Morning Note: Market News and an update from Ashtead Group.

Market News

Markets fluctuated as geopolitics remains front and centre. President Macron tells Figaro that France and the UK are working on a Ukraine truce plan. President Trump stopped military aid to Ukraine after clash.

Trump pushed ahead with tariffs, saying there was “no room left” for Canada and Mexico to avoid levies. Canada retaliated by putting tariffs on $107bn of US products. The president also signed an order to raise tariffs on China to 20% as planned. China retaliated against Trump with tariffs with levels of up to 15% on farm goods and defence firms. The measures response is aimed at US farmers that may swing public opinion against the trade war, Bloomberg Economics said.

In the run-up to the tariff deadline, though, US equities tumbled the most this year – S&P 500 (-1.8%); Nasdaq (-2.6%). The Mag7 ETF fell by -3.3%, with Nvidia down 8.7%. Treasury note yields fell to the lowest in four months and oil dropped to a three-month low. Gold moved back up above $2,900 an ounce. In Asia this morning, equity markets were mixed: Nikkei 225 (-1.2%); Hang Seng (-0.1%); Shanghai Composite (+0.2%). The yen gained after Trump warned of trade levies on FX manipulators including Japan and China.

The FTSE 100 is currently 0.6% lower at 8,816. The February BRC shop price index fell by -0.7%, slightly below the -0.6% forecast. Food inflation moved up to 2.1%, while non-food prices fell by 2.1%. Sterling trades at $1.2715 and €1.2095.

OPEC+ said it will proceed with plans to boost crude output in April after repeated delays. OPEC’s oil output rose by 240,000 barrels a day last month to a daily average of 27.35m barrels, the most since December 2023. Brent Crude moved below $71 a barrel.

Source: Bloomberg

Company News

This morning Ashtead Group has released results for the first nine months of its financial year to 30 April 2025. The figures were slightly below market expectations although guidance for the full-year has been reiterated. Against a weak overall equity market backdrop, the shares have been marked down by 4% in early trading.

Ashtead is a leading supplier of rental tools and equipment in the US & Canada (91% of revenue) and the UK (9%), generating revenue of almost $11bn in FY2024. At the end of January, the group’s rental fleet at cost was $18bn, with an average fleet age of 47 months.

The company represents a good play on infrastructure spend by Western governments seeking to stimulate economic growth via fiscal means and the shift in the market from owning to renting equipment. The market is increasingly broad, with non-construction sectors now accounting for more than 50% of revenue. In North America, the group operates in a fragmented market which it expects to grow from $77bn to $94bn by 2027.

Under the latest iteration of its Sunbelt strategy (4.0), Ashtead plans to invest $20bn over the next five years to take advantage of substantial structural growth opportunities. The aim is to supplement strong same-store growth with 300-400 greenfield openings and bolt-on acquisitions. As a result, the group continues to broaden its product offering and leverage the benefits of scale to unlock margin progression.

The industry is structurally positioned to deliver sustained rate progression – pricing reflects inflation in the group’s cost base (including skilled labour wages and fleet costs) and added value to customers. Overall, the aim is to deliver strong revenue growth (6%-9% p.a.), improving margins (by 3%-5%) and returns, and strong free cash flow generation.

Although listed in the UK, Ashtead reports in US dollars. However, at the time of the half-year results in December, the company announced a proposal to move its primary listing to the US over the next 12-18 months.

In the nine months to 31 January 2025, revenue increased by 0.4% at constant exchange rates (CER) to $8,262m, while underlying rental revenue grew 5% at CER to $7,646m. Adjusted profit before taxation fell by 5% to $1,698m, driven as expected by lower used equipment sales.

In North America, the strength of mega projects and hurricane response efforts have more than offset the lower activity levels in local commercial construction markets which have been affected by the prolonged higher interest rate environment.

In the US, rental-only revenue rose 4% to $5,203m, driven by both volume and rate improvement. Organic growth (same-store and greenfield) was 3%, while bolt-on acquisitions contributed 1%. Rental revenue drop-through to EBITDA was 71%.

In Canada, rental-only revenue grew 16% to C$530m driven by a recovery in the Specialty Film & TV business. In a manner similar to the US, growth was also helped by volume and rate improvement. The UK business generated rental-only revenue of £357m, an increase of 2%.

During the period, capital expenditure was $2.1bn across existing locations and greenfield sites. $56m was spent on three bolt-on acquisitions, while 54 locations were added in North America. The company generated free cash flow of $858m, versus an outflow of $463m in the previous year. Financial gearing ended the period at 1.7x net debt to EBITDA, at the upper end of the group’s target range of 1.0x-2.0x.

The group operates a progressive dividend policy – in FY2024, the company paid out 105c (1.5% yield). An amount is then allocated to share buybacks based on availability after organic growth, bolt-on acquisitions, and dividends within the target leverage range. The company is currently undertaking a programme to buy back up to $1.5bn over the next 18 months

The group expects results for the financial year to 30 April 2025 to be in line with its previous expectations: rental revenue growth of 3%-5%; gross capital expenditure of $2.5bn-$2.7bn; and free cash flow of $1.4bn.

Source: Bloomberg