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Ashtead shares fall as higher interest rates erode profits

Ashtead shares fell on Tuesday after the group announced falling sales growth rates and diminishing profits.

The company was considered a growth powerhouse for many years due to its remarkable ability to shake off any economic constraints. This no longer seems to be the case and interest rates are partly to blame. 

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Ashtead released results on Tuesday confirmed a prior slowdown in its core US business was not a blip. 

Fourth quarter sales growth slipped to 7%. Growth is still growth but the real concern for investors will be declining profit before tax over the full year period. Profit before tax fell to $2,230m in 2024 from 2,273m in 2023.

Higher interest rates were blamed for rising costs with financing expenses rising by around a third. Margins across all geographies were squeezed as a result. 

“Ashtead’s markets are slowing. Hot off the heels of news that it may be looking to move its main listing to the US, this was a slightly soft set of results,” said Matt Britzman, equity analyst, Hargreaves Lansdown.

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“Whether you look at revenue, profit, or guidance, it’s hard to see much for markets to get excited about here. Management would be forgiven for giving slightly conservative guidance for the coming year after several disappointments of late, and it looks like that’s the case.

“But rental giant Ashtead is still demonstrating its strength, just in a softer market. The larger construction equipment players are taking market share, and that plays right into Ashtead’s hands. Mega-projects in the US will continue to act as a medium-term tailwind, and it was positive to see rental rates showing strength in the final quarter. This had been an area of concern going into the results. Longer term, the US rental market is fragmented and there’s a growing appreciation from end-users as to the benefits of rental over ownership.”

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