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Ashtead profits gain as US hurricanes boost revenues

Ashtead hiked its final dividend by 20% and plans to spend at least a further £600mln on share buybacks
Ashtead says it "continues to look to the medium term with confidence"

British equipment rental company Ashtead Group PLC (LON:AHT) posted a 16% increase in full year underlying pre-tax profit as hurricanes in the US bolstered demand.

Underlying pre-tax profit in the year to 30 April 2018 rose to £927.3mln from £793.4mln a year ago as rental revenue jumped 17% to £3.4bn from £2.9bn.

The company’s US division, Sunbelt, delivered a 20% increase in rental only revenue to US$3.1bn, supported by demand for equipment used for clean-up efforts in the aftermath of hurricanes Harvey, Irma and Maria.

READ: Ashtead Group predicts full-year results in line with expectations as it prepares investor event

The UK arm, A-Plant, generated rental only revenue of £344mln, up 13% on the previous year, driven by increased fleet on rent.

CRS acquisition lifts Canada revenue

The Sunbelt Canada business saw revenue jump to C$223mln from C$77mln a year ago, boosted by the acquisition of CRS last August.

Group EBITDA margins fell to 46.8% from 47.2% last year, reflecting declines in Canada.

"This year-on-year decline in margins primarily reflects the evolution of the group’s Canadian business, where underlying EBITDA margins declined significant year-on-year following the acquisition of CRS and the rapid shift in scale of the operations," said Liberum.

"Although some might see this dynamic as disappointing we would flag the group’s US and UK margins showed a modest improvement on FY17."

The company invested £1.2bn of capital in the business for the year, compared to £1.1bn in 2017, and expects a similar level of expenditure in the current fiscal year.  

“So, with all divisions performing well and a strong balance sheet to support our plans, the board continues to look to the medium term with confidence,” said chief executive Geoff Drabble.

However, the firm warned on risks arising from the potential impact of Brexit on the UK economy and tough competition in the market.

Ashtead hikes dividend, carries out share buyback programme

Ashtead raised its final dividend to 27.5p per share from 22.75p last year, bringing the total dividend for the year to 33.0p, up 20% on the prior year’s 27.5p.

Debt grew to £2.7bn at April 30 from £2.5mln last year as the company invested in its fleet and made a number of bolt-on acquisitions. Free cash flow generation rose to £386mln from £319mln.

Last December, the group announced a £500mln share buyback and up to £1bn over the following 18 months. To date the group has spent £200mln under this programme and expects to spend at least a further £600mln. 

"Even if FY results were relatively solid, the final dividend upped by 20% and the company is confident in the medium term outlook, this is not enough to detract from its significant exposure to the US, at a time when President Trump is fanning the flames of a potential trade war with China and maybe even allies," said Mike van Dulken, head of research at Accendo Markets.

Shares fell 5.8% to 2,234p in morning trading.

-- Adds share price, analyst comment --

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Ashtead Group Timeline

December 11 2018

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