13th Jun 2023 13:54
(Alliance News) - Analysts were pleased with Ashtead Group PLC's results on Tuesday, as the company looks ahead to "US mega projects" in the year ahead.
Ashtead announced higher profit and revenue in what it called a "record performance" for the financial year ended April 30.
The London-based US-focused industrial equipment rental company reported pretax profit of USD2.16 billion, up 30% from USD1.67 billion a year prior and 1.3% higher than USD2.13 billion expected by Liberum.
Adjusted pretax profit rose 26% to USD2.27 billion from USD1.82 billion and was 1.0% higher than Liberum's estimate of USD2.25 billion.
Ashtead said its performance in financial 2023 was a "record", with "ongoing momentum in robust end markets".
The company noted inflationary pressures, particularly regarding labour costs, transportation and fuel. Net financing costs increased 57% to USD366.2 million in financial 2023, from USD232.6 million the year prior. Staff costs were 17% higher at USD576.0 million from USD490.5 million.
Revenue rose 24% to USD9.67 billion from USD7.96 billion and was 0.5% higher than Liberum's expectation of USD9.62 billion. Rental revenue increased 22% to USD8.67 billion from USD7.24 billion.
US rental-only revenue climbed 23% to USD5.88 billion from USD4.78 billion, while Canada rental-only revenue grew 20% to CAD548 million, about USD410.3 million, from CAD456 million. UK rental-only revenue climbed 6.5% to GBP429 million from GBP403 million.
"These positive deliverables can be attributed to the consistent growth and expansion of the company. Over 165 new locations have been added across North America, as Canada and the United States play vital parts to the expansion of the group," said Edison Group Director Andy Murphy.
However, AJ Bell investment director Russ Mould tried to "pick holes" in Ashtead's results, by looking particularly at its UK and Canada arms.
"At some point, Ashtead might decide to offload its UK arm as it continues to be the weak spot. Canada, on the other hand, is more encouraging according to comments by the company. Ashtead sees similarities to its US arm with strong volume growth and improving rental rates," Mould said.
The company declared a dividend of 85.0 US cents per year, up from 67.5 US cents a year ago. This brings the total dividend to 100.0 US cents, in line with Liberum's expectations, and up 25% from 80.0 US cents paid for financial 2022.
Looking ahead, the company cited Sunbelt3.0, a project under which it plans to add 298 greenfield locations across North America by 2024, amid a focus in the UK to transform the business towards enhanced and sustainable margins and returns.
Chief Executive Brendan Horgan said: "We enter the final year of Sunbelt 3.0 with clear momentum in strong end markets, which are enhanced by the increasing number of mega projects and recent US legislative acts. We are in a position of strength, with the operational flexibility and financial capacity to capitalise on the opportunities arising from these strong markets and ongoing structural change. The board looks to the future with confidence."
Analysts are also optimistic about Ashtead's future.
Peel Hunt noted that the "key component" to guidance is Sunbelt US rental revenue growth of 13% to 16%, which is "slightly ahead" of Peel Hunt's expectations. It said that it maintains its pretax profit guidance of USD2.54 billion for financial 2024.
Liberum's Charlie Campbell also noted the importance "US mega projects" looking ahead, especially to "offset weakness in non-residential construction."
Campbell added that the shares are "good value", after it said it expects full-year consensus to hold.
Edison Group's Murphy said: "With markets remaining strong and a solid year ending, Ashtead is well set to continue for the following year."
Ashtead shares were 0.4% lower at 5,394.00 pence each on Tuesday afternoon in London.
Peel Hunt rates Ashtead at 'buy', with a target price of 6,000p. Liberum also reiterated its 'buy' recommendation, with a slightly higher target price of 6,550p.
By Sophie Rose, Alliance News reporter
Comments and questions to [email protected]
Copyright 2023 Alliance News Ltd. All Rights Reserved.
Related Shares:
Ashtead Group