Rental equipment business Ashtead Group led the FTSE 100 lower on Tuesday as it released weaker-than-forecast results for the last financial year.
At £52.96 per share, Ashtead’s shares were last 3.9% cheaper on the day.
The company said that revenues grew 12% during the financial year ending March 2024, to $10.9 billion. This was driven by a 10% increase in rental revenues, to $9.6 billion.
However, headline sales growth cooled to 7% in the final quarter, to $2.6 billion, while rental revenues rose a more modest 9%, to $2.3 billion.
In the US, total revenues increased 13% over the course of financial 2024, to $9.3 billion, while rental revenues improved 12%.
Ashtead said that the results reflected “continued market outperformance [and] the benefits of our strategy of growing our Specialty businesses and broadening our end markets.”
Rental sales grew 8% on an organic basis, with bolt-on acquisitions contributing another 4%.
Revenues in Canada rose 7% year on year, Ashtead said, to $664 million, with markets there “growing in a similar manner to the US with strong volume growth and rate improvement.”
However, the firm added that that strike action by the Writers Guild of America and Screen Actors Guild “had a significant impact on the performance of the Specialty Film & TV business and some impact on the rest of the Canadian business, which rents into that space.”
Industrial action which ended in December also impacted its US and UK businesses, Ashtead said.
In the UK, revenues increased 8% on an annual basis, to $888 million.
Expansion Continues
Operating profit rose 5% over the course of the year, to $2.6 billion, but dipped 2% during quarter four, to $561 million.
Ashtead’s profits were also impacted by higher interest payments on its debt, while greater capital expenditure also put pressure on the bottom line.
The business invested $4.3 billion in total across the business last year, a $539 million increase from fiscal 2023.
Of this, the FTSE firm spent $905 million on 26 bolt-on acquisitions. It added another 113 locations in its key North American marketplace over the course of the year.
Ashtead’s debt ticked up to $10.7 billion last year from $9 billion. It raised the full-year dividend to 105 US cents per share from 100 cents previously.
“Strong” results
Chief executive Brendan Horgan said that Ashtead’s operating performance “continues to be strong” as it printed record revenues and operating profit for the last year.
He commented that the $4.3 billion investment it made across its operations last year “is enabling us to take advantage of the substantial structural growth opportunities that we see for the business, while maintaining a strong and flexible balance sheet.”
Horgan added that “our end markets in North America remain robust with healthy demand, supported in the US by the increasing proportion of mega projects and the ongoing impact of the legislative acts.”
For financial 2025, Ashtead said it expects rental revenue growth at group level to slow to between 5% and 8%.
“Solid Performance”
Analyst Andy Murphy of Edison Group said that Ashtead “has delivered another solid performance in 2024.” He noted that “the company’s robust growth in the US market… underscores its strong foothold and strategic expansion in North America.”
Murphy added that “the proposed final dividend of 89.25 cents, bringing the total to 105 cents for the year, up from 100 cents, signifies Ashtead’s confidence in its financial health and future prospects.”
Matt Britzman, analyst at Hargreaves Lansdown, commented that “this was a slightly soft set of results,” noting that “whether you look at revenue, profit, or guidance, it’s hard to see much for markets to get excited about here.”
However, Britzman added that the FTSE 100 firm “is still demonstrating its strength, just in a softer market.” He commented that “larger construction equipment players are taking market share, and that plays right into Ashtead’s hands.”
Royston Wild owns shares in Ashtead Group.
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