As an equipment hire group with a huge operation in North America, Ashtead (AHT) can be seen as a play on US infrastructure spending and the “builder-in-chief” promises of President Donald Trump. In its latest financial year, however, AHT also looked like a play on the increasing frequency – or so we're told – of extreme weather events, with the reconstruction efforts following repeated hurricanes adding roughly $100m (£75.9m) of rental revenues. But even if you strip out the impact of Hurricanes Irma, Maria and Harvey, US revenues still grew 15 per cent. Expansion of the group’s countrywide network continued, with 62 stores added in the US bringing the total to 658. Management is targeting 900 stores stateside by 2021, and is looking to grow this network through a combination of organic growth and bolt-on acquisitions.
With capacity on the rise, the question then arises - how long can demand keep growing? Finance director Michael Pratt said the group sees two to three years or more of good growth left. While the good times last, it will maintain its highly leveraged position (which admittedly decreased to 1.6 times cash profits in the year) in order to take full advantage of the M&A opportunities on offer. Mr Pratt noted that the construction industry tends to have early sight of when a cycle is coming to an end, giving time for remedial action to be taken.
Investors had better hope that is true, as the group remains very much a US infrastructure play with little in the way of diversification. Despite strong growth in the UK and Canadian businesses, both are a sideshow to the US division – Sunbelt US – which accounts for 84 per cent of revenues. That said, Ashtead acquired CRS in August last year, more than doubling the size of its Canadian operations.
One-off costs associated with the CRS deal meant the group came up marginally short of Jefferies' profit expectations, but the broker has upgraded earnings forecasts based on positive foreign-exchange translations - EPS of 163p is projected for the April 2019 year-end, against 128p in FY2018.
| ASHTEAD (AHT) | ||||
| ORD PRICE: | 2,225p | MARKET VALUE: | £10.9bn | |
| TOUCH: | 2,223-2,225p | 12-MONTH HIGH: | 2,441p | LOW: 1,523p |
| DIVIDEND YIELD: | 1.5% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 516p* | NET DEBT: | 107% | |
| Year to 30 Apr | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 1.63 | 357 | 46.1 | 11.5 |
| 2015 | 2.04 | 474 | 60.5 | 15.3 |
| 2016 | 2.55 | 617 | 81.3 | 22.5 |
| 2017 | 2.90 | 765 | 101 | 27.5 |
| 2018 | 3.42 | 862 | 195 | 33.0 |
| % change | +18 | +13 | +94 | +20 |
| Ex-div: | 16 Aug | |||
| Payment: | 14 Sep | |||
| *Includes intangible assets of £1.09bn, or 222p a share | ||||
