ii view: Ashtead builds on rental resilience

Shares in this US focused FTSE 100 company are down by close to a fifth year-to-date. Buy, sell, or hold?

Second-quarter update to 31 October

• Rental revenue up 26% to $2.54 billion 
• Adjusted pre-tax profit up 28% to $688 million
• Interim dividend up 20% to 15 US cents per share
• Net debt up 31% to $8.42 billion

Guidance:

• Expects full-year results above its previous forecasts

Chief executive Brendan Horgan said:

“Our end markets remain strong and half-way through our strategic growth plan, Sunbelt 3.0, we are ahead of plan.  In the period, we invested $1.7bn in capital across existing locations and greenfields and $609m on 27 bolt-on acquisitions, adding a combined 72 locations in North America. Our business is performing well with clear momentum in robust end markets.  

ii round-up:

Ashtead Group (LSE:AHT) is an equipment rental hire company which trades under the Sunbelt brand in the US, Canada and the UK.  

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Employing over 23,000 people, Ashtead rents a full range of construction and industrial equipment across a wide variety of applications to a diverse customer base.

The USA generates the vast majority of group sales at just over four-fifths, followed by the UK and then Canada. 

For a round-up of these latest results announced on 6 December, please click here. 

ii view:

Started in the village of Ashtead in Surrey in 1947, it today rents out more than 900,000 items to over 800,000 different customers. Its array of items available to rent include aerial platforms, air compressors, heaters, and forklift trucks. Generating most of its sales in the US, it previously switched to report its results and dividend payments in US dollars from the UK pound.  

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For investors, the highly uncertain economic outlook including rising interest rates and even potentially falling property prices, remain a risk. Rising costs for businesses generally warrant consideration, too, as do continued global supply chain challenges, while a price to net asset value above the three-year average suggests the shares are not obviously cheap.   

On the upside, demand has remained robust so far, with full-year forecasts raised. Bolt-on acquisitions continue to be made adding to its location diversity, while a one-fifth increase in the dividend suggests confidence in the outlook, with the payment have been raised for more than 15 consecutive years. 

On balance, and while some caution looks sensible, the taking of market share from competitors and a record of resilience continue to provide a reassuring long-term outlook.  

Positives: 

• Ongoing bolt-on acquisitions 
• Progressive dividend payment 

Negatives:

• Uncertain economic outlook
• High dependency on US business 

The average rating of stock market analysts:

Buy