A combination of solid results, a dividend hike and reports of a $1tn infrastructure spending package in the US supported a 10% advance to £27 at tool hire business Ashtead (AHT).
In the 12 months to 30 April 2020 the company generated 86% of its revenue from the US. The decision to stick with a progressive dividend policy came amid confidence it would strengthen its market position and continue to generate strong cash flow in its new fiscal year.
The company also reported a fall in annual profit following a weak end to the final quarter of its fiscal year amid weaker rental demand weighed on performance.
DIVIDEND INTACT
The company proposed a final dividend of 33.5p, taking its dividend for the year to 40.65p, up from 40.0p last year.
In the 12 months ended 30 April, statutory pre-tax profit slipped 7% to £240.9m on-year, while revenue rose 12% to £1.14bn.
Performance was hurt by a slump in the fourth-quarter performance, with profit down 52% owing to lower trading volumes in the second half of March and April as a result of the Covid-19 pandemic.
MODEST MISS ON RECORD YEAR
AJ Bell investment director Russ Mould said: ‘Before coronavirus intervened, Ashtead was on course for a record year. A very bleak fourth quarter, which included at least a month of lockdown conditions, only led to a modest drop in full year profit.
‘Ashtead’s ability to sustain dividend growth in the future may have received a further boost overnight with reports of a big new package of infrastructure spending in the US - its core market.
‘The construction businesses picking up these mooted federal contracts would likely head straight to Ashtead for generators, forklifts, diggers and trucks and the like as they get to work building roads, bridges and broadband infrastructure.’
