Ashtead revenue jumps 23% in fourth quarter

Industrial equipment rental company Ashtead returned to growth in the fourth quarter, with total revenue rising 23% and rental revenue increasing 15% to £1.098bln.

For the year, revenue was up 3% while revenue from rentals increased 1% to £4.473bln. This helped the company report full year operating profit of £1.135bln, down slightly from the £1.224bln reported a year ago.

“Our performance this year illustrates the benefits of our long-term strategy to broaden and diversify our end markets and strengthen our balance sheet,” Ashtead (LON:AHT) Chief Executive Brendan Horgan said in a statement to the London Stock Exchange. “The last year has proven the strength in our business model during a difficult period in the economic cycle, through responding in the manner we did to the challenges arising as a result of the pandemic.”

The strong performance in the fourth quarter should provide the company a platform to push on in the coming year, according to Hargreaves Lansdown (LON:HRGV) Equity Analyst Nicholas Hyett.

“Ashtead’s performance accelerated into the year end, with the amount of equipment on rent accelerating over the fourth quarter,” Hyett said in an emailed note. “That bodes well for 2022, especially as large government infrastructure development plans have yet to get underway, providing a supportive backdrop to the wider construction sector that Ashtead supplies.”

The FTSE 100 constituent managed to increase its full year dividend to 42.15p, up 3.7% from 40.65p in 2020 and has also recently announced a £1bln share buyback. Hyett thinks returning cash via buybacks may not be the most sensible option in the current climate.

“The shares currently trade on a PE ratio they have rarely touched in in the past, and using surplus cash to buy back expensive shares is a common route to shareholder value destruction,” Hyett added. “Still, with a positive market outlook and strong balance sheet, Ashtead deserves to be riding high.”

At 10:04BST, shares in Ashtead were trading higher by 1.5% at 5,166 pence per share.