- Equipment hire specialist raises annual dividend once more
- Annual growth streak now runs to twenty
- Absence of profit guidance for new financial year
- Lower capital investment budget also hints at unclear economic outlook
“A second consecutive drop in annual profits and a planned second cut in capital expenditure in new equipment from Ashtead both suggest the economic outlook is not as clear as many would like to think, especially in the company’s core market of America,” says AJ Bell investment director Russ Mould.
“Even so, the kit hire specialist is hiking its dividend for the year to April 2025 to maintain a growth streak in its annual shareholder distribution that now runs for twenty years and keep its status as one of just seventeen FTSE 100 index members to have a run of at least ten straight increases.
“Ashtead continues to benefit in America from the tail end of the Inflation Reduction and Chips Acts, passed during Joe Biden’s presidency, while repair work after a busy hurricane season also contributed to sales in the year just ended. The company also started to shake off the effects of the film writers’ and actors’ strikes in Hollywood, which affected demand for scaffolding and temporary power sources, but higher interest rates from the US Federal Reserve has hit residential construction.
“The company has changed the manner in which it presents its revenue split and absorbed Canada within a broader ‘North America’ categorisation. All the same, the US and Canada represent more than 90% of revenues and the UK the rest at just 8% so the slowdown in US housing starts and new housing permits matters.
Source: LSEG Refinitiv data, US Census Bureau
“As a result, revenue growth from equipment hire has slowed right down to almost zero.
Source: Company accounts. *Constant currency basis. Financial year to April.
“As a result, Ashtead has seen its headline, dollar-denominated pre-tax profit figure decline for the second time in a row, to $2 billion in the year to April 2025 from $2.1 billion in 2024 and $2.2 billion in the twelve months to April 2023.
Source: Company accounts, Marketscreener, consensus analysts' forecasts. Financial year to April.
“Analysts are tentatively forecasting a modest increase in underlying pre-tax income for the year to April 2026, but they may want to see an improvement in headline indicators such as the purchasing managers’ index for manufacturing, housing starts and a few more besides before they get too excited.
Source: LSEG Refinitiv data, ISM
“Ashtead’s chief executive Brendan Horgan and his team are taking a relatively cautious view, too, which makes sense, given how uncertainties over trade and tariffs and their potential knock-on effects continue to linger.
“Mr Horgan has steered estimates for revenues growth in the new financial year to somewhere between flat and up 4%. He and the board have also sanctioned a second consecutive reduction in capital expenditure on new equipment. The more bullish Ashtead is on the outlook, the more kit it is likely to buy, so it can rent it out and generate revenues and profits. The opposite also holds true, however.
Source: Company accounts. Financial year to April.
“The rate at which Ashtead is acquiring smaller rivals has also slowed a lot. One upside of this for shareholders, however, is the company can return cash to shareholders, once management feels all investment needs to stay competitive are met.
“Ashtead is increasing its dollar-denominated annual dividend by just enough to maintain a growth streak in sterling terms that now stretches back twenty years, even if weakness in the greenback relative to the pound means the increment in the year to April 2025 is going to be much smaller than of late.
Source: Company accounts, Marketscreener, analysts’ consensus forecasts. Financial year to April.
“The firm also continues to run a share buyback scheme. The sum total of dividends and buybacks added together was $886 million in the year to April 2025, or some 3.4% of the current stock market capitalisation.
“An active buyback programme may be one potential attraction to US investors when Ashtead switches its primary stock market listing to New York from London early next year, pending shareholder approval. Whether this galvanises the share price remains to be seen, since Ashtead already trades on very similar valuations multiples to its US listed peer United Rentals, at least on an earnings basis, and their margin and free cash flow profiles are pretty similar.”
