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Ashtead marked down on replacement expenditure slowdown

Shares in Ashtead Group pulled back further following release of a Q3 update that cast doubt on forward replacement expenditure
March 1, 2016

Shares in Ashtead (AHT) clicked firmly into reverse despite an ostensibly decent set of numbers at the third-quarter (Q3) mark. The equipment rental group maintained third-quarter physical utilisation rates at 72 per cent, exactly the same as a year ago, while cash profits were up 21 per cent over the year to date.

IC TIP: Buy at 921p

So on the face of it there's little to fret about, but operators like Ashtead are highly attuned to macro sentiment, so any hint of impending difficulties - such as the slowdown in Q3 rental revenues - will be seized upon by an increasingly anxious marketplace. Although Ashtead said it expects gross capital expenditure at the top end of previous guidance, management also warned that the group was "entering a very different replacement cycle" so the related outlay "will be much lower than recent years".