Ashtead forecasts a lower annual profit than last year due to Coronavirus shutdowns

In its statement on Monday, Ashtead Group (LON: AHT) warned that its annual profit is expected to come in weaker than last year. The equipment rental firm cited Coronavirus shutdowns for a significant decline in demand that pushed the company into withdrawing an additional £402 million loan.

In the year that ends on April 30^th, Ashtead forecast £1.05 billion in underlying pretax profit. The company had recorded £1.11 billion in profit last year. According to Ashtead:

“Since the middle of March, the unprecedented action taken by governments and the private sector to contain the virus has resulted in adverse conditions within the group’s end-markets.”

Ashtead’s Sunbelt business notes a 2% increase in revenue

Its Sunbelt business, on the contrary, noted a 2% increase in rental revenue last month in the U.S that was attributed to its services including provision of equipment to hospitals, first responders, and alternative care facilities.

The company recently commented that it plans on refocusing its business in the UK to mirror the growth of its North American non-construction businesses as it struggles with foreign exchange headwinds fuelling pricing issues.

The London-headquartered firm, however, expects its total rental revenue in the U.S to print 15% lower in April as its performance only noted a modest improvement in the U.S since April 10^th.

In a bit to preserve cash to survive the economic blow from COVID-19, Ashtead also withdrew an extra £402 million from its credit facility for 1 year. The company also suspended its share repurchase programme and M&A activity (mergers and acquisitions) and said that it will slash its capital expenditures by roughly £500 million this year to further shore up its financial stature.

Ashtead says it will not furlough its U.S or U.K workers

The company, however, expressed confidence that none of its 14,000 workers in North America and 3,800 in the United Kingdom will be placed on government-supported furlough. Ashtead has no plans of resorting to state-sponsored schemes for job retention.

Following the announcement, Ashtead was reported 4.7% up in the morning session on Monday.

At 1,947 GBX per share, the firm is currently around 20% down year to date in the stock market. In mid-March, the stock had dropped to 1,300 GBX per share. Its performance in 2019, on the contrary, was reported largely upbeat with an annual gain of a little under 50%.

At the time of writing, Ashtead is valued at £8.75 billion and has a price to earnings ratio of 11.05.