Profits of £6.6m (£3.3m) from a 53 per cent rise in sales to £31.9m were four times those of two years ago and almost double those for the whole of last year. The jump in profits, which also saw earnings per share rise 42 per cent to 15.5p and the half-time dividend increase 23 per cent to 1.6p, partly reflects the company's strong operational gearing. With high fixed overheads any small increase in sales falls through to a proportionately bigger rise in profits.
But it also stems from a widening of the customer base, both by acquisitions and organically, through a concentration on industrial areas outside the core and still depressed construction industry.
Although less important than at the beginning of the recession when construction customers accounted for nearly all rental contracts signed, the industry is still important and the half-year's profits rise was achieved despite almost no benefit from price rises.
Peter Lewis, chairman,believes flat prices help Ashtead because they hit struggling competitors harder. Many companies, without the benefit of Ashtead's indulgent shareholders to fund expansion, are still in severe difficulties.
That has helped Ashtead increase its market share of the small-ticket non-operated equipment market to about 9 per cent compared with only 4 per cent at the start of the recession. Ashtead measures its progress by comparing the revenues on any piece of equipment with its original cost to give an indication of the time in which plant pays for itself.
At the low point of the slump revenues were running at an average of 0.49 of cost, implying a two-year payback, at which level profits are possible but not exciting returns. In the first half that ratio improved to 0.67, at which level operating margins approached 20 per cent.
At the height of the last construction boom, the ratio was 0.76, a payback of 16 months, and margins were an enviable 30 per cent. Even without rising prices, Mr Lewis believes that sort of return could be achievable soon.
As well as its core plant hire business in Britain, Ashtead has small, profitable businesses in the southern states of the US, and the oil industry, which because of the high-technology nature of its plant offers even higher margins than the rest of the business. For the year to next April, profits are expected to rise to £12.5m, giving earnings per share of 29.8p, a 43 per cent increase. The shares closed unchanged at 422p.