City News:

Hirers still announcing good results

EHN’s financial analyst Catherine Stratton considers the latest Stock Market news and views.

Ashtead’s sound third quarter performance has not prevented its share price tumbling to a three and a half year low, as concerns grow over its US exposure. When the company announced its latest results at the beginning of March, Chief Executive Geoff Drabble said that its “markets in the US and the UK remain good” and that the company’s experience “on the ground suggests that this will continue for the foreseeable future.” Just over two weeks later, the shares fell by over 13% in one day as Investec Securities put out a ‘sell’ recommendation, based on data showing that construction demand in the US is deteriorating at a faster rate than had been previously expected.

Within the Ashtead results, A-Plant reported that its 6% revenue growth in the third quarter was a reflection of a 10% increase in average fleet size and a 1% increase in physical utilisation to 68%, with hire rates broadly unchanged. A-Plant Chief Executive Sat Dhaiwal says the company is pleased with its results and expects the fourth quarter figures to be “good”. He is looking for further progress in the financial year 2008/2009.

A-Plant’s capital expenditure in the year to April 2008 is likely to reach £120m, a 50% increase on last year; the acceleration in investment was to both meet growing demand and to de-age the fleet, which now has an average life of just under three years. As a result, having achieved this lower age, A-Plant’s capital expenditure next year is set to fall.

A-Plant is continuing its strategy of opening ‘super sites’; six are currently up and running and a further four are nearly ready to open. Sat Dhaiwal says that the process is slow because of the difficulty of finding suitable sites, but he thinks the softening of the property market should bring more opportunities and he expects to have 12 ‘super sites’ trading by the end of 2008. Another aspect of A-Plant’s positive thinking is that it will be recruiting 38 additional apprentices to start training in September; it currently has over 70.

NEW SPEEDY FINANCIAL DIRECTOR

At the beginning of April, Justin Read, the new Financial Director of Speedy, will take over from Neil O’Brien, whose intention to resign was announced last September but who will remain with the company for a handover period. Justin Read, 46, was until recently employed by Hanson plc in the dual roles of Managing Director, Hanson Continental Europe, and Head of Corporate Development. Speedy Chief Executive Steve Corcoran, commenting on the new Director, said that his experience “in global business would be invaluable.”

If a recent item in The Sunday Times is given any credence, it would seem that an early task for Justin Read will be the sale of Speedy Space. All the indications are, however, that the paper has been premature in suggesting that Speedy has taken a definite decision to sell its long established portable accommodation business, which could raise over £100m; the company is believed to be still examining its options.

Aggreko’s very impressive 2007 results show just why the company has become such a favourite with investors. Even in the current uncertain markets, its share price is less than 8% below its ‘high’- a strength in marked contrast to the performances of the other hire shares. Aggreko is a truly international business and this spreads risk across widely differing economies and economic cycles. Despite all the mounting economic problems internationally, Aggreko Chairman Philip Rogerson expects to make “good progress” in the current year, indicating that the company’s trading performance in the early weeks of 2008 has further increased confidence in the business.

Overall, there can be little doubt that the UK economy is facing, at the very best, uncertainty throughout this year. The CBI’s latest quarterly outlook (March 2008) predicts growth of 1.8% this year and 1.7% next year, but believes that the slow down should enable the Bank of England to reduce interest rates twice over the rest of the year and to cut further in 2009 to 4.5%. Despite all the mounting gloom, CBI Director-General Richard Lambert points out that many businesses are reporting that conditions are still good. This view is certainly substantiated by the recent trading statements from leading hirers. •

Executive Hire News › Archives › April 2008 › City News › Hirers still announcing good results

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