‘Resilient’ Ashtead shares soar after shareholders keep dividend

Shares in industrial equipment rental company the Ashtead Group rose strongly on Tuesday as the company promised to continue paying out a dividend to its investors.

The company said it had remained “resilient” through the pandemic, even as pre-tax profit halved to £98 million in the final quarter of the financial year, on revenue of £1.1 billion, down 2%.

Across the financial year ending in April, profit before tax dropped 4%, while revenue was up 9% to £5.1 billion.

Though the proportion of its fleet in the US that is out on rent fell by 15%, it still presented a fairly positive picture for investors, with full year dividend by more than half a pence to 40.65p.

“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,” said Joe Healey, an analyst at the Share Centre.

Analysts said the business has long been prepared for downturns, as it operates in a cyclical sector.

Over the years, several acquisitions have added more strings to Ashtead’s bow. So when the pandemic struck, it was able to provide equipment for hospitals, emergency services and others.

But in the long run, the company could still be facing troubles which have so far not forced Ashtead to take drastic measures, such as claiming Government furlough money or slashing shareholder payouts.

“We’re still worried about what happens further down the line when the effects of the shocking rise in unemployment in the US starts to filter through to the real economy,” said Nicholas Hyett, an analyst at Hargreaves Lansdown.

He added: “Traditionally construction has been hit hard by economic downturns, and Ashtead is very exposed to the sector. Government stimulus might boost infrastructure spending but new offices and retail space are unlikely to be in high demand given the changes coronavirus is causing in the macro-economy.”

Ashtead’s chief executive, Brendan Horgan, said: “I am extraordinarily proud of, and grateful for, our team members and their response during a time when our communities were in need. All levels of the organisation quickly adapted our operations to continue servicing our customers while keeping our leading value of safety at the forefront of all we do.

“While no-one could have foreseen the global impact of Covid-19, our business model and capital structure are designed to withstand the cyclical nature of some of our end markets.”

Shares rose as much as 19% on Tuesday morning before settling up around 8%.