Equipment hire firm Ashtead (AHT) gains 4.7% to £19.16 as it updates on trading in the wake of the coronavirus - the shares now higher than they were at the beginning of 2019.
While today’s update effectively amounts to a profit warning, in the context of the crisis it is a very robust looking statement.
Rental-only revenue for Sunbelt US in March was 2% higher than the prior year and the company said it expected April US rental-only revenue to be 15% lower than in April last year.
This was principally driven by a 19% fall in the general tool business, but the broader-based specialty businesses were expected to be about 9% higher, consistent with their performance in March. Profit for the 12 months to 30 April 2020 is expected to be a smidge above £1bn.
‘ESSENTIAL BUSINESS’
The company has been providing critical equipment and services to areas like healthcare, utilities, telecoms, testing site and food services which explains why its rental arm is deemed an essential business in the US, Canada and UK.
The company has introduced a range of social distancing measures, put hiring on pause, suspended M&A activity and a share buyback programme and cut capital expenditure in half for the current financial year to £500m.
In an effort to boost liquidity, the company also said it had accessed an additional $500m through its senior secured credit facility for one year, increasing the facility size to $4.6bn for the next twelve months.
Notably the company says that even if revenue fell a lot more than it has already, it would be free cash flow positive for the year having run a series of stress tests on the business.
KEEPING STAFF ON
Ashtead has also not made any team members redundant and does not at present intend to seek assistance from the UK government’s Coronavirus Job Retention Scheme.
AJ Bell investment director Russ Mould says: ‘It is encouraging to see management keep an eye to the future by keeping staff on. Businesses who are able to do so will be better placed for recovery as they won’t need to recruit and train lots of new hires to cope with increased levels of activity when they come.
‘It will be interesting to see what happens with the company’s dividend given it has an exceptional track record of growth. There is no mention of the payout in today’s statement and investors will be watching June’s full year results closely for an update.’
