Executive Hire News › Archives › April 2009 › City News : Downturn hits A-Plant

City News : Downturn hits A-Plant

Catherine Stratton reviews the latest A-Plant results.

While the Stock Market is beginning to show tentative signs of a very limited recovery in response to the action by governments to mitigate the international banking crisis, the recent results of Ashtead testify to the downturn to which the hire market is now exposed in the UK. Ashtead reports quarterly, so we are able to monitor the company’s performance over three month periods, although, for the sake of simplicity, we show only the nine months figures in our results tables.

SEGMENTAL ANALYSIS

In its third quarter (the three months to 31 January), A-Plant experienced a 14% drop in revenues to £44m. Inevitably, given the high operational gearing of a hire business, this has led to a decline in operating profits over the period, which fell to £0.3m before exceptional costs and amortisation (compared with £5.4m in the same quarter of 2007/2008). Exceptional items of £4m, relating to the company’s cost reduction programme, meant that A-Plant recorded an operating loss of £3.7m, (2007/2008: £5.4m operating profit). The accompanying statement indicates that A-Plant’s fleet was some 2% larger than a year earlier, but utilisation fell to 62%, from 68%.

Turning to the nine months performance, A-Plant’s operating loss of £1.7m is after exceptional items and amortisation of £16.2m. In December Ashtead announced a programme to lower the Group’s cost base by £45m. This has now been substantially implemented with A-Plant accounting for £16.1m and Sunbelt for the balance. These costs relate mainly to the impairment of the fleet due to accelerated disposals and to property costs arising from depot closures. The value of the A-Plant fleet at original cost has declined to £355m, compared with £360m at the end of April last year, while its depot numbers have fallen to 154 from 192 in April and 194 at the end of January 2008. The comments of Ashtead Chief Executive Geoff Drabble indicate that the Board believes the Group to be maintaining its strong market positions in the US and the UK and that it will continue to gain market share. •