The Ashtead Group (LSE: AHT) share price has greater than doubled prior to now 5 years. But it surely dipped 5% in early buying and selling on FY outcomes day.

The 18 June replace confirmed falling earnings on the tools rental agency, as rental income progress didn’t hit targets. Ashtead achieved 10%, however had set its steerage at 11%-13%.

Greater debt curiosity funds didn’t assist the underside line both.

Revenue fall

The figures present a ten% fall in revenue earlier than tax for the fourth quarter. And it’s down 2% for the complete 12 months, to $2.1bn (£1.7bn). Earnings per share (EPS) fell 6%.

Income did develop 7% in This autumn, and 12% for the 12 months, so margins are being squeezed.

Free money move fell by greater than half, to $216m (£170m). That’s after the agency considerably raised its capital expenditure although, placing funding into present and new greenfield websites.

Nonetheless, because the report instructed us, it did contribute to larger debt, and that does concern me.

Debt

CEO Brendan Horgan spoke of “larger curiosity expense, reflecting the rate of interest atmosphere and elevated common debt ranges“. I take some conflicting ideas from that.

Internet debt reached $10.7bn (£8.4bn) at 30 April. That’s maybe not a lot for an organization with a £23bn market cap. But it surely pushed the web debt to EBITDA ratio up to 1.7 occasions, from 1.6, at fixed foreign money.

Issues are difficult by IFRS 16 accounting rule modifications, which make reported debt look larger. However even excluding that, Ashtead has set its new goal vary for internet debt to EBITDA at 1.0 to 2.0 occasions (and it could be 1.4 to 2.4 occasions after IFRS 16).

Does such a variety hassle anybody? To me, it makes it sound just like the board doesn’t have a lot of a clue about it. It additionally makes me concern one thing close to the prime quality.

Falling prices?

Nonetheless, the opposite facet of all of it is the present rate of interest atmosphere.

Debt is pricey proper now, however that has to alter when central banks lastly determine to begin dropping their rates of interest.

What it means to me is that we’re a set of outcomes from an uncommon 12 months, in circumstances that don’t make issues look so good.

And a 12 months from now, if rates of interest are signficantly decrease, we’d see a complete totally different outlook for a agency like Ashtead.

Dividend

We did, at the least, see a 5% hike within the dividend to 105c (79p). That’s a yield of only one.5%, thoughts, so this isn’t a retirement revenue money cow simply but.

I anticipate forecasts to be reduce a bit, so the present price-to-earnings (P/E) ratio of 18 for 2025 may rise. But when we get again to the long run progress that the analysts anticipate, it may nonetheless be truthful worth.

For me, although, there’s an excessive amount of uncertainty. And I see cheaper shares on the market with decrease threat. Possibly in one other 12 months.