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Equipment rental firm Ashtead lowers UK rental revenue outlook, shares fall
Global Banking & Finance Review®
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(Reuters) -British equipment rental firm Ashtead Group on Tuesday lowered its annual UK rental revenue growth forecast to 6%-9% from 10% to 13% citing softening market conditions.
(Reuters) -British equipment rental firm Ashtead Group on Tuesday lowered its annual UK rental revenue growth forecast to 6%-9% from 10% to 13% citing softening market conditions.
Shares in the London-listed company, which have gained about 10% this year compared with a marginally weaker FTSE 100, were down 4.9% in morning trade.
The company, which trades under the name Sunbelt Rentals in the United States, retained the rest of its outlook after reporting an 11% climb in adjusted pretax profit to $615 million in the first quarter ended July 31.
“Despite the UK market conditions softening, we expect overall performance to be in line with our expectations and the board looks to the future with confidence,” CEO Brendan Horgan said in a statement.
The company’s UK business has been weighed down by inflationary pressures hitting its cost base and margins.
“Ashtead is seen as a bellwether of economic health and its latest update is a warning for deteriorating conditions in the UK,” said Hargreaves analyst Susannah Streeter.
“While the warning lights have been flashing …the extent of the fall in guidance has come as shock.”
Ashtead, which competes with the likes of United Rentals in the United States, serves construction, emergency response as well as entertainment markets in the U.S., UK and Canada, renting out equipment ranging from diggers to construction tools.
In the United States, its largest market, the group expects to benefit from the increasing number of mega projects, for data centres, electric vehicle battery plants and infrastructure, and recent legislative acts.
“The proliferation of ‘mega-projects’ …which currently represents ~30% of construction starts and favour rental suppliers with scale, product breadth and financial capacity, also strongly suggest that the largest rental suppliers will outperform the wider market,” RBC Capital analysts wrote in a note.
However, the group said its Film & TV business was severely impacted by the Writers Guild of America and Screen Actors Guild strikes in Canada.
(Reporting by Yadarisa Shabong in Bengaluru; Editing by Sherry Jacob-Phillips and Sharon Singleton)
Rental revenue is the income generated from leasing out equipment or property. It is a key metric for businesses in the rental industry, reflecting their financial performance.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It can impact businesses by increasing costs and affecting consumer demand.
Mega-projects are large-scale investments typically involving significant capital and resources, often in sectors like construction and infrastructure. They can drive economic growth and create jobs.
Adjusted pretax profit is a measure of a company's profitability before tax, adjusted for non-recurring items. It provides a clearer view of operational performance.
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