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CITY NEWS


MIXED SIGNALS Catherine Stratton assesses the recent results from Ashtead and Vp.


The recent results of Ashtead and Vp indicate that the hire industry may be over the worst, but there remain fears of a double dip recession, especially after the Emergency Budget and the on-going examination of Government spending. The City is understandably nervous about the long term prospects for construction as the Government axes its predecessor’s programmes such as Building Schools for the Future. All this disquiet inevitably rebounds on hire shares and we have seen the Speedy share price hit a new low for the year of 22.5p, taking it below the 23p level of the rights issue in May 2009. Meanwhile the Ashtead share price has rebounded from its high point in April of 128.5p to 95p.


ASHTEAD: RESULTS FOR THE YEAR ENDED 30 APRIL 2010 30.04.10 (£m) 30.04.09 (£m) % Change 838.4 255.1 66.0** 4.8


Revenue EBITDA


Operating profit Profit before tax.


*after exceptional items and amortisation of £39.3m **after exceptional items and amortisation of £2.5m ***after exceptional items of £86.6m


SEGMENTAL ANALYSIS Revenue


Sunbelt (US) A-Plant(UK) Total


30.04.10 (£m) 30.04.09 (£m) % Change 674.5 162.3 836.8


865.5 208.0


1,073.5


-22.1 -22.0 -22.0


Operating Profit /(Loss)(after except. items and amortisation) 30.04.10 (£m) 30.04.09 (£m) % Change 70.8 1.2


Sunbelt (US) A-Plant (UK)


Corporate costs Total


(6.0) 66.0


89.6


(15.7) (5.5) 68.4


-21.0 ------ +9.1 -3.5


Note: Exceptional items and amortisation for Sunbelt were £1.9m (2009: £54.8m) and for A-Plant were £0.6m (2009: £31.8m).


Nevertheless, both Ashtead and Vp found some grounds for limited optimism in their results. Ashtead Chief Executive, Geoff Drabble, affirmed his belief that the worst was over, particularly in the US construction market and indicated that the company would be increasing its capital investment markedly with £175m planned for the current year (compared with £30m last). It is expected that much of this investment will be in the US, where the company looks to the market to stabilise this year and to improve through 2011.


11


1,073.5 316.8* 68.4*** 0.8


-21.9 -19.5 -3.5


+500


Ashtead says that the UK market is also stabilising currently but adds that ‘uncertainty around the impact of public sector cuts makes the medium term less certain’. In the course of last year A-Plant reduced its UK depot network from 122 to 105, and in the US Sunbelt locations fell by five to 393.


Vp’s strategy of owning a group of specialist hire businesses has undoubtedly helped to alleviate some of the recession’s severity. It contained its revenue decline to just under 15% and it has significantly strengthened its balance sheet with debt falling by £17.6m over the year to £48.3m. The group as a whole has been quietly building up its overseas activities, which now account for some 15% of revenues.


Vp: RESULTS FOR THE YEAR ENDED 31 MARCH 2010 31.03.10 (£m) 31.03.09 (£m) % Change 134.2 16.9


Revenue Operating profit Profit before taxation 14.3*


157.5 21.7 20.8


*after exceptional items of £343,000 relating to a profit of £113,000 on the disposal of a property and employment termination costs of £456,000.


-14.8 -22.1 -31.2


HIRE STATION: RESULTS REPORTED AS PART OF THE ABOVE 31.03.10 (£m) 31.03.09 (£m) % Change 50.1 3.2


Revenue Operating Profit


55.7 6.4


-10.0 -50.0


Vp’s tool hire operation has performed well against the difficult market conditions. Hire Station Managing Director John Singleton reports that, like his competitors, he has had to contend with continual erosion of hire rates and the shortening of hire periods. He does not see any prospect of hire rates improving in the short term and the company has focused on controlling costs. This has not precluded some improvements to the company’s branch network - it has moved its Croydon outlet into bigger premises and, in July, it has opened a new branch in Aberdeen. He has also been heartened by the “fantastic performance” of ESS Safeforce.


• An item in The Independent on Sunday in early July suggested that Wolseley was preparing to sell Brandon, which it acquired just


over four years ago for £71.9m. Will, as happened in the case of Hewden, a private equity house buy it? And if so, for how much? Wolseley’s financial year ends on 31 July; it would seem probable that, if a deal is to be done, it will be announced by the time the company issues its preliminary results in September.


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