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Ashtead raises outlook, but capex weighs on shares

Reuters - UK Focus

* First (Other OTC: FSTC - news) -quarter pretax profit rises 63 pct to 99.5 mln stg

* Revenue increases 26 pct to 410.5 mln stg

* First-quarter capital expenditure 279 mln stg

* Stocks falls 10 pct; top percentage loser on FTSE-250 index

By Karen Rebelo

Sept 4 (Reuters) - Equipment rental group Ashtead Group Plc (LSE: AHT.L - news) raised its earnings expectations for the full year, but concerns over large capital expenditure in the first quarter dragged the company's stock down as much as 10 percent.

The British company, which hires out diggers and tools on short-term contracts, said capital expenditure in the quarter ended July 31 was 279 million pounds ($433 million).

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The company said its expectation for gross capital expenditure was unchanged from the year end at 560 million pounds.

"We have the luxury of being able to buy our equipment on very, very short lead times and therefore the concept of an annual capital budget is alien to us," Chief Executive Geoff Drabble said.

Panmure Gordon analyst Paul Jones said it was too early for the company to predict its spending pattern for the year.

"What Ashtead have actually said is, 'yeah' we'll probably invest more in the full year but we're not changing our guidance yet .... some people have taken that as they've invested badly and wrongly and they've got the timing wrong," Jones said.

Ashtead shares were down 9 percent at 626.5 pence at 1132 GMT. The stock was the top percentage loser on the FTSE-250 Midcap Index on Wednesday.

STRONG FIRST QUARTER

Ashtead said pretax profit for the first quarter rose 63 percent to 99.5 million pounds from a year earlier. Revenue increased 26 percent to 410.5 million pounds.

The company has defied a limp construction market, with the industry on both sides of the Atlantic only now starting to recover from the spectacular bust that began in 2008.

Revenue from the company's core Sunbelt business in the United States rose 25 percent to 343.9 million pounds.

"Anything to do with energy is the strongest bit ... we are still seeing negative growth for anything which is government led. So sequestration in America is clearly some drag on the overall growth of the construction market," Drabble said.