Ashtead Group shares slump as FTSE 100 firm trims revenue outlook

Ashtead Group shares fell the most on the FTSE 100 on Tuesday morning after the company warned revenue growth would be towards the lower end of guidance.

The equipment rental company, which rents out machinery such as battery-powered saws and forklifts, saw its shares fall 7 per cent in early trading before recovering to a 4.1 per cent decline to £54.92 shortly afterwards noon.

Its performance in North America has been affected by subdued levels of emergency response activity from natural disasters, as well as industrial actions across the US film and television sector.

Although Hollywood’s labor disputes ended in December, Ashtead noted that activity had resumed more “slowly than expected” in Canada since the new year began.

As a result, the Surrey-based company expects turnover expansion to likely be at the lower end of its 11 to 13 per cent range this financial year.

But Ashtead said full-year results will be “broadly” in line with forecasts, supported by bolt-on acquisitions and growing rental sales.

In North America, where it operates under the name Sunbelt Rentals, the company saw revenue rise 15 percent to $7.1 billion in the nine months ending in January.

Trade has also been helped by a surge in big construction projects and legislation, such as Joe Biden’s Inflation Reduction Act, which commits the US federal government to spending hundreds of billions on improving infrastructure.

“We are in a position of strength, with the operational flexibility and financial capacity to capitalize on opportunities arising from these market conditions and ongoing structural changes,” said Brendan Horgan, CEO of Ashtead.

However, the company’s UK sales stagnated at £523.7 million 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 $1.69 billion following an increase in depreciation charges and financing costs amid higher interest rates and debt levels.

The group’s net debts in January were $11.2 billion, more than $2.5 billion higher than at the same point last year, due to higher capital spending that generated a free cash outflow of $463 million.

Ashtead plans to reduce gross capital spending levels from around $4.2 billion in the current fiscal year to between $3 billion and $3.3 billion over the next 12 months.

Russ Mould, investment director at AJ Bell, said: “Ashtead has been a huge success over recent decades thanks to more companies choosing to rent rather than own construction equipment, as well as significant infrastructure spending in the US. “U.S., where it primarily does business.” .’

“That has made investors see Ashtead as bulletproof, but recent years have shown that it can be tough at times.”