US performance underpins growth at Ashtead

Ashtead reported a 13% improvement in revenue in its first three quarters on Tuesday, to £3.93bn, as its rental revenue rose 12% to £3.57bn.

The FTSE 100 industrial equipment rental company said its operating profit for the nine months ended 31 January totalled £1.07bn, up from £963m year-on-year.

Its pre-tax profit for the period was £947m, up from £888m, and was £969m excluding the impact of IFRS 16.

Earnings per share were 11% higher at 154.3p.

Ashtead said it invested £1.26bn of capital in the business during the nine months, up from £1.29bn a year earlier, while its free cash flow hit a record of £363m, compared to £72m a year earlier.

A total of £407m was spent on bolt-on acquisitions during the period, down from £491m, as the firm’s net debt-to-EBITDA leverage rose to 1.9x from 1.8x.

“Our North American end markets remain supportive and we continue to execute well on our strategy of organic growth supplemented by targeted bolt-on acquisitions in a moderating growth environment,” said chief executive officer Brendan Horgan.

“This strategy reflects the structural growth opportunity we see in the business as we broaden our product offering, geographic reach and end markets.

“In contrast, the UK market remains challenging and we are therefore refocusing A-Plant on leveraging its platform to deliver long-term sustainable results, while generating strong cash flow.”

Horgan noted the company’s £1.3bn invested in capital and the £407m it spent on bolt-on acquisitions in the period, which added 82 locations across the group.

“As discussed at the half year, we expect capital expenditure for the year to be at the lower end of our previous guidance [of around] £1.4bn.”

Looking forward to the 2021 financial year, Horgan said the board was anticipating gross capital expenditure of between £1.1bn and £1.3bn, which should result in mid to high single digit revenue growth in the US.

He added that the company remained focussed on responsible growth.

“Our increasing scale and strong margins are delivering growing earnings and significant free cash flow.

“This provides significant operational and financial flexibility, enabling us to invest in the long-term structural growth opportunity and enhance returns to shareholders, while maintaining leverage within our target range of 1.5x to 2.0x net debt-to-EBITDA, excluding IFRS 16.

“We spent £376m under our share buyback programme in the period, in line with our expectation to spend a minimum of £500m on share buybacks in 2019/20.”

The programme would be extended for the 2021 financial year, Horgan said, with an anticipated spend of at least £500m.

In North America, he said the business continued to perform well in supportive end markets, while in the UK Ashtead had taken decisive strategic action to refocus the business in the challenging market conditions.

“Although construction markets are moderating, we expect results to be in line with expectations and the board continues to look to the medium term with confidence.”

At 0800 GMT, shares in Ashtead were up 0.77% at 2,425.52p.