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Ashtead continues to prosper stateside

As predicted, the destructive impact of US hurricanes has led to increased rental revenues for the group
December 13, 2017

With repeated hurricanes hitting the US this year, equipment hire group Ashtead (AHT) has been well placed to help affected communities get back on their feet. Sunbelt, the group’s north American business, was boosted by the clean-up efforts following hurricanes Harvey, Irma and Maria, leading to a 26 per cent increase in underlying pre-tax profit to £537m. With hurricane season now officially over until June 2018, activity levels are expected to normalise in the second half of the year. However, results for the full year are still expected to be ahead of previous expectations.

IC TIP: Hold at 2048p

Ashtead spent £298m on nine bolt-on acquisitions in the year, six of which were acquired by Sunbelt’s US division, and one by its Canadian unit. Such deals have added approximately 5 per cent to Sunbelt’s revenue since 1 May 2016.

As might be expected, a large spend on acquisitions led to increased net debt in the period, although this was partially offset by a £65m currency translation benefit. This, combined with earnings growth, held the net debt to cash profit ratio steady at 1.8 times.

With this in mind, the group is looking to carry out a share buyback programme of between £500m and £1bn over the next 18 months, and will be seeking shareholder approval at the next annual meeting.

Analysts at Deutsche Bank are forecasting adjusted pre-tax profit of £901m, giving EPS of 119p in the year to April 2018 (from £793m and 104p in FY2017).

ASHTEAD (AHT)   
ORD PRICE:1,943pMARKET VALUE:£9.7bn
TOUCH:1,942-1,944p12-MONTH HIGH:2,118pLOW: 1,476p
DIVIDEND YIELD:1.5%PE RATIO:17
NET ASSET VALUE:427p*NET DEBT:134%
Half-year to 31 OctTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20161.5541354.34.75
20171.9049364.55.50
% change+22+19+19+16
Ex-div:18 Jan   
Payment:7 Feb   
*Includes intangible assets of £1.1bn, or 220p a share