If there is one chief executive of a big UK-listed company who should be happy about Donald Trump’s election win, it is Geoff Drabble. The US president’s pledge to invest $1tn into infrastructure seems a boon for Ashtead, the equipment-hire group that Mr Drabble has run for a decade.
A large supplier to the US construction sector, Ashtead’s share price has risen more than a third since the November election, as investors have piled into a stock regarded as a Trumponomics proxy.
But while the prospect of new roads, railways and bridges is welcomed by the owner of one of the world’s largest collections of dumpers and diggers, it is a wider trend that excites Mr Drabble.
Dressed for our interview at the company’s London headquarters in a smart blue suit and tie and sporting a white mop of hair, he expounds his belief that we are a transformation is under way in how assets of all varieties are owned, used and serviced.
“People just don’t want to own stuff any longer. They will only own it if it’s the cheapest and most reliable way of doing it,” says the affable 57-year-old in his north-east English accent.
Greasy forklift trucks and noisy diesel generators may seem distant from what has become known as the “sharing economy” in the tech world. The term refers to a model of hiring things owned by others, put into practice across a growing club of Silicon Valley start-ups, such as ride-hailing app Uber and
home rental site Airbnb.
The idea is that it is convenient and efficient to use items only when needed, leaving ownership overheads to someone else. Mr Drabble’s implication is that Ashtead, which supplies everything from concrete mixers to sewer cameras to heaters that kill bed bugs, and its competitors will benefit from any acceleration in the trend.
“Our customers are a bit like me going skiing just for a long weekend . . . To have [skis] sitting in the garage for 51 weeks of the year makes no sense,” he says, speaking in a personable manner peppered with occasional swear words.
Even so, equipment rental companies such as Ashtead can serve volatile industries, particularly the construction sector. Their perennial challenge is how to judge the right moment of the economic cycle to invest in its fleet, which usually requires extra debt, and when to pare back. The worst scenario is to pile on borrowings ahead of a downturn; interest costs can rise just as the cash flow available to pay them shrinks.
For now, Mr Drabble is wagering on continued growth in construction and other industries the company serves. This zeal is to be expected from the leader of a rental company, but his confidence in getting things right it is not entirely unfounded.
During his tenure, revenue at Ashtead has almost tripled to £2.5bn. The group is now in the top 50 of the FTSE 100.
A variety of factors are behind the achievement. In what is a fragmented but expanding market, Ashtead has gained share at the expense of smaller operators. In the US, where the company generates more than 90p in every £1 of operating profit, these are often family-run outfits that lack the financial clout and scale to compete effectively.
Many construction contractors, scarred by the fallout of the 2008 crisis, have sold heavy-duty machinery and now rent new gear, analysts say.
“[Equipment rental] is the simplest business in the whole wide world. It’s just, ‘Make it easy, make it reliable and make it affordable’ — and why would you buy?” says Mr Drabble.
While Ashtead has benefited from a steadily rising construction market, analysts also credit its entrepreneurial culture that offers employees career progression and profit-sharing.
Mr Drabble’s first break was at Black & Decker, the US tool and appliance maker, in his native north-east region. After a short stint as an “unbelievably average” accountant beginning in the late 1980s, he was sent to fix an underperforming warehouse, then quickly rose through the management ranks. There followed a spell as divisional manager of the building materials arm of UK-listed Laird. During this time he became a non-executive director of Ashtead, before getting the top job in 2007.
However, some analysts question whether the double-digit annual growth that Ashtead has enjoyed since 2011 — and is hoping to maintain until at least 2021 as part of a five-year plan unveiled last year — is sustainable.
“It’s something I worry about too,” says Mr Drabble. “I haven’t [worried] for a while, though.”
He points to the company’s comparatively low debt, which at a net 1.7 times earnings before interest, tax, depreciation and amortisation, is beneath peers.
The ratio is also lower than it was in 2009, partly because Ashtead’s leaders are determined to avoid the tough decisions the company was forced to take in the last downturn.
“We were stupid to close branches and we got rid of too many staff,” Mr Drabble admits. “It was horrible . . . 18 months later, we were recruiting again, and you think, ‘Did I really need to do that or did I just have to be seen to be doing it?’”
One measure Mr Drabble says he is more ashamed of than anything else: the suspension of 401(k) retirement plan payments for US employees.
“That was fundamentally wrong and what we’ve done subsequently with healthcare, pay, profit share . . . is built around [the fact that] we had some recompense to make for that and I hope we’re behind it now. But it hurt a lot.”
To defend against further, inevitable slumps, Ashtead has reduced its reliance on construction, which now provides less than half of revenues. Mr Trump’s infrastructure plans will mean “moderate growth for longer”, Mr Drabble adds. But he is careful not to suggest that Ashtead will escape the vagaries of its core market.
“The time the chief executive of any industry linked to construction says their business is not cyclical is the time for them to retire.”