5th Mar 2024 11:13
(Alliance News) - Earnings forecasts for Ashtead Group PLC face sizeable cuts after it warned full-year revenue would be at low-end of previous guidance.
On Tuesday, Ashtead reported a sharp drop in profit in the third quarter of its financial year, saying rental revenue growth in the key US market was hurt by fewer natural disasters requiring emergency response, and by the strike by actors and writers in Hollywood.
Looking ahead to the full financial year, Ashtead expects rental revenue growth at the low end of its previously guided range of 11% to 13%. This reflects a lower outlook for Canada, where Ashtead now expects 11% to 13% growth, the same as in the US and overall, down from 14% to 16% previously.
Shares were down 6.3% to 5,370.00 pence on Tuesday morning in London. The wider FTSE 100 index was down just 0.1%.
London-based Ashtead provides equipment hire and makes by far the most of its money in the US via its Sunbelt arm.
Ashtead reported pretax profit of USD442.0 million for the three months that ended January 31, down 12% from USD505.1 million a year before. On an adjusted basis, excluding amortisation, pretax profit was USD473.0 million, down 11% from USD534.7 million.
Total revenue was USD2.66 billion, up 9.5% from USD2.43 billion, as rental revenue rose by 9.4% to USD2.36 billion from USD2.19 billion.
UBS analyst Rory Mackenzie said profits are tracking "well below expectations, given a more mixed environment with some overcapacity".
He noted the weaker annual growth in November and December was due to a lower level of emergency/hurricane work and that Ashtead had been hoping for an improvement back to 11% to 12% growth in January and February.
However, this has not materialised due to broader market weakening slightly, Mackenzie explained.
He said given guidance for increasing depreciation, interest costs and an average 50% drop-through rate, this could suggest high single-digit-low double-digit downgrades to consensus adjusted earnings per share.
While absolute growth is still robust, there is an element of an expectation 'reset' ahead of the April Capital Markets Day, Mackenzie stated.
Mackenzie has a 'neutral' rating on Ahstead and a share price target of 5,500p.
By Jeremy Cutler, Alliance News reporter
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