(Reuters) - British equipment rental company Ashtead said it was confident a pick-up in U.S. and British construction would help it deliver more growth in the next three to five years after it posted a 50 percent rise in full-year 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) beating its guidance that it would hit the upper end of analyst expectations of 350 million.
“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,” CEO 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 diggers and tools on short-term contracts, has grown rapidly over the past few years as hard-up customers in the United States and Britain have turned to hiring equipment rather than buying and maintaining it.
Drabble said the pick-up in construction for residential housing market in the U.S. and Britain would help boost demand for 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.
Analysts at Liberum maintained their ‘buy’ rating on Ashtead stock and said: “FX headwinds may temper the reported rate of growth through full year 2015, but the business still shows no sign of slowing down on an underlying basis.”
“As recovery continues, Ashtead’s financing structure and younger fleet base provides a competitive advantage, which should support continued premium growth,” they added.
Shares in Ashtead, which have jumped 44 percent over the past twelve months, and 11 percent over the last month, fell back 4.7 percent on Tuesday morning to 843 pence by 0843 GMT.
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 locations of its offering.
Drabble said the company had seen a marked improvement in its UK division A-Plant, which accounts for 15 percent of group revenue, after seeing a 33 percent rise to 244 million for the full year.
($1 = 0.5956 British Pounds)
Reporting by Li-mei Hoang; Editing by Sophie Walker