LONDON (ShareCast) - (Sharecast News) - Construction equipment hire firm Ashtead saw fourth quarter profits halve but paid a dividend despite the impact of the coronavirus pandemic.
Pre-tax profits for the period fell 52% to £98m, while the dividend was held at 33.5p a share for total of 40.65, up from last year's 40p, the company said on Tuesday.

Core earnings fell 14% to £464m, while underlying rental revenue slipped 1% to £1.03bn. Underlying full year pre-tax profits fell 4% to £1.06bn, slightly lower than the £1.05bn the company forecast in April as lockdowns started to take hold around the world.

US rental revenue fell 12% in April due to the general tool business sliding 15% year on year, while the specialty businesses excluding oil and gas were 9% higher. The reduction in the general tool business being driven by declines in volume rather than rental rates, Ashtead said.

Net debt rose 43% to £5.4bn as the company spent an extra £453m on bolt-on acquisitions. Ashtead took swift action in March to brace for the pandemic's impact, slashing capital expenditure, suspend its share buyback programme, halt acquisitions squeeze operational spending.

Richard Hunter, head of markets at interactive investor said Ashtead had so far seen off most of the pandemic challenges "with aplomb", but cautioned that given Ashtead's exposure to the US in particular, "the fragility of the construction market is of some concern not only in the present but potentially further out as the speed and the breadth of easing restrictions come through at an uneven pace".

However, Hunter said the strength of momentum over the first three quarters of the year had enabled Ashtead to "get over the line for the full year".

"Overall, revenues grew by 9%, the group consolidated its access to liquidity which now stands at some $4.6bn and the fact that Ashtead was designated as an essential business in its major markets cushioned some of the wider economic blow," he said.

"The resilient showing from the business has been mirrored by a share price which has remained stable in the year to date, has risen 86% since the indiscriminate markdowns leading to the March lows, and is ahead by 24% over the last year, as compared to a decline of 17% for the wider FTSE100."

"The group appears to have taken the right decisions at the right times and is well-placed despite the challenges which are yet to come as a result of the pandemic. Ashtead has been a market favourite for some time and the consensus of the shares as a buy will almost certainly remain intact."

Hargreaves Lansdown analyst Nicholas Hyett echoed concerns about the effects on the business when "the shocking rise in unemployment in the US starts to filter through to the real economy".

"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."

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