Ashtead bumps up buyback after strong first quarter
Ashtead will increase and extend its share buyback plans as the equipment rental group expects full year results to beat current expectations after a strong first quarter.
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On the back of the buoyant end markets in the US and UK and a combination of organic growth and bolt-on acquisitions, the FTSE 100 group grew statutory revenue 22% to £1.05bn in the three months to 31 July, with underlying pre-tax profit up 23% to £285.6m.
Given continued weakness in the pound, chief executive Geoff Drabble said the board expects full year results to be ahead of its previous expectations.
Underlying earnings per share rose 46% to 44.8p for the first quarter and there was £51m of free cash flow generated.
EPS was boosted by the £300m spent on the share buyback announced last December, and Drabble said the buyback scheme will be increased to £125m per quarter to take it to a total of £675m and extended for the financial year 2019/20 with further anticipated spend of "at least £500m".
"Our end markets remain strong and are supported by continued structural change as customers rely increasingly on rental while we leverage the benefits of scale," Drabble said.
Ashtead invested £465m by way of capital expenditure and £145m on bolt-on acquisitions in the quarter, up from £377m and £116m respectively.
"Our strong margins and lower replacement capital expenditure are delivering good earnings growth and significant free cash flow generation. This provides us with significant operational and financial flexibility, enabling us to invest in the long-term structural growth opportunity and enhance returns to shareholders while maintaining leverage within our target range of 1.5 to 2.0 times net debt to EBITDA."
Ashtead shares rose almost 3% to 2,339p in early trading on Tuesday.
This was strong set of results, said broker Liberum with underlying revenue growth ahead of expectations primarily reflecting the impact of organic growth, supported by the positive contribution from hurricanes.
Margins are slightly lower than year ago levels, however, with capex spend ahead of analysts' expectations "and the balance of risk clearly lies to the upside relative to current management guidance".
"We continue to believe that the shares under appreciate the value of the structural growth opportunities ahead of it," Liberum said, given that the shares trade on 15.3 times earnings for the full year despite delivering 13% PBT compound annual growth over the FY18-21 period, "on what we see as conservative assumptions".