Ashtead Group PLC

Ashtead Group PLC (LON: AHT) is a global equipment rental business with national networks in the United Kingdom, Canada, and the United States. The company is the UK’s leading equipment rental business, with 190 stores in Scotland, England, and Wales. In North America, the group is 2^nd largest equipment rental company, with 884 stores in 46 states and Canada.

On 3^rd March 2020, the company will announce its third-quarter results for the period ended 31st January 2020.

Recent News
On 2^nd January 2020, the company announced that it had cancelled 45,030,879 shares held in treasury.

Financial Highlights (for the half-year and second quarter ended 31 October 2019, £ million)

(Source: Interim Reports, Company Website)

For the first half of 2020, the group’s revenue increased by 14% to £2,681 millionas compared with the corresponding period of the last year, driven by strong growth in Canadian and the US markets. Excluding the impact of IFRS 16, the rental revenue increased by 13% in the first half of 2020 and underlying earnings per share rose by 11% in H1 FY20, both at constant exchange rates.Statutory profit before tax for the first half of 2020 was £660 million, an increase of 6%from the corresponding period of the last year. As a result, basic earnings per share increased by 10% to 107 pence against the same period last year (2018: 95.1 pence). In the first half of 2020, the capital expenditure was £1,010 million gross and net of disposal proceeds of £866 million. On 31^st October 2019, the group’s rental fleet at cost was £9 billion. Presently, the company’s average fleet age was 33 months. In the period, the company invested £1 billion in the capital and an additional £231 million on bolt-on acquisitions, which added 50 locations across the group. This investment reflects the structural progress opportunity. On a constant currency basis, the ratio of net debt to EBITDA increased to 1.9 times against the previous year (2018: 1.8 times). The interim dividend per share surged by 10% to 7.15 pence.

Share Price Performance

Daily Chart as at February-03-20, before the market closed (Source: Thomson Reuters)

Ashtead Group PLC shares were trading at GBX 2,488 at the time of writing before the market close (at 9:20 AM GMT) on 3^rd February 2020 and were up by 1.34% versus the previous day closing price. Stock 52 weeks High and Low are GBX 2,599/GBX 1,744. The group’s stock is reflecting the higher volatility as against the benchmark index based on the company’s beta of 1.30.

Conclusion
The company continues to trade well with robust rental revenue growth.The strong margins and increasing scale are delivering significant free cash flow generation and good earnings growth. Excluding IFRS 16, the company maintaining leverage within thetarget of 1.5 to 2.0 times range net debt to EBITDA.In the current period, the company spent 250 million pounds under the share buyback programme, in line with the anticipations to spend a minimum of 500 million pounds on share buybacks in the financial year 2020.

In supportive North American end markets, the company’s business continues to perform well, while the group has taken crucial strategic action to refocus the United Kingdom business in the challenging market conditions. Thus, except for a currency and the UK headwind, the company anticipate results to be in line with the anticipations and the Board of the group continues to look to the medium term with confidence.

Based on the rationale as highlighted above, we have given a “Hold” recommendation at the closing price of GBX 2,455 (as on 31^st January 2020).

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