Results round-up

Industrial equipment rental firm Ashtead said half year earnings were boosted by clean-up efforts after hurricanes Harvey, Irma and Maria and the weak pound as it posted a 16% rise in pre-tax profits to £493.1m.

The company added that it was starting a share buyback programme, of at least £500m and up to £1bn over the next 18 months.

Revenues were up 16% to £1.9bn with earnings per share jumping to 64.5p from 54.3p. The interim dividend was increased to 5.5p a share from 4.75p.

Underlying rental revenue grew 22% in the second quarter, taking first half revenue to £1.8bn. Operating profits rose 21% to £591m.

Chief executive Geoff Drabble said Ashtead's end markets remained strong.

"We continue to execute well on our strategy through a combination of organic growth and bolt-on acquisitions. We made significant investments in the period, spending £708m on capital expenditure and £298m on nine acquisitions," he said.

"Whilst we would anticipate that activity levels would normalise during the second half, post hurricane clean-up, we expect full year results to be ahead of our prior expectations."

In a separate announcement, the company said Brendan Horgan had been promoted to group chief operating officer from January 1, 2018 and chairman Chris Cole was retiring next year.

Ashtead shares rose 3.9% in early trading, and Hargreaves Lansdown equity analyst Nicholas Hyett said the company was in a "sweet spot at the moment."

"The key US construction market is booming with hurricane reconstruction work adding further fuel. Ashtead’s response has been to up capital expenditure beyond previous guidance, and continue bulking up its geographic footprint and exposure to specialty areas with bolt-on deals. So far it’s been able to do that while keeping debt comfortably within its target range," he said.

However, Hyett added that HL was "not entirely convinced" about the buyback programme.

"Ashtead’s a highly cyclical business and while things are looking good at the moment we feel it’s important to protect its strong balance sheet position. Conditions can change quickly and Ashtead has experience of hitting the downside with too much debt. It wasn’t pleasant."

"With shares trading above their long term rat

Balfour Beatty is "increasingly confident" of improving margins this year as it continues to win new business on better terms.

Amid the second part of a transformation programme under chief executive Leo Quinn, the construction group expects to be able to pay down debts next year, with year end net cash guided to be flat on the prior year's £173m. Average net cash for the year is expected to be around £40m.

The 2017 year end order book is expected to be "broadly in line" with the £11.4bn at the half-year stage, post the $57m cash disposal of US subsidiary Heery International completed in October.

This will mean the order book will be roughly 10% lower than the previous year as Quinn, who initiated his Build to Last transformation programme three years ago when appointed to arrest the group's six profit warnings in two years, has been focused on simplifying the group, cleaning up the balance sheet and improving the quality of contracts rather than focusing on volumes.

He said actions taken in the programme "have laid a solid foundation for long term profitable growth" and that he continued to focus on de-risking the business.

The proceeds from the Heery disposal, operating cash flows and expected future sales from the investments portfolio, put the FTSE 250 group "in an excellent position to pay down borrowings as they fall due in 2018".

Following on from August's first half results where Balfour swung to pre-tax profit of £12m from a loss of £15m last year has seen further fruits from its more selective bidding approach.

Further new business has been won in its chosen markets on terms and at rates which reflect the increased discipline over bidding and risk introduced by Quinn.

"The order book increasingly consists of projects bid and delivered under our enhanced transparency, governance and controls and I remain confident that the Group will achieve industry-standard margins in the second half of 2018," he said.

BBY shares had risen 1.1% to 275.1p by just after 1000 GMT on Tuesday.

Analyst George Salmon at Hargreaves Lansdown said the fact the group is striving to get margins "to the not-so-heady heights of 2-3% by the back end of next year shows the difficulties within the sector".

He added: "Historically, the challenge for the industry as a whole has been coping with the twin demands of costing up contracts well in advance, while bumping elbows with numerous competitors.

"Balfour’s new strategy adopts a quality over quantity approach. This will likely impact the order book, but with Carillion’s difficulties showing what can happen when bid discipline is relaxed, this feels like a sensible strategy.”

Noting that consensus forecasts point to around £15m of investment disposal profits in the full year, analysts at Investec said management were closing in on making some sales, so the figure could come out higher or as low as zero depending on timing.

The £12-15m represents circa 10-12% of full year operating profit.

"There are no surprises in the statement, which is positive given the challenges peers have faced in the UK this year," Investec said, with a nod to Carillion and Interserve.

"As FY18 approaches, management has more visibility on margins, and this appears to have driven more confidence in their target of achieving industry average margins in H2 FY18."