Weekly outlook: Ashtead and Berkeley first-half results

Key events for UK wealth managers for the week starting 4 December

construction of the frame house against the background of the blue sky with clouds

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Monday 4 December

  • US factory orders
  • In the US, quarterly results from Nio

Tuesday 5 December

  • Full-year results from SSP Group, Victrex, On The Beach, Gooch & Housego and Marston’s
  • First-half results from Moonpig and CML Microsystems
  • Analysts’ meeting at IWG
  • BRC UK retail sales monitor
  • Interest rate decision from the Reserve Bank of Australia
  • Services industry purchasing managers’ indices (PMIs) from Japan, Asia, Europe, the UK and US
  • In the US, quarterly results from AutoZone, Ferguson, JM Smucker and Toll Brothers
  • Ashtead first-half results

Equipment rental company Ashtead will present its first-half results on Tuesday after a November profit warning reset expectations for performance.

Chief executive Brendan Horgan said the slowdown was due to a quiet wildfire and hurricane season in the US, as well as writers and actors strikes. In the US, the top business areas for the company were mobile work platforms and forklifts, while the UK list was led by accommodation and mobile elevating platforms.

Expectations for US growth has dropped from 13-16% to 11-13%, which will be mirrored across the group as the US made up 85% of sales for the first quarter. Analysts are now expecting earnings before interest, tax, depreciation and amortisation to be near $5bn (£3.96bn) for the year, still up from last year’s $4.4bn (£3.5bn) but less than the original forecast of $5.2bn (£4.1bn).

Russ Mould, AJ Bell investment director, and Danni Hewson, AJ Bell head of financial analysis, said: “In the first quarter of fiscal 2023-24, sales grew by 19% and Ebitda by 18%, so the new full-year guidance implies a slowdown from that rapid rate, even if it still points to full-year growth in the (non-statutory) Ebitda profit metric of 14%.

“That is still impressive but the deceleration in momentum may be why investors are fretting, and therefore why the shares trade nearer to their twelve-month lows than their twelve-month highs.”

Mould and Hewson also noted that Ashtead is likely to benefit from infrastructure and technology initiatives, meaning that “it is tempting to see the profit warning as a blip, but the share price does not seem convinced, as it looks at weakness in the manufacturing purchasing managers’ index and the housebuilding industry”.

Analysts will look for a continued increasing dividend in the results, which hasn’t dipped since 2005, and any news on the capital expenditure budget, which currently has a range between $3.9-4.3bn (£3.1-3.4bn). Ashtead also will continue its $500m (£395.9m) share buyback programme, which it announced in May.

“This forms part of the company’s capital allocation strategy, which prioritises capital investment to grow the fleet, then bolt-on acquisitions and then return any remaining excess cash to shareholders via dividends and buybacks,” Hewson and Mould added.

Wednesday 6 December

  • Full-year results from TUI, Paragon Banking and Tritax Eurobox
  • First-half results from Redde Northgate
  • Analysts’ meeting at Weir
  • Bank of England Financial Stability Report
  • UK construction industry purchasing managers’ index (PMI)
  • German factory orders
  • Interest rate decision from the Bank of Canada
  • US oil inventories
  • In Asia, monthly sales figures from Taiwanese silicon chip foundry UMC
  • In the US, quarterly results from Brown-Forman, Campbell’s Soup, Chewy and GameStop

Thursday 7 December

  • Full-year results from Future
  • First-half results from Frasers, DS Smith, Yellow Cake and Quiz
  • Trading statement from Balfour Beatty
  • Halifax UK house price index
  • EU industrial production
  • New US housing permits
  • In the US, quarterly results from Broadcom, Lululemon Athletica, Dollar General and Ciena

Friday 8 December

  • Japanese wage growth
  • In Asia, monthly sales figures from Taiwanese silicon chip foundry TSMC
  • Berkeley first-half results

Berkeley will reveal its first-half results this Friday, with its shares currently trading at a 12-month peak.

The expected figures for the 2024 and 2025 fiscal years are £1.05bn in total pre-tax profit, which analysts believe could mean £540m in profit for fiscal 2024. The company suggested profit will come in with an even split for the two parts of the year, leaving an expected number of £270m for these results. The peak pre-tax profit came in 2018, just shy of £1bn for the fiscal year.

Mould and Hewson noted that the current positive share price is likely “buoyed by management’s ambitious plans for housing completions, profits, and cash returns to investors by 2025, as well as hopes for interest rate cuts from the Bank of England in 2024”.

Berkeley has announced its intention to return £283m to shareholders each year through September 2025, and set out a share dividend worth £63m and £78m of buybacks in the first half of the fiscal year.

“The next statement on the mix between buybacks and dividends is due in February and Berkeley is already on record as saying the annual dividend will be at least 66p a share, leaving up to 200p a share for buybacks,” Mould and Hewson said.

Analysts will be paying close attention to the numbers for volume completions and pricing, which came in at 4,043 completions at an average price of £608,000 last year. This average price has dropped from near £800,000 in 2021.

“In the first half last year the builder completed on 2,080 homes at an average price of £560,000,” Hewson and Mould explained. “Also watch out here for any updates on reservation rates, which were last described as coming in down by around a third on the previous year.”

Eyes will also be on Berkeley’s operating margin, which ticked up slightly last year but is expected to drop again. Net asset value also sat at £31.01 at the end of last fiscal year, meaning the current net asset value is up 1.5 times what it has commonly seen in the past.

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