Investment pays off for Ashtead as profits surge

Ashtead is that rarest flower, a success story in the construction industry. Doubled interim pre-tax profits yesterday confirmed that the fast-growing plant hire business is continuing to reap the benefits of investing throughout the recession.

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.

Start your day with The Independent, sign up for daily news emails
i100 In this video, the late actor Leonard Nimoy explains how he decided to use the gesture for his character
Arts and Entertainment
Secrets of JK Rowling's Harry Potter workings have been revealed in a new bibliography
arts + ents
Robert De Niro has walked off the set of Edge of Darkness
news The Godfather Part II actor has an estimated wealth of over $200m
Arts and Entertainment
Fearne Cotton is leaving Radio 1 after a decade
radio The popular DJ is leaving for 'family and new adventures'
Robbie Savage will not face a driving ban
football'Mr Marmite' faced the possibility of a 28-day ban
Life and Style
Nearly half of all young people in middle and high income countries were putting themselves at risk of tinnitus and, in extreme cases, irreversible hearing loss
It was only when he left his post Tony Blair's director of communications that Alastair Campbell has published books
people The most notorious spin doctor in UK politics has reinvented himself
ebooksA special investigation by Andy McSmith
Life and Style
The new model would be a “pedal assist” bike in which the rider’s strength is augmented by the engine on hills and when they want to go fast
Arts and Entertainment
arts + ents
Life and Style
Arts and Entertainment
James Franco and Zachary Quinto in ‘I Am Michael’
filmJustin Kelly's latest film tells the story of a man who 'healed' his homosexuality and turned to God
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower