Ashtead raises profit expectations after strong first half

LONDON (Reuters) - British industrial equipment hire group Ashtead AHT.L raised its annual earnings forecast on Tuesday thanks to strong demand in the United States, building on a 21 percent rise in pretax profit in the first half of its financial year.

Its shares leapt by more than 9 percent in early trading, reaching its highest level in five months, and were the biggest gainer on the FTSE 100 .FTSE index.

The company, which hires out diggers and tools on short term contracts, said its full year results should now exceed its previous expectations and it would invest more in its fleet of equipment to respond to growing demand from its customers.

Analysts had expected the company to report full year pretax profit of 608 million pounds in the year to April 2016, according to Thomson Reuters data.

The London-listed firm has greatly benefited from the rebound in U.S. construction markets, particularly in the private sector. That has helped it to outperform rivals with more exposure to the struggling oil and gas sectors.

“We are encouraged by both where we are in the cycle and the structural opportunities for further growth,” Chief Executive Geoff Drabble told Reuters.

Drabble said the company had opened 38 new locations in the United States and had increased its full capital expenditure plans by 100 million to 1.1 billion pounds.

“We are performing well, the best metrics we’ve ever had in a good economy. So my question rather would be, why would we not increase capex?,” he said.

The company reported underlying pretax profit rose 21 percent to 343 million pounds in the six months ended Oct. 31, up from 266 million pounds a year earlier.

Its U.S. division Sunbelt, which accounts for around 85 percent of its revenue, reported a 23 percent rise to 1.7 billion pounds. A-Plant, its UK division which makes up the remainder of its earnings, posted a 8 percent rise in revenue to 178 million.

Reporting by Li-mei Hoang; Editing by Mark Potter and Keith Weir