• 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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