Ashtead future boosted by infrastructure expansion and hopes of interest rate hikes in the US

 
Oliver Gill
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Ashtead hires out diggers on short-term contracts, which can be used for all manner of purposes (Source: Getty)

Equipment rental firm Ashtead's share price fell over two per cent today, despite hopes of it being boosted Donald Trump's proposed infrastructure expansion.

The figures

Underlying rental revenue in the first nine months of the firm's financial year grew by 13 per cent to £2.2bn with earnings similarly growing from £869m to £1.1bn.

Operating profit was up nine per cent, from £543m to £681m.

The group's net debt to earnings ratio – effectively the number of years of earnings it would take to pay down lending – fell from 1.9x to 1.7x.

Read more: Ashtead shares pop on double-digit rental revenue

Why it's interesting

Ashtead might be a UK-listed firm (headquartered in Leatherhead, just down the road from the town of Ashtead itself) but 87 per cent of its profits are generated in the US.

Read more: Ashtead Group's share price is on the up, building on a set of good results

Andrew Gibb, an analyst at RBC labelled the results "another solid update, with earnings broadly in line with our expectations".

Third quarter profits of £178.7m were ahead of consensus expectations of £176m.

Gibb added: "These results coupled with the positive commentary around future capex plans suggest the growth momentum has much further to run."

Meanwhile, Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said Ashstead was "building on a Trump boom" in the months to come. He added:

Few other stocks in the UK market have benefitted as much from the Trump trade as construction equipment rental business Ashtead.

"A stronger dollar, fueled by the prospect of higher US interest rates, and President Trump’s planned infrastructure spending splurge have boosted both the value of current revenues and the potential for future earnings."

What the company said

Ashtead chief executive Geoff Drabble said:

We continue to grow responsibly, adhering to the capital allocation priorities we have outlined. We invested £812m by way of capital expenditure and a further £196m on bolt-on acquisitions.

With the continuing opportunity for profitable growth, we expect capital expenditure this year to be towards the upper end of our guidance (approximately £1.2bn).

As is customary, we have given our early guidance to growth for 2017-18. This is consistent with the strategic plan we recently outlined to the market which anticipates circa double-digit growth in the US through to 2021.

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