A tree fell in front of a building after the passage of Hurricane Irma in Miami © EPA
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Clean-up efforts following the devastation wrought by hurricanes in the US helped Ashtead pile up a nearly one-fifth increase in half-year sales as the plant hire group said it would buy back up to £1bn worth of shares.
The FTSE 100 company, which rents out equipment ranging from concrete mixers and diggers to sewer cameras and heaters for killing bed bugs, posted a 16 per cent increase in pre-tax profit to £413m during the six months to the end of October. Revenue was up 19 per cent to £1.55bn.
It put this down to “good underlying performance”, supplemented by some $40m-$45m of recovery work following hurricanes Harvey, Irma and Maria, which battered several southern US states this year causing tens of billions of dollars in damage.
“Our end markets remain strong and a wide range of metrics have shown consistent improvement,” said Geoff Drabble, chief executive. “We expect a number of years of good earnings growth and significant free cash flow generation.”
Although headquartered in London, Ashtead generates some 90 per cent of its earnings in the US through its Sunbelt business. While the weak pound gave a boost to sales figures, Mr Drabble added that the group’s rental revenue increased 20 per cent at constant exchange rates.
On the back of its strong trading, the company said results for the full financial year should exceed management’s previous expectations. Analysts at Stifel described the performance as “a strong set of numbers which shouldn’t come as much of a surprise”.
Shares in Ashtead climbed 3.2 per cent on Tuesday morning to £20.88, giving the company a market capitalisation of £10.4bn.
In a sign of confidence in its prospects, Ashtead announced it would start a share buyback programme of at least £500m and up to £1bn over the next 18 months, subject to shareholder approval at its next annual general meeting. That represents 5 per cent to 10 per cent of outstanding shares, according to UBS.
The company is proceeding with a five-year plan to maintain double-digit annual revenue growth until at least 2021. This is being achieved in part through “bolt-on” acquisitions in the fragmented US equipment rental market, with almost £300m spent on nine takeovers during the period.
Ashtead also revealed that as part of its succession planning, it had promoted to chief operating officer Brendan Horgan, who has been chief executive of Sunbelt and on the group’s board since 2011.
Mr Horgan will continue to run Sunbelt while working on operational and strategic development of the wider group alongside Mr Drabble, under whose 11-year tenure Ashtead’s revenues have tripled.
In addition, the company is recruiting a new chairman following the decision by Chris Cole to retire next year following more than a decade in the role.
Proposed UK corporate governance rules set out last week state that chairmen should step down after nine years on the board, a change that would catch out the chairs. of more than 60 of Britain’s largest listed companies