum during the downturn, and carrying that into recovering markets ought to make us a lot fitter and a lot healthier," he said.
Group revenue increased 23 percent to 1.25 billion pounds in the nine months from 1.014 billion in 2012 with strong growth in both its U.S. and UK businesses.
The London-listed company, which hires out diggers and tools on short-term contracts, has grown rapidly over the past few years as hard-up customers in the United States and Britain have turned to hiring equipment rather than buying and maintaining it.
The firm has also been able to invest in its fleet, currently worth $3.4 billion, while credit has been tight for its rivals, allowing it to secure work at higher prices and increase market share.
Drabble said he would look to add more acquisitions in the coming years to the company's specialist division to help broaden its base and increase market share in both of the regions its operates in.
Ashtead is currently the No.2 player in the United States, with a market share of 6 percent, which it aims to double over the coming years.
"We are such a transactional business with little or no forward order book, the fact that we will get there, I think is pretty inevitable, precision around when we will get there is far more difficult," said Drabble.
The company has also enjoyed growth in its UK business, A-Plant, which grew by 16 percent in the third quarter.
"We are clearly gaining market share here too, which is encouraging because it's a long old hard ride in the UK," said Drabble.
"We've settled the business down, we've invested sensibly and we're now reaping the rewards of that. We've done some small bolt-on acquisitions which is why the headline number for the UK is so much better, and we will continue to do that," he added.
Shares in the firm leapt by 8.1 percent to 914.5 pence by 0859 GMT, making it the highest riser on the FTSE 100 index.
"Another sparkling update from Ashtead, delivering results above and beyond expectations by some way," said Panmure analyst Paul Jones.
"The company continues to enjoy the effects of increases in fleet size and initial rate increases, and we expect further organic growth," he said.
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