'It was probably the most difficult thing we have ever done. The acquisition would have given us number one position in the non-operated plant market but the assumptions behind the deal turned out to be wrong,' Peter Lewis, the chairman, said.
He was speaking as Ashtead, which has 5 per cent of the non-operated plant hire market, reported a slump in pre-tax profits from pounds 4m to pounds 2.3m in the year to 30 April on a reduction in turnover from pounds 31.4m to pounds 30.8m.
He said there was no sign of a substantial nationwide improvement in market conditions. The final dividend was held at 3.025p for an unchanged total of 4.125p but a disappointed stock market lowered the shares by 18p to 120p.
Mr Lewis said that turnover in May and June was 2 per cent up on the same time last year on a stable number of billing days, but it was too early to say if price weakness, which produced falls of 30 per cent in the most competitive plant hire areas, had yet gone from the market.
He said that operational gearing was such that a 10 per cent rise in prices would double Ashtead's operating profits. All managers have been given incentives to push for higher prices.
Elimination of over-supply in the plant hire market has sent at least 200 outlets to the wall in the past 12 months and brought widespread losses and many opportunities for acquisitions. But Ashtead, which made a profit in all of its 51 profit centres, is now looking to improve its existing businesses and balance sheet.
Gearing fell from 72 per cent to 43 per cent, although capital spending at pounds 7.8m was only slightly reduced in order to keep plant hire assets up to date.
Profit-sharing payments were unchanged at pounds 300,000. Ashtead employees have agreed to a pay freeze in the current year. Mr Lewis and George Burnett, managing director, have not had a pay rise since December 1989.
Barclays de Zoete Wedd is expecting only a slight improvement in pre-tax profits to pounds 2.4m this year and an unchanged dividend.Reuse content