Ashtead’s first-quarter revenue rose by 2% to $2.8bn, in line with expectations, driven by rental revenue growth of 2%. Underlying operating profit fell 5% to $683mn ($717mn expected).
Free cash flow rose from $0.2bn to $0.5bn due to reduced capital spending. Net debt improved by $0.5bn to $10.3bn.
Ashtead repurchased $0.3bn of shares this quarter under its ongoing $1.5bn buyback programme.
The group expects rental revenue to grow by 0-4% for the new year (2.7% expected). Full-year free cash flow guidance has been upgraded from $2.0-2.3bn to $2.2-2.5bn ($2.1bn expected).
The shares were up 2.5% in early trading.
Our view
Ashtead delivered a decent first quarter, with revenue growth turning positive for the first time since the end of last year. Profits may take another quarter to follow suit, but the group will soon start lapping some easier comps, and if the market picks up as expected, earnings growth could be back on the cards in 2026.
Ashtead’s own ambition has perhaps been its downfall in recent times. Rapid expansion led to a period of overspending that coincided with a slowing market. But investment in the growing fleet has been reined in, which means even a small rise in fleet utilisation can have an outsized impact on margins and cash flows – and we’re already starting to see a cash flow benefit.
The more local market is still looking soft in places, with unpredictable trade policies making it hard for privately funded construction projects to get sign-off. But there are green shoots, and a big chunk of the demand for Ashtead’s fleet of rental equipment comes from publicly funded projects, which should be more insulated.
North America is Ashtead’s largest market and remains the real growth opportunity over the medium term. There are several growth drivers here, ranging from the onshoring of supply chains to government legislation looking to expand infrastructure and chip manufacturing.
Ashtead's scale and expertise are proving valuable, with its win rate on so called ‘mega-projects’ running at roughly twice the company average. The bigger players have an advantage in the fragmented industry, and there’s still scope to snap up smaller players in the space too.
Growing the speciality business is also a key strategy (things like scaffolding, flooring and air conditioning). These businesses are higher growth and present a varied income stream for Ashtead, which should help provide a little more resilience during downturns.
Cash flows have been a major benefactor of the reigned in spending, and the balance sheet is in a good position. Plans are in place to start allocating capital to expansion again next year, to match improving market activity.
We think capital discipline and better utilisation of the existing fleet can drive improving profit and cash flow even if top-line growth is only in the low-single-digit range. We see upside over the medium term and the valuation isn’t overly demanding. But it isn’t as attractive as earlier in the year given an improvement in sentiment, and there are no guarantees.
Environmental, social and governance risk
General Industrial companies are medium risk in terms of ESG but can trend up to the higher end of the spectrum depending on subindustry. The primary risks can include labour relations, emissions (either product or production-based), business ethics and product governance. Other concerns are waste and health & safety.
According to Sustainalytics, Ashtead’s overall management of material ESG issues is strong.
Ashtead reports on Scope 1 and 2 emissions, has initiatives in place to reduce emissions, and aligns these initiatives with its risk management programme. Within the last three years, the company's carbon intensity trend experienced a moderate decline. ESG reporting is strong, and executive pay is explicitly tied to ESG performance targets.
Ashtead key facts
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