Ashtead delivers flat Q2 profit but says US demand remains 'robust'
Equipment hire specialist Ashtead delivered flat second quarter profits on Tuesday, but said demand in the US remained “robust”.
The company, which last month cut annual profit and revenue forecasts, said pre-tax profit for the three months to October 31 were $666m, up 1%. First-half earnings were up 5% to $1.2bn.
Shares in Ashtead slumped in November as the company lowered full year forecasts after a quieter hurricane season and the writers’ and actors’ strike in the US and revealed it would take a $2bn depreciation charge.
It now expects both group and US rental revenue growth in the range of 11% to 13%, down from previous guidance of 13% to 16% for both, which will result in core profit being 2- 3% below current market expectations.
Ashtead added that it also now expected a full-year depreciation charge of around $2.1bn a net interest cost of $540m which will result in adjusted profit before tax being below current market expectations.
"Notwithstanding these factors, our end markets in North America remain robust with healthy demand, supported in the US by the increasing number of mega projects and recent legislative acts," Ashtead said on Tuesday.
"We are in a position of strength, with the operational flexibility and financial capacity to capitalise on the opportunities arising from these market conditions and ongoing structural change."
Matt Britzman, equity analyst at Hargreaves Lansdown said that after the downgrade it was "good to see a continued upbeat tone about the longer-term demand dynamics".
"It was a little unnerving to see revenue and profit guidance get cut a couple of weeks ago, markets had largely assumed there was enough of a buffer in guidance to absorb some near-term demand weakness. Nonetheless, more reassurances today on the underlying demand dynamics were welcomed."
"The North American market is key, with mega projects off the back of recent legislation being Ashtead’s bread and butter. Its scale and expertise are a winning formula in a fragmented industry. There’s still a general feeling of positivity around the group, and next year’s strategy update should be the next major catalyst for movement in the valuation.”
Reporting by Frank Prenesti for Sharecast.com