Ashtead Share Discussion Threads

[bracke] 25/7/2018 16:53

"whether you were acting as an agent provocateur?"
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Oh ian how could you!!

My enquiry was entirely genuine and fully innocent.

You have cut me to the quick.

[ianwwwhite] 25/7/2018 16:42

Good day bracke,

Let's be clear I will not be arguing with anyone. I did wonder however at the time of your original 'innocent' enquiry whether you were acting as an agent provocateur?

Edit: p.s. If you don't like the 'notes' strategy, it seems to me the answer is simple, don't buy the shares :-)

[bracke] 25/7/2018 15:37

Good day ian

Will this be the fifty post argument of the full one hundred?

I presume the all the "Shares repurchased" are held in Treasury (max allowed 10%). If that is the situation ok if they sell them for more than they paid.

Shares in Treasury do not receive the dividend so more £ avail for the remaining shares.

As to the notes.....hmmmm.

[ianwwwhite] 25/7/2018 15:06

I reviewed the current AHT buyback progress this morning, and thought it might be of interest:

Commencing: 15/12/17

Shares repurchased: 11,595,407

Cost of shares repurchased: £244,793,608

Average cost per share repurchased: £21.11

Current share price (24/07/18) £23.49

(Shares in Treasury appreciation approx 16% tbc)

It is worth mentioning that the daily share purchase has reduced to around 72,000 shares from an initial 110,000 at commencement, as the average cost per share has increased

e&oe

[ianwwwhite] 25/7/2018 14:53

Good afternoon all,

I am getting a distinct feeling of deja vu reading the recent postings on this thread.

I thought that the rationale for buybacks versus paying down debt and increasing dividends (none of which are mutually exclusive)had been well aired at the beginning of the year.

davidcar7 was kind enough to quote from a reply received from Geoff Drabble (post 54880 11/01/18) explaining his thinking:

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Our priorities remain fleet growth and small bolt on acquisitions as we gain market share and improve margins by leveraging the fixed cost in our now extensive depot platform. Clearly this is designed to enhance earnings per share and therefore the share price.

We also find ourselves highly cash generative and even after funding these plans, unless we make further investment, our net debt to Ebitda leverage would begin to fall well below our target range of 1.5 to 2.0 times. The big question I guess is, whether this is desirable or not?

Well this really depends on our outlook and where we are in the cycle. Currently, our outlook is very positive and we anticipate multiple years of moderate growth. Therefore, we are happy to operate within our longstanding range. It's my belief that by allocating £500m (which would otherwise only be used to delever) to reduce the share count and hence improve EPS, is a sensible approach. As it happens ,from a multiple perspective I do think we are undervalued and having the discipline to recognise this rather than potentially pay inflated multiples for large M&A is a sensible low risk approach to growing the share price. Also , as our cash flow is better understood, I do think there is a chance that we also get a re-rating - but who knows.

So will we spend £500m or £1bn? I don't know! We could spend £1bn but only if there is an absence of good organic growth opportunities and/or M&A. However be assured we will always be disciplined in our leverage, remaining within guidance and will constantly reassess what constitutes value.
I hope this helps. Of course, there is judgement involved but it is made with a clear understanding of the parameters in which we should operate and a focus on long term share price appreciation.
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Good enough for me, and without wishing to start an argument, I personally would like to disassociate myself from any implied criticism of the management in our comments, in my opinion they are doing an exceptional job.

It may be that my appreciation of good results, a rising dividend and shareprice, and an extremely positive and growing cash flow might be at variance with your own views.

Hopefully as usual there will be room for more one than one view on this thread :-)

[bracke] 25/7/2018 10:48

Good day fenners

Your recent posts on buybacks and notes......Directors are supposed to run the company for their shareholders (no laughing please). Why do they apparently act in a manner which is not in the best interest of the shareholders? ie. what is their motivation.?

[discodave4] 25/7/2018 10:42

Agree, seems madness IMO.Lord Wolfson (CEO of Next) is regarded as the expert on buybacks and has refined their model to maximise shareholder value - simply buy when the rate of return is optimum and don't buy when its not!.HTTPS://www.theguardian.com/business/2013/mar/21/lord-wolfson-next-shares-buybackDD

[fenners66] 25/7/2018 10:27

That we are agreed upon.

The comparison to next is fair ( I have not looked up Next but presume you are saying they bought back loads) however we know that this business is different.

The market for rental is cyclical - even if this cycle is lasting for ever....
The company is very capital intensive and generally growth means more investment in more plant costing more cash !

There is still a reason to grow by acquisition - more cash

So why spend it on getting rid of shareholders ? After all they are just buying off some to ensure they get out - not rewarding the loyal - we could have a much higher dividend yield by now.


Its just a US fad for buybacks - everyone else is doing it - but maybe others have run out of ideas on how to grow their business!

For me its MADNESS - and how many of the buybacks already could have been bought for LESS the next day etc.

If we buy shares and they drop the next day we feel a bit down - but the company is doing this with our money day after day.....

[fenners66] 25/7/2018 09:49

DD - I believe I acknowledged and tackled that with reference to the tiny %

They buy back such a tiny % of the shares but cost a huge chunk of cash.

