The head of equipment rental group Ashtead said a wave of spending on upgrading US roads, railways and bridges is more likely than it has been for a generation and will be a major boon for his industry.
“Post the election and with the Biden administration, it’s shaping up to be more likely than I’ve ever seen . . . It’s when, not if.” said Brendan Horgan, chief executive of the FTSE-listed group, which is also the second largest equipment hire group in the US. “We will take a bigger bite out of that . . . [spending] if it does happen to come.”
Proposals by Republican senators this week for $568bn of federal spending on infrastructure came in well short of the $2tn demanded by US president Joe Biden. Nevertheless, even with pared down spending, Horgan estimated an additional $100-160bn on top of the $475bn of annual spending on non-residential construction.
However, the company, which trades as Sunbelt Rentals and hires out equipment including excavators, tools and power generators, said that the details were still too uncertain to include as a factor in updated financial targets at its capital markets day this week.
It is aiming for revenue growth to increase from £4.9bn a year in the 12 months to January to about £6.3bn a year by the 2024 financial year.
“I’ve been waiting 25 years from an infrastructure standpoint,” Horgan said, adding that the spending plans were likely to be less than $2tn because “an unfathomable amount” had been spent on stimulus measures in response to the pandemic.
William Kirkness, an analyst at Jefferies, said that infrastructure spending would boost demand for equipment and tools, pushing up the rates Sunbelt could charge. “It’s going to suck up a lot of equipment,” he said.
Ashtead has diversified into other rental markets besides construction to make the business less cyclical. Revenues for the group fell during the pandemic because much of the construction and events sectors ground to a halt last spring but demand for equipment for hospitals and testing sites cushioned the blow.
Horgan, who rose through the ranks of Sunbelt, hopes to expand its share of the rental market to 20 per cent in North America in the long-term by widening product ranges, opening new sites and buying smaller rivals.