Ashtead Group PLC (LSE:AHT) reported stronger first-quarter sales and profits than expected as the US construction sector remained strong.
But the FTSE 100-listed construction equipment hire group said this performance is being offset by increasing interest costs, so full-year profit targets are unchanged even though rental revenue guidance was raised for the US, Canada and the UK.
The weighted average interest cost on its debt facilities is 4%, up from 3% at the time of the fourth-quarter results, which is also what they were a year ago.
Revenue for the first quarter ended 31 July 2022 was 25% higher than the same period a year earlier, with rental revenue for its US business, Sunbelt, up 29% or 20% on an organic basis that compares same-store and greenfield site openings, while US bolt-on acquisitions since 1 May 2021 contributed 6% of rental revenue growth.
A dozen acquisitions were made in the quarter, costing US$337mln, as part of the total of US$699mln in capital invested, also including in existing locations and greenfield openings, with a combined 33 locations added, all in North America.
Adjusted profit before tax of US$555mln was generated in the quarter, up 28% on last year and well above the US$509mln average analyst forecast.
Chief executive Brendan Horgan said the business is “performing well with clear momentum in supportive end markets” and it is “in a position of strength and have the experience to navigate the challenges and capitalise on the opportunities arising from the market circumstances we face”.
These include supply chain constraints, inflation, labour scarcity and economic uncertainty, all factors which Horgan said the board is “convinced are drivers of ongoing structural change”.
For the full year, US rental revenue is now expected to increase 17-20%, up from previous guidance of 13-16%, with Canada seen growing 19-22% (15-18%) and the predicted decline in the UK reduced to -4% to 0% (-5% to -2%). Capital expenditure and cashflow guidance were unchanged.