Ashtead shares sink as UK profits slip amid tough market conditions
The tool and construction equipment hire business saw total profits rise as its US arm offset challenges in the UK.
Shares in Ashtead have dived after the construction supplier’s UK business saw profits shrink due to “challenging” market conditions.
The FTSE 100 firm said its UK-based tool and equipment hire business, A-Plant, saw operating profits for the six months to October slide 32% to £30 million.
Ashtead said it is now “refocusing” the A-Plant arm in a bid to deliver “long-term sustainable results, while generating strong cash flow”.
The company said its UK arm and currency headwinds could drag on performance, with its results for the year set to hit expectations excluding these factors.
Meanwhile, group operating profits increased by 8% to £771 million as it was boosted by strong performance in its US business.
Group revenues jumped 14% to £2.68 billion for the six-month period, following 12% revenue growth in the second quarter.
Revenues in its US Sunbelt business grew by 21.1% to £2.3 billion on the back of organic growth and “targeted bolt-on acquisitions”.
Ashtead chief executive Brendan Horgan said: “Our business continues to perform well in supportive North American end markets, while we have taken decisive strategic action to refocus our UK business in the challenging market conditions.
“We remain focused on responsible growth. Our increasing scale and strong margins are delivering good earnings growth and significant free cash flow generation.”
Russ Mould, investment director at AJ Bell, said: “Today’s first-half results from construction equipment hire firm Ashtead may raise questions over the long-term position of its UK business within the group.
“As profit tumbles at its domestic A-Plant unit, investors may hope a plan to refocus these operations ultimately becomes a plan to recycle them, to prevent them dragging on a robust North American business.
“Recent strength in the pound is also affecting performance as the company’s predominantly dollar revenue is translated back into sterling and the outlook comments could be read as a very mild profit warning.”
Shares in the firm slipped 7.4% to 2,190p on Tuesday morning.