Not only that but the future EPS increase is in no way guaranteed - no one has certainty over where the results will be a year or two out.

Also the impact on the share price is far greater from the other influences - profitability , cash flow, debt to equity ratio and dividend yields.

But having the cash on the balance sheet, in order to pay future dividends strengthens balance sheet.

There is an argument that paying off the debt instead - increases the EPS (yes I know there is a tax effect) but this is real extra profit from less interest cost.
At the same time a higher profit - higher future profit when there are less fees associated with replacing future debt issues - should mean a higher enterprise value.

We know that the enterprise value is made up of debt and equity so QED higher value less debt means higher equity value anyway - win win.

I know that the yanks like buybacks - but they also like Trump and hot dog eating contests !

[discodave4] 24/7/2018 19:25

So buybacks are to reward the sellers of a company - dividends reward the owners - no brainer.Suppose the counter argument is that buybacks increase future eps and thus capital returns to owners.

[bracke] 24/7/2018 13:35

Thanks fenners.





Iv'e been viewing the daily chart to try and ascertain the likely direction of the next move

Viewing a two year daily chart shows that the share price has had major moves up (500-800 points) followed by sideways declining moves for 200-300 points.

The last major move up was April to early June when it rose approx 550 points. It then dropped to 2200 since when it rose back to 2400 and has been in a range between 2400 and 2300.


I suspect it will require something special to push the share price up by 500-800 points especially as it is only a short time since the last large rise It may well go to 2400 again but I suspect it is not done with 2200.

OK AHT DO YOUR WORST!!

[fenners66] 24/7/2018 10:14

Yes the cunning plan is the advisor's gravy train.

Ironic I was having a pop at that on another board yesterday and it pops up here.
I also made points decrying share buy backs ....


As you said a small minority selling brings price down.

A small minority (of shares in issue) brings price up - when they do buybacks.

And the next day the share price will fluctuate any which way it likes.

Buybacks effect the shares on the day, reduce (usually by a tiny %) the number of shares in issue - which long term has little effect on share price when compared to say profitability , cash flow, debt to equity ratio and dividend yields. None of which can be absolutely certain a year away.

But cash on the balance sheet for future dividends , or invested in better businesses is a far better use than buy-backs that would not affect me in any meaningful way - unless I was selling !

So buybacks are to reward the sellers of a company - dividends reward the owners - no brainer.

[bracke] 24/7/2018 10:02

Good day fenners

Thanks for your reply

My thinking was that they are borrowing money in order to pay back earlier borrowings. Is that what they are doing? If so Disco's reasoning about spending money on share buybacks seems odd when it could be used to pay down debt.

Is there a cunning plan I am unaware of?


Once again 2300 was tested yesterday and it held with a bounce up today. It appears ian's ability to take it down to 2200 is sadly lacking........or is he bluffing and buying at 2300 for selling at 2400?

[discodave4] 23/7/2018 22:30

I will apologise upfront for my ignorance, but aren't secured notes basically a loan against certain assets? - Can understand the reasoning (I think) but why are they doing a share buyback as well then issuing $500m of loan notes?.

[fenners66] 23/7/2018 21:16

" Ashtead intends to use the net proceeds of the offering to (i) repay a portion of the outstanding amounts borrowed under its first priority senior secured credit facility and (ii) pay related fees and expenses.

The transaction will enable the Company to fix the cost of a further tranche of its debt at attractive long-term rates and extend its average debt maturity profile. "

Ha ha I have been ranting about reissue of debt and the advisor's gravy train on another board today - write the costs off as exceptional again !

As they do with the early redemption of Every debt issue !

[fenners66] 23/7/2018 20:34

I had not noticed them - I'll take a look

[bracke] 23/7/2018 17:03

Good day fenners

What do you make of the 'Notes Offering'?

[ianwwwhite] 20/7/2018 17:59

Thanks bracke

re 'I suspect it would take some serious manipulation and/or a sustained rise in the £/$ to take it to 2200' .... I'll get on to it on Monday! :-)

Have a great weekend all!

IWW

[bracke] 20/7/2018 17:30

It does look very much like a double top with initial target the 'valley' at 2200.
However this is not just any share price this is AHT 'Wonder' share price and it does not like to conform.

I suspect it would take some serious manipulation and/or a sustained rise in the £/$ to take it to 2200; especially with dedicated rampers like fenners singing its praises and suggesting it's cheap at the current level.

[ianwwwhite] 20/7/2018 15:45

Bracke

Lol!

Is that a possible 'double top' reversal formation I see, with support at 2200?
.

[bracke] 20/7/2018 15:28

Good day ian

"Seems to me that there is still a gap at around 2260 earlier in July that remains unfilled."
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Give it time but you need to get fenners to stop posting about 2962. He'll every man and his dog rushing to buy and it will never fall to your desired top up level.

I note it's back to 2300 again...anyone for 2200?

[discodave4] 20/7/2018 14:31

The Donald is controlling the markets at the moment by the looks of it!.

[fenners66] 20/7/2018 14:10

They could have used a target price of 2962 though !

Given my calcs. on the price URI are using for their latest acquisition that target has some substance (!)

[fenners66] 20/7/2018 14:08

Thanks SMCNI