Shares in US-focused plant and equipment hire firm Ashtead (AHT) gained 1.7% to £51.70 after the company signaled a return to growth in the fourth quarter to the end of April and raised its dividend yet again.
SOLID PERFORMANCE
For the quarter, revenues were up 23% to £1.27 billion, well ahead of the broader marketplace, while operating profits were up 95% to £264 million.
That brought annual revenues to £5.05 billion, an increase of 3% on a constant currency basis, while operating profits were just 3% lower at £2.3 billion compared with a 19% drop at the half-year stage.
The firm scaled back its investments both in organic growth and in bolt-on acquisitions, which totaled £125 million against £453 million the previous year.
As a result, free cash flow soared 75% to £1.38bn and net debt to earnings before interest, taxes, depreciation and amortization fell to 1.4 times from 1.9 times, putting the firm in rude financial health.
Chief executive Brendan Horgan commented: ‘We have shown that our business can perform in both good times and more challenging ones. We enter the new financial year with clear momentum, strong positions in all our markets, supported by high quality fleet, a strong financial position and our exciting new Sunbelt 3.0 strategic plan, positioning us well to respond to market conditions and capitalise on opportunities.’
THE PRICE OF CONSISTENCY
The final dividend has been raised to 35p per share from 33.5p, taking the full year pay-out to 42.15p per share, marking sixteen years of consecutive increases.
‘What is good for America is good for Ashtead’, says AJ Bell investment director Russ Mould. ‘Sunbelt will benefit from higher economic output in the US and especially from more activity in key end-markets such as construction, while even the oil and gas sector is looking a lot less bad than before.
‘The tricky bit is Ashtead’s valuation. A forward price/earnings ratio of 30 is testament to the resilience of the company’s operating model, its strong cash flow and excellent dividend growth track record, but such a huge premium to the wider FTSE 100 surely means that such positive factors are well known’, adds Mould.
