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Ashtead keeps dividend unchanged as fourth-quarter profits halve due to pandemic

Last updated: 08:53 16 Jun 2020 BST, First published: 07:28 16 Jun 2020 BST

Ashtead Group -

Ashtead Group PLC (LON:AHT) has kept its dividend policy unchanged despite profits having halved in its fourth quarter as the coronavirus (COVID-19) pandemic impacted the construction industry. 

In the three months to April 30, 2020, the US-focused construction equipment rental group said rental revenue fell by 2% to £1.04bn and profit before tax dropped by 52% to £98mln. 

The sudden fall in activity levels, with revenues up 3% year-on-year in March but then down 12% in April, had a large impact on profit in the quarter as a large proportion of costs are fixed in the short term, the FTSE 100-listed company said.

In the results statement, Ashtead chief executive Brendan Horgan said the group took “prompt actions to optimise cash flow, reducing capital expenditure and operating costs, and strengthen further our liquidity position”.

For the year ended April 30, 2020, as a whole, this meant that revenue was up 9% to £5.05bn and profit slipped 7% to £983mln.

A proposed final dividend of 33.5p is the same as was declared a year ago and means the total payout of 40.65p for the full year is up 1.6% on the previous year.

“Looking forward, we believe that the impact of the COVID-19 pandemic will continue to give rise to market uncertainties over the coming months,” the company said, with revenue down 14% in May.

“However, with strong market positions in all our markets, supported by good quality fleets and a strong financial position, we believe that we are well-positioned to respond to this market uncertainty and continue to support our customers and team members,” it added.

Net debt figure stands at £5.4bn, an increase of 43% compared to the previous year, while the company has access to liquidity of US$4.6bn.

Ashtead's shares spiked 12% to 2,702p on Tuesday morning.

Analysts at broker Liberum said the results were broadly in line with forecasts and while there is little detail in the outlook the unchanged dividend “gives encouragement". May US revenue was only down 8%, but perhaps an element of catch up here.

They added that the company's valuation looks “quite full, reflecting market's correct view that this will be a winner coming out the other side, but not leaving much room for error in terms of exit from lockdown".

Richard Hunter, head of markets at Interactive Investor, said “Ashtead has so far seen off most of the pandemic challenges with aplomb."

He added: “Given the company’s exposure to the US in particular, the fragility of the construction market is of some concern not only in the present but potentially further out as the speed and the breadth of easing restrictions come through at an uneven pace.

Even so, he said the spirits of investors were lifted by the maintenance of the dividend and the swift and decisive action taken by management.

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