Ashtead posts resilient results and grows dividend

Despite impacts of coronavirus, the equipment rental group have announced a 1% rise on dividends from last year

Article updated: 16 June 2020 1:00pm Author: Joe Healey

  • Rental equipment business showcased resilient full-year results despite impacts of coronavirus, causing shares to rise roughly 15% in early trading
  • Investors welcome final dividend announcement of 33.5p, taking the total dividend for the year to 44.65p, just over a 1% rise from previous year
  • Group continues to operate a strong, cash-flow generative model which can defend the company in difficult times
  • Recommendation: We continue to view the stock as a ‘Buy’ for investors willing to accept a medium level of risk

Ashtead, the equipment rental business, showcased resilient full-year results despite the coronavirus impact this morning, which has sent shares up roughly 15% in early trading. Rental revenues for the year were up 8%, spurred by a robust first three quarters of the year, helping to deliver marginal EPS growth which came in at 175p compared to 174.2p in the previous year. From a financial standpoint, the business remains flexible with a solid balance sheet, consistent leverage ratios with net debt to EBITDA having only marginally increased to 1.9x, and record free cash-flows which came in at £792m. For investors, the strong news would have been the final dividend announcement of 33.5p, taking the total dividend for the year to 44.65p, just over a 1% rise from the previous year’s dividend.

In the current landscape where most businesses are fighting to maintain flexibility and cutting dividends, Ashtead investors will be pleased to see the business has not only maintained dividends but managed to marginally grow them. This highlights the resilience of the Group’s business model in difficult times. There’s no question the Group have been hit by coronavirus, with US fleet on rent falling 15% in a mere 5 weeks and general trading in the second half of March and April being lower, although this has been mitigated by the Group’s speciality businesses. Sunbelt Rentals in the US, UK & Canada is designated an essential business and has been providing equipment towards a multitude of first-line services, resulting in growth for the speciality segment of 9% compared to the previous year.

Overall, we still believe in the future growth prospects for Ashtead. Currently, Ashtead have a 7% market share in the US. However, their target is 15% through organic growth and acquisitions which we think is plausible as rental markets continue to improve. Furthermore, the Group operates a strong, cash-flow generative model which, as illustrated this morning, can defend the company in difficult times, helping to preserve shareholder dividends. Taking all this into account, we continue to view the stock as a ‘BUY’ for investors willing to accept a medium level of risk.


All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

Joe Healey

Investment Research Analyst

Following his completion of the graduate scheme, Joe is an Investment Research Analyst covering equities. He holds a BA Hons Business Management degree and is currently studying towards CFA Level II after passing CFA Level I in June 2019.