UPDATE: Ashtead To Invest In Fleet As Recovery Approaches

17th Jun 2010 10:13

(Adds executive and analyst comment.) By Jason Douglas Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Construction equipment rental company Ashtead Group PLC (AHT.LN) Thursday said it earmarked GBP225 million to plow into overhauling its fleet over the next 12 months, as improving demand for its diggers, pumps and generators suggests a recovery in building activity may be approaching. Still, Chief Executive Geoff Drabble said Ashtead remains cautious. He told Dow Jones Newswires there are mixed signals about recovery in the U.S., while looming public spending cuts may depress construction activity in the U.K. in future years. Ashtead Thursday reported a pretax profit of GBP1.9 million for the three months to April 30, compared with a loss of GBP29.2 million a year earlier. Revenue was 20% down on year due to lower rentals and lower sales prices for older equipment. The previous year's earnings were weighed on by restructuring and write-offs. Drabble said there was a "gentle" month-on-month improvement in rentals in North America during the quarter and that trend has continued through May and June. The company has begun re-investing in its fleet in anticipation of further improvements. Ashtead said it will spend GBP225 million this fiscal year replacing older kit with new machines to better appeal to customers. The money will come entirely from cash from operations, Ashtead said. Drabble added that the company has the resources to expand its fleet if the recovery gathers pace. It had $537 million available under a debt facility that it could call on at the end of April. Ashtead reported a pretax profit of GBP4.8 million for the full fiscal year to April 30, a 95% decline on the previous year's earnings, excluding certain items. Revenue slumped to GBP769.6 million from GBP974 million as construction activity dried up. Drabble said Ashtead was pleased to have made a profit in what was a tough year, adding it picked up market share because smaller firms were going out of business. The company increased its dividend to 2.9 pence a share from 2.75 pence a year earlier. Broker Panmure Gordon said Ashtead's results were better than anticipated. At 0900 GMT, shares in Ashtead were up 1.1 pence, or 1%, at 114.8 pence, outperforming a 0.3% higher Dow Jones U.K. Smaller Companies index. The stock has gained 41% since the start of the year. Panmure Gordon said the current share price suggests investors' expectations of how quickly recovery will happen for Ashtead are a little optimistic. -By Jason Douglas, Dow Jones Newswires; 44-20-7842-9272; [email protected] (END) Dow Jones Newswires June 17, 2010 05:13 ET (09:13 GMT)