Ashtead Group shares slump as FTSE 100 firm trims revenue outlook

  • Ashtead Group leases machinery like battery-powered saws and forklift trucks
  • The Surrey-based business saw its shares slump 7% in early trading on Tuesday

Ashtead Group shares were the FTSE 100’s biggest faller on Tuesday morning after the firm warned revenue growth would be towards the lower end of guidance.

The equipment rental company, which leases machinery like battery-powered saws and forklift trucks, saw its shares slump 7 per cent in early trading before recovering to be 4.1 per cent down at £54.92 just after midday.

Its performance in North America has been hurt by subdued levels of natural disaster emergency response activity, as well as industrial action across the US film and television sector.

Market drop: Ashtead Group, which leases machinery like battery-powered saws and forklift trucks, saw its shares slump 7 per cent in early trading on Tuesday

Although the Hollywood labour disputes concluded in December, Ashtead noted activity resumed more ‘slowly than expected’ in Canada since the new year began.

Consequently, the Surrey-based business expects turnover expansion will probably be at the bottom end of its 11 to 13 per cent range this financial year.

But Ashtead said annual results will be ‘broadly’ commensurate with forecasts, supported by bolt-on acquisitions and growing rental sales.

In North America, where it trades under the name Sunbelt Rentals, the company saw revenue jump by 15 per cent to $7.1billion in the nine months ending January.

Trading has also been helped by an increase in large construction projects and laws, such as Joe Biden’s Inflation Reduction Act, committing the US federal government to spend hundreds of billions improving infrastructure.

‘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 changes,’ said Brendan Horgan, chief executive of Ashtead.

However, the firm’s UK sales flatlined at £523.7million over the nine-month period, partly due to the end of Covid-related contracts with the Department of Health.

Ashtead’s total pre-tax profits also stagnated, remaining at $1.69billion following a surge in depreciation charges and financing costs amid higher interest rates and debt levels.

The group’s net debts in January were $11.2billion, more than $2.5billion up on the same point last year, owing to greater capital expenditure spending driving a free cash outflow of $463million.

Ashtead plans to reduced gross capex levels from around $4.2billion in the current fiscal year to between $3billion and $3.3billion in the following 12 months.  

Russ Mould, investment director at AJ Bell, said: ‘Ashtead has been a major success over the past few decades thanks to more companies deciding to rent rather than own construction equipment as well as significant spending on infrastructure in the US where it mainly does business.’

‘That’s made investors consider Ashtead to be bulletproof, but the past few years have shown that it can occasionally be tough-going.’