Shares in the company responded positively rising 2% to 976p, going against the flow of the FTSE 100 which was down 1.2% at 5974 by late morning.
Geoff Drabble, Ashtead’s chief executive, hailed 2015/2016 as “another very successful year” for the group evidenced by the 17% increase in group rental revenue and a 24% boost in underlying pre-tax profit of £645m at constant exchange rates.
Drabble said that “strong margins” coupled with the rental company’s natural moderation of its rental fleet expenditure meant Ashtead could afford to “continue both to invest in our long-term structural growth opportunity and enhance returns to shareholders.”
“We have seen a good seasonal upward trend in fleet on rent throughout the Spring which has continued into the new financial year. Our end markets remain strong, the structural drivers are still in place and we have a strong balance sheet which allows us to execute our plans responsibly. As a consequence, the Board continues to look to the medium term with confidence," Drabble stated.
The performance of Ashtead and another major US player, United Rentals, are some indication that the “US construction market seems to be holding up pretty well,” said AXA portfolio manager, Jamie Forbes-Wilson.
“People know construction is a cyclical industry,” he said. “The duration of these cycles has been longer than they have historically, which reflects the world we live in. Extended business cycles across the piece create a nice tailwind for companies like United Rentals and Ashtead who are pretty well placed for now, subject to the health of the US economy.”
Though Ashtead derives 84% of its group revenue from its US division Sunbelt (as opposed to its UK arm, A-Plant), Forbes-Wilson notes similar parallels in the recent performance of the wider UK construction industry.
He finds UK housebuilder, Crest Nicholson, is in a similarly reassuring position after continuing to generate good cash flow, which enabled it to increase its interim dividend yet again.
The UK FTSE 250 construction company also returned healthy half year results for 2016 Tuesday with 25% growth in profit before tax (£72.6m) and similarly announced a proposed interim dividend of 9.1p per share, up 42%.
“The interest rate environment is such that affordability is still there. I would have been disappointed had they not raised dividends,” Forbes-Wilson commented.
He added: “We’re not seeing a big effect from concerns through Crest Nicholson’s customer base about Brexit. Notwithstanding how the vote goes, the UK housebuilder market remains pretty robust.”