Ashtead confident despite mixed first quarter

3rd Sep 2024 07:15

(Sharecast News) - Ashtead Group reported modest first quarter revenue growth on Tuesday, amid challenging market conditions.

The FTSE 100 company said rental revenue rose 7% year-on-year to $2.54bn, driving total revenue up by 2% to $2.75bn.

Despite those gains, operating profit saw a slight decrease of 2% to $688m, while adjusted profit before tax fell 7% to $573m.

Earnings per share also dipped, by 10% to 92.4 cents.

The firm said it was continuing to expand its footprint in North America, adding 33 new locations during the quarter.

Capital investment in the business amounted to $855m, a decrease from $1.13bn a year earlier.

Additionally, Ashtead completed two bolt-on acquisitions valued at $53m, significantly lower than the $361m spent on acquisitions in the same period last year.

In a key management update, Ashtead also announced that chief financial officer Michael Pratt would retire in September 2025.

As part of its succession planning, Alex Pease would join the group in October as CFO-designate.

Pease previously served as CFO at WestRock and other major public companies.

He would be based in Fort Mill, South Carolina, and would work closely with Pratt over the next year to ensure a smooth transition.

Ashtead said it remained confident that its full-year results would meet previous expectations, despite the mixed performance in the first quarter.

"We launched our Sunbelt 4.0 strategic growth plan in April and the business is focused on executing against our five actionable components - customer, growth, performance, sustainability and investment," said chief executive officer Brendan Horgan.

"The group is performing well with rental revenue up 7% and revenue up 2% in the first quarter.

"In North America, the increasing proportion of mega projects and the strength of our specialty businesses has more than offset the lower activity levels in local commercial construction markets."

Horgan noted that as expected, lower used equipment sales and a higher increase in depreciation and interest costs resulted in a fall in adjusted profit before tax to $573m from $615m.

"The investments in and expansion of the business over Sunbelt 3.0 and into Sunbelt 4.0 are enabling us to take advantage of the diverse opportunities that we see while maintaining a balance sheet that affords us considerable flexibility and optionality.

"In the quarter we invested $855m in capital across existing locations and greenfields and $53m on two bolt-ons, adding a total of 33 new locations in North America."

Brendan Horgan said Ashtead was in a "position of strength", with the operational flexibility and financial capacity to capitalise on structural growth opportunities.

"We have started the year well and expect full-year results will be in line with our expectations.

"The board looks to the future with confidence."

At 0809 BST, shares in Ashtead Group were up 3.73% at 5,558p.

Reporting by Josh White for Sharecast.com.