Ashtead sees profit fall a third as construction recovery slows
Construction equipment hire firm Ashtead saw profit fall over a third in the first quarter as the coronavirus pandemic squeezed building activity around the world.
Despite what it called a “resilient” performance over the coronavirus lockdown period, revenue and profit both fell in the period.
Shares slipped nearly one per cent as markets opened.
The figures
In the first quarter, rental revenue at Ashtead slipped from £1.16bn to £1.08bn, a decline of eight per cent.
For the full year, it said that it expected rental revenue to be down mid to high single digits when compared with last year, assuming there is not another major market shutdown.
Profit fell from £319m to £208m, a fall of 35 per cent, while earnings per share slipped from 51.4p to 34.7p in the same period.
Earnings at the FTSE 100 firm also joined in the decline, falling from £627m to £548m.
Ashtead also reported record free cash flow of £447m, almost three times as much as at the end of 2019, where it stood at £161m.
Why it’s interesting
Today’s results come after a challenging three months in the construction industry, which was hammered by the coronavirus lockdown restrictions.
Although levels of activity have picked up from April’s nadir, the latest data suggests that the pace of recovery is stalling.
Last week, the headline IHS Markit/CIPS UK Construction Total Activity Index registered 54.6 in August, down from 58.1 in July.
It marks the third consecutive month of growth in construction output — indicated by any figure higher than 50 — but the latest expansion was the slowest in this period.
“The latest PMI data signalled a setback for the UK construction sector as the speed of recovery lost momentum for the first time since the reopening phase began in May,” said Tim Moore, economics director at IHS Markit, which compiles the survey.
“The main reason for the slowdown in total construction output growth was a reduced degree of catch-up on delayed projects and subsequent shortages of new work to replace completed contracts in August.”
What Ashtead said
Chief executive Brendan Horgan said: “In these challenging markets, the group delivered a strong quarter with rental revenue down only eight per cent at constant exchange rates.
“This resilient performance illustrates the successful execution of our long-term strategy, which we embarked upon after the last recession, to broaden and diversify our end markets and strengthen our balance sheet.
“This positioned us to capitalise on our ever increasing scale, while remaining agile, particularly during these unprecedented times.”