- Net debt climbs by $1.25bn to $8.4bn
- Leverage of 1.6 times at lower end of target range
Plant and equipment hire firm Ashtead (AHT) continued its rapid push across new markets in North America, adding on 72 new sites to its network.
Of these, 34 were greenfield locations as the company spent $1.9bn (£1.56bn) on opening and stocking new sites. A further 38 came through the acquisition of some 27 companies during the half year at a cost of $609mn.
This pushed up its net debt during the period up by more than $1.25bn to $8.4bn. Even so, the company argued that its net debt-to-cash profit leverage ratio of 1.6 times remained “in the bottom half” of its target range of 1.5 to 2.0-times.
Besides, it continues to be bullish about its prospects. Chief executive Brendan Horgan told analysts conditions were “as favourable for our business as I’ve ever witnessed”, citing high demand, an improving outlook for its end markets and the firm’s own financial strength.
Indeed, it has spent a further $243mn since the end of October on six more deals in North America and raised its full-year guidance for rental revenue growth to 18-21 per cent, from 15-17 per cent previously. It also reiterated its full-year free cash flow guidance of $300mn and expected capex of between $3bn-$3.3bn, the bulk of which will be on equipment for its growing rental fleet.
The company continues to play the role of consolidator, as the second-biggest player in the market with a 12 per cent share, up from 4 per cent back in 2010. It expects a diverse market to be dominated by just a handful of players in the future.
Ashtead was one of the FTSE 100’s top performers last year and its growth in a much stronger US market (the UK now only makes up 9 per cent of revenue and growth is expected to be flat this year) explains its outperformance against UK peers – its shares are down 15 per cent this year, compared with Speedy Hire’s (SDY) decline of 36 per cent and VP’s (VP.) fall of 27 per cent.
The company’s shares are now more competitively priced at around 16 times consensus earnings forecasts, in line with their five-year average. Peel Hunt analyst Andrew Nussey said the investment case for the company remains “firmly intact”, forecasting adjusted earnings per share growth in excess of 15 per cent for each of the next three years. If that is achieved, any concern about its debt would prove unwarranted. However, US commerce department data showed construction spending slowed again in October, with private construction spending 0.5 per cent lower month on month as both residential and non-residential investment fell. The US contracting market may be more robust, but it’s not completely immune to a downturn. Hold.
Last IC View: Hold, 3,652p, 14 Jun 2022
| ASHTEAD (AHT) | ||||
| ORD PRICE: | 5,108p | MARKET VALUE: | £22.4bn | |
| TOUCH: | 5,106-5,110p | 12-MONTH HIGH: | 6,572p | LOW: 3,269p |
| DIVIDEND YIELD: | 1.3% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 1,218¢ | NET DEBT: | 157% | |
| Half-year to 31 Oct | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (¢) | Dividend per share (¢) |
| 2021 | 3.88 | 0.89 | 148 | 12.5 |
| 2022 | 4.80 | 1.19 | 202 | 15.0 |
| % change | +24 | +33 | +37 | +20 |
| Ex-div: | 12 Jan | |||
| Payment: | 09 Feb | |||
| *Includes intangible assets of $3.1bn, or 710¢ a share. £1 = $1.22 | ||||
