- Shares down 6% amid concern about US economy
- Record results reported
- Business ‘has clear momentum’
Concerns about the US economy and higher net debt overshadowed the latest record set of results from equipment hire business Ashtead (AHT).
The company derives nearly 90% of its revenue from North America where higher than expected inflation figures and expectations of a 0.75% hike in interest rates from the US Federal Reserve later this week are creating jitters about the economy.
This seemed to contribute to a 6% fall in the shares to £35.77, extending year-to-date losses to more than 40%.
Ashtead also reported an increase in its borrowings with net debt to earnings increasing from 1.4 times to 1.5 times.
Though, putting this into context, it is worth noting the company has secured its debt at an average rate of 3% with an average term of six years.
Revenue was up 18% to $7.96 billion and pre-tax profit up 35% to $1.67 billion.
The company was able to invest $2.4 billion in the business and $1.3 billion in bolt-on acquisitions while also buying back $414 million worth of shares and paying out $269.3 million in dividends.
Ashtead also managed to sustain its high margins despite inflationary pressures thank to its scale and ability to pass on costs to customers.
‘WELL POSITIONED’
Ashtead chief executive Brendan Horgan said: ‘Our business has demonstrated its ability over the last two years to perform in both good times and more challenging ones. The new financial year has started well and the business has clear momentum.
‘We are well positioned to navigate the challenges and capitalise on the opportunities arising from the market circumstances we face, including supply chain constraints, inflation, labour scarcity and economic uncertainty, all factors which we believe to be drivers of ongoing structural change.’
AJ Bell investment director Russ Mould commented: ‘Construction equipment rental group Ashtead continues to achieve strong sales and earnings growth and its latest results are a reminder of how the business is top of its class when it comes to generating strong returns.
‘It follows a simple model of renting out equipment, making sure availability is good, and reinvesting the proceeds back into its business so it has a bigger pool of equipment on which to make returns.
‘Ashtead predominantly operates in the US where there is a structural trend for businesses to rent equipment rather than own it outright.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Tom Sieber) and the editor (Steven Frazer) own shares in AJ Bell.
