* Cost cuts help to deliver 87 pct profit leap
* Full-year revenue increases by 20 pct
* Shares up 4.9 pct
By Christine Murray
LONDON, June 20 Ashtead Group is reaping
the rewards of an efficiency drive and a shift by builders
towards renting equipment, which helped it to defy a volatile
construction market with impressive full-year numbers on
The British company, which hires out diggers and tools on
short-term contracts, reported profit and revenue up 87 percent
and 20 percent respectively, prompting an upgrade to its profit
forecast for the coming year.
Ashtead has upped its forecasts at every announcement for
the past seven quarters despite construction markets on both
sides of the Atlantic only now starting to recover from a
spectacular bust that began in 2007.
Chief Executive Geoff Drabble attibuted the success to cuts
made early in the recession and investment in customer service
thereafter, allowing the company to win market share.
"Without any great fancy initiatives per se, we've just
become a lot more efficient and, bizarrely, the recession was
the making of us," he said. "Out of necessity we saw what we
could do, it changed people's mindset."
Ashtead's performance belies the American Rental
Association's prediction for 6.9 percent industry revenue growth
Drabble said the sector's recovery remains volatile in the
United States, which accounts for 95 percent of Ashtead's
operating profit, but added that residential markets had picked
up and that he expects more private non-residential activity
next year and government spending in the following two years.
In Britain, where Ashtead is more reliant on big companies
such as Balfour Beatty for its work, Drabble is less
"It's still pretty tough out there. There's great work in
London and there's not much work going on anywhere else," he
said. "Government expenditure remains depressed and, more
importantly, unclear in terms of direction.
"There are, periodically, great sound bites about investing
in infrastructure. I've yet to see anything come out of those
There are, however, small signs that housebuilding has
started to recover, partly because of government schemes such as
Help to Buy and Funding for Lending.
British construction output in April showed the smallest
annual fall in almost 18 months, raising hopes that the sector
might contribute to economic growth in the second quarter.
Despite the apparent gloom, Ashtead isn't looking to expand
in emerging markets, such as those in Latin America or the
Middle East, any time soon.
"The problem with the developing markets is that we give
people relatively expensive bits of equipment for relatively
little money and we presume we'll get them back," Drabble said.
"Do we cast a wistful eye periodically at other geographies?
Yes, we do, but I don't think anything is imminent."
Analysts seem to have faith in his strategy. In a Thomson
Reuters poll of 15 analysts, only one rated Ashtead a "hold",
with none giving a "sell" rating.
The company's shares, which were the fourth-highest FTSE 250
riser in the past 12 months, were up 4.9 percent by 1116 GMT.