Hurricane rebuilding work gives Ashtead first half a lift
Company announces share buyback of up to £1bn
Industrial equipment rental firm Ashtead said half year earnings were boosted by clean-up efforts after hurricanes Harvey, Irma and Maria and the weak pound as it posted a 16% rise in pre-tax profits to £493.1m.
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The company added that it was starting a share buyback programme, of at least £500m and up to £1bn over the next 18 months.
Revenues were up 16% to £1.9bn with earnings per share jumping to 64.5p from 54.3p. The interim dividend was increased to 5.5p a share from 4.75p.
Underlying rental revenue grew 22% in the second quarter, taking first half revenue to £1.8bn. Operating profits rose 21% to £591m.
Chief executive Geoff Drabble said Ashtead's end markets remained strong.
“We continue to execute well on our strategy through a combination of organic growth and bolt-on acquisitions. We made significant investments in the period, spending £708m on capital expenditure and £298m on nine acquisitions,” he said.
“Whilst we would anticipate that activity levels would normalise during the second half, post hurricane clean-up, we expect full year results to be ahead of our prior expectations.”
In a separate announcement, the company said Brendan Horgan had been promoted to group chief operating officer from January 1, 2018 and chairman Chris Cole was retiring next year.
Ashtead shares rose 3.9% in early trading, and Hargreaves Lansdown equity analyst Nicholas Hyett said the company was in a "sweet spot at the moment".
"The key US construction market is booming with hurricane reconstruction work adding further fuel. Ashtead’s response has been to up capital expenditure beyond previous guidance, and continue bulking up its geographic footprint and exposure to specialty areas with bolt-on deals. So far it’s been able to do that while keeping debt comfortably within its target range," he said.
However, Hyett added that HL was "not entirely convinced" about the buyback programme.
"Ashtead’s a highly cyclical business and while things are looking good at the moment we feel it’s important to protect its strong balance sheet position. Conditions can change quickly and Ashtead has experience of hitting the downside with too much debt. It wasn’t pleasant."
"With shares trading above their long term ratings at the moment, albeit only just, it’s not as though the shares are exactly a bargain either.”