The Ashtead Technology (LSE: AT.) share price was already in the doldrums before today (17 July). Now, after a one-day crash of 23%, it’s arguably in the mud at the bottom of the North Sea. Or at least that’s what it feels like for my Stocks and Shares ISA.
You see, I bought this AIM-listed stock at 475p in late 2023, and by July 2024 it had jumped to 864p. Then it started falling, and falling. Now, it’s all the way down at 346p. By the time you read this, it could be even lower.
This stomach-churning rollercoaster is captured in the share price chart below.
Weak outlook
For those unfamiliar, Ashtead Technology provides rental equipment and expertise to the global offshore energy industry (both wind projects and oil and gas). It specialises in underwater technology, with a fleet of over 30,000 assets.
The reasons for today’s crash was a half-year trading update. Revenue jumped 23% year on year to £99m, which sounds great, but it actually dropped 6% on a pro-forma basis. In other words, headline growth was boosted by acquisitions but there was underlying weakness.
The company blamed a few things: “A combination of the challenging geopolitical environment, significant disruption in the US market and a small foreign exchange headwind, together with a focus on higher quality rental revenues and pro-actively reducing exposure to cross hire and low margin equipment sales, resulted in lower revenues than initially expected”.
It wasn’t all doom and gloom though. The adjusted earnings before interest, taxes, and amortisation (EBITA) margin held firm at around 27.3%, consistent with the group’s medium-term target of a high 20% figure. This was helped by operational synergies from two acquisitions (Seatronics and J2 Subsea), which were delivered faster and better than expected.
Meanwhile, cost control remains disciplined, even while investing for growth and cash generation met expectations. The net debt leverage is manageable at 1.6 times.
Looking ahead to the second half however, revenue growth is expected to be in the high single digits, despite being the seasonally stronger half. And full-year adjusted EBITA is now anticipated to be “modestly below” previous forecasts.
Muddy waters
Ashtead Technology has a global presence, with bases in the North Sea, US Gulf, Middle East, and Asia. Tariff uncertainty clearly isn’t helping, as firms pause expansion plans until trade policy becomes clearer. This appears to be directly impacting demand for survey work and rental gear.
While Ashtead operates globally, the North Sea remains a key market, so the government’s flip-flopping on oil and gas licences isn’t ideal. Meanwhile, there’s a growing backlash against Net Zero policies (not great for offshore wind farms), though whether that will lead to more North Sea drilling is unclear.
There’s a lot of uncertainty around, and that’s rippling down to equipment providers like Ashtead Technology.
My (undecided) view
The firm says customer backlogs and contract wins remain strong, supporting a positive medium-term outlook. And it’s targeting a move to the London Stock Exchange’s main market, which may attract more investors. I’m not selling.
To double down, or not, that’s the question I’m wrestling with now. The stock looks cheap, even with earnings under pressure. As my position’s already under water, I’m undecided. But new investors might want to consider the dip.
