5th Sep 2023 11:49
(Alliance News) - Ashtead Group PLC on Tuesday reported a strong start to its financial year, but the company cut its guidance for UK rental revenue growth.
By late morning on Tuesday, shares were down 1.1% at 5,408.00 pence each in London, paring back steeper losses earlier in the morning, when they had been down about 5% to 5,107.73p. However, the stock remains up 25% over the past 12 months.
In the first quarter ended July 31, the industrial equipment rental company said revenue rose 19% to USD2.70 billion from USD2.26 billion a year before, as pretax profit climbed 11% to USD585 million from USD527 million.
The company invested USD1.1 billion in capital across existing locations and greenfields and USD361 million on 9 bolt-on acquisitions, which added a combined 40 locations in North America.
"More revealing is the underlying pretax profit at USD614.9 million when stripping out one-offs, compared to the previous year's USD554.7 million," considered Edison director Andy Murphy.
While the situation in the UK was challenging, Ashtead hails the "robust end markets" in North America, with a rise in US mega projects.
"Expansion into North America is clearly paying dividends in both the US and Canada. The receding risk of recession in the States also feeds into a positive narrative, while the equipment rental space not only continues to grow with revenues up by 14% but the group estimates that there could be much more to play for," said interactive investor's Richard Hunter.
Despite "softening" conditions in UK markets, Ashtead expects its overall performance to be in line with its expectations. However, it cut its rental revenue growth guidance in the UK to a range of 6% to 9% from 10% to 13% previously.
"The business is a cyclical one which brings its own risks, especially in the event of any weakening in demand...Even so, for the moment, Ashtead is making hay while the sun shines and momentum is building," ii's Hunter added.
By Elizabeth Winter, Alliance News senior markets reporter
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