Ashtead puts shareholder returns first as capital is freed

These results make clear that Ashtead, which hires out construction and industrial equipment on short-term contracts, has been faring much better than many industry peers from an operational perspective. At this stage of the cycle you might reasonably have expected that trading activity would be deteriorating, but it has held up reasonably well, as evidenced by the maintenance of a physical utilisation rate of 70 per cent from a year ago. The group delivered a 19 per cent increase in 'rental only' revenue, while the trading margin moved up two percentage points to 29 per cent. Performance was bolstered by the rebound in North American construction markets, particularly in the private sector. And although the full-year impact of the 2014-issued senior secured notes increased net financing costs, net earnings were still up a third year on year.

Ashtead's management, with some justification, point to the inherent flexibility of the group's capital model as a key advantage. Although gross capital expenditure of £1.24bn was up by 17 per cent from a year earlier, the net outlay grew more slowly as the group boosted used equipment sales in response to the downturn in oil and gas markets. The replacement spend is expected be much lower in the 2017 financial year, within a broad range of £700m to £1bn. It means that Ashtead is set to generate even more free cash flow, ergo the dual boost to shareholders' coffers.

Prior to these figures, BoA/Merrill Lynch had anticipated adjusted profit of £1.4bn for the year to April 2017, giving rise to EPS of 97p (from £1.18bn in FY2016).