* Company expects to beat its earlier profit expectations
* Increases share buyback plan; Q1 profit up 20 pct
* Shares rise as much as 6 percent (Adds shares, analysts’ comments)
By Justin George Varghese and Shashwat Awasthi
Sept 11 (Reuters) - Industrial equipment rental firm Ashtead Group expects to beat its previous full-year profit expectations thanks to a weaker sterling and will increase its share buyback programme, it said on Tuesday, sending its shares up as much as 6 percent.
The company, which makes 84 percent of its revenue from U.S. business Sunbelt, said first-quarter underlying profit jumped 20 percent, helped by better margins, lower capital spending on replacing equipment and a lower pound.
“With the benefit of weaker sterling, we expect full year results to be ahead of our expectations and the board continues to look to the medium term with confidence,” Ashtead said in a statement, without giving details of its expectations.
After recovering strongly into the start of this year, the pound has slipped back against the dollar towards the levels seen after the 2016 Brexit referendum, amid uncertainty over the outcome of Britain’s departure from the European Union.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said Ashtead also appeared to be benefitting from U.S. President Donald Trump’s policies aimed at boosting economic growth.
“A massive cut to corporation tax has done wonders for profits this year, and it’s also sparked a round of investment in the domestic U.S. economy which is seeing demand for Ashtead’s construction equipment soar,” he said in a note.
Ashtead also said it planned to raise share buybacks to 125 million pounds ($163 million) per quarter from around 100 million pounds estimated earlier.
Shares in the firm, which rents equipment such as diggers and construction tools, were up 2.6 percent to 23.38 pounds at 0818 GMT to top Britain’s FTSE-100 index of blue-chip companies.
Prior to Tuesday’s update, analysts were on average expecting Ashtead to make a full-year underlying pretax profit of 927.3 million pounds, according to Thomson Reuters I/B/E/S.
“With 1Q19 and the FY19 outlook ahead (we think on FX mainly), and the buyback programme expanded, we expect consensus to move up about 4 percent,” analysts from brokerage Investec said in a note.
In the three months to July 31, Ashtead’s fiscal first quarter, underlying pretax profit rose to 285.6 million pounds from 238.5 million a year earlier.
Rental revenue rose 16 percent to 961 million pounds, with U.S. construction and industrial equipment rental revenue up 20 percent to $1.17 billion.
$1 = 0.7659 pounds Reporting by Justin George Varghese and Shashwat Awasthi in Bengaluru; Editing by Amrutha Gayathri and Mark Potter