Ashtead aims high as UK and US grow fast in first half

As growth at Ashtead Group's UK and US divisions has been at the faster end of its expectations, with a further boost from the pound's collapse, the plant hire group said it now expects full year results will exceed its original targets.

Including the effects of the weak pound, group rental revenue in the six months to 31 October grew 28% to £1.45bn, or 13% at the underlying level if the £53m currency benefit is ignored.

With group margins improving, underlying pre-tax profits rose 9% to £425.9m and earnings per share at the same rate to 56p.

The interim dividend was hoisted 19% to 4.75p per share.

"With the continuing opportunity for profitable growth, we have increased our full year capital expenditure guidance," said chief executive Geoff Drabble, with the figure narrowed to £1-1.2bn at current exchange rates.

He said both divisions "continue to perform at the upper end of expectations" in the second half.

Revenue growth was perfectly balanced, with same-store growth of 7% and bolt-ons and greenfield site openings contributing another 7% growth.

As expected, debt was increased by fleet investments and bolt-on acquisitions, with weaker sterling also contributing to reported debt increasing by £377m to £2.66bn with the ratio of net debt to EBITDA reduced to 1.8 times from 1.9 times on a constant currency basis, within the target range.

Analyst Nicholas Hyett at Hargreaves Lansdown recalled that earlier in the year Ashtead seemed to battening down the hatches and expressing its “watchful” mood before committing to greater spending, but had certainly changed its tone now.

"Construction markets are looking more positive, with both the UK and US performing strongly, and Ashtead would be a likely beneficiary of any Trump driven infrastructure splurge in the US. The group is looking to build on that opportunity, increasing capital expenditure plans for the full year.

He added a note of caution though: "The group hasn’t historically proven very adept at judging the cycle and was caught out by the financial crisis – when it was heavily over-indebted and earnings disappeared almost overnight. That doesn’t seem to be a problem at the moment, but we’ll be keeping an eye on leverage nonetheless.”