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Ashtead Beats Expectations and Hikes Dividend

Rental equipment firm Ashtead reported a 17% rise in profits as its defied concerns about the outlook for the construction sector

Holly Black 18 June, 2019 | 11:53AM



A thriving U.S. economy and a weaker pound helped Ashtead (AHT) to a strong set of results. The firm reported that revenue from rentals was up 18% to £4.1 billion in the year to 30 April while pre-tax profits climbed 17% to £1.1 billion.

Ashtead is an equipment rental company for the construction and facilities management industries among others. It operates predominantly in the U.S., but also the UK and Canada. Clean-up operations following hurricanes Florence and Michael helped to boost business, although the operations were smaller in scale than when hurricane Irma struck the region the previous year.

Ashtead chief executive Brendan Horgan said the firm was focused on growing responsibly, increasing its scale while maintaining strong margins. Ashtead invested £1.6 billion into its business over the year, £622 million on acquisitions and added 146 new locations across the group to further broaden its reach and try to increase market share.  Ashtead will pay a final dividend of 33.5p a share – up from 27.5p a year ago. The total pay out for the year is up 21% to 40p a year.

Shares in the business climbed 2.6% after the results to 2012p. Morningstar analysis suggests shares are currently trading at a discount to their fair value, which is estimated to be 2848p.

Ed Monk, associate director at Fidelity, added: “For investors, a 21% increase in the dividend will be welcome after recent falls in the share price. Ashtead is currently allocating a lot of capital to acquisitions, with a whole stream of purchases of regional rental firms in the U.S. and Canada this year, and that appears to be paying off.”

Ashtead’s results beat expectations and defied concerns about a slowdown in the construction market, which have recently weighed on the results of Ferguson and seen Kier Group issue a share price warning and announced 1,200 job cuts.

Some of the largest shareholders in Ashtead include the Silver-rated Merian UK Mid Cap fund, which has 4.3% of its £3.2 billion of assets invested in the firm. The four-star rated Montanaro European MidCap Fund has 3.9% of its portfolio in the business and the Smith & Williamson UK Equity Growth 3.7%.

David Barclay, senior investment manager at Brewin Dolphin, said: “Ashtead acts as a bellwether for wider economic conditions, particularly in the U.S. Judging by today’s results from the company, the signs are relatively positive.”

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Ashtead Group PLC2,155.00 GBX1.22
Ferguson PLC6,434.00 GBX1.00
Kier Group PLC118.00 GBX-0.84

About Author

Holly Black  is Senior Editor, Morningstar.co.uk

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