FTSE 100 equipment rental company Ashtead has reported a 19 per cent boost in revenue during the first-half in trading.
The company’s £1.9 billion increase was enjoyed on the back of a weak pound and high demand in the US for its fleet after various clean-up operations were needed following hurricanes Irma, Maria and Harvey.
The boost to trading from the natural disasters contributed to pre-tax profit growth rising 16% to £493.1 million in the period.
Ashtead’s pre-tax profits grew by 16 per cent following Hurricanes Irma, Maria and Harvey
During morning trading today Ashtead’s share price grew by 1.5 per cent to 2,050p.
Chief executive Geoff Drabble commenting on the up-beat figures said: ‘The strong quarter was pleasing as it was based on good underlying performance, supplemented by clean-up efforts following Hurricanes Harvey, Irma and Maria.’
The CEO added: ‘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.
‘Our strong performance, together with the successful execution of our 2021 plan, allows the board to continue to look to the medium term with confidence.’
The firm also announced that it is to launch a share buyback of at least £500 million and up to £1 billion over the next 18 months.
Ashtead’s good news was synchronised with the announcement that its chairman Chris Cole, has retired.
The company has started the search for a successor to Cole, who has been chairman since 2007, with the aim of a handover at the annual general meeting in September 2018.
Brendan Horgan, the current chief executive of the Northern American construction equipment rental arm Sunbelt, has been promoted to chief operating officer as part of the group’s long-term succession planning.
Ian Forrest, investment research analyst at The Share Centre recommends a cautious approach to the investing in the company.
Geoff Drabble (centre): Ashtead’s CEO revealed the board is looking to the ‘medium term with confidence’.
‘The management has played a key role in Ashtead’s stellar performance so it was good to see that the CEO of the very successful US division, Brendan Horgan, will now be helping with strategic development across the whole company,’ he said.
‘With all this good news it was no surprise to see the shares respond with a 5% rise in the shares in early trading. We continue to recommend Ashtead as a ‘buy’ due to the strong earnings momentum it has developed, the potential for further improvement in cash flow, and the good prospects especially in the US. After a strong rise in the shares in recent months we would suggest drip-feeding into the shares.’
Nicholas Hyett, equity analyst at Hargeaves Lansdown, believes the share buyback is good news for shareholders in the short-term.
He added: ‘We’re still not entirely convinced about the decision. Conditions can change quickly and Ashtead has experience of hitting the downside with too much debt. It wasn’t pleasant.’
Hyett stressed that Ashtead is a highly cyclical business and that it needs to protect its balance sheet even though it’s currently in a good position.
Ashtead is the second largest equipment rental business in the US, hiring out diggers and tools for the construction and industrial sectors.
Its Sunbelt business operates across 646 locations in the US and in Canada and employs 10,610 staff.
In the UK, Ashtead has 189 locations nationwide and 3,546 employees.
TOP DIY INVESTING PLATFORMS