ii view: Ashtead grows annual dividend again

Swift management action has been taken to combat Covid-19, but should investors be reassured?

Full-year results to 30 April 2020

• Revenue up 9% to £5.05 billion
• Pre-tax profit down to 4% £1.06 billion
• Final dividend of 33.5p per share, same as last year
• Total full-year dividend up 1.6% to 40.65p

Chief executive Brendan Horgan said:

“While no one could have foreseen the global impact of Covid-19, our business model and capital structure are designed to withstand the cyclical nature of some of our end markets.  We took prompt actions to optimise cash flow, reducing capital expenditure and operating costs, and strengthen further our liquidity position.  In these unprecedented times, the results of our long-term strategy to mature our business through diversity and scale came through in our performance.

“Looking forward, I am certain these swift actions combined with the strength of our cash flow and balance sheet will serve the Group well.”

ii round-up:

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

Employing over 18,000 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 around 86%, followed by the UK and then Canada. 

For a round-up of these full-year results, please click here. 

ii view:

Ashtead rents a full range of construction and industrial equipment across a wide variety of applications to a diverse customer base. Its Sunbelt business in the US employs the majority of staff across more than 800 locations. Next comes its UK business with around 190 locations and generating just under a tenth of sales. Its Canadian division is the smallest, accounting for around 5% of sales across 77 outlets.   

Prior to Covid-19, its North America business had continued to perform well, given supportive end markets. In the UK, strategic action had been commenced to refocus the business given challenging market conditions.  

For investors, both a strong record of operational execution and record free cash flow of £792 million should not be overlooked. Confidence to not only pay but increase the dividend for a 14th consecutive year is also reassuring. But the pandemic is now offering its own challenges. Profits have fallen year-over-year with the share buyback scheme previously halted, but, while investors will likely exercise near-term caution, they will also appreciate Ashtead’s enviable long-term record of results. 

Positives: 

• Market share in many US regions still has room to grow
• Grown the dividend for 14 consecutive years

Negatives:

• High dependency on US business 
• Net debt up 43% to £5.4 billion

The average rating of stock market analysts:

Buy