1st Mar 2016 09:11
LONDON (Alliance News) - Shares in equipment rental company Ashtead Group PLC sank on Tuesday morning as it reported a marginal slowdown in revenue growth in the third quarter, though pretax profit remained much higher year-on-year.
Ashtead shares were down 13% to 808.00 pence Tuesday morning, the worst performer in the FTSE 100.
The group said its pretax profit for the three months to the end of January was GBP139.1 million, up 17% year-on-year from the GBP113.9 million it posted in 2014.
For the first nine months of the financial year, pretax profit grew 20% to GBP481.8 million from GBP379.4 million, indicating a slowdown in growth in the third quarter, driven by weakening orders from the oil and gas industry. In line with other suppliers to oil and gas companies, Ashtead is seeing orders soften as energy operators trim spending and suspend projects to cope with the current low oil price environment.
Ashtead has continued to benefit from its strong Sunbelt rental business in the US and the associated boost from the strong dollar against a weaker pound. Revenue for the third quarter rose 14% to GBP546.9 million from GBP462.9 million, with nine-month revenue up 17% to GBP1.68 billion from GBP1.36 billion, again demonstrating a slowdown in growth from the first half.
Ashtead said its UK and US businesses both performed well, but warned the oil and gas-related slowdown in revenue growth was likely to continue into the fourth quarter. Ashtead said it was taking a "watchful" stance on the broader economic environment.
Still, the group said it continues to see "encouraging growth opportunities" and expects double-digit expansion of its fleet in 2016 and 2017. Its fleet replacement spending cycle is moderating, it said, which will drive growth in earnings and cash generation.
"Our continued success demonstrates both the strength of our strategy and the overall health of the markets we serve," said Ashtead Chief Executive Geoff Drabble.
"With both divisions performing well, strong end markets and our strategy clearly working, we expect full year results to be in line with our expectations and the board looks forward to the medium term with confidence," Drabble added.
By Sam Unsted; [email protected]; @SamUAtAlliance
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