Ashtead (AHT) shares sink amid UK construction concerns

Despite challenging conditions in the UK, the group is still performing well in the core North American market

Article updated: 10 December 2019 11:00am Author: Ian Forrest

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  • Ashtead reports a 10% rise in Q2 rental revenue and a 4% increase in pre-tax profit
  • Shares dropped 8% in early trading as the group warned on challenging conditions in the UK, though they have still outperformed the market this year
  • The company said full-year results should still be in line with expectations and the interim dividend was increased by 10%
  • Recommendation: we continue to recommend the shares as a ‘Buy’ due to the strong earnings momentum and the potential for further improvement in cash flow and continued growth in the US

Equipment hire group Ashtead reported a 10% rise in second quarter rental revenue and a 4% increase in pre-tax profit today, but a warning about challenging conditions in the UK sent the shares down in early trading. The key North American market remains strong and the company invested £1bn in capital in the first half, along with £231m on acquisitions. Action is being taken to refocus the smaller UK operations, but the company said full-year results should still be in line with expectations and the interim dividend was increased by 10%.

The shares dropped 8% on the news, although they have still comfortably outperformed the market this year. While the news in the UK is concerning, that part of the company represents a smaller part of overall revenue, only around 10%, and with the core North American market still performing well and further capital being invested, the outlook for the group remains positive. We continue to recommend the shares as a ‘Buy’ due to the strong earnings momentum and the potential for further improvement in cash flow and continued growth in the US

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All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

 

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Ian Forrest

Investment Research Analyst

Ian’s background in investments, financial journalism and research has seen him advising private investors on equities and helping to manage portfolios. His qualifications include the Certificate in Financial Planning and the Chartered Institute for Securities & Investment’s Investment Advice Diploma.

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