Ashtead full-year profits to gain from Sunbelt growth, pound slide

By Noor Zainab Hussain and Tanishaa Nadkar

(Reuters) - Ashtead Group Plc <AHT.L> expects full-year results to top its already upbeat expectations, the equipment hire company said on Tuesday, as its dominant U.S. Sunbelt business benefits from lower taxes and stronger demand for renting industrial gear.

The London-listed company, which hires out diggers, construction tools and other equipment, has also been helped by Brexit-driven weakness in the pound, which has helped increase the value of dollar revenues from the United States.

The pound hovered near 20-month lows on Tuesday, as political turmoil deepened in Britain after a key vote on Brexit was delayed. <GBP=>

"Our business is performing well in supportive end markets," Ashtead Chief Executive Geoff Drabble said in a statement. "Accordingly, we expect full-year results to be ahead of our prior expectations."

Ashtead's shares, which lost ground last week on worries over a U.S.-China trade dispute and an economic slowdown in the United States, climbed 5 percent to 1,689 pence on Tuesday, placing them at the top of London's bluechip index <.FTSE>.

Ashtead's Sunbelt business in the United States accounts for 87 percent of its overall revenue, and clean-up efforts in the country following Hurricanes Florence and Michael raised additional rental revenue of between $15 million and $20 million (15.71 million pounds) in the first half, the company said.

In a sign of Sunbelt's importance to Ashtead, the company last month appointed Sunbelt's head as its next CEO.

"Ashtead is one of the most heavily U.S.-exposed businesses on the UK stock market, and as Trump's America enjoys a tax cut-fuelled investment boom, that's stood it in great stead," said Nicholas Hyett, an equity analyst at Hargreaves Lansdown.

Ashtead said in September it expected to beat its previous full-year profit forecasts thanks to a weaker pound.

Analysts on average expect Ashtead's pretax profit to rise some 3 percent this year, factoring in the effects of a weaker pound, Liberum analyst Charlie Campbell said.

Ashtead has said it would continue with its strategy of growing organically, supplemented by small acquisitions.

The firm also raised its full-year capital expenditure outlook, led by rising demand for rental equipment.

"Investment is coming at a price, with debt up 761 million pounds, and while overall leverage isn't increasing, it does leave Ashtead more vulnerable to a downturn," Hyett said.

The company reported a 25 percent jump in pretax profit to 610 million pounds ($776.4 million) in the six months ended Oct. 31. Underlying rental revenue rose 18 percent to 2.07 billion pounds.

(This story has been refiled to add dropped word in the headline.)

(Reporting by Tanishaa Nadkar and Noor Zainab Hussain in Bengaluru; Editing by Sai Sachin Ravikumar and Jan Harvey)