- Sales and earnings grow by over 20%
- Robust end markets support higher rental rates
- Firm upbeat on its current-year prospects
Industrial equipment hire firm Ashtead Group (AHT) delivered record revenue and earnings for the year to the end of April driven by what it described as ‘robust’ end-markets.
Having rallied roughly 20% since the start of the second quarter, the shares eased 80p or 1.5% to £53.34.
STRONG ORGANIC GROWTH
Group revenue for the 12 months to April were up 24% to $9.7 billion, with rental-only revenue up 22% to $8.7 billion, ahead of the firm’s most recent growth forecast, driven as usual by strong US demand.
US rental revenue grew 23% to $5.9 billion, with organic growth contributing 18% thanks to volume and rate improvement and bolt-on acquisitions adding 5% to the total.
The group invested $3.8 billion in capital across existing locations and new greenfield sites, while spending $1.1 billion on 50 acquisitions, meaning it added 165 new locations in North America.
According to chief executive Brendan Horgan, in the last two years the North American business has added more than 270 new locations generating more than $900 million in additional sales, which if it were classed as a standalone operation would make it a top 10 player.
SPECIALTY FOCUS PAYS OFF
Part of the firm’s success is undoubtedly due to the growth in non-residential ‘mega projects’ across the US, supported by the Inflation Reduction Act and other government legislation.
However, its specialty hire business – which it decided a couple of years ago to invest heavily in – has been a major driver of revenue and profits, consistently outgrowing the general tool hire business.
The specialty businesses take advantage of growth opportunities in a broad range of lowly-penetrated, non-construction markets which are under-served by the firm’s rivals, such as power and HVAC (heating, ventilation, air conditioning), ground protection, flooring and temporary structures.
CONFIDENT OUTLOOK
Total US construction orders put in place are expected to increase from $1.8 Trillion last year to roughly $2.5 Trillion in 2027, with half that figure accounted for by residential building and the other half by general construction projects, according to Dodge Data & Analytics.
Assuming low single-digit growth in demand for rental equipment, that suggests Ashtead’s US target market will grow from $56 billion in 2022 to just under $70 billion in 2027 which gives it plenty of headroom for growth.
Thanks to the strength of its end-markets and its investment in new operating centres, the firm actually expects to grow its US rental income by between 13% and 16% this year and group rental revenues to increase by a similar amount.
