(Alliance News) - Ashtead Group PLC said Monday it expects to report a drop in profit for its current financial year as Covid-19 has a mixed effect on the group's businesses.
The FTSE 100 equipment rentals firm said that, with a few exceptions, its locations in the US, UK and Canada remained open and active, although trading volumes have been hit by the actions taken by several governments to contain the virus outbreak.
Sunbelt Rentals in particular has been designated as an essential business in the three countries, due to its supply of equipment and services to the government and private sector responses to the pandemic.
As a result of the market conditions, rental-only revenue for Sunbelt US in March was up 2% from the year before; however revenue for April is expected to be down by 15% year-on-year.
This is due to revenue from the general tool business expected to be 18% lower year-on-year, driven by declines in volume rather than rental rates.
Ashtead said that as a result of the revenue trends, underlying pretax profit for the year ending April 30 was GBP1.05 billion. In the prior year, underlying pretax profit was GBP1.11 billion.
Ashtead said that it remains in a strong financial position with long-term committed debt facilities. In response to the coronavirus crisis, the company has modelled a variety of downside scenarios over the coming year. Under such scenarios, Ashtead said it remains free cash flow positive throughout the next financial year.
The company has paused its share buyback in a bid to preserve cash. In addition, Ashtead has suspended all merger and acquisition activity, as well as reducing its planned capital expenditure for the year ending April 2021 to GBP500 million from the initial range of GBP1.1 billion to GBP1.3 billion.
"Looking forward, I am certain the swift actions we took during these unprecedented times and the strength of our balance sheet will serve the group well. These factors, when combined with the diversity of our products and end markets, contribute to the strength of our long-term business model and put the board in a position of confidence to look to the coming financial year as one of strong cash generation and strengthening our market position," said Chief Executive Brendan Horgan.
Shares in Ashtead were up 4.3% at 1,909.00 pence on Monday in London.
By Dayo Laniyan; dayolaniyan@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
Ashtead Group (AHT)