The phrase “sharing economy” conjures up images of tech-savvy millennials riding around in Ubers, not cement mixers and diesel generators.
However, Ashtead, the Surrey-based company that hires out building equipment, has arguably benefited from the trend just as much as any number of trendy start-ups.
The plant hire giant was on a roll last year until it was caught up in the autumn market sell-off fuelled by fears the American economy was headed for recession.
Ashtead is highly sensitive to any hint that building projects in the US could dry up — roughly 85% of its sales come from its American business Sunbelt.
Yet much of the gloom hanging over the world’s largest economy has now lifted, helped by the Federal Reserve’s decision to slow the pace of interest-rate rises.
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For Ashtead, which said in a strong set of half-year results in December that it had seen no sign of weakness on the ground, that means little has changed besides a big discount in its share price.
Investors will be looking for confirmation in this week’s third-quarter update that the company expects its revenue and profit growth to continue. The broker Bank of America Merrill Lynch has pencilled in a 23% increase in pre-tax profits to £1.1bn this financial year, rising to £1.3bn next year.
There is good reason to believe that Ashtead can go on profiting from the modern preference for renting things rather than owning them — to which the construction sector is no exception.
Sunbelt is the second-largest player in a still-fragmented US plant hire market (it has an 8% share, behind leader American Rentals’ 12%), suggesting its strategy of chasing growth by opening new rental depots and gobbling up smaller rivals has plenty of room to run.
There is a potential fly in the ointment: Geoff Drabble, the man who took over an unsexy plant hire group in 2006 and transformed it into a FTSE 100 powerhouse, steps down in May. Even so, his replacement, Brendan Horgan, has played a pivotal role in the transformation, heading Sunbelt since 2011.
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If Donald Trump’s grand promises to unleash an infrastructure splurge ever get off the ground, things could get much better for Ashtead. Even without that, all the company really needs is for the American economy to avoid a serious downturn in the immediate future.
The shares have raced back in the new year and closed at £20.47 on Friday, valuing the business at £9.7bn, but they are still some way short of last year’s peak. Unless you think a US recession is around the corner, they look like a buy.