Ashtead to refocus on UK amid challenging market conditions

Rental group looks to combat 1% profit reduction after tough UK trading

Article updated: 3 March 2020 10:00am Author: Ian Forrest

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  • Group reports 12% underlying rental revenue growth and 11% underlying EBITDA growth
  • Company maintains its capital investment plans and recorded a record free cash flow of £363m
  • CEO comments on a supportive North American market yet a challenging UK one which contributed to the group’s pre-tax profit reduction for the quarter down by 1%
  • As a result, decisive strategic action to refocus the UK business in the challenging market condition has been taken
  • Recommendation: We feel the outlook for the Group remains positive and we maintain our ‘Buy’ recommendation for investors seeking growth

Ashtead released Q3 earnings this morning, showcasing 12% underlying rental revenue growth and 11% underlying EBITDA growth in its nine months for FY trading. The company has maintained its capital investment plans and recorded a record free cash flow of £363m. In total, the group posted underlying 11% EPS growth to 154.3p. The group’s CEO commented on a supportive North American market yet a challenging UK one, which contributed to the group’s pre-tax profit reduction of 1% for the quarter. As a result, decisive strategic action to refocus the UK business in the challenging market conditions has been taken. Despite construction markets moderating, the group expect results to be in line with expectations for the fiscal year.

Tough UK trading was expected for this release following the group’s December update, so it’s not too much of a surprise that this has dragged results. Profits in its UK segment have reduced roughly 30% compared to the first nine months in FY 2019, highlighting clear difficulties. However, this profit accounts for around 3.5% of the total group’s profits in comparison to its core US market, accounting for roughly 94%. The group also saw 13.6% profit growth for the first nine months, so investors shouldn’t be too concerned.

Structural drivers for Ashtead remain relatively supportive, with its US and Canadian markets continuing to post robust top-line rental growth. Margins in its core markets remain healthy and the group are continuing to capitalise on acquisition opportunities. Therefore we feel the outlook for the group remains positive. Currently trading below its long-term forward P/E, we view the company as a ‘BUY’ for investors seeking growth and willing to accept medium risk.


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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