Ashtead’s UK profit tumbles amid ‘challenging’ market
Equipment hire giant Ashtead has bemoaned a “challenging” UK market, in which its home A-Plant business has seen profits shrink nearly a third in the first half of the year.
The FTSE 100 company enjoyed a six per cent overall rise in profit, owing to a strong performance in its core US unit, called Sunbelt, but struggled in its smaller business on home soil.
Shares fell four per cent this morning, as analysts raised concerns about Ashtead’s growing reliance on its US business, which makes up 86 per cent of overall revenue.
The figures
Profit before tax rose to £660m for the six months ending 31 October, while revenue was £2.68bn, a 14 per cent rise.
Earnings per share were up 10 per cent, as the firm enjoyed a 17.3 per cent rise in profit at its Sunbelt business in the US to £755.9m.
But profit at A-Plant, Ashtead’s UK arm, fell 32.1 per cent to just £30m.
Why it’s interesting
The London-listed firm said it was “refocusing” its UK business on “leveraging its platform to deliver long-term sustainable results, while generating strong cash flow”.
“The UK market remains challenging,” said chief executive Brendan Horgan.
He added that the firm had made £231m worth of investment in bolt-on acquisitions to the business, which had benefited its Sunbelt business.
Richard Hunter, head of markets at interactive investor, commented “A confluence of concerns have taken the wind out of Ashtead’s sails following this update.
“While there is a pre-tax profit which is up … the number is light of expectations. Furthermore, there are wider worries overhanging the stock, not least of which is the company’s reliance on the US part of its business,” he added.
What Ashtead said
Horgan added: “Our North American end markets remain strong and we continue to execute well on our strategy of organic growth supplemented by targeted bolt-on acquisitions.
“We remain focused on responsible growth. Our increasing scale and strong margins are delivering good earnings growth and significant free cash flow generation.”