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Strong fundamentals push Ashtead stock to lead Footsie-100

September 5
4:55 AM 2015

The encouraging rise in revenues and further growth potential have helped industrial equipment hire group Ashtead to top the FTSE-100 stocks in terms of price rise in the market.

Ashtead provides industrial equipment on a rental basis.

The stock price on London Stock Exchange (LSE) rose over five percent making it the highest gainer among Footsie-100 stocks on 2 September. The company has assured its investors about strong revenue growth and encouraging profits after the announcement of first quarter results.

Ashtead recorded 26 percent growth in revenues in the first quarter ending July. Pre-tax profit also rose 23 percent to GBP155.4 million during the quarter.

After rising over five percent on Wednesday, Ashtead stock was further up 2.53 percent on Thursday to close at GBP1,013. With this, the market capitalization stands at 5,098.87million and price-earnings ratio (P/E) at 16.7. The earnings per share (EPS) was 60.5. 

The Ashtead stock was moving downward until 24 August and later it started moving upwards. After easing on Tuesday (1 September), it galloped on next two days making it higher gainer among Footsie stocks. 

The assurance about further growth from the company boosted the market sentiment. Ashtead is offering industrial equipment right from small tools, water pumps to large diggers on rent. The assurance came at a time when industry competitors Speedy Hire and HSS Hir announced lowering forecast for profits. Both the companies have just cut their projections downwards following the easing demand in the oil and gas industry. 

The strong performance of Ashtead during the first quarter indicates it diversified strategy in the markets. The company offers industrial equipment considering the specific requirements of geographically and sector-wise.

The company made GBP349million capital expenditure during the quarter. It has opened 19 greenfield locations and acquired one small unit. The company is also planning to open its operations in 50 new locations. The continuous plan for investing and growth clearly holds the value for it in the quarters to come. 

Ashtead recorded operating profit growth of 25 percent as it rose from GBP133.5mn to GBP180.2mn during the first quarter. Profit before taxation rose 23 percent from GBP120.4mn to GBP160.7mn. EPS rose 26 percent from 14.9p to 20.3p. The net debt to EBITDA stands at 1.8 times. Banking on its strategy and strong end markets, Ashtead is expecting full year results to be in line its expectations. 

Despite the slowdown in oil and gas markets, Ashtead has managed to keep the revenues at high end of 23 percent growth, which was driven by increased fleet on rent. Good yield development in Greenfields and bolt-ons was more than offset by the adverse impact of oil and gas. The average physical utilization stood at 72 percent.

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