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Ashtead's moment in the sun

Plant hire group Ashtead has defied market fears and delivered strong growth in the US
December 9, 2015

Concerns around overcapacity in the US tool hire market, the downturn in oil and gas markets and warnings on rivals weighed on Ashtead' s (AHT) shares during the summer. However, these first-half results from the plant hire group seem to have put pay to any residual investor jitteriness, with shares rising more than 8 per cent on the day of announcement. The group's US Sunbelt business - which accounts for 86 per cent of total revenue - continued to go great guns. US rental-only revenue here grew by more than a fifth to $1.19bn (£788m). This propelled group operating profit up by more than a quarter to £371m.

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Same-store growth of 13 per cent continued to drive a strong sales performance from Sunbelt, as the business benefited from the ongoing recovery in construction markets across the pond. The group defines same-store growth as increasing the fleet size in stores that have been in existence for at least a year. The division also opened a record 38 new sites, compared with 20 during the same time last year. The UK A-Plant business grew at a slower rate, yet rental-only revenue was still up 9 per cent to £131m during the period.

While construction is still a core end-market for Ashtead, the group has steadily reduced its exposure. The sector now accounts for 45 per cent of group revenue, compared with 55 per cent in 2007. Instead, management has focused on broadening its client base, leasing out equipment more to utilities and maintenance services companies. "If you've got the diversification, then you can ride out the bumps in the road," says chief executive Geoff Drabble.

Given higher physical utilisation at three-quarters of the group's fleet during the second quarter, management has increased its target for this year's capital expenditure to around £1.1bn.

Broker Investec Securities expects adjusted EPS of 78.7p for the full financial year, up from 62.3p in the year to April 2015.

 

ASHTEAD GROUP (AHT)

ORD PRICE:1,117pMARKET VALUE:£5.62bn
TOUCH:1,116-1,118p12-MONTH HIGH:1,231pLOW: 838p
DIVIDEND YIELD:1.5%PE RATIO:16
NET ASSET VALUE:250p*NET DEBT:158%

Half-year to 31 OctTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20140.9925933.03.0
20151.2733243.74.0
% change+28+28+32+33

Ex-div: 14 Jan

Payment: 3 Feb

*Includes intangible assets of £612m, or 122p a share