(Corrects typographical error in spelling of “machinery” in paragraph 6)
By Li-mei Hoang
June 17 (Reuters) - UK-based tools and plant-hire company Ashtead said it was confident a pick-up in U.S. and British construction industry activity would help it deliver more growth in the next three to five years after it posted a 50 percent rise in its pretax profit on Tuesday.
The company, which saw strong performances in both the United States and Britain, said underlying pretax profit rose to 362.1 million pounds ($608 million) in the year ended April 30, beating its forecast that it it would hit the upper end of analysts’ expectations of 350 million.
It raised the final dividend by 54 percent to 9.25 pence a share to give a total payout for the year of 11.5 pence, up from 7.5 pence the previous year.
“We have been really consistent for the past two to three years ... and that has also carried on into the first six weeks of the new financial year,” Chief Executive Geoff Drabble told Reuters.
“Based on where we are in terms of volume of construction, versus the normal historical cycle, we think we have got a minimum of three and possibly up to five good years of growth ahead of us ... That’s very positive,” he added.
Ashtead, which hires out machinery and tools on short-term contracts through its Sunbelt stores in the United States and A-Plant network in the UK, has grown rapidly over the past few years as hard-up customers have turned to hiring equipment rather than buying and maintaining it.
Drabble said the pick-up in demand in the housebuilding sector in the U.S. and Britain would also help boost demand in other areas of construction such as private and institutional buildings in the coming years.
Data earlier this month showed U.S. construction spending rose 0.2 percent to an annual rate of $953.5 billion, its highest level in five years.
“There’s no question in my mind, both sides of the Atlantic, there is a sense of a corner having been turned ... There are a lot of new projects starting and we are getting more than our fair share of that,” said Drabble.
Shares in Ashtead, which have jumped 44 percent over the past 12 months, and 11 percent over the last month, were down 5.7 percent on the day at 836.5 pence by 1119 GMT.
Jefferies analyst Justin Jordan, who maintained his ‘buy’ rating on Ashtead stock, blamed the fall on a bout of profit-taking.
“There are enormous opportunities for growth, both organic expansion and through selective bolt-ons and M&A in both the U.S. and UK, and what they have within the business is the strongest balance sheet in equipment rental,” he said.
“It gives them quite a lot of options to either expand their pace of fleet expansion organically, potentially do some bolt acquisitions or potentially materially increase the dividend to shareholders and the reality of this morning’s results is that they have done a little bit of all of those,” he added.
The company, which spent 103 million pounds on small acquisitions last year, said it planned to add 50 new locations to its business in the coming year as part of its longer term plans to add 600.
Drabble said the company had seen a marked improvement in the UK business, which accounts for just 15 percent of group revenue, after seeing a 33 percent rise in rental revenue to 244 million pounds for the full year. Meanwhile rental revenue at Sunbelt, its biggest division, was up 23 percent at $1.97 billion. ($1=0.5956 British pounds) (Reporting by Li-mei Hoang; Editing by Sophie Walker and Greg Mahlich)