On the face of it, first-half figures from equipment rental specialist Ashtead (AHT) told a familiar story – the North American Sunbelt businesses continued to propel growth while the domestic backdrop remained subdued. Yet although US rental revenue continued to outpace the wider market, increasing by 15 per cent to $2.1bn (£1.6bn), the group has flagged a lower rate of growth compared with recent years. Given the US accounts for over 90 per cent of cash profits (Ebitda), investors reacted badly and sent the shares down by as much as 8 per cent.
More competitive market conditions in the UK saw rental-only revenue decline by 2 per cent to £187m. Pre-tax return on investment dipped from 10 per cent to 7 per cent, compared with 23 per cent in the US. Ashtead is seeking to “refocus” its UK operations, adapting the fleet to better match demand and is pursuing cross-selling opportunities.
The group spent £231m on 11 bolt-on acquisitions and invested around £1bn in its rental fleet. Some £250m has also gone towards share repurchases as part of a minimum of £500m of buybacks to be conducted in this financial year. As such, excluding almost £900m in lease liabilities, net debt has increased by 17 per cent to £4.2bn, equivalent to 1.9 times cash profits.
Peel Hunt forecasts adjusted pre-tax profit of £1.19bn and EPS of 195p in 2020, up from £1.11bn and 174p in 2019.
| ASHTEAD (AHT) | ||||
| ORD PRICE: | 2,190p | MARKET VALUE: | £9.96bn | |
| TOUCH: | 2,189-2,191p | 12-MONTH HIGH: | 2,468p | LOW: 1,572p |
| DIVIDEND YIELD: | 1.9% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 636p* | NET DEBT: | 147%** | |
| Half-year to 31 Oct | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 2.25 | 610 | 95.1 | 6.50 |
| 2019 | 2.68 | 660 | 107 | 7.15 |
| % change | +19 | +8 | +13 | +10 |
| Ex-div: | 16 Jan | |||
| Payment: | 5 Feb | |||
| *Includes intangible assets of £1.5bn or 333p a share, **Excludes lease liabilities of £999m | ||||
