In a falling market, equipment hire group Ashtead has slipped back despite reporting record profits.
The company, which rents out everything from small tools to large excavation equipment, reported a rise in full year profits from £362m to £490m, benefiting from positive construction markets on both sides of the Atlantic. It was also positive on the outlook.
But with a spate of profit taking its shares are down 17p at £11.10. Analysts remain positive. Andrew Nussey at Peel Hunt said:
Growth momentum [is] continuing with underlying (constant currency) fourth quarter profits up 42% despite tough comp. Net debt £1,687m gives return on investment of 19% despite significant fleet expansion. Outlook remains positive with momentum into the first quarter. Modest forecast upgrades: April 2016 by 2% to £610m.
Shares are trading on upgraded PE of 15 times to Apil 2016 and whilst some may have been expecting larger upgrades, we note it is still early in the year. With clear momentum we reiterate our buy.
Investec also issued a buy note:
The group has yet again delivered results ahead of expectations, with pre-tax profit up 35% to a record £490m. There appear to be no signs of any slowdown in the US and this is reflected in the confirmation that it will again invest some £1bn in capex during 2016.
We continue to see the trajectory of recovery as more sustainable than in previous cycles and this should ensure earnings momentum remains strong for some time yet. In our view, the current rating is not prohibitive.
Elswhere Ladbrokes is leading the FTSE 250 higher, up 3p at 120p after an upgrade from Morgan Stanley. The bank said:
New chief executive Jim Mullen will outline his plans for Ladbrokes on June 30. We see scope for forecast upgrades for the first time in years, both Digital and Retail have significant catchup potential, Europe could be a hidden gem, cash earnings exceeds earnings per share, and the valuation is cheap. We upgrade to overweight.
But property companies were mixed after a series of Goldman Sachs recommendations.
Foxtons has fallen 6p to 248o.6p as the bank moved from neutral to sell, based on its premium valuation compared to its peers.
Crest Nicholson is down 10.5p at 534p after Goldman reduced its recommendation from buy to neutral.
But Barratt Developments is 3.5p better at 599.5p as Goldman lifted its target price from 517p to 605p.
Lower down the market APR Energy has blown a fuse, down 92.5p or 26.5% at 256p after the temporary power supply company said full year results were likely to be significantly below expectations. It blamed the costs of moving out of Libya and delayed contract negotiations.
Flowgroup, the efficient energy equipment supplier, has fallen 8.75p to 18.25p as it warned of a substantial reduction in the number of boilers it expected to install in 2015. The European Court of Justice ruled earlier this month that the UK’s reduced VAT rate of 5% on energy-saving products was in breach of EU laws. VAT is now expected to be applied on its products at 20%, and it plans to accelerate its cost cutting programme.
Cantor Fitzgerald analyst Adam Forsyth said:
The early incarnation of the Flow boiler made strong economic sense when VAT was 5% for larger households. The VAT change is likely to reduce the set of suitable households and so today’s announcement is understandable if disappointing. The delay to cash breakeven is also a concern but the recent £23m fund raising should give some comfort here. The timings suggested in the statement imply a six month set back while a re-launch in winter is perhaps better than a summer launch for this product. The VAT ruling itself is still to be clarified by the UK government which remains supportive of micro generation in our view. But the product needs to achieve momentum in the marketplace and this setback is not helpful in that regard. We are putting our forecasts, valuation and recommendation under review but overall see this news as disappointing.
