Ashtead in top gear as Brexit fears subside

Ashtead hires out equipment in the UK and US
Ashtead hires out equipment in the UK and US

“It’s not time to get out the bunting and have a tea party yet, but things are not as bad as we thought,” Ashtead’s chief executive Geoff Drabble said of the effect the EU referendum has had on the UK’s construction industry.

Mr Drabble, who has led FTSE 100 equipment hire company Ashtead for a decade, said he had feared the worst post-Brexit, but that most of his worries had been unfounded.

“I’m still watchful, and there is a chance of drag,” he said. "But things have not dried up to the extent I thought.

"The real acid test for the industry was whether Brexit fears would be so great that projects scheduled to start this spring wouldn’t. They did start, and the question now is whether there is enough new stuff in the pipeline for 2018. It’s early, but I’m hearing slightly warmer views than previously expressed.”

He made the comments as Ashtead reported a 31pc rise in sales in the third quarter to £804.5m, and pre-tax profits of £171.2m, up 28pc on the same period a year earlier. The quarterly figures to the end of January benefited from the weak pound. Excluding exchange rate movements, sales increased 13pc, while profits were 8pc higher.

Ashtead’s US and UK divisions performed strongly, underpinned by continuing growth in the equipment hire sector.

Equipment hire took off in the aftermath of the financial crisis, as companies looked to unburden their balance sheets. Mr Drabble said companies have now become comfortable with renting, while the industry itself has matured and become more reliable.

“It’s a virtuous cycle, the more we invest and the bigger we get, the more people feel they can rely on renting and don’t need to own,” he said.

Mr Drabble sees big potential in Ashtead's North America market, which is five times bigger than the UK, very fragmented and with a lower prevalence of equipment hire.

If the White House makes progress with any of its pledges to cut corporation tax, invest in infrastructure and boost military spending, Ashtead also stands to benefit.

The company expects sales growth in the double digits next year and to open 60 new locations, with the majority in the US.

Profit warning at Aggreko

Shares in Aggreko tumbled 13pc after the company warned that  profits this financial year would be lower than last year, thanks to pricing issues in Argentina.

Aggreko, which hires out power equipment to large energy users and covers electricity shortfalls, has been hurt by a slowdown in oil and gas markets and had difficulty negotiating contracts in South America. Sales in the year to the end of December fell 3pc to £1.52bn, while pre-tax profits slumped by nearly a quarter to £172m. It booked a £30m impairment charge related to a slowdown in the North American oil and gas sector, as well as £19m in exceptional costs related to restructuring.

Please review our commenting policy