Ashtead Group plc Delivers Record Profits In Q1

Ashtead Group plc (LON: AHT) raises its full-year results guidance after flying start.

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 3 September, 2014 12:01 pm BST

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Shares of Ashtead Group (LSE: AHT) increased by 2.3% in early trade after the company, which rents construction and industrial equipment, delivered record pretax profit of £120m in the first quarter.

Ashtead’s businesses continued to perform well in August and the company now expects that its full year results will beat expectations.

“We invested £284m in capital expenditure and a further £32m on bolt-on acquisitions in the quarter as we continue our strategy focused on organic growth,” chief executive Geoff Drabble said.

Due to strong demand in the UK and the US the group has increased its capital expenditure guidance to between £825m and £875m this year.

Ashtead’s net debt increased slightly to £1.3bn at 31 July 2014, but due to earnings growth the ratio of net debt to EBITDA reduced to 1.9 times. Ashtead said that a healthy balance sheet will underpin future growth. Sales increased to £458m in the quarter from £411m a year earlier.

City experts believe Ashtead could increase the full-year dividend by 50% to 31p per share. Therefore, after this morning’s price movement, Ashtead shares may offer an income of 1.3%.