ii view: Ashtead results mixed ahead of switch to Wall Street

Second-quarter results to 31 October

• Total revenues up 1% to $2.96 billion (£2.22 billion)
• Rental revenues up 1% to $2.76 billion 
• Adjusted pre-tax profit down 4% to $656 million 
• Interim dividend up 4% to 37.5 US cents per share
• New $1.5 billion share buyback programme
• Net debt of $10.55 billion and up from $10.3 billion in Q1

Guidance:

• Continues to expect current full-year (2026) rental revenue growth of 0-4%

Chief executive Brendan Horgan said:

“The Group reported solid results for both the first half of the year and the second quarter, with revenue, profit, and free cash flow in line with our expectations as we benefit from long-term industry trends and ongoing improvements in our sector.  

“Given the continued confidence in our free cash flow outlook, today we are also announcing a new share buyback programme. I would like to thank the team for these results and leading every day with our safety-first culture and Engage for Life programme.”

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ii round-up:

Ashtead Group (LSE:AHT) today reported record free cashflow supporting a new $1.5 billion share buyback programme, although profit marginally missed forecasts due to rising costs. 

Mega project activity such as those for US infrastructure pushed rental revenues for the second quarter up 1% from a year ago to $2.76 billion (£2.1 billion). Costs up 3.5% year-over-year left adjusted pre-tax profits for the three months to late October down 4% to $656 million. Analysts had expected about $670 million.

Shares in Ashtead, which is switching its main stock market listing to the USA in early March, swung between small gains and losses in early UK trading having come into these latest results down around 3% so far in 2025. That’s in contrast to a near one-fifth gain for the FTSE 100 index year-to-date. UK focused Speedy Hire (LSE:SDY) is down around 7% over that time. 

Ashtead rents out a full range of construction, industrial, lighting and emergency power generating equipment via its Sunbelt brand in North America and the UK. 

The new $1.5 billion share buyback is due to begin on 2 March and in tandem with the group’s primary stock market listing switch. It follows on from a previous programme of the same size which ends in late February.

An interim dividend of 37.5 US cents per share is up 4% from a year ago and is due to be paid to eligible shareholders on 6 February. 

Both mega projects and early signs of a pick-up in local construction activity support management’s forecast for growth in annual rental revenues of up to 4%. 

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the results. Third-quarter results are likely to be announced mid-April. 

ii view:

Began in 1947, Ashtead today employs around 25,000 people. The company rents out more than one million items of equipment to over 900,000 different customers. Under categories General or Speciality, items of equipment that can be rented include aerial platforms, air compressors, heaters, lighting, water pumps and crowd control barriers.

North American general tool hire generated most sales during this latest half year at 59%. That was followed by North American speciality tool hire at 32% and UK sales the balance of 9%. The group holds the second biggest market share in North America and first position in the UK. Competitors include S&P 500 company United Rentals Inc (NYSE:URI). 

For investors, both staff and other costs rose during this latest period with an exceptional cost of $69 million also being taken in relation to the stock market listing switch. Events outside of management’s control such as strikes, customer bankruptcies and even the weather given group services to help in the aftermath of hurricanes, warrant consideration. A forecast price/earnings (PE) ratio above the 10-year averages may suggest the shares are not obviously cheap, while elevated US government debt could at some point see expenditure on mega projects reduced. 

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On the upside, demand for mega projects continues to support revenue growth with signs of a pick-up in local construction activity. Seven bolt-on acquisitions totalling $143 million for the half-year assisted growth. Diversity of both customer and geographical location exist, while more than 10 years of consecutive annual dividend increases leaves the shares on a forecast dividend yield of close to 2%.  

On balance, and despite ongoing risks, this giant of the hiring world continues to justify its place in many already diversified investor portfolios.

Positives: 

• Product and customer diversity 
• Progressive dividend payment 

Negatives:

• Tough economic backdrop
• High dependency on US business 

The average rating of stock market analysts:

Buy