Latest News And Breaking Headlines

Ashtead benefits as supply constraints boost rental market

Ashtead chief executive Brendan Horgan said he expected the equipment group to benefit from supply chain constraints for another 18 months as more companies chose to rent machines due to the lack of supply for sale.

The FTSE 100 company rents out scaffolding, excavators and other equipment and has benefited from supply chain disruptions, making it more difficult for companies to source such goods.

Ashtead said on Tuesday that sales were up a fifth in the year to the end of April to $8 billion and pre-tax profits were up 35 percent to $1.7 billion.

The Covid-19 pandemic and lockdowns have disrupted global trade, creating parts shortages and logistical bottlenecks, affecting equipment manufacturing across all sectors.

Horgan said problems with supply chains and the delivery of goods are still major concerns for the global economy. “When it comes to the economy, the world is concerned about three things: supply chain constraints, inflation and labor shortages,” he said.

He noted that there was an “ongoing shift from ownership to renting,” which he said “would last for years.”

The limited supply of equipment had increased the withdrawal rate of Ashtead’s goods to its customers in the US, Canada and the UK.

“Today, when you think of: can you? [equipment] when you need it, when you want to buy it? The answer will undoubtedly be no,” he said.

However, Ashtead, which generates about 80 percent of its revenues from the US, is still concerned about the prospects for economic growth. The share price, which jumped during the pandemic, has fallen 40 percent since the beginning of this year, falling 4 percent on Tuesday.

“Investors have macroeconomic concerns that North America will slow down and potentially slide into recession,” said Andrew Nussey, an analyst at Peel Hunt. “So it’s this concern that outweighs Ashtead’s continued strong delivery.”

He said it would be easy to compare the current situation with the knock-on effects of the global financial crisis on the US rental market. But he thought Ashtead was in a strong position. “Look How” [it] has proven its model during the pandemic. It’s sentiment versus reality.”

In the UK, Horgan said there were a number of long-term projects and events that he expected would support equipment demand. “We have Glastonbury coming up, the Chelsea Flower Show, so there are signs of a return to normalcy,” he added.

However, he expected that work restrictions, more generally, would continue to be an issue. “As a society, be it in the US, Canada or the UK, we are putting out more skilled trade, from commercial drivers to plumbers, than we are creating every year. That’s why we think there are real challenges for the near future.”

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